Registration No.33-37511
As filed with the Securities and Exchange Commission on October 31, 1996
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 9 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 10 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) (Zip Code)
Registrant's Telephone Number: (813) 823-8712
John K. Carter
700 Central Avenue
P.O. Box 33030
ST. PETERSBURG, FLORIDA 33733-8030
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485
X on NOVEMBER 1, 1996 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(1) of Rule 485
on pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of Rule 485
on pursuant to paragraph (a)(2) of Rule 485
this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
- -------------------------------------------------------------------------------
The Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940, and filed its Rule 24f-2 Notice for the fiscal
year ended December 31, 1995 on February 28, 1996.
TEMPLETON AMERICAN TRUST, INC.
CROSS-REFERENCE SHEET
FORM N-1A
PART A
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
1 Cover page Cover Page
2 Synopsis Expense Summary
3 Condensed Financial "Financial Highlights";
Information "How Does the Fund
Measure Performance?"
4 General Description "How Is the Fund Organized?";
of Registrant "How Does the Fund Invest Its
Assets?"; "What Are the Fund's Potential
Risks?"
5 Management of the Fund "Who Manages the Fund?"
5A Management's Discussion Contained in Registrant's Annual
of Fund Performance Report to Shareholders
6 Capital Stock and Other "How Is the Fund Organized?";
Securities "Servicesto Help You Manage Your
Account"; "What Distributions Might
I Received From the Fund?"; "How Taxation
Affects You and the Fund?"
7 Purchase of Securities "How Do I Buy Shares?"; "May I
Being Offered Exchange Shares for Shares of
Another Fund?"; "Transaction
Procedures and Special
Requirements"; "Services to Help You
Manage Your Account"; "Who Manages
the Fund?" "Useful Terms
and Definitions"
8 Redemption or Repurchase "May I Exchange Shares for Shares of
Another Fund?"; "How Do I Sell
Shares?"; "Transaction Procedures
and Special Requirements"? "Services
to Help You Manage Your Account"
9 Pending Legal Procedures Not Applicable
</TABLE>
TEMPLETON AMERICAN TRUST, INC.
CROSS-REFERENCE SHEET
FORM N-1A
PART B
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
10 Cover Page Cover Page
11 Table of Contents Table of Contents
12 General Information and Not Applicable
History
13 Investment Objectives and "How Does the Fund Invest Its
Policies Assets?";"Investment Restrictions";
"What Are the Fund's Potential Risks?"
14 Management of the "Officers and Trustees"; "Investment
Registrant Advisory and Other Services"
15 Control Persons and "Officers and Trustees"; "Investment
Principal Holders of Advisory and Other Services";
Securities "Miscellaneous Information?"
16 Investment Advisory and "Investment Advisory and Other
Other Services Services"; "The Fund's Underwriter"
17 Brokerage Allocation and "How Does the Fund Buy Securities
Other Practices For Its Portfolio?"
18 Capital Stock and Other "Miscellaneous Information"; "See
Securities Prospectus"How Is The Fund
Organized?"
19 Purchase, Redemption and "How Do I Buy, Sell and Exchange
Pricing of Securities Shares?";"How Are Fund Shares
Being Offered Valued?"; "Financial Statements"
20 Tax Status "Additional Information on
Distributions and Taxes"
21 Underwriters "The Fund's Underwriter"
22 Calculation of Performance "How Does the Fund Measure
Data Performance?"
23 Financial Statements Financial Statements
</TABLE>
PROSPECTUS
& APPLICATION
[LOGO]
TEMPLETON
AMERICAN TRUST, INC.
--------------------------------------------------
MAY 1, 1996
AS AMENDED NOVEMBER 1, 1996
INVESTMENT STRATEGY:
GROWTH AND INCOME
[FRANKLIN TEMPLETON LOGO]
- --------------------------------------------------------------------------------
This prospectus describes Templeton American Trust, Inc. (the "Fund").
It contains information you should know before investing in the Fund.
Please keep it for future reference.
THE FUND MAY 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 "HOW DOES THE FUND INVEST ITS
ASSETS? -- 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.
The Fund's SAI, dated May 1, 1996, as may be amended from time to time,
includes more information about the Fund's procedures and policies. It
has been filed with the SEC and is incorporated by reference into this
prospectus. For a free copy or a larger print version of this prospectus,
call 1-800/DIAL BEN or write the Fund at the address shown.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY OF THE U.S. GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
TEMPLETON
AMERICAN TRUST, INC.
----------------------------------------------------------
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 Distributors.
----------------------------------------------------------
When reading this prospectus, you will see
certain terms beginning with capital letters.
This means the term is explained
in our glossary section.
<PAGE>
<TABLE>
<S> <C> <C>
TEMPLETON TABLE OF CONTENTS
AMERICAN ABOUT THE FUND
TRUST, INC.
- ----------------------- Expense Summary ........................................ 2
MAY 1, 1996
as amended November 1, Financial Highlights .................................. 4
1996
How does the Fund Invest its Assets? .................. 5
What are the Fund's Potential Risks ................... 10
Who Manages the Fund? ................................. 13
How does the Fund Measure Performance? ................ 16
How is the Fund Organized? ............................ 16
How Taxation Affects You and the Fund ................. 17
ABOUT YOUR ACCOUNT
How Do I Buy Shares? .................................. 18
May I Exchange Shares for Shares of Another Fund? ..... 25
How Do I Sell Shares? ................................. 28
What Distributions Might I Receive from the Fund? ..... 30
Transaction Procedures and Special Requirements ....... 31
Services to Help You Manage Your Account .............. 36
700 Central Avenue
St. Petersburg, Florida GLOSSARY
33701
1-800/DIAL BEN Useful Terms and Definitions .......................... 39
</TABLE>
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Fund. It is based on the historical expenses of each class for the fiscal year
ended December 31, 1995. The Class I expenses are annualized. Your actual
expenses may vary.
<TABLE>
<S> <C> <C> <C>
Class I Class II
A. Shareholder Transaction Expenses(+)
Maximum Sales Charge Imposed on Purchases
(as a percentage of Offering Price) 5.75%(++) 1.00%(+++)
Deferred Sales Charge(++++) NONE 1.00%
Exchange Fee (per transaction) $5.00* $5.00*
B. Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.70% 0.70%
Rule 12b-1 Fees 0.35%** 1.00%**
Other Expenses (audit, legal, business
management, transfer agent and custodian) 0.70% 0.70%
----- -----
Total Fund Operating Expenses 1.75% 2.40%
----- -----
</TABLE>
C. Example
Assume the annual return for each class is 5% and operating expenses are as
described above. For each $1,000 investment, you would pay the following
projected expenses if you sold your shares after the number of years shown.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------
CLASS I $74*** $109 $147 $252
CLASS II $44 $ 84 $137 $281
</TABLE>
For the same Class II investment, you would pay projected expenses of $34
if you did not sell your shares at the end of the first year. Your projected
expenses for the remaining periods would be the same.
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends of each class and are not
directly charged to your account.
(+)If your transaction is processed through your Securities Dealer you may be
charged a fee by your Securities Dealer for this service.
- Templeton American Trust, Inc.
2
<PAGE>
(++)There is no front-end sales charge if you invest $1 million or more in
Class I shares.
(+++)Although Class II has a lower front-end sales charge than Class I, its
Rule 12b-1 fees are higher. Over time you may pay more for Class II shares.
Please see "How Do I Buy Shares? - Deciding Which Class to Buy."
(++++)A Contingent Deferred Sales Charge of 1% may apply to Class I purchases
of $1 million or more if you sell the shares within one year and any Class II
purchase if you sell the shares within 18 months. See "How Do I Sell
Shares? - Contingent Deferred Sales Charge" for details.
*$5.00 fee is only for Market Timers. We process all other exchanges without a
fee.
**The Class I fees are annualized. The actual Rule 12b-1 fees for the eight
month period ended December 31, 1995, were 0.23%. 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 charge
permitted under the NASD's rules.
***Assumes a Contingent Deferred Sales Charge will not apply.
Templeton American Trust, Inc. -
3
<PAGE>
FINANCIAL HIGHLIGHTS
This table summarizes the Fund's financial history. Except for the six months
ended June 30, 1996, the information has been audited by McGladrey & Pullen
LLP, the Fund's independent auditors. Their audit report covering each of the
most recent five years appears in the Fund's Annual Report to Shareholders for
the fiscal year ended December 31, 1995. The Annual Report to Shareholders also
includes more information about the Fund's performance. For a free copy, please
call Fund Information.
CLASS I SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996(1) 1995(2)
<S> <C> <C>
- ----------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of period $14.23 $13.37
------ ------
Income from investment operations:
Net investment income .12 .11
Net realized and unrealized gain 1.12 1.21
------ ------
Total from investment operations 1.24 1.32
------ ------
DISTRIBUTIONS:
Dividends from net investment income -- (.20)
Distributions from net realized gains -- (.26)
------ ------
Total distributions -- (.46)
------ ------
Change in net asset value 1.24 .86
------ ------
Net asset value, end of period $15.47 $14.23
====== ======
TOTAL RETURN* 8.71% 9.94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $1,512 $ 881
Ratio of expenses to average net assets 1.46%** 1.81%**
Ratio of net investment income to average net assets 1.80%** 1.31%**
Portfolio turnover rate -- 4.44%
Average commission rate paid (per share) $.0033
</TABLE>
(1)For the six months ended June 30, 1996.
(2)For the period May 1, 1995 (commencement of sales) through December 31, 1995.
*Total Return does not reflect sales commissions. Not annualized for periods
less than one year.
**Annualized.
- Templeton American Trust, Inc.
4
<PAGE>
CLASS II SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996(1) 1995 1994 1993 1992 1991(2)
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
(For a share outstanding
throughout
the period)
Net asset value, beginning
of period $ 14.25 $ 12.49 $ 13.39 $ 11.77 $ 11.20 $ 10.00
------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income .08 .14 .04 .04 .10 .08
Net realized and
unrealized gain 1.09 2.04 .17 1.82 .83 1.22
------- ------- ------- ------- ------- -------
Total from investment
operations 1.17 2.18 .21 1.86 .93 1.30
------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from net
investment income -- (.14) (.05) (.03) (.11) (.08)
Distributions from net
realized gains -- (.28) (1.06) (.21) (.09) (.02)
Distributions in excess
of realized gains -- -- -- -- (.16) --
------- ------- ------- ------- ------- -------
Total distributions -- (.42) (1.11) (.24) (.36) (.10)
------- ------- ------- ------- ------- -------
Change in net asset value 1.17 1.76 (.90) 1.62 .57 1.20
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 15.42 $ 14.25 $ 12.49 $ 13.39 $ 11.77 $ 11.20
======= ======= ======= ======= ======= =======
TOTAL RETURN* 8.21% 17.55% 1.63% 15.82% 8.33% 13.05%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000) $43,058 $44,183 $37,959 $34,418 $27,485 $13,019
Ratio of expenses to
average net assets 2.17%** 2.40% 2.47% 2.53% 3.17% 3.94%**
Ratio of expenses, net of
reimbursement to average
net assets 2.17%** 2.40% 2.47% 2.53% 2.25% 2.25%
Ratio of net investment
income to average net
assets 1.06% .95% .34% .31% 1.13% 1.64%**
Portfolio turnover rate -- 4.44% 31.92% 14.10% 27.91% 9.86%
Average commission rate
paid (per share) $ .0033
</TABLE>
(1)For the six months ended June 30, 1996.
(2)For the period February 7, 1991 (commencement of operations) to December 31,
1991.
*Total Return does not reflect sales commissions or the contingent deferred
sales charge. Not annualized for periods of less than one year.
**Annualized.
HOW DOES THE FUND INVEST ITS ASSETS?
The Fund's Investment Objective
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
primarily in stocks and debt obligations of U.S. companies. The objective is a
fundamental policy of the Fund and may not be changed without shareholder
approval. Of course, there is no assurance that the Fund's objective will be
achieved.
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
Templeton American Trust, Inc. -
5
<PAGE>
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, and which may include structured
investments). TICI will select equity investments for the Fund on the basis of
fundamental company-by-company analysis (rather than broader analyses of
specific industries or sectors of the economy). Although TICI will consider
historical value measures, such as price/earnings ratios, operating profit
margins and liquidation values, the primary factor in selecting equity
securities will be the company's current price relative to its long-term
earnings potential, as determined by TICI. The percentage of the Fund's assets
to be invested in equity and debt securities will vary from time to time, based
on TICI's assessment of the relative total return potential of various
investment vehicles.
Whenever, in the judgment of TICI, market or economic conditions warrant, the
Fund may, for temporary defensive purposes, invest without limit in money
market securities, denominated in U.S. dollars or in the currency of any foreign
country, issued by entities organized in the U.S. or any foreign country,
consisting of: short-term (less than 12 months to maturity) and medium-term
(not greater than five years to maturity) obligations issued or guaranteed by
the U.S. government or the government of a foreign country, their agencies or
instrumentalities; finance company and corporate commercial paper, and other
short-term corporate obligations, in each case rated Prime-1 by Moody's or A-1
or better by S&P or, if unrated, of comparable quality as determined by TICI;
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 U.S. 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
- Templeton American Trust, Inc.
6
<PAGE>
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 exchange contracts, and futures contracts
and related options, all of which may be classified as derivatives. When deemed
appropriate by TICI, 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 "How does the Fund Invest its Assets?" 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.
Types of Securities in which the Fund May Invest
The Fund is authorized to use the various securities and investment techniques
described below. Although these strategies are regularly used by some investment
companies and other institutional investors in various markets, some of these
strategies cannot at the present time be used to a significant extent by the
Fund in some of the markets in which the Fund may invest and may not be
available for extensive use in the future.
Borrowing. The Fund may borrow up to one-third of the value of its total assets
from banks to increase its holdings of portfolio securities. Under the 1940 Act,
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 or gains received from the securities purchased with borrowed funds.
Templeton American Trust, Inc. -
7
<PAGE>
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 U.S. 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 or lower 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.
Forward Foreign Currency Exchange 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
- Templeton American Trust, Inc.
8
<PAGE>
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 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 "How does
the Fund Invest its Assets - 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.
Templeton American Trust, Inc. -
9
<PAGE>
WHAT ARE THE FUND'S POTENTIAL RISKS?
You 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 in equity
securities may also be reflected in declines in the price of the shares of the
Fund. Changes in the prevailing rates of interest in any of the countries in
which the Fund is invested in fixed income securities will likely affect the
value of such holdings and thus the value of Fund shares. Increased rates of
interest, which frequently accompany inflation and/or a growing economy, are
likely to have a negative effect on the value of Fund shares. In addition,
changes in currency valuations will affect the price of the shares of the Fund.
History reflects both decreases and increases in stock markets and interest
rates in individual countries and throughout the world, and in currency
valuations, and these may recur unpredictably in the future. Additionally,
investment decisions made by TICI will not always be profitable or prove to
have been correct. The Fund is not intended as a complete investment program.
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 U.S. Foreign companies are not
generally subject to uniform accounting or financial reporting standards, and
auditing practices and requirements may not be comparable to
- Templeton American Trust, Inc.
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<PAGE>
those applicable to U.S. companies. The Fund may encounter difficulties or be
unable to vote proxies, exercise shareholder rights, pursue legal remedies, and
obtain judgments in foreign courts.
Brokerage commissions, custodial services, and other costs relating to
investment in foreign countries are generally more expensive than in the U.S.
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 U.S. 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 U.S. 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 "What are the Fund's Potential Risks?" in the SAI.
Prior governmental approval of non-domestic 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
Templeton American Trust, Inc. -
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<PAGE>
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.
As a non-fundamental policy, the Fund will limit its investments in Russian
securities to 5% of its total assets. Russian securities involve additional
significant risks, including political and social uncertainty (for example,
regional conflicts and risk of war), currency exchange rate volatility,
pervasiveness of corruption and crime in the Russian economic system, delays in
settling portfolio transactions and risk of loss arising out of Russia's system
of share registration and custody. For more information on these risks and
other risks associated with Russian securities, please see "What are the Fund's
Potential Risks?" in the SAI.
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 C by S&P, and between Baa and C
by Moody's or, if unrated, are of equivalent investment quality as determined
by TICI. As an operating policy, which may be changed by the Board 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. See "How does the Fund Invest its Assets? - Debt Securities"
in the SAI for descriptions of debt securities rated BBB by S&P and Baa by
Moody's. High-risk, lower quality debt securities, commonly known 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 TICI 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 TICI, the issuer may resume interest payments in the near
future. As a fundamental policy, the
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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 or gains 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 TICI'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 securities 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.
WHO MANAGES THE FUND?
The Board. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations. The
Board also monitors the Fund to ensure no material conflicts exist between the
two classes of shares. While none is expected, the Board will act appropriately
to resolve any material conflict that may arise.
Investment Manager. TICI is the investment manager of the Fund. It is wholly
owned by Resources, a publicly owned company engaged in the financial services
industry through its subsidiaries. Charles B. Johnson and Rupert H. Johnson, Jr.
are the principal shareholders of Resources. TICI and its affiliates serve as
advisers for a wide variety of public investment mutual funds and private
clients throughout the world, with total assets under management of over $148
billion. The Templeton organization has been investing globally since 1940.
TICI and its affiliates have offices in Argentina, Australia, Bahamas, Canada,
France, Germany, Hong Kong, India, Italy, Luxembourg, Poland, Russia, Scotland,
Singapore, South Africa, U.S., and Vietnam.
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Portfolio Management. The lead portfolio manager of the Fund is Peter A. Nori.
Mr. Nori is a vice president of TICI. He holds a BS in finance and an MBA with
an emphasis in finance from the University of San Francisco. He is a Chartered
Financial Analyst and a member of the Association for Investment Management and
Research. Mr. Nori completed Franklin's management training program before
moving into portfolio research in 1990 as an equity analyst and co-portfolio
manager of the Franklin Convertible Securities Fund. As a portfolio manager and
research analyst, Mr. Nori currently manages separate accounts and a variable
annuity product. He has research responsibilities for the steel industry, data
processing/software, textile and apparel stocks, and country coverage of
Austria.
Gary R. Clemons and William T. Howard, Jr. exercise secondary portfolio
management responsibilities for the Fund. Mr. Clemons is a vice president of
TICI. He holds a BS in geology from the University of Nevada - Reno and an MBA
with emphases in finance and investment banking from the University of
Wisconsin - Madison. He joined TICI in 1993. Prior to that time he was a
research analyst at Templeton Quantitative Advisors, Inc. in New York, where he
was also responsible for management of a small capitalization fund. As a
research analyst with Templeton, Mr. Clemons has responsibility for the
telecommunications industries and country coverage of Columbia, Peru, Sweden
and Norway. Mr. Howard is a vice president of TICI. He holds a BA in
international studies from Rhodes College and an MBA in finance from Emory
University. He is a Chartered Financial Analyst and a member of the Financial
Analysts Society. Before joining the Templeton organization in 1993, Mr. Howard
was a portfolio manager and analyst with the Tennessee Consolidated Retirement
System in Nashville, Tennessee, where he was responsible for research and
management of the international equity portfolio, and specialized in the
Japanese equity market. As a portfolio manager and research analyst with
Templeton, Mr. Howard's research responsibilities include the transportation,
shipping, machinery and engineering industries worldwide. He is also
responsible for country coverage of both Japan and New Zealand.
Services Provided by TICI and TGII. TICI manages the Fund's assets and makes
its investment decisions. TGII, the Fund's business manager, provides certain
administrative facilities and services for the Fund. Please see "Investment
Management and Other Services" and "Miscellaneous Information" in the SAI for
information on securities transactions and a summary of the Fund's Code of
Ethics.
Investment Management and Business Management Fees. For the fiscal year ended
December 31, 1995 the Fund paid 0.70% of its average daily net assets in
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<PAGE>
investment management fees and paid 0.15% of its average daily net assets in
business management fees.
Expenses. For the fiscal year ended December 31, 1995, the total fund operating
expenses were 1.81% (annualized) and 2.40% of average daily net assets of Class
I shares and Class II shares, respectively.
Portfolio Transactions. TICI tries to obtain the best execution on all
transactions. If TICI believes more than one broker or dealer can provide the
best execution, it may consider research and related services and the sale of
Fund shares when selecting a broker or dealer. Please see "How Does the Fund
Buy Securities For its Portfolio?" in the SAI for more information.
The Rule 12b-1 Plans
Each class has a distribution plan or "Rule 12b-1 Plan" under which it may
reimburse Distributors or others for activities primarily intended to sell
shares of the class. These expenses may include, among others, distribution or
service fees paid to Securities Dealers or others who have executed a servicing
agreement with the Fund, Distributors or its affiliates, printing prospectuses
and reports used for sales purposes, preparing and distributing sales
literature and advertisements, and a prorated portion of Distributors' overhead
expenses.
Payments by the Fund under the Class I plan may not exceed 0.35% per year of
Class I's average daily net assets. Under the plan, costs and expenses not
reimbursed in any quarter (including costs and expenses not reimbursed because
they exceed the applicable limit of the plan) may be reimbursed in subsequent
quarters or years. Distributors has informed the Fund that it had no
unreimbursed expenses under the Class I plan at December 31, 1995. During the
first year after certain Class I purchases made without a sales charge,
Distributors may keep the Rule 12b-1 fees associated with the purchase.
Under the Class II plan, the Fund may pay Distributors up to 0.75% per year of
Class II's average daily net assets to pay Distributors or others for providing
distribution and related services and bearing certain Class II expenses. All
distribution expenses over this amount will be borne by those who have incurred
them. During the first year following the purchase of Class II shares for
shares purchased on or after May 1, 1995, and until May 1, 1997 for Class II
shares purchased before May 1, 1995, Distributors will retain 0.75% per annum
of Class II's average daily net assets to partially recoup fees Distributors
pays to securities dealers.
The Fund may also pay a servicing fee of up to 0.25% per year of Class II's
average daily net assets under the Class II plan. This fee may be used to pay
Templeton American Trust, Inc. -
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<PAGE>
Securities Dealers or others for, among other things, helping to establish and
maintain customer accounts and records, helping with requests to buy and sell
shares, receiving and answering correspondence, monitoring dividend payments
from the Fund on behalf of customers, and similar servicing and account
maintenance activities.
The Rule 12b-1 fees charged to each class are based only on the fees
attributable to that particular class. For more information, please see "The
Fund's Underwriter" in the SAI.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, each class of the Fund advertises its performance. The more
commonly used measures of performance are total return, current yield and
current distribution rate. Performance figures are usually calculated using the
maximum sales charge, but certain figures may not include the sales charge.
Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested. Current yield for each
class shows the income per share earned by that class. The current distribution
rate shows the dividends or distributions paid to shareholders of a class. This
rate is usually computed by annualizing the dividends paid per share during a
certain period and dividing that amount by the current Offering Price of the
class. Unlike current yield, the current distribution rate may include income
distributions from sources other than dividends and interest received by the
Fund.
The investment results of each class will vary. Performance figures are always
based on past performance and do not indicate future results. For a more
detailed description of how the Fund calculates its performance figures, please
see "How does the Fund Measure Performance?" in the SAI.
HOW IS THE FUND ORGANIZED?
The Fund is a diversified, open-end management investment company, commonly
called a mutual fund. It was organized as a Maryland corporation on October 31,
1990, and is registered with the SEC under the 1940 Act. The Fund began
offering two classes of shares on May 1, 1995: Templeton American Trust,
Inc. - Class I and Templeton American Trust, Inc. - Class II. All shares
purchased before that time are considered Class II shares. Additional classes
of shares may be offered in the future.
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
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the Fund for matters that affect the Fund as a whole. For matters that only
affect one class, however, only shareholders of that class may vote. Each class
will vote separately on matters (1) affecting only that class, (2) expressly
required to be voted on separately by state corporation law, or (3) required to
be voted on separately by the 1940 Act.
The Fund has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the members of the Board. If
this happens, holders of the remaining shares voting will not be able to elect
anyone to the Board.
The Fund does not intend to hold annual shareholder meetings. It may hold a
special meeting, however, for matters requiring shareholder approval under the
1940 Act. The Fund will call a special meeting of shareholders for the purpose
of considering the removal of a Board member if requested in writing to do so
by shareholders holding at least 10% of the outstanding shares. The 1940 Act
requires that we help you communicate with other shareholders in connection
with removing members of the Board.
HOW TAXATION AFFECTS YOU AND THE FUND
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
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 to shareholders substantially all of its net investment income and
realized capital gains, which generally will be taxable income or capital gains
in their hands. Distributions declared in October, November or December to
shareholders of record on a date in such month and paid during the following
January will be treated as having been received by shareholders on December 31
in the year such distributions were declared. The Fund will inform you each year
of the amount and nature of such income or gains. Sales or other dispositions of
Fund shares generally will give rise to taxable gain or loss.
Templeton American Trust, Inc. -
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<PAGE>
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
Opening Your Account
To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check. PLEASE INDICATE WHICH CLASS OF SHARES YOU WANT TO BUY. IF YOU DO NOT
SPECIFY A CLASS, YOUR PURCHASE WILL BE AUTOMATICALLY INVESTED IN CLASS I SHARES.
<TABLE>
<CAPTION>
MINIMUM
INVESTMENTS*
<S> <C>
- --------------------------------------
To Open Your Account... $100
To Add to Your
Account.............. $ 25
</TABLE>
*We may waive these minimums for retirement plans. We may also refuse any order
to buy shares.
Deciding Which Class to Buy
You should consider a number of factors when deciding which class of shares to
buy. IF YOU PLAN TO BUY $1 MILLION OR MORE IN A SINGLE PAYMENT OR YOU QUALIFY
TO BUY CLASS I SHARES WITHOUT A SALES CHARGE, YOU MAY NOT BUY CLASS II SHARES.
Generally, you should consider buying Class I shares if:
- - you expect to invest in the Fund over the long term;
- - you qualify to buy Class I shares at a reduced sales charge; or
- - you plan to buy $1 million or more over time.
You should consider Class II shares if:
- - you expect to invest less than $50,000 in the Franklin Templeton Funds; and
- - you plan to sell a substantial number of your shares within approximately six
years or less of your investment.
Class I shares are generally more attractive for long-term investors because of
Class II's higher Rule 12b-1 fees. These may accumulate over time to outweigh
the lower Class II front-end sales charge and result in lower income dividends
for Class II shareholders. If you qualify to buy Class I shares at a reduced
sales charge based upon the size of your purchase or through our Letter of
Intent or cumulative quantity discount programs, but plan to hold your shares
less than
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<PAGE>
approximately six years, you should evaluate whether it is more economical for
you to buy Class I or Class II shares.
For purchases of $1 million or more, it is considered more beneficial for you to
buy Class I shares since there is no front-end sales charge, even though these
purchases may be subject to a Contingent Deferred Sales Charge. Any purchase of
$1 million or more is therefore automatically invested in Class I shares. You
may accumulate more than $1 million in Class II shares through purchases over
time, but if you plan to do this you should determine whether it would be more
beneficial for you to buy Class I shares through a Letter of Intent.
Please consider all of these factors before deciding which class of shares to
buy. There are no conversion features attached to either class of shares.
Purchase Price of Fund Shares
For Class I shares, the sales charge you pay depends on the dollar amount you
invest, as shown in the table below. The sales charge for Class II shares is 1%
and, unlike Class I, does not vary based on the size of your purchase.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
AT A PERCENTAGE OF AMOUNT PAID
--------------------- TO DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
CLASS I
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 None
CLASS II
UNDER $1,000,000*.................. 1.00% 1.01% 1.00%
</TABLE>
*A Contingent Deferred Sales Charge of 1% may apply to Class I purchases of $1
million or more and any Class II purchase. Please see "How Do I Sell
Shares? - Contingent Deferred Sales Charge." Please also see "Other Payments to
Securities Dealers" below for a discussion of payments Distributors may make
out of its own resources to Securities Dealers for certain purchases. Purchases
of Class II shares are limited to purchases below $1 million. Please see
"Deciding Which Class to Buy."
Sales Charge Reductions and Waivers
If you qualify to buy shares under one of the sales charge reduction or waiver
categories described below, please include a written statement with each
purchase order explaining which privilege applies. If you don't include this
Templeton American Trust, Inc. -
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<PAGE>
statement, we cannot guarantee that you will receive the sales charge reduction
or waiver.
Cumulative Quantity Discounts - Class I Only. To determine if you may pay a
reduced sales charge, the amount of your current Class I purchase is added to
the cost or current value, whichever is higher, of your Class I and Class II
shares in other Franklin Templeton Funds, as well as those of your spouse,
children under the age of 21 and grandchildren under the age of 21. If you are
the sole owner of a company, you may also add any company accounts, including
retirement plan accounts. Companies with one or more retirement plans may add
together the total plan assets invested in the Franklin Templeton Funds to
determine the sales charge that applies.
Letter of Intent - Class I Only. You may buy Class I shares at a reduced sales
charge by completing the Letter of Intent section of the shareholder
application. A Letter of Intent is a commitment by you to invest a specified
dollar amount during a 13 month period. The amount you agree to invest
determines the sales charge you pay on Class I shares.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
- - You authorize Distributors to reserve 5% of your total intended purchase in
Class I shares registered in your name until you fulfill your Letter.
- - You give Distributors a security interest in the reserved shares and appoint
Distributors as attorney-in-fact.
- - Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
- - Although you may exchange your shares, you may not sell reserved shares until
you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct. Our policy of reserving shares does not apply to
certain retirement plans.
If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? - Letter of Intent" in the SAI or
call Shareholder Services.
Group Purchases - Class I Only. If you are a member of a qualified group, you
may buy Class I shares at the reduced sales charge that applies to the group as
a
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<PAGE>
whole. The sales charge is based on the combined dollar value of the group
members' existing investments, plus the amount of the current purchase.
A qualified group is one that:
- - Was formed at least six months ago,
- - Has a purpose other than buying Fund shares at a discount,
- - Has more than 10 members,
- - Can arrange for meetings between our representatives and group members,
- - Agrees to include sales and other Franklin Templeton Fund materials in
publications and mailings to its members at reduced or no cost to
Distributors,
- - Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and
- - Meets other uniform criteria that allow Distributors to achieve cost savings
in distributing shares.
Sales Charge Waivers. The Fund's sales charges (front-end and contingent
deferred) will not apply to certain purchases. For waiver categories 1, 2 or 3
below: (i) the distributions or payments must be reinvested within 365 days of
their payment date, and (ii) Class II distributions may be reinvested in either
Class I or Class II shares. Class I distributions may only be reinvested in
Class I shares.
The Fund's sales charges will not apply if you are buying Class I shares with
money from the following sources or Class II shares with money from the sources
in waiver categories 1 or 4:
1. Dividend and capital gain distributions from any Franklin Templeton Fund
or a REIT sponsored or advised by Franklin Properties, Inc.
2. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds
3. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment
option the Franklin Valuemark Funds, the Templeton Variable Annuity Fund,
the Templeton Variable Products Series Fund, or the Franklin Government
Securities Trust. You should contact your tax advisor for information on
any tax consequences that may apply.
Templeton American Trust, Inc. -
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<PAGE>
4. Redemptions from any Franklin Templeton Fund if you:
- Originally paid a sales charge on the shares,
- Reinvest the money within 365 days of the redemption date, and
- Reinvest the money in the same class of shares.
An exchange is not considered a redemption for this privilege. The Contingent
Deferred Sales Charge will not be waived if the shares reinvested were subject
to a Contingent Deferred Sales Charge when sold. We will credit your account in
shares, at the current value, in proportion to the amount reinvested for any
Contingent Deferred Sales Charge paid in connection with the earlier
redemption, but a new Contingency Period will begin.
If you immediately placed your redemption proceeds in a Franklin Bank CD, you
may reinvest them as described above. The proceeds must be reinvested within
365 days from the date the CD matures, including any rollover.
5. Redemptions from other mutual funds
If you sold shares of a fund that is not a Franklin Templeton Fund within
the past 60 days, you may invest the proceeds without any sales charge if
(a) the investment objectives were similar to the Fund's, and (b) your
shares in that fund were subject to any front-end or contingent deferred
sales charges at the time of purchase. You must provide a copy of the
statement showing your redemption.
The Fund's sales charges will also not apply to Class I purchases by:
6. Trust companies and bank trust departments agreeing to invest in Franklin
Templeton Funds over a thirteen month period at least $1 million of assets
held in a fiduciary, agency, advisory, custodial or similar capacity and
over which the trust companies and bank trust departments or other plan
fiduciaries or participants, in the case of certain retirement plans, have
full or shared investment discretion. We will accept orders for these
accounts 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 the order.
7. Group annuity separate accounts offered to retirement plans
8. Retirement plans that (i) are sponsored by an employer with at least 100
employees, (ii) have plan assets of $1 million or more, or (iii) agree to
invest at least $500,000 in the Franklin Templeton Funds over a 13 month
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<PAGE>
period. Retirement plans that are not Qualified Retirement Plans or SEPS,
such as 403(b) or 457 plans, must also meet the requirements described
under "Group Purchases - Class I Only" above. However, any Qualified or
non-Qualified Retirement Plan account which was a shareholder in the Fund
on or before February 1, 1995, and which does not meet the other
requirements of this section, may purchase shares subject to a sales charge
of 4% of the Offering Price, 3.2% of which will be retained by Securities
Dealers.
9. An Eligible Governmental Authority. Please consult your legal and
investment advisors to determine if an investment in the Fund is
permissible and suitable for you and the effect, if any, of payments by the
Fund on arbitrage rebate calculations.
10. Broker-dealers, registered investment advisors or certified financial
planners, who have entered into a supplemental agreement with Distributors
for clients participating in comprehensive fee programs
11. Registered Securities Dealers and their affiliates, for their investment
accounts only
12. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer
13. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies
14. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer
15. Accounts managed by the Franklin Templeton Group
16. Certain unit investment trusts and their holders reinvesting distributions
from the trusts
How Do I Buy Shares in Connection with Retirement Plans?
Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need an
application other than the one included in this prospectus. For a
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<PAGE>
retirement plan brochure or application, please call our Retirement Plans
Department.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
Other Payments to Securities Dealers
The payments below apply to Securities Dealers who initiate and are responsible
for Class II purchases and certain Class I purchases made without a sales
charge. A Securities Dealer may only receive one of these payments for each
qualifying purchase. Securities Dealers who receive payments under items 1, 2
or 3 below will earn the Rule 12b-1 fee associated with the purchase starting
in the thirteenth calendar month after the purchase. The payments described
below are paid by Distributors or one of its affiliates, at its own expense,
and not by the Fund or its shareholders.
1. Securities Dealers may receive up to 1% of the purchase price for Class II
purchases.
2. Securities Dealers will receive up to 1% of the purchase price for Class I
purchases of $1 million or more.
3. Securities Dealers may, in the sole discretion of Distributors, receive up
to 1% of the purchase price for Class I purchases made under waiver category
8 above.
4. Securities Dealers may receive up to 0.25% of the purchase price for Class I
purchases made under waiver categories 6 and 9 above.
PLEASE SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES - OTHER PAYMENTS TO
SECURITIES DEALERS" IN THE SAI FOR ANY BREAKPOINTS THAT MAY APPLY.
Securities Dealers may receive additional compensation from Distributors or an
affiliated company in connection with selling shares of the Franklin Templeton
Funds. Compensation may include financial assistance for conferences,
shareholder services, automation, sales or training programs, or promotional
activities. Registered representatives and their families may be reimbursed for
travel expenses, including lodging, in connection with business meetings or
seminars. In some cases, this compensation may only be available to Securities
Dealers whose representatives have sold or are expected to sell significant
amounts of shares. Securities Dealers may not use sales of the Fund's shares to
qualify for this compensation if prohibited by the laws of any state or
self-regulatory agency, such as the NASD.
- Templeton American Trust, Inc.
24
<PAGE>
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
If you own Class I shares, you may exchange into any of our money funds except
Franklin Templeton Money Fund II ("Money Fund II"). Money Fund II is the only
money fund exchange option available to Class II shareholders. Unlike our other
money funds, shares of Money Fund II may not be purchased directly and no
drafts (checks) may be written on Money Fund II accounts.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund and its rules and
requirements for exchanges. For example, some Franklin Templeton Funds do not
accept exchanges and others may have different investment minimums. Some
Franklin Templeton Funds do not offer Class II shares.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
<S> <C>
- ----------------------------------------------------------------------
BY MAIL 1. Send us written instructions signed by all
account owners
2. Include any outstanding share certificates
for the shares you're exchanging
- ----------------------------------------------------------------------
BY PHONE Call Shareholder Services or TeleFACTS(R)
If you do not want the ability to exchange by
phone to apply to your account, please let us
know.
- ----------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ----------------------------------------------------------------------
</TABLE>
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
Will Sales Charges Apply to My Exchange?
You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable sales
charge of the new fund. If you have never paid a sales charge on your shares
because, for example, they have always been held in a money fund, you will pay
the Fund's applicable sales charge no matter how long you have held your
shares. These charges may not apply if you qualify to buy shares without a sales
charge.
Templeton American Trust, Inc. -
25
<PAGE>
We will not impose a Contingent Deferred Sales Charge when you exchange shares.
Any shares subject to a Contingent Deferred Sales Charge at the time of
exchange, however, will remain so in the new fund. See the discussion on
Contingent Deferred Sales Charges below and under "How Do I Sell Shares?"
Contingent Deferred Sales Charge - Class I. For accounts with Class I shares
subject to a Contingent Deferred Sales Charge, shares are exchanged into the
new fund in the order they were purchased. If you exchange Class I shares into
one of our money funds, the time your shares are held in that fund will not
count towards the completion of any Contingency Period.
Contingent Deferred Sales Charge - Class II. For accounts with Class II shares
subject to a Contingent Deferred Sales Charge, shares are exchanged into the
new fund proportionately based on the amount of shares subject to a Contingent
Deferred Sales Charge and the length of time the shares have been held. For
example, suppose you own $1,000 in shares that have never been subject to a
Contingent Deferred Sales Charge, such as shares from the reinvestment of
dividends and capital gains ("free shares"), $2,000 in shares that are no longer
subject to a Contingent Deferred Sales Charge because you have held them for
longer than 18 months ("matured shares"), and $3,000 in shares that are still
subject to a Contingent Deferred Sales Charge ("CDSC liable shares"). If you
exchange $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.
Likewise, CDSC liable shares purchased at different times will be exchanged into
a new fund proportionately. For example, assume you purchased $1,000 in shares
3 months ago, 6 months ago, and 9 months ago. If you exchange $1,500 into a new
fund, $500 will be exchanged from shares purchased at each of these three
different times.
While Class II shares are exchanged proportionately, they are redeemed in the
order purchased. In some cases, this means exchanged shares may be CDSC liable
even though they would not be subject to a Contingent Deferred Sales Charge if
they were sold. We believe the proportional method of exchanging Class II
shares more closely reflects the expectations of Class II shareholders if
shares are sold during the Contingency Period. The tax consequences of a sale or
exchange are determined by the Code and not by the method used by the Fund to
transfer shares.
If you exchange your Class II shares for shares of Money Fund II, the time your
shares are held in that fund will count towards the completion of any
Contingency Period.
- Templeton American Trust, Inc.
26
<PAGE>
Exchange Restrictions
Please be aware that the following restrictions apply to exchanges:
- - You may only exchange shares within the SAME CLASS.
- - The accounts must be identically registered. You may exchange shares from a
Fund account requiring two or more signatures into an identically registered
money fund account requiring only one signature for all transactions. Please
notify us in writing if you do not want this option to be available on your
account(s). Additional procedures may apply. Please see "Transaction
Procedures and Special Requirements."
- - Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact our Retirement Plans Department for information on exchanges
within these plans.
- - The fund you are exchanging into must be eligible for sale in your state.
- - We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
- - Your exchange may be restricted or refused if you: (i) request an exchange out
of the Fund within two weeks of an earlier exchange request, (ii) exchange
shares out of the Fund more than twice in a calendar quarter, or (iii)
exchange shares equal to at least $5 million, or more than 1% of the Fund's
net assets. Shares under common ownership or control are combined for these
limits. If you exchange shares as described in this paragraph, you will be
considered a Market Timer. Each exchange by a Market Timer, if accepted, will
be charged $5.00. Some of our funds do not allow investments by Market Timers.
Because excessive trading can hurt Fund performance and shareholders, we may
refuse any exchange purchase if (i) we believe the Fund would be harmed or
unable to invest effectively, or (ii) the Fund receives or anticipates
simultaneous orders that may significantly affect the Fund.
Templeton American Trust, Inc. -
27
<PAGE>
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
<S> <C>
- ----------------------------------------------------------------------
BY MAIL 1. Send us written instructions signed by all
account owners
2. Include any outstanding share certificates
for the shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts
may need to send additional documents.
Accounts under court jurisdiction may have
additional requirements.
- ----------------------------------------------------------------------
BY PHONE Call Shareholder Services
(Only available if you have completed and sent to us the telephone
redemption agreement included with this prospectus)
Telephone requests will be accepted:
- If the request is $50,000 or less.
Institutional accounts may exceed $50,000 by
completing a separate agreement. Call
Institutional Services to receive a copy.
- If there are no share certificates issued
for the shares you want to sell or you have
already returned them to the Fund
- Unless you are selling shares in a Trust
Company retirement plan account
- Unless the address on your account was
changed by phone within the last 30 days
- ----------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ----------------------------------------------------------------------
</TABLE>
We will send your redemption check within seven days after we receive your
request in proper form. If you sell your shares by phone, the check may only be
made payable to all registered owners on the account and sent to the address of
record. We are not able to receive or pay out cash in the form of currency.
If you sell shares you just purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
- Templeton American Trust, Inc.
28
<PAGE>
Trust Company Retirement Plan Accounts
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call our Retirement Plans Department.
Contingent Deferred Sales Charge
For Class I purchases, if you did not pay a front-end sales charge because you
invested $1 million or more or agreed to invest $1 million or more under a
Letter of Intent, a Contingent Deferred Sales Charge may apply if you sell all
or a part of your investment within the Contingency Period. Once you have
invested $1 million or more, any additional Class I investments you make
without a sales charge may also be subject to a Contingent Deferred Sales
Charge if they are sold within the Contingency Period. The charge is 1% of the
value of the shares sold or the Net Asset Value at the time of purchase,
whichever is less.
We will first redeem shares not subject to the charge in the following order:
1) A calculated number of shares equal to the capital appreciation on shares
held less than the Contingency Period,
2) Shares purchased with reinvested dividends and capital gain distributions,
and
3) Shares held longer than the Contingency Period.
We then redeem shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated NUMBER OF SHARES, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.
Waivers. We waive the Contingent Deferred Sales Charge for:
- - Exchanges
- - Account fees
- - Sales of shares purchased pursuant to a sales charge waiver
- - Redemptions by the Fund when an account falls below the minimum required
account size
- - Redemptions following the death of the shareholder or beneficial owner
Templeton American Trust, Inc. -
29
<PAGE>
- - Redemptions through a systematic withdrawal plan set up before February 1,
1995
- - Redemptions through a systematic withdrawal plan set up on or after February
1, 1995, up to 1% a month of an account's Net Asset Value (3% quarterly, 6%
semiannually or 12% annually). For example, if you maintain an annual balance
of $1 million in Class I shares, you can withdraw up to $120,000 annually
through a systematic withdrawal plan free of charge. Likewise, if you
maintain an annual balance of $10,000 in Class II shares, $1,200 may be
withdrawn annually free of charge.
- - Distributions from individual retirement plan accounts due to death or
disability or upon periodic distributions based on life expectancy
- - Tax-free returns of excess contributions from employee benefit plans
- - Distributions from employee benefit plans, including those due to termination
or plan transfer
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
Dividends and capital gains are calculated and distributed the same way for each
class. The amount of any income dividends per share will differ, however,
generally due to the difference in the Rule 12b-1 fees of each class.
The Fund intends to pay a dividend at least annually representing substantially
all of its net investment income and any net realized capital gains. Dividend
payments are not guaranteed, are subject to the Board's discretion and may vary
with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY FIXED RATE
OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution.
Distribution Options
You may receive your distributions from the Fund in any of these ways:
1. Buy additional shares of the Fund - You may buy additional shares of the same
class of the Fund (without a sales charge or imposition of a Contingent Deferred
Sales Charge) by reinvesting capital gain distributions, dividend
distributions, or both. If you own Class II shares, you may also reinvest your
distributions in Class I shares of the Fund. This is a convenient way to
accumulate additional shares and maintain or increase your earnings base.
- Templeton American Trust, Inc.
30
<PAGE>
2. Buy shares of other Franklin Templeton Funds - You may direct your
distributions to buy the same class of shares of another Franklin Templeton
Fund (without a sales charge or imposition of a Contingent Deferred Sales
Charge). If you own Class II shares, you may also direct your distributions to
buy Class I shares of another Franklin Templeton Fund. Many shareholders find
this a convenient way to diversify their investments.
3. Receive distributions in cash - You may receive capital gain distributions,
dividend distributions, or both in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee.
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE THE SHAREHOLDER APPLICATION
INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT REPRESENTATIVE WHICH
OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL AUTOMATICALLY
REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE SAME CLASS OF THE FUND.
For Trust Company retirement plans, special forms are required to receive
distributions in cash. You may change your distribution option at any time by
notifying us by mail or phone. Please allow at least seven days prior to the
record date for us to process the new option.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
How and When Shares Are Priced
The Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share of each class as of the scheduled close of the NYSE,
generally 4:00 p.m. Eastern time. You can find the prior day's closing Net Asset
Value and Offering Price for each class in many newspapers.
The Net Asset Value of all outstanding shares of each class is calculated on a
pro rata basis. It is based on each class' proportionate participation in the
Fund, determined by the value of the shares of each class. Each class, however,
bears the Rule 12b-1 fees payable under its Rule 12b-1 plan. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. The Fund's assets are
valued as described under "How Are Fund Shares Valued?" in the SAI.
The Price We Use When You Buy or Sell Shares
You buy shares at the Offering Price of the class you wish to purchase, unless
you qualify to buy shares at a reduced sales charge or with no sales charge. The
Offering Price of each class is based on the Net Asset Value per share of the
Templeton American Trust, Inc. -
31
<PAGE>
class and includes the maximum sales charge. We calculate it to two decimal
places using standard rounding criteria. You sell shares at Net Asset Value.
We will use the Net Asset Value next calculated after we receive your
transaction request in proper form. If you buy or sell shares through your
Securities Dealer, however, we will use the Net Asset Value next calculated
after your Securities Dealer receives your request, which is promptly
transmitted to the Fund. Your redemption proceeds will not earn interest
between the time we receive the order from your dealer and the time we receive
any required documents.
Proper Form
An order to buy shares is in proper form when we receive your signed
shareholder application and check. Written requests to sell or exchange shares
are in proper form when we receive written instructions signed by all registered
owners, with a signature guarantee if necessary. We must also receive any
outstanding share certificates for those shares.
Written Instructions
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
- - Your name,
- - The Fund's name,
- - The class of shares,
- - A description of the request,
- - For exchanges, the name of the fund you're exchanging into,
- - Your account number,
- - The dollar amount or number of shares, and
- - A telephone number where we may reach you during the day, or in the evening
if preferred.
Signature Guarantees
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
- Templeton American Trust, Inc.
32
<PAGE>
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature and may be
obtained from certain banks, brokers or other eligible guarantors. YOU SHOULD
VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR PRIOR TO SIGNING. A
NOTARIZED SIGNATURE IS NOT SUFFICIENT.
Share Certificates
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate
is lost, stolen or destroyed, you may have to pay an insurance premium of up to
2% of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form. In this case, you should send the certificate and assignment
form in separate envelopes.
Telephone Transactions
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
We may only be liable for losses resulting from unauthorized telephone
transactions if we do not follow reasonable procedures designed to verify the
identity of the caller. When you call, we will request personal or other
identifying information, and will also record calls. For your protection, we may
delay a transaction or not implement one if we are not reasonably satisfied that
telephone instructions are genuine. If this occurs, we will not be liable for
any loss.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send written
Templeton American Trust, Inc. -
33
<PAGE>
instructions to us, as described elsewhere in this prospectus. If you are
unable to execute a transaction by telephone, we will not be liable for any
loss.
Trust Company Retirement Plan Accounts. You may not sell shares or change
distribution options on Trust Company retirement plans by phone. While you may
exchange shares of Trust Company IRA and 403(b) retirement accounts by phone,
certain restrictions may be imposed on other retirement plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call our Retirement Plans Department.
Account Registrations and Required Documents
When you open an account, you need to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
Joint Ownership. If you open an account with two or more owners, we register
the account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or
more owners, all owners must sign instructions to process transactions and
changes to the account. Even if the law in your state says otherwise, you will
not be able to change owners on the account unless all owners agree in writing.
If you would like another person or owner to sign for you, please send us a
current power of attorney.
Gifts and Transfers to Minors. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
Trusts. If you register your account as a trust, you should have a valid written
trust document to avoid future disputes or possible court action over who owns
the account.
Required Documents. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
- Templeton American Trust, Inc.
34
<PAGE>
<TABLE>
<CAPTION>
TYPE OF ACCOUNT DOCUMENTS REQUIRED
<S> <C>
- -----------------------------------------------------------------------
CORPORATION Corporate Resolution
- -----------------------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement that
identify the general partners, or
2. A certification for a partnership agreement
- -----------------------------------------------------------------------
TRUST 1. The pages from the trust document that
identify the trustees, or
2. A certification for trust
- -----------------------------------------------------------------------
</TABLE>
Street or Nominee Accounts. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both
dealers must have an agreement with Distributors or we will not process the
transfer. Contact your Securities Dealer to initiate the transfer. We will
process the transfer after we receive authorization in proper form from your
delivering Securities Dealer. Accounts may be transferred electronically
through the NSCC. For accounts registered in street or nominee name, we may
take instructions directly from the Securities Dealer or your nominee.
Electronic Instructions. If there is a Securities Dealer or other
representative of record on your account, we are authorized to use and execute
electronic instructions. We can accept electronic instructions directly from
your dealer or representative without further inquiry. Electronic instructions
may be processed through the services of the NSCC, which currently include the
NSCC's "Networking," "Fund/SERV," and "ACATS" systems, or through Franklin/
Templeton's PCTrades II(TM) System.
Tax Identification Number
For tax reasons, we must have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete
Templeton American Trust, Inc. -
35
<PAGE>
an "awaiting TIN" certification, we must receive a correct tax identification
number within 60 days of your initial purchase to keep your account open.
Keeping Your Account Open
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
Automatic Investment Plan
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the account application included with this
prospectus or contact your investment representative. The market value of the
Fund's shares may fluctuate and a systematic investment plan such as this will
not assure a profit or protect against a loss. You may discontinue the program
at any time by notifying Investor Services by mail or phone.
Systematic Withdrawal Plan
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum
payment amount for each withdrawal must be at least $50. For retirement plans
subject to mandatory distribution requirements, the $50 minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account.
- Templeton American Trust, Inc.
36
<PAGE>
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
Because of the front-end sales charge, you may not want to set up a systematic
withdrawal plan if you plan to buy shares on a regular basis. Shares sold under
the plan may also be subject to a Contingent Deferred Sales Charge. Please see
"Contingent Deferred Sales Charge" under "How Do I Sell Shares?"
You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us in
writing at least seven business days before the end of the month preceding a
scheduled payment. Please see "How Do I Buy, Sell and Exchange Shares? -
Systematic Withdrawal Plan" in the SAI for more information.
TeleFACTS(R)
From a touch-tone phone, you may call our TeleFACTS system (day or night) at
1-800/247-1753 to:
- - obtain information about your account;
- - obtain price and performance information about any Franklin Templeton Fund;
- - exchange shares between identically registered Franklin accounts; and
- - request duplicate statements and deposit slips for Franklin accounts.
You will need the code number for each class to use TeleFACTS. The code numbers
for Class I and Class II are 100 and 200, respectively.
Statements and Reports to Shareholders
We will send you the following statements and reports on a regular basis:
- - Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
- - Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports or an interim quarterly
report.
Templeton American Trust, Inc. -
37
<PAGE>
Institutional Accounts
Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. For further information, call Institutional
Services.
Availability of These Services
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
What If I Have Questions About My Account?
If you have any questions about your account, you may write to Investor
Services, P.O. Box 33030, St. Petersburg, FL 33733-8030. The Fund and
Distributors are also located at this address. You may also contact us by phone
at one of the numbers listed below.
<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN
TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
<S> <C> <C>
- ------------------------------------------------------------------------
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
(1-800/342-5236) 11:30 a.m. to 8:00 p.m.
(Saturday)
Retirement Plans 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
- Templeton American Trust, Inc.
38
<PAGE>
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1940 Act - Investment Company Act of 1940, as amended
Board - The Board of Directors of the Fund
CD - Certificate of deposit
Class I and Class II - The Fund offers two classes of shares, designated "Class
I" and "Class II." The two classes have proportionate interests in the Fund's
portfolio. They differ, however, primarily in their sales charge structures and
12b-1 plans.
Code - Internal Revenue Code of 1986, as amended
Contingency Period - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the
contingency period is 18 months. Regardless of when during the month you
purchased shares, they will age one month on the last day of that month and
each following month.
Contingent Deferred Sales Charge (CDSC) - A sales charge of 1% that may apply
if you sell your shares within the Contingency Period.
Distributors - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Directors."
Eligible Governmental Authority - any state or local government or any
instrumentality, department, authority or agency thereof that has determined
the Fund is a legally permissible investment and that can only buy shares of
the Fund without paying sales charges.
Franklin Funds - the mutual funds in the Franklin Group of Funds(R) except
Franklin Valuemark Funds and the Franklin Government Securities Trust
Franklin Templeton Funds - the Franklin Funds and the Templeton Funds
Franklin Templeton Group - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
Investor Services - Franklin/Templeton Investor Services, Inc., the Fund's
transfer agent and shareholder servicing agent
IRS - Internal Revenue Service
Templeton American Trust, Inc. -
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<PAGE>
Letter - Letter of Intent
Market Timer(s) - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.
Moody's - Moody's Investors Service, Inc.
NASD - National Association of Securities Dealers, Inc.
Net Asset Value (NAV) - the value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by
the number of shares outstanding.
NSCC - National Securities Clearing Corporation
NYSE - New York Stock Exchange, Inc.
Offering Price - The public offering price is based on the Net Asset Value per
share of the class and includes the frontend sales charge. The maximum front-
end sales charge is 5.75% for Class I and 1% for Class II.
Qualified Retirement Plan(s) - an employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
REIT - Real Estate Investment Trust
Resources - Franklin Resources, Inc.
SAI - Statement of Additional Information
S&P - Standard & Poor's Corporation
SEC - U.S. Securities and Exchange Commission
Securities Dealer - a financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
SEP - an employer sponsored simplified employee pension plan established under
section 408(k) of the Code
TeleFACTS(R) - Franklin Templeton's automated customer servicing system
- Templeton American Trust, Inc.
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<PAGE>
Templeton Funds - the U.S. registered mutual funds in the Templeton Group of
Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund
TGII - Templeton Global Investors, Inc., the Fund's business manager
TICI - Templeton Investment Counsel, Inc., the Fund's investment manager, is
located at Broward Financial Centre, Fort Lauderdale, FL 33394-3091.
Trust Company - Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. - United States
We/Our/Us - Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
Templeton American Trust, Inc. -
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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 IRS.
Obtaining a Number. If you do not have a Social Security Number/Taxpayer
Identification Number or you do not know your 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 EMPLOYER ID # OF
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
- -Individual Individual -Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- -------------------------------------------------------------------------------
- -Joint Individual Owner who will -Corporation, Corporation,
be paying tax Partnership, or Partnership, or
or first-named other organization other organization
individual
- -------------------------------------------------------------------------------
- -Unif. Gift/ Minor -Broker nominee Broker nominee
Transfer to Minor
- -------------------------------------------------------------------------------
- -Sole Proprietor Owner of
business
- -------------------------------------------------------------------------------
- -Legal Guardian Ward, Minor,
or Incompetent
- -------------------------------------------------------------------------------
</TABLE>
Exempt Recipients. Please provide your TIN and check the "Exempt Recipient" box
if you are an exempt recipient. Exempt recipients include:
A corporation
A financial institution
An organization exempt from tax under section 501(a), or an individual
retirement plan
A registered dealer in securities or commodities registered in the U.S. or a
U.S. possession
A real estate investment trust
A common trust fund operated by a bank under section 584(a)
- Templeton American Trust, Inc.
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<PAGE>
An exempt charitable remainder trust or a non-exempt trust described in section
4947(a)(1)
An entity registered at all times under the Investment Company Act of 1940
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%. You are an "Exempt
Foreign Person" if you are not (1) a citizen or resident of the U.S., or (2) a
U.S. corporation, partnership, estate, or trust. In the case of an individual,
an "Exempt Foreign Person" is one who has been physically present in the U.S.
for less than 31 days during the current calendar year. An individual who is
physically present in the U.S. for at least 31 days during the current calendar
year will still be treated as an "Exempt Foreign Person," provided that the
total number of days physically present in the current calendar year and the two
preceding calendar years does not exceed 183 days (counting all of the days in
the current calendar year, only one-third of the days in the first preceding
calendar year and only one-sixth of the days in the second preceding calendar
year). In addition, lawful permanent residents or green card holders may not be
treated as "Exempt Foreign Persons." If you are an individual or an entity, you
must not now be, or at this time expect to be, engaged in a U.S. trade or
business with respect to which any gain derived from transactions effected by
the Fund/Payer during the calendar year is effectively connected to the U.S.
(or your transactions are exempt from U.S. taxes under a tax treaty).
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
Templeton American Trust, Inc. -
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<PAGE>
address of your principal office. If you are an estate or trust, provide the
address of your permanent residence or the principal office of any fiduciary.
Notice of Change in Status. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that (1)
the taxpayer identification number you have given is correct, and (2) the
Internal Revenue Service has not notified you that you are subject to backup
withholding because you failed to report certain interest or dividend income.
You 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.
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.
- Templeton American Trust, Inc.
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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
___________________ and that the following is a true and correct copy
State
of a resolution adopted by the Board of Directors at a meeting duly called and
held on __________________________
Date
RESOLVED, that the _________________________________________________
Officers' Titles
of this Corporation or Association are authorized to open an account in
the name of the Corporation or Association with one or more of the
Franklin Group of Funds or Templeton Family of Funds (collectively, the
"Funds") and to deposit such funds of this Corporation or Association in
this account as they deem necessary or desirable; that the persons
authorized below may endorse checks and other instruments for deposit to
said account or accounts; and
FURTHER RESOLVED, that any of the following __________ officers are
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
Templeton American Trust, Inc. -
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<PAGE>
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)
- Templeton American Trust, Inc.
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<PAGE>
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 Funds' 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 now automatically available to
Franklin Templeton Fund shareholders, please sign and return this authorization
to Franklin/Templeton Investor Services, Inc. ("Investor 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
Franklin Templeton (a "Franklin Templeton Fund" or a "Fund"), now open or
opened at a later date, holding shares registered as follows:
- --------------------------------------------------------------------------------
Print name(s) as shown in registration (called "Shareholder")
- --------------------------------------------------------------------------------
Account number(s)
I/We authorize each Fund and Investor Services to honor and act upon telephone
requests, given as provided in this agreement, to redeem shares from any
Shareholder account.
- ------------------------------------- -------------------------------------
Signature(s) OF all registered owners and date
- ------------------------------------- -------------------------------------
Printed name (and title/capacity, if applicable)
Verification Procedures: I/We understand and agree that: (1) each Fund and
Investor 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 Investor 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
Templeton American Trust, Inc. -
47
<PAGE>
initiated by telephone; and (3) as long as the Fund and Investor 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 authorize each Fund and Investor 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
Investor 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
Investor Services by registered mail, return receipt requested, or by a Fund or
Investor Services upon receipt of any information that causes a Fund or
Investor 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 Investor
Services immediately upon the death of any of the undersigned.
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 Investor Services that the Shareholder has the
authority to enter into this agreement and that each of us are 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
Investor Services may honor a telephone redemption request given by ANY officer/
partner/member/administrator or agent of Shareholder ACTING ALONE.
Restricted Accounts: Telephone redemptions and dividend option changes may not
be accepted on Franklin Templeton Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin/Templeton Investor Services, Inc.
P.O. Box 33030
St. Petersburg, FL 33733-8030
- Templeton American Trust, Inc.
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Templeton American Trust, Inc. -
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Templeton American Trust, Inc. -
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Templeton American Trust, Inc. -
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<PAGE>
FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST -- Call 1-800/DIAL BEN (1-800/342-5236) 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.
INTERNATIONAL GROWTH
Franklin Global Health Care Fund
Franklin International Equity Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Global Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller
Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
INTERNATIONAL GROWTH
AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton
Global Currency Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
INTERNATIONAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High
Income Currency Fund
Templeton Americas
Government Securities Fund
GROWTH
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Templeton American Trust, Inc.
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin AGE High Income Fund
Franklin Investment
Grade Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR NON-U.S. INVESTORS:
Franklin Tax-Advantaged
High Yield Securities Fund
Franklin Tax-Advantaged
International Bond Fund
Franklin Tax-Advantaged U.S.
Government Securities Fund
FOR CORPORATIONS:
Franklin Corporate Qualified
Dividend 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
Tax-Exempt Money 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**
VARIABLE ANNUITIES
Franklin Valuemark(SM)
Franklin Templeton Valuemark
Income Plus (an immediate annuity)
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**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.
TL100 K 11/96
<PAGE>
Logo Appears Here
FRANKLIN TEMPLETON
TEMPLETON
FUNDS
P.O. Box 33031
St. Petersburg, FL
33733-8031
1-800-393-3001
Please do not use this form for any retirement plan for which Franklin
Templeton Trust Company serves as custodian or trustee, or for Templeton
Money Fund, Templeton Institutional Funds or Templeton Capital Accumulator
Fund. Request separate applications.
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
- ------------------
CLASS
I II Templeton
[ ] [ ] $______American Trust
[ ] ______Americas Government Securities Fund
[ ] [ ] ______Developing Markets Trust
[ ] [ ] ______Foreign Fund
[ ] [ ] ______Global Bond Fund
CLASS
I II Templeton
[ ] [ ]$______Global Infrastructure Fund
[ ] [ ] ______Global Opportunities Trust
[ ] [ ] ______Global Real Estate Fund
[ ] [ ] ______Global Smaller Companies Fund
[ ] [ ] ______Greater European Fund
CLASS
I II Templeton
[ ] [ ]$______Growth Fund
[ ] [ ] ______Growth and Income Fund
[ ] ______Japan Fund
[ ] [ ] ______Latin America Fund
[ ] [ ] ______World Fund
CLASS
I II
[ ] [ ] Other:$______
(except for Class II Money Fund)
-----------------
-----------------
----------------
1 ACCOUNT REGISTRATION - PLEASE PRINT
n INDIVIDUAL OR JOINT ACCOUNT
- -------------------------------------------------------------------------------
First name Middle initial Last name Social Security number(SSN)
- -------------------------------------------------------------------------------
Joint owner(s) Joint ownership means Social Security number (SSN)
"joint tenants with rights of
survivorship" unless otherwise specified.)
ALL OWNERS MUST SIGN SECTION 4.
[] GIFTS/TRANSFERS TO A MINOR
- ----------------------------------------- As Custodian For -----------------
Name of custodian (one only) Minor's name (one only)
- ----------------------------------------- Uniform Gifts/
Transfers to Minors Act-------------
State (minor's or custodian's state Minor's Social Security number
of residence)
Please Note: Custodian's signature, not minor's, is required in Section 4.
- ------------------------------------------------------------------------------
[ ] TRUST, CORPORATION, PARTNERSHIP, RETIREMENTPLAN, 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 Telephone(---)-----------------
Street address (P.O. Box acceptable if Area code
street address is given)
- --------------------------------------- Evening Telephone(---)---------------
City State Zip code Area code
I am a citizen of: [ ] U.S. or [ ]_________________________________________
===============================================================================
3 INITIAL INVESTMENT - $100 minimum initial investment
Enclosed is a check payable to the Fund indicated above for $__________________.
===============================================================================
4 SIGNATURE AND TAX CERTIFICATIONS - All registered owners must sign application
See "Important Notice Regarding Taxpayer IRS Certifications" in back of
prospectus. The Fund reserves the right to refuse to open an account without
either a certified taxpayer identification number ("TIN"), Social Security
number ("SSN"), 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 not subject to backup withholding because I have not
been notified by the IRS that I am subject to backup withholding as a result of
a failure to report all interest or dividends or because the IRShas notified me
that I am 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 correct TIN or SSN, or that of the minor
named in section 1.
[ ] Awaiting TIN. I am waiting for a number to be issued to me. I understand
that if I do not provide a TIN to the Fund within 60 days, the Fund is
required to commence 31% backup withholding until I provide a certified TIN.
[ ] Exempt Recipient. Individuals cannot be exempt. Check this box only after
reading the instructions, found in the back of the Fund's prospectus,
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 neither a citizen nor a resident of the United States. I
certify to the best of my knowledge and belief, I qualify as an exempt
foreign person and/or entity as described in the instructions, found in
the back of the Fund's prospectus."
Permanent address for income
tax purposes:---------------------------------------------------------------
Street Address City State Country Postal 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
fund shares involves risks, including the possible loss of the principal amount
invested.
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
Franklin Templeton Dealer #
We hereby submit this application for the purchase of shares of the Fund(s)
and class(es) indicated in accordance with the terms of our selling agreement
with Franklin/Templeton Distributors, Inc.("FTD"), and with the prospectus(es)
for the Funds. 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 # ___________Representative # ______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.
This application must be preceded or accompanied by a prospectus for the
Fund(s) being purchased.
TLGOF APP 08/96
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 and capital gains. [ ] Pay all dividends in cash
and reinvest capital gains.
[ ] Pay capital gains in cash and reinvest [ ] Pay all dividends and
dividends. capital gains in cash.
===============================================================================
7 OPTIONAL SHAREHOLDER PRIVILEGES
A. Special Payment Instructions for Distributions (Check one box)
[ ] Invest distributions, as noted in Section 6, or l withdrawals, as noted in
Section 7B, in another Franklin or Templeton Fund.
Restrictions may apply to purchases of shares of a different class. See the
prospectus for details.
Fund Name___________________________________ Existing Account Number
OR
[ ] Send my distributions, as noted in Section 6, to the person, named below,
instead of as registered and addressed in Sections 1 and 2.
Name ___________________________________ Street Address____________________
City____________________________________ State _____________ ZipCode_______
- ------------------------------------------------------------------------------
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 withdrawals to: [ ] address of
record OR [ ] the Franklin or Templeton Fund, or person specified in
Section 7A - 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 Franklin Templeton 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 NOTwish 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 (circle one) savings, checking, other ___________________________
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) _______________________________________________
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
- ------------------------------- ------------------ ------------- ------------
Your Street Address City State Zip Code
- -------------------------------------------------------------------------------
E. Letter of Intent (LOI)-- Not Applicable to Purchases of Class II
[ ]I/We agree to the terms of the LOI and provisions for reservations of Class I
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 Class I and/or Class II 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. I
understand that reduced sales charges will apply only to purchases of Class I
shares.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
[ ]$50,000-99,999(except for Global Bond Fund [ ] $100,000-249,999 []$250,000-499,999 [] $500,000-999,999 []$1,000,000 or more
and Americas Government Securities Fund)
</TABLE>
Purchases of Class I shares under LOI of $1,000,000 or more are made at net
asset value and may be subject to a contingent deferred sales charge as
described in the prospectus.
Purchases made within the last 90 days will be included as part of your LOI.
However, certain employee benefit plans are subject to different rules.
Please write in your account number(s)
----------- ------------ ------------
- -------------------------------------------------------------------------------
F. Cumulative Quantity Discount--Not Applicable to Purchases of Class II Shares
Class I shares may be purchased at the offering price applicable to the total
of (a) the dollar amount then being purchased plus (b) the amount equal to the
cost or current value (whichever is higher) of the combined holdings of the
purchaser, his or her spouse, and their children or grandchildren under age 21,
of Class I and/or Class II shares of funds in Franklin Templeton, as well as
other holdings of Franklin Templeton Investments, as that term is defined in the
prospectus. In order for this cumulative quantity discount to be made available,
the shareholder or his or her securities dealer must notify FTIor FTD of the
total holdings in Franklin Templeton each time an order is placed. I understand
that reduced sales charges will apply only to purchases of Class I shares.
[ ]I/We own shares of more than one Fund in Franklin Templeton 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
(Section 1), or wish to have distribution income sent to an address other than
the address on your existing account's registration (Section 7A), a signature
guarantee is required. Signatures of all registered owners must be guaranteed by
an "eligible guarantor institution" 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.
TEMPLETON AMERICAN TRUST, INC.
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
AS AMENDED NOVEMBER 1, 1996
700 CENTRAL AVENUE
ST. PETERSBURG, FL 33701 1-800/DIAL BEN
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
How does the Fund Invest its Assets?.........................
What are the Fund's Potential Risks?.........................
Investment Restrictions......................................
Officers and Directors ......................................
Investment Management and Other Services.....................
How does the Fund Buy Securities for its Portfolio?..........
How Do I Buy, Sell and Exchange Shares?......................
How are Fund Shares Valued?..................................
Additional Information on Distributions and Taxes............
The Fund's Underwriter.......................................
How does the Fund Measure Performance?.......................
Miscellaneous Information....................................
Financial Statements.........................................
Useful Terms and Definitions.................................
Appendices...................................................
</TABLE>
When reading this SAI, you will see certain terms beginning with capital
letters. This means the term is explained under "Useful Terms and
Definitions."
Templeton American Trust, Inc.(the "Fund") is a diversified, open-end management
investment company. The Fund's investment objective is long-term total return
(capital growth and income). The Fund seeks to achieve its objective through a
flexible policy of investing primarily in stocks and debt obligations of U.S.
companies.
The Prospectus, dated May 1, 1996, as may be amended from time to time, contains
the basic information you should know before investing in the Fund. For a free
copy, call 1-800/DIAL BEN or write the Fund at the address shown.
THIS SAI IS NOT A PROSPECTUS. IT CONTAINS INFORMATION IN ADDITION TO AND IN MORE
DETAIL THAN SET FORTH IN THE PROSPECTUS. THIS SAI IS INTENDED TO PROVIDE YOU
WITH ADDITIONAL INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF THE FUND,
AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK;
ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
HOW DOES THE FUND INVEST ITS ASSETS?
The following provides more detailed information about some of the securities
the Fund may buy and its investment policies. You should read it together with
the section in the Prospectus entitled "How does the Fund Invest its Assets?"
The Fund may invest for defensive purposes in commercial paper which, at the
date of investment, must be rated A-1 by S&P or Prime-1 by 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. TICI 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, i.e., banks or broker-dealers which have been determined
by the TICI 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 TICI. 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.
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 creditworthiness analysis than would be the case if the Fund
were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of low rated debt securities have been found to be less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interest rates, for example, could
cause a decline in low rated debt securities prices because the advent of a
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of low
rated debt securities defaults, 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 "Additional Information on
Distributions and Taxes"). 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.
STRUCTURED INVESTMENTS. Included among the issuers of debt securities in which
the Fund may invest are entities organized and operated solely for the purpose
of restructuring the investment characteristics of various securities. These
entities are typically organized by investment banking firms which receive fees
in connection with establishing each entity and arranging for the placement of
its securities. This type of restructuring involves the deposit with or purchase
by an entity, such as a corporation or trust, of specified instruments and the
issuance by that entity of one or more classes of securities ("structured
investments") backed by, or representing interests in, the underlying
instruments. The cash flows on the underlying instruments may be apportioned
among the newly issued structured investments to create securities with
different investment characteristics such as varying maturities, payment
priorities or interest rate provisions; the extent of the payments made with
respect to structured investments is dependent on the extent of the cash flows
on the underlying instruments. Because structured investments of the type in
which the Fund anticipates investing typically involve no credit enhancement,
their credit risk will generally be equivalent to that of the underlying
instruments.
The Fund is permitted to invest in a class of structured investments that is
either subordinated or unsubordinated to the right of payment of another class.
Subordinated structured investments typically have higher yields and present
greater risks that unsubordinated structured investments. Although the Fund's
purchase of subordinated structured investments would have a similar economic
effect to that of borrowing against the underlying securities, the purchase will
not be deemed to be leveraged for purposes of the limitations placed on the
extent of the Fund's assets that may be used for borrowing activities.
Certain issuers of structured investments may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, the Fund's investment in
these structured investments may be limited by the restrictions contained in the
1940 Act. Structured investments are typically sold in private placement
transactions, and there currently is no active trading market for structured
investments. To the extent such investments are illiquid, they will be subject
to the Fund's restrictions on investments in illiquid securities.
FUTURES CONTRACTS. The Fund 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 U.S. and foreign exchanges and in the over-the-counter markets.2
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 TICI, 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 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 TICI'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.
WHAT ARE THE FUND'S POTENTIAL RISKS?
RISK FACTORS. 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, 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 U.S. Foreign companies are not
generally subject to uniform accounting or financial reporting standards, and
auditing practices and requirements may not be comparable to those applicable to
U.S. companies. The Fund, therefore, may encounter difficulty in obtaining
market quotations for purposes of valuing its portfolio and calculating its Net
Asset Value. Foreign markets have substantially less volume than the NYSE and
securities of some foreign companies are less liquid and more volatile than
securities of comparable U.S. 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 TICI 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 U.S., 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 U.S.
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 U.S. economy in such respects as growth
of gross domestic product, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Investments in Eastern European countries may involve risks of nationalization,
expropriation and confiscatory taxation. The Communist governments of a number
of Eastern European countries expropriated large amounts of private property in
the past, in many cases without adequate compensation, and there can be no
assurance that such expropriation will not occur in the future. In the event of
such expropriation, the Fund could lose a substantial portion of any investments
it has made in the affected countries. Further, no accounting standards exist in
Eastern European countries. Finally, even though certain Eastern European
currencies may be convertible into U.S. dollars, the conversion rates may be
artificial to the actual market values and may be adverse to Fund shareholders.
Investing in Russian securities involves a high degree of risk and special
considerations not typically associated with investing in the U.S. securities
markets, and should be considered highly speculative. Such risks include: (1)
delays in settling portfolio transactions and risk of loss arising out of
Russia's system of share registration and custody; (2) the risk that it may be
impossible or more difficult than in other countries to obtain and/or enforce a
judgment; (3) pervasiveness of corruption and crime in the Russian economic
system; (4) currency exchange rate volatility and the lack of available currency
hedging instruments; (5) higher rates of inflation (including the risk of social
unrest associated with periods of hyper-inflation); (6) controls on foreign
investment and local practices disfavoring foreign investors and limitations on
repatriation of invested capital, profits and dividends, and on the Fund's
ability to exchange local currencies for U.S. dollars; (7) the risk that the
government of Russia or other executive or legislative bodies may decide not to
continue to support the economic reform programs implemented since the
dissolution of the Soviet Union and could follow radically different political
and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the dissolution of the Soviet Union; (8) the
financial condition of Russian companies, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (9)
dependency on exports and the corresponding importance of international trade;
(10) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (11) possible
difficulty in identifying a purchaser of securities held by the Fund due to the
underdeveloped nature of the securities markets.
There is little historical data on Russian securities markets because they are
relatively new and a substantial proportion of securities transactions in Russia
are privately negotiated outside of stock exchanges. Because of the recent
formation of the securities markets as well as the underdeveloped state of the
banking and telecommunications systems, settlement, clearing and registration of
securities transactions are subject to significant risks. Ownership of shares
(except where shares are held through depositories that meet the requirements of
the 1940 Act) is defined according to entries in the company's share register
and normally evidenced by extracts from the register or by formal share
certificates. However, there is no central registration system for shareholders
and these services are carried out by the companies themselves or by registrars
located throughout Russia. These registrars are not necessarily subject to
effective state supervision and it is possible for the Fund to lose its
registration through fraud, negligence or even mere oversight. While the Fund
will endeavor to ensure that its interest continues to be appropriately recorded
either itself or through a custodian or other agent inspecting the share
register and by obtaining extracts of share registers through regular
confirmations, these extracts have no legal enforceability and it is possible
that subsequent illegal amendment or other fraudulent act may deprive the Fund
of its ownership rights or improperly dilute its interests. In addition, while
applicable Russian regulations impose liability on registrars for losses
resulting from their errors, it may be difficult for the Fund to enforce any
rights it may have against the registrar or issuer of the securities in the
event of loss of share registration. Furthermore, although a Russian public
enterprise with more than 1,000 shareholders is required by law to contract out
the maintenance of its shareholder register to an independent entity that meets
certain criteria, in practice this regulation has not always been strictly
enforced. Because of this lack of independence, management of a company may be
able to exert considerable influence over who can purchase and sell the
company's shares by illegally instructing the registrar to refuse to record
transactions in the share register. This practice may prevent the Fund from
investing in the securities of certain Russian issuers deemed suitable by TICI.
Further, this also could cause a delay in the sale of Russian securities by the
Fund if a potential purchaser is deemed unsuitable, which may expose the Fund to
potential loss on the investment.
The Fund endeavors to buy and sell foreign currencies on as favorable a basis as
practicable. Some price spread in currency exchange (to cover service charges)
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, TICI 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 Board considers, at least annually, the likelihood of the imposition by any
foreign government of exchange control restrictions which would affect the
liquidity of the Fund's assets maintained with custodians in foreign countries,
as well as the degree of risk from political acts of foreign governments to
which such assets may be exposed. The Board also considers the degree of risk
involved through the holding of portfolio securities in domestic and foreign
securities depositories (see "Investment Management and Other Services -
Shareholder Servicing Agent and Custodian"). However, in the absence of willful
misfeasance, bad faith or gross negligence on the part of TICI, 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 Board's 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
TICI's ability to predict movements in the direction of the market correctly, as
to which no assurance can be given.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions as fundamental policies. These
restrictions may not be changed without the approval of a majority of the
outstanding voting securities of the Fund. Under the 1940 Act, this means the
approval of (i) more than 50% of the outstanding shares of the Fund or (ii) 67%
or more of the shares of the Fund present at a shareholder meeting if more than
50% of the outstanding shares of the Fund are represented at the meeting in
person or by proxy, whichever is less.
The Fund MAY 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 TICI, individually own
more than 1/2 of 1% of the securities of such company or, 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.
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 NYSE or AMEX, 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 "How does the Fund Buy
Securities for its Portfolio?" as to transactions in the same
securities for the Fund, other clients and/or other mutual
funds within the Franklin Templeton Group of Funds.)
If a percentage restriction is met at the time of investment, a later increase
or decrease in the percentage due to a change in value of portfolio securities
or the amount of assets will not be considered a violation of any of the
foregoing restrictions. 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.
OFFICERS AND DIRECTORS
The Board has the responsibility for the overall management of the Fund,
including general supervision and review of its investment activities. The
Board, in turn, elects the officers of the Fund who are responsible for
administering the Fund's day-to-day operations. The affiliations of the officers
and Board members and their principal occupations for the past five years are
shown below. Members of the Board who are considered "interested persons" of the
Fund under the 1940 Act are indicated by an asterisk ("*").
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME, ADDRESS AND AGE WITH THE FUND PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
<S> <C> <C>
- --------------------------------- ------------------------ ---------------------------------------------------
HARRIS J. ASHTON Director Chairman of the Board, president and chief
Metro Center executive officer of General Host Corporation
1 Station Place (nursery and craft centers); and a director of
Stamford, Connecticut RBC Holdings (U.S.A.) Inc. (a bank holding
Age 64 company) and Bar-S Foods; and officer and/or
director or trustee of 55 of the investment
companies in the Franklin Templeton Group of
Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
NICHOLAS F. BRADY* Director Chairman of Templeton Emerging Markets Investment
The Bullitt House Trust PLC; chairman of Templeton Latin America
102 East Dover Street Investment Trust PLC; chairman of Darby Overseas
Easton, Maryland Investments, Ltd. (an investment firm)
Age 66 (1994-present); chairman and director of
Templeton Central and Eastern European Fund;
director of the Amerada Hess Corporation,
Christiana Companies, and the H.J. Heinz
Company; Secretary of the United States
Department of the Treasury (1988-1993);
and chairman of the board of Dillon, Read &
Co. Inc. (investment banking) prior to 1988; and
officer and/or director or trustee of 23 of the
investment companies in the Franklin Templeton
Group of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------- ------------------------ ---------------------------------------------------
HARMON E. BURNS Director and Vice Executive vice president, secretary and director
777 Mariners Island Blvd. President of Franklin Resources, Inc.; executive vice
San Mateo, California president and director of Franklin Templeton
Age 51 Distributors, Inc.; executive vice president of
Franklin Advisers, Inc.; and officer and/or
director, as the case may be, of other subsidiaries
of Franklin Resources, Inc. and officer and/or
director or trustee of 60 of the investment
companies in the Franklin Templeton Group
of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
FRANK J. CROTHERS Director President and chief executive officer of Atlantic
P.O. Box N-3238 Equipment & Power Ltd.; vice chairman of
Nassua, Bahamas Caribbean Utilities Co., Ltd.; president of Provo
Age 52 Power Corporation; a director of various other
business and non profit organizations; and officer
and/or director or trustee of 4 of the investment
companies in the Franklin Templeton Group of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
S. JOSEPH FORTUNATO Director Member of the law firm of Pitney, Hardin, Kipp &
200 Campus Drive Szuch; and a director of General Host Corporation
Florham Park, New Jersey (nursery and craft centers); and officer and/or
Age 64 director or trustee of 57 of the investment
companies in the Franklin Templeton Group of
Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------- ------------------------ ---------------------------------------------------
JOHN Wm. GALBRAITH Director President of Galbraith Properties, Inc. (personal
360 Central Avenue investment company); director of Gulf West Banks,
Suite 1300 Inc. (bank holding company) (1995-present) and
St. Petersburg, Florida Mercantile Bank (1991-1995); vice chairman of
Age 75 Templeton, Galbraith & Hansberger Ltd.
(1986-1992); and chairman of Templeton Funds
Management, Inc. (1974-1991); and officer and/or
director or trustee of 22 of the investment
companies in the Franklin Templeton Group of
Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
ANDREW H. HINES, JR. Director Consulting Group; chairman of the board and chief
150 2nd Avenue N. executive officer of Florida Progress Corporation
St. Petersburg, Florida (1982-1990) and director of various of its
Age 73 subsidiaries; chairman and director of Precise
Power Corporation; executive-in-residence
of Eckerd College (1991-present); and a director
of Checkers Drive-In Restaurants, Inc.; and
officer and/or director or trustee of 23 of the
investment companies in the Franklin Templeton Group
of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------- ------------------------ ---------------------------------------------------
CHARLES B. JOHNSON Director, Chairman of President, chief executive officer, and director
777 Mariners Island Blvd. the Board of Franklin Resources, Inc.; chairman of the
San Mateo, California and Vice President board and director of Franklin Advisers, Inc. and
Age 63 Franklin Templeton Distributors, Inc.; director
of General Host Corporation (nursery and craft
centers), Franklin Templeton Investor Services,
Inc. and Templeton Global Investors, Inc.; and
officer and director, trustee or managing general
partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc.; and
officer and director, trustee or managing general
partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc.; and 56
of the investment companies in the Franklin
Templeton Group of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
BETTY P. KRAHMER Director Director or trustee of various civic
2201 Kentmere Parkway associations; formerly, economic analyst, U.S.
Wilmington, Delaware government; and officer and/or director or
Age 67 trustee of 23 of the investment companies in the
Franklin Templeton Group of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------- ------------------------ ---------------------------------------------------
GORDON S. MACKLIN Director Chairman of White River Corporation (information
8212 Burning Tree Road services); director of Fund America Enterprises
Bethesda, Maryland Holdings, Inc., MCI Communications Corporation,
Age 68 Fusion Systems Corporation, Infovest Corporation,
MedImmune, Inc., Source One Mortgage Services
Corporation, and Shoppers Express, Inc.(on-line
shopping service); and formerly held the following
positions: chairman of Hambrecht and Quist Group;
director of H&Q Healthcare Investors and Lockheed Martin
Corporation; and president of the National Association of
Securities Dealers,Inc.; and officer and/or director
or trustee of 52 of the investment companies in
the Franklin Templeton Groupof Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
FRED R. MILLSAPS Director Manager of personal investments (1978-present);
2665 N.E. 37th Drive chairman and chief executive officer of Landmark
Fort Lauderdale, Florida Banking Corporation (1969-1978); financial vice
Age 67 president of Florida Power and Light (1965-1969);
vice president of The Federal Reserve Bank of
Atlanta (1958-1965); and a director of various
other business and nonprofit organizations;
and officer and/or director or trustee of
23 of the investment companies in the Franklin
Templeton Group of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
CONSTANTINE DEAN TSERETOPOULOS Director Physician, Lyford Cay Hospital (July
Lyford Cay Hospital 1987--present); cardiology fellow, University of
P.O. Box N-7776 Maryland (July 1985-July 1987); internal medicine
Nassau, Bahamas intern, Greater Baltimore Medical Center (July
Age 42 1982-July 1985); and officer and/or director or
trustee of 4 of the investment companies in the
Franklin Templeton Group of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
GARY P. MOTYL President Executive vice president and director of
500 East Broward Blvd. Templeton Investment Counsel, Inc.; director of
Fort Lauderdale, Florida Templeton Global Investors, Inc.; formerly,
Age 44 research analyst and portfolio manager with Landmark
First National Bank(1979 to 1981); security
analyst with Standard & Poor's Corporation
(1974-1979); and officer of 2 of the investment
companies in the Franklin Templeton Group
of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
RUPERT H. JOHNSON, JR.* Vice President Executive vice president and director of Franklin
777 Mariners Island Blvd. Resources, Inc. and Franklin Templeton
San Mateo, California Distributors, Inc.; president and director of
Age 56 Franklin Advisers, Inc.; director of Franklin
Templeton Investor Services, Inc.; and officer
and/or director, trustee or managing general
partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc.; and an
officer and/or director, as the case may be,of various
investment companies in the Franklin Templeton Group
of Funds; and officer and/or director, trustee or
managing general partner, as the case may be, of
most other subsidiaries of Franklin Resources,
Inc.; and 60 of the investment companies in the
Franklin Templeton Group of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------- ------------------------ ---------------------------------------------------
CHARLES E. JOHNSON Vice President Senior vice president and director of Franklin
500 East Broward Blvd. Resources, Inc.; senior vice president of
Fort Lauderdale, Florida Franklin Templeton Distributors, Inc.; president
Age 40 and chief executive officer of Templeton
Worldwide, Inc.; president and director of
Franklin Institutional Services Corporation;
chairman of the board of Templeton Investment
Counsel, Inc.; vice president and/or director, as
the case may be, for some of the subsidiaries of
Franklin Resources, Inc.; and an officer and/or
director, as the case may be, of various
investment companies in the Franklin Templeton
Group of Funds; and officer and/or director, as
the case may be, of other subsidiaries of
Franklin Resources, Inc. and officer
and/or director or trustee of 39 of the investment
companies in the Franklin Templeton Group
of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
DEBORAH R. GATZEK Vice President Senior vice president and general counsel of
777 Mariners Island Blvd. Franklin Resources, Inc.; senior vice president
San Mateo, California of Franklin Templeton Distributors, Inc.; vice
Age 47 president of Franklin Advisers, Inc. and officer
of various investment companies in the Franklin
Templeton Group of Funds; and officer of 60
of the investment companies in the Franklin
Templeton Group of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
</TABLE>
<
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------- ------------------------ ---------------------------------------------------
MARTIN L. FLANAGAN Vice President Senior vice president, treasurer and chief
President financial officer of Franklin Resources, Inc.;
777 Mariners Island Blvd. director and executive vice president of
San Mateo, California Templeton Investment Counsel, Inc.; director,
Age 36 president and chief executive officer of
Templeton Global Investors, Inc.; accountant with
Arthur Andersen & Company (1982-1983); and a
member of the International Society of Financial
Analysts and the American Institute of Certified
Public Accountants; and officer and/or director, as
the case may be, of other subsidiaries of
Franklin Resources, Inc.; and officer and/or
director or trustee of 60 of the investment
companies in the Franklin Templeton Group
of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
MARK G. HOLOWESKO Vice President President and director of Templeton Global
Lyford Cay Advisors Limited; chief investment officer of global
Nassau, Bahamas equity research for Templeton Worldwide, Inc.; president or
Age 36 vice president of the Templeton Funds; formerly, investment
administrator with Roy West Trust Corporation (Bahamas)
Limited (1984-1985); and officer of 23 of the investment
companies in the Franklin Templeton Group of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
JOHN R. KAY Vice President Vice president of the Templeton Funds; vice
500 East Broward Blvd. president and treasurer of Templeton Global
Fort Lauderdale, Florida Investors, Inc. and Templeton Worldwide, Inc.;
Age 56 assistant vice president of Franklin Templeton
Distributors, Inc.; formerly, vice president
and controller of the Keystone Group, Inc.;
and officer of 27 of the investment companies
in the Franklin Templeton Group of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------- ------------------------ ---------------------------------------------------
ELIZABETH KNOBLOCK Vice President - General counsel, secretary and a senior vice
500 East Broward Blvd. Compliance president of Templeton Investment Counsel, Inc.;
Fort Lauderdale, Florida formerly, vice president and associate general
Age 41 counsel of Kidder Peabody & Co. Inc. (1989-1990),
assistant general counsel of Gruntal & Co.,
Incorporated (1988), vice president and associate
general counsel of Shearson Lehman Hutton Inc.
(1988), vice president and assistant general
counsel of E.F. Hutton & Co. Inc. (1986-1988),
and special counsel of the division of investment
management of the Securities and Exchange
Commission (1984-1986); and officer of 23 of the
investment companies in the Franklin Templeton
Group of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
JAMES R. BAIO Treasurer Certified public accountant; treasurer of the
500 East Broward Blvd. Templeton Funds; senior vice president of
Fort Lauderdale, Florida Templeton Worldwide, Inc., Templeton Global
Age 42 Investors, Inc., and Templeton Funds Trust
Company; formerly, senior tax manager with Ernst
& Young (certified public accountants)
(1977-1989); and officer of 23 of the investment
companies in the Franklin Templeton Group of
Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
BARBARA J. GREEN Secertary Senior vice president of Templeton Worldwide,
500 East Broward Blvd. Inc. and Templeton Global Investors, Inc.;
Fort Lauderdale, Florida secretary of the Templeton Funds; formerly,
Age 49 deputy director of the Division of Investment
Management,executive assistant and senior advisor
to the chairman, counsellor to the chairman,
special counsel and attorney fellow, U.S.
Securities and Exchange Commission (1986-1995);
attorney, Rogers & Wells; and judicial clerk, U.S.
District Court (District of Massachusetts);
and officer of 23 of the investment companies in
the Franklin Templeton Group of Funds.
- --------------------------------- ------------------------ ---------------------------------------------------
</TABLE>
The table above shows the officers and Board members who are affiliated with
Distributors and TICI. Nonaffiliated members of the Board and Mr. Brady are
currently paid 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 the
Fund. Accordingly, the Fund currently pays the independent members of the Board
and Mr. Brady an annual retainer of $100 and a fee of $0 per meeting of the
Board and its portion of a flat fee of $2,000 for each Audit Committee meeting
and/or Nominating and Compensation Committee meeting attended. As shown above,
some of the nonaffiliated Board members also serve as directors, trustees or
managing general partners of other investment companies in the Franklin
Templeton Group of Funds. They may receive fees from these funds for their
services. The following table provides the total fees paid to nonaffiliated
Board members and Mr. Brady by the Fund and by other funds in the Franklin
Templeton Group of Funds.
<TABLE>
<CAPTION>
NUMBER OF
BOARDS IN THE
TOTAL FEES FRANKLIN
RECEIVED FROM TEMPLETON GROUP
TOTAL FEES THE FRANKLIN OF FUNDS ON
RECEIVED FROM TEMPLETON GROUP WHICH EACH
NAME THE FUND* OF FUNDS* SERVES**
<S> <C> <C> <C>
Harris J. Ashton $ 100 $ 327,925 56
Nicholas F. Brady 100 98,225 24
Frank J. Crothers 118 22,975 4
S. Joseph Fortunato 100 344,745 58
John Wm. Galbraith 75 70,100 23
Andrew H. Hines, Jr. 100 106,325 24
Betty P. Krahmer 75 93,475 24
Gordon S. Macklin 100 321,525 53
Fred R. Millsaps 115 104,325 24
Constantine Dean 118 22,975 4
Tseretopoulos
</TABLE>
*For the fiscal year ended December 31, 1995
**We base the number of boards on the number of registered investment companies
in the Franklin Templeton Group of Funds. This number does not include the total
number of series or funds within each investment company for which the Board
members are responsible. The Franklin Templeton Group of Funds currently
includes [] registered investment companies, with approximately [] U.S. based
funds or series.
Nonaffiliated members of the Board and Mr. Brady are reimbursed for expenses
incurred in connection with attending board meetings, and paid pro rata by each
fund in the Franklin Templeton Group of Funds for which they serve as director,
trustee or managing general partner. No officer or Board member received any
other compensation, including pension or retirement benefits, directly or
indirectly from the Fund or other funds in the Franklin Templeton Group of
Funds. Certain officers or Board members who are shareholders of Resources may
be deemed to receive indirect remuneration by virtue of their participation, if
any, in the fees paid to its subsidiaries.
As of October 1, 1996, the officers and Board members, as a group, owned of
record and beneficially approximately 4,129 shares, or less than 1% of the
Fund's total outstanding shares. Many of the Board members also own shares
in other funds in the Franklin Templeton Group of Funds. Charles B. Johnson and
Rupert H. Johnson, Jr. are brothers and the father and uncle, respectively, of
Charles E. Johnson.
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT MANAGER AND SERVICES PROVIDED. The Fund's investment manager is TICI.
TICI provides investment research and portfolio management services, including
the selection of securities for the Fund to buy, hold or sell and the selection
of brokers through whom the Fund's portfolio transactions are executed. TICI`s
activities are subject to the review and supervision of the Board to whom TICI
renders periodic reports of the Fund's investment activities. TICI is covered by
fidelity insurance on its officers, directors and employees for the protection
of the Fund.
TICI acts as investment manager to numerous other investment companies or funds
and accounts. TICI may give advice and take action with respect to any of the
other funds it manages, or for its own account, that may differ from action
taken by TICI on behalf of the Fund. Similarly, with respect to the Fund, TICI
is not obligated to recommend, buy or sell, or to refrain from recommending,
buying or selling any security that TICI and access persons, as defined by the
1940 Act, may buy or sell for its or their own account or for the accounts of
any other fund. TICI is not obligated to refrain from investing in securities
held by the Fund or other funds that it manages. Of course, any transactions for
the accounts of TICI and other access persons will be made in compliance with
the Fund's Code of Ethics. (See "Miscellaneous Information - Summary of Code of
Ethics.")
BUSINESS MANAGER AND SERVICES PROVIDED. The Fund's business manager is TGII
(and, prior to April 1, 1993, Templeton Funds Management, Inc.). TGII provides
office space and furnishings, facilities and equipment required for managing the
business affairs of the Fund. TGII also maintains all internal bookkeeping,
clerical, secretarial and administrative personnel and services and provides
certain telephone and other mechanical services. TGII is covered by fidelity
insurance on its officers, directors and employees for the protection of the
Fund.
INVESTMENT MANAGEMENT AND BUSINESS MANAGEMENT FEES. Under its investment
management agreement the Fund pays TICI a monthly fee equal to an annual rate of
0.70% of its average daily net assets. Each class pays its proportionate share
of the management fee.
The investment management fee will be reduced as necessary to comply with the
most stringent limits on Fund expenses of any state where the Fund offers it
shares. Currently, the most restrictive limitation on the Fund's allowable
expenses for each fiscal year, as a percentage of its average net assets, is
2.5% of the first $30 million in assets, 2% of the next $70 million, and 1.5% of
assets over $100 million. Expense reductions have not been necessary based on
state requirements.
Under its business management agreement, the Fund pays TGII a monthly fee equal
on an annual basis to 0.15% of the first $200 million in assets, 0.135% of the
next $500 million, 0.1% of the next $500 million, and 0.075% of assets over
$1,200 million. Each class of shares of the Fund pays a portion of the fee,
determined by the proportion of the Fund that it represents.
For the fiscal years ended December 31, 1995, 1994 and 1993, investment
management fees, and business management fees were as follows:
<TABLE>
<CAPTION>
Year Ended December 31 1995 1994 1993
- --------------------------------------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
Investment Management Fees $304,286 $255,905 $223,035
Business Management Fees $ 65,203 $ 54,836 $ 47,794
</TABLE>
INVESTMENT MANAGEMENT AGREEMENT. The investment management agreement may
continue in effect for successive annual periods if its continuance is
specifically approved at least annually by a vote of the Board or by a vote of
the holders of a majority of the Fund's outstanding voting securities, and in
either event by a majority vote of the Board members who are not parties to the
investment management agreement or interested persons of any such party (other
than as members of the Board), cast in person at a meeting called for that
purpose. The investment management agreement may be terminated without penalty
at any time by the Board or by a vote of the holders of a majority of the Fund's
outstanding voting securities, or by TICI on 60 days' written notice, and will
automatically terminate in the event of its assignment, as defined in the 1940
Act.
SHAREHOLDER SERVICING AGENT. Investor Services, a wholly-owned subsidiary of
Resources, is the Fund's shareholder servicing agent and acts as the Fund's
transfer agent and dividend-paying agent. Investor Services is compensated on
the basis of a fixed fee per account.
CUSTODIAN. The Chase Manhattan Bank, at its principal office at MetroTech
Center, Brooklyn, NY 11245, and at the offices of its branches and agencies
throughout the world, acts as custodian of the Fund's assets. The custodian does
not participate in decisions relating to the purchase and sale of portfolio
securities.
AUDITORS. McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, NY 10017, are the
Fund's independent auditors. During the fiscal year ended December 31, 1995,
their auditing services consisted of rendering an opinion on the financial
statements of the Fund included in the Fund's Annual Report to Shareholders for
the fiscal year ended December 31, 1995, and review of the Fund's filings with
the SEC and the IRS.
HOW DOES THE FUND BUY SECURITIES FOR ITS PORTFOLIO?
The selection of brokers and dealers to execute transactions in the Fund's
portfolio is made by TICI in accordance with criteria set forth in the
investment management agreement and any directions that the Board may give.
When placing a portfolio transaction, TICI seeks to obtain prompt execution of
orders at the most favorable net price. When portfolio transactions are done on
a securities exchange, the amount of commission paid by the Fund is negotiated
between TICI and the broker executing the transaction. The determination and
evaluation of the reasonableness of the brokerage commissions paid in connection
with portfolio transactions are based to a large degree on the professional
opinions of the persons responsible for the placement and review of the
transactions. These opinions are based on the experience of these individuals in
the securities industry and information available to them about the level of
commissions being paid by other institutional investors of comparable size. TICI
will ordinarily place orders to buy and sell over-the-counter securities on a
principal rather than agency basis with a principal market maker unless, in the
opinion of TICI, a better price and execution can otherwise be obtained.
Purchases of portfolio securities from underwriters will include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
will include a spread between the bid and ask price.
The amount of commission is not the only factor TICI considers in the selection
of a broker to execute a trade. If TICI believes it is in the Fund's best
interest, it may place portfolio transactions with brokers who provide the types
of services described below, even if it means the Fund will pay a higher
commission than if no weight were given to the broker's furnishing of these
services. This will be done only if, in the opinion of TICI, the amount of any
additional commission is reasonable in relation to the value of the services.
Higher commissions will be paid only when the brokerage and research services
received are bona fide and produce a direct benefit to the Fund or assist TICI
in carrying out its responsibilities to the Fund, or when it is otherwise in the
best interest of the Fund to do so, whether or not such services may also be
useful to TICI in advising other clients.
When TICI believes several brokers are equally able to provide the best net
price and execution, it may decide to execute transactions through brokers who
provide quotations and other services to the Fund, in an amount of total
brokerage as may reasonably be required in light of these services.
Specifically, these services may include providing the quotations necessary to
determine the Fund's Net Asset Value, as well as research, statistical and other
data.
It is not possible to place a dollar value on the special executions or on the
research services received by TICI from dealers effecting transactions in
portfolio securities. The allocation of transactions in order to obtain
additional research services permits TICI to supplement its own research and
analysis activities and to receive the views and information of individuals and
research staff of other securities firms. As long as it is lawful and
appropriate to do so, TICI and its affiliates may use this research and data in
their investment advisory capacities with other clients. If the Fund's officers
are satisfied that the best execution is obtained, the sale of Fund shares which
shall be deemed to include also shares of other funds which have either the same
investment adviser or an investment adviser affiliated with TICI may also be
considered a factor in the selection of broker-dealers to execute the Fund's
portfolio transactions.
Because Distributors is a member of the NASD, it may sometimes receive certain
fees when the Fund tenders portfolio securities pursuant to a tender-offer
solicitation. As a means of recapturing brokerage for the benefit of the Fund,
any portfolio securities tendered by the Fund will be tendered through
Distributors if it is legally permissible to do so. In turn, the next investment
management fee payable to TICI will be reduced by the amount of any fees
received by Distributors in cash, less any costs and expenses incurred in
connection with the tender.
If purchases or sales of securities of the Fund and one or more other investment
companies or clients supervised by TICI are considered at or about the same
time, transactions in these securities will be allocated among the several
investment companies and clients in a manner deemed equitable to all by TICI,
taking into account the respective sizes of the funds and the amount of
securities to be purchased or sold. In some cases this procedure could have a
detrimental effect on the price or volume of the security so far as the Fund is
concerned. In other cases it is possible that the ability to participate in
volume transactions and to negotiate lower brokerage commissions will be
beneficial to the Fund.
During the fiscal years ended December 31, 1995, 1994 and 1993, the Fund paid
brokerage commissions totaling $10,454, $34,622 and $20,620, respectively.
As of December 31, 1995, the Fund did not own securities of its regular
broker-dealers.
HOW DO I BUY, SELL AND EXCHANGE SHARES?
ADDITIONAL INFORMATION ON BUYING SHARES
The Fund continuously offers its shares through Securities Dealers who have an
agreement with Distributors. Securities Dealers may at times receive the entire
sales charge. A Securities Dealer who receives 90% or more of the sales charge
may be deemed an underwriter under the 1933 Act.
Securities laws of states where the Fund offers its shares may differ from
federal law. Banks and financial institutions that sell shares of the Fund may
be required by state law to register as Securities Dealers. Financial
institutions or their affiliated brokers may receive an agency transaction fee
in the percentages indicated in the table under "How Do I Buy Shares? - Purchase
Price of Fund Shares" in the Prospectus.
When you buy shares, if you submit a check or a draft that is returned unpaid to
the Fund we may impose a $10 charge against your account for each returned item.
Under agreements with certain banks in Taiwan, Republic of China, the Fund's
shares are available to these banks' trust accounts without a sales charge. The
banks may charge service fees to their customers who participate in the trusts.
A portion of these service fees may be paid to Distributors or one of its
affiliates to help defray expenses of maintaining a service office in Taiwan,
including expenses related to local literature fulfillment and communication
facilities.
Class I shares of the Fund may be offered to investors in Taiwan through
securities advisory firms known locally as Securities Investment Consulting
Enterprises. In conformity with local business practices in Taiwan, Class I
shares may be offered with the following schedule of sales charges:
<TABLE>
<CAPTION>
SIZE OF PURCHASE - U.S. DOLLARS SALES CHARGE
- ------------------------------- ------------
<S> <C>
Under $30,000 3.0%
$30,000 but less than $50,000 2.5%
$50,000 but less than $100,000 2.0%
$100,000 but less than $200,000 1.5%
$200,000 but less than $400,000 1.0%
$400,000 or more 0%
</TABLE>
OTHER PAYMENTS TO SECURITIES DEALERS. Distributors will pay the following
commissions, out of its own resources, to Securities Dealers who initiate and
are responsible for purchases of Class I shares of $1 million or more: 1% on
sales of $1 million to $2 million, plus 0.80% on sales over $2 million to $3
million, plus 0.50% on sales over $3 million to $50 million, plus 0.25% on sales
over $50 million to $100 million, plus 0.15% on sales over $100 million.
Either Distributors or one of its affiliates may pay the following amounts, out
of its own resources, to Securities Dealers who initiate and are responsible for
purchases of Class I shares by certain retirement plans pursuant to a sales
charge waiver, as discussed in the Prospectus: 1% on sales of $500,000 to $2
million, plus 0.80% on sales over $2 million to $3 million, plus 0.50% on sales
over $3 million to $50 million, plus 0.25% on sales over $50 million to $100
million, plus 0.15% on sales over $100 million. Distributors may make these
payments in the form of contingent advance payments, which may be recovered from
the Securities Dealer or set off against other payments due to the dealer if
shares are sold within 12 months of the calendar month of purchase. Other
conditions may apply. All terms and conditions may be imposed by an agreement
between Distributors, or one of its affiliates, and the Securities Dealer.
LETTER OF INTENT. You may qualify for a reduced sales charge when you buy Class
I shares, as described in the Prospectus. At any time within 90 days after the
first investment that you want to qualify for a reduced sales charge, you may
file with the Fund a signed shareholder application with the Letter of Intent
section completed. After the Letter is filed, each additional investment will be
entitled to the sales charge applicable to the level of investment indicated on
the Letter. Sales charge reductions based on purchases in more than one Franklin
Templeton Fund will be effective only after notification to Distributors that
the investment qualifies for a discount. Your holdings in the Franklin Templeton
Funds, including Class II shares, acquired more than 90 days before the Letter
is filed, will be counted towards completion of the Letter but will not be
entitled to a retroactive downward adjustment in the sales charge. Any
redemptions you make during the 13 month period, except in the case of certain
retirement plans, will be subtracted from the amount of the purchases for
purposes of determining whether the terms of the Letter have been completed. If
the Letter is not completed within the 13 month period, there will be an upward
adjustment of the sales charge, depending on the amount actually purchased (less
redemptions) during the period. The upward adjustment does not apply to certain
retirement plans. If you execute a Letter prior to a change in the sales charge
structure of the Fund, you may complete the Letter at the lower of the new sales
charge structure or the sales charge structure in effect at the time the Letter
was filed.
As mentioned in the Prospectus, five percent (5%) of the amount of the total
intended purchase will be reserved in Class I shares of the Fund registered in
your name until you fulfill the Letter. This policy of reserving shares does not
apply to certain retirement plans. If total purchases, less redemptions, equal
the amount specified under the Letter, the reserved shares will be deposited to
an account in your name or delivered to you or as you direct. If total
purchases, less redemptions, exceed the amount specified under the Letter and is
an amount that would qualify for a further quantity discount, a retroactive
price adjustment will be made by Distributors and the Securities Dealer through
whom purchases were made pursuant to the Letter (to reflect such further
quantity discount) on purchases made within 90 days before and on those made
after filing the Letter. The resulting difference in Offering Price will be
applied to the purchase of additional shares at the Offering Price applicable to
a single purchase or the dollar amount of the total purchases. If the total
purchases, less redemptions, are less than the amount specified under the
Letter, you will remit to Distributors an amount equal to the difference in the
dollar amount of sales charge actually paid and the amount of sales charge that
would have applied to the aggregate purchases if the total of the purchases had
been made at a single time. Upon remittance, the reserved shares held for your
account will be deposited to an account in your name or delivered to you or as
you direct. If within 20 days after written request the difference in sales
charge is not paid, the redemption of an appropriate number of reserved shares
to realize the difference will be made. In the event of a total redemption of
the account prior to fulfillment of the Letter, the additional sales charge due
will be deducted from the proceeds of the redemption, and the balance will be
forwarded to you.
If a Letter is executed on behalf of certain retirement plans, the level and any
reduction in sales charge for these plans will be based on actual plan
participation and the projected investments in the Franklin Templeton Funds
under the Letter. These plans are not subject to the requirement to reserve 5%
of the total intended purchase, or to any penalty as a result of the early
termination of a plan, nor are these plans entitled to receive retroactive
adjustments in price for investments made before executing the Letter.
REINVESTMENT DATE. Shares acquired through the reinvestment of dividends will be
purchased at the Net Asset Value determined on the business day following the
dividend record date (sometimes known as the "ex-dividend date"). The processing
date for the reinvestment of dividends may vary and does not affect the amount
or value of the shares acquired.
ADDITIONAL INFORMATION ON EXCHANGING SHARES
If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will be exchanged into
the new fund and will be invested at Net Asset Value. Backup withholding and
information reporting may apply. Information regarding the possible tax
consequences of an exchange is included in the tax section in this SAI and in
the Prospectus.
If a substantial number of shareholders should, within a short period, sell
their shares of the Fund under the exchange privilege, the Fund might have to
sell portfolio securities it might otherwise hold and incur the additional costs
related to such transactions. On the other hand, increased use of the exchange
privilege may result in periodic large inflows of money. If this occurs, it is
the Fund's general policy to initially invest this money in short-term,
interest-bearing money market instruments, unless it is believed that attractive
investment opportunities consistent with the Fund's investment objective exist
immediately. This money will then be withdrawn from the short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
The proceeds from the sale of shares of an investment company are generally not
available until the fifth business day following the sale. The funds you are
seeking to exchange into may delay issuing shares pursuant to an exchange until
that fifth business day. The sale of Fund shares to complete an exchange will be
effected at Net Asset Value at the close of business on the day the request for
exchange is received in proper form. Please see "May I Exchange Shares for
Shares of Another Fund?" in the Prospectus.
ADDITIONAL INFORMATION ON SELLING SHARES
SYSTEMATIC WITHDRAWAL PLAN. There are no service charges for establishing or
maintaining a systematic withdrawal plan. Once your plan is established, any
distributions paid by the Fund will be automatically reinvested in your account.
Payments under the plan will be made from the redemption of an equivalent amount
of shares in your account, generally on the first business day of the month in
which a payment is scheduled.
Redeeming shares through a systematic withdrawal plan may reduce or exhaust the
shares in your account if payments exceed distributions received from the Fund.
This is especially likely to occur if there is a market decline. If a withdrawal
amount exceeds the value of your account, your account will be closed and the
remaining balance in your account will be sent to you. Because the amount
withdrawn under the plan may be more than your actual yield or income, part of
the payment may be a return of your investment.
The Fund may discontinue a systematic withdrawal plan by notifying you in
writing and will automatically discontinue a systematic withdrawal plan if all
shares in your account are withdrawn or if the Fund receives notification of the
shareholder's death or incapacity.
THROUGH YOUR SECURITIES DEALER. If you sell shares through your Securities
Dealer, it is your dealer's responsibility to transmit the order to the Fund in
a timely fashion. Any loss to you resulting from your dealer's failure to do so
must be settled between you and your Securities Dealer.
REDEMPTIONS IN KIND. The Fund has committed itself to pay in cash (by check) all
requests for redemption by any shareholder of record, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of the 90-day period. This commitment
is irrevocable without the prior approval of the SEC. In the case of redemption
requests in excess of these amounts, the Board reserves the right to make
payments in whole or in part in securities or other assets of the Fund, in case
of an emergency, or if the payment of such a redemption in cash would be
detrimental to the existing shareholders of the Fund. In these circumstances,
the securities distributed would be valued at the price used to compute the
Fund's net assets and you may incur brokerage fees in converting the securities
to cash. The Fund does not intend to redeem illiquid securities in kind. If this
happens, however, you may not be able to recover your investment in a timely
manner.
GENERAL INFORMATION
If dividend checks are returned to the Fund marked "unable to forward" by the
postal service, we will consider this a request by you to change your dividend
option to reinvest all distributions. The proceeds will be reinvested in
additional shares at Net Asset Value until we receive new instructions.
If mail is returned as undeliverable or we are unable to locate you or verify
your current mailing address, we may deduct the costs of our efforts to find you
from your account. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for its location services.
All checks, drafts, wires and other payment mediums used to buy or sell shares
of the Fund must be denominated in U.S. dollars. We may, in our sole discretion,
either (a) reject any order to buy or sell shares denominated in any other
currency or (b) honor the transaction or make adjustments to your account for
the transaction as of a date and with a foreign currency exchange factor
determined by the drawee bank.
SPECIAL SERVICES. The Franklin Templeton Institutional Services Department
provides specialized services, including recordkeeping, for institutional
investors. The cost of these services is not borne by the Fund.
Investor Services may pay certain financial institutions that maintain omnibus
accounts with the Fund on behalf of numerous beneficial owners for recordkeeping
operations performed with respect to such owners. For each beneficial owner in
the omnibus account, the Fund may reimburse Investor Services an amount not to
exceed the per account fee that the Fund normally pays Investor Services. These
financial institutions may also charge a fee for their services directly to
their clients.
Certain shareholder servicing agents may be authorized to accept your
transaction request.
HOW ARE FUND SHARES VALUED?
We calculate the Net Asset Value per share of each class as of the scheduled
close of the NYSE, generally 4:00 p.m. Eastern time, each day that the NYSE is
open for trading. As of the date of this SAI, the Fund is informed that the NYSE
observes the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
For the purpose of determining the aggregate net assets of the Fund, cash and
receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date. Portfolio securities
listed on a securities exchange or on the NASDAQ National Market System for
which market quotations are readily available are valued at the last quoted sale
price of the day or, if there is no such reported sale, within the range of the
most recent quoted bid and ask prices. Over-the-counter portfolio securities are
valued within the range of the most recent quoted bid and ask prices. Portfolio
securities that are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market as
determined by TICI.
Portfolio securities underlying actively traded call options are valued at their
market price as determined above. The current market value of any option held by
the Fund is its last sale price on the relevant exchange prior to the time when
assets are valued. Lacking any sales that day or if the last sale price is
outside the bid and ask prices, options are valued within the range of the
current closing bid and ask prices if the valuation is believed to fairly
reflect the contract's market value.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
of the NYSE on each day that the NYSE is open. Trading in European or Far
Eastern securities generally, or in a particular country or countries, may not
take place on every NYSE business day. Furthermore, trading takes place in
various foreign markets on days that are not business days for the NYSE and on
which the Net Asset Value of each class is not calculated. Thus, the calculation
of the Net Asset Value of each class does not take place contemporaneously with
the determination of the prices of many of the portfolio securities used in the
calculation and, if events materially affecting the values of these foreign
securities occur, the securities will be valued at fair value as determined by
management and approved in good faith by the Board.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times before
the scheduled close of the NYSE. The value of these securities used in computing
the Net Asset Value of each class is determined as of such times. Occasionally,
events affecting the values of these securities may occur between the times at
which they are determined and the scheduled close of the NYSE that will not be
reflected in the computation of the Net Asset Value of each class. If events
materially affecting the values of these securities occur during this period,
the securities will be valued at their fair value as determined in good faith by
the Board.
Other securities for which market quotations are readily available are valued at
the current market price, which may be obtained from a pricing service, based on
a variety of factors including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific issues. Securities and other assets for which
market prices are not readily available are valued at fair value as determined
following procedures approved by the Board. With the approval of the Board, the
Fund may utilize a pricing service, bank or Securities Dealer to perform any of
the above described functions.
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
You may receive two types of distributions from the Fund:
1. INCOME DIVIDENDS. The Fund receives income generally in the form of
dividends, interest and other income derived from its investments. This income,
less the expenses incurred in the Fund's operations, is its net investment
income from which income dividends may be distributed. Thus, the amount of
dividends paid per share may vary with each distribution.
2. CAPITAL GAIN DISTRIBUTIONS. The Fund may derive capital gains or losses in
connection with sales or other dispositions of its portfolio securities.
Distributions by the Fund derived from net short-term and net long-term capital
gains (after taking into account any capital loss carryforward or post October
loss deferral) may generally be made twice each year. One distribution may be
made in December to reflect any net short-term and net long-term capital gains
realized by the Fund as of October 31 of that year. Any net short-term and net
long-term capital gains realized by the Fund during the remainder of the fiscal
year may be distributed following the end of the fiscal year.
TAXES
As stated in the Prospectus, the Fund has elected to be treated as a regulated
investment company under Subchapter M of the Code. The Board reserves the right
not to maintain the qualification of the Fund as a regulated investment company
if it determines this course of action to be beneficial to shareholders. In that
case, the Fund will be subject to federal and possibly state corporate taxes on
its taxable income and gains, and distributions to shareholders will be taxable
to the extent of the Fund's available earnings and profits.
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.
Generally, dividends and distributions are taxable to shareholders, whether
received in cash or reinvested in shares of the Fund. Any distributions that are
not from a Fund's investment company taxable income or net capital gain may be
characterized as a return of capital to shareholders or, in some cases, as
capital gain. Shareholders will be notified annually as to the federal tax
status of dividends and distributions they receive and any tax withheld thereon.
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 may 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 U.S. 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 financial 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
distribution. 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, or as a capital gain.
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
IRS notifies the shareholder or the Fund that the shareholder has failed to
report properly certain interest and dividend income to the IRS and to respond
to notices to that effect, or (3) when required to do so, the shareholder fails
to certify that he is not subject to backup withholding. 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.
THE FUND'S UNDERWRITER
Pursuant to an underwriting agreement, Distributors acts as principal
underwriter in a continuous public offering for both classes of the Fund's
shares. The underwriting agreement will continue in effect for successive annual
periods if its continuance is specifically approved at least annually by a vote
of the Board or by a vote of the holders of a majority of the Fund's outstanding
voting securities, and in either event by a majority vote of the Board members
who are not parties to the underwriting agreement or interested persons of any
such party (other than as members of the Board), cast in person at a meeting
called for that purpose. The underwriting agreement terminates automatically in
the event of its assignment and may be terminated by either party on 60 days'
written notice.
Distributors pays the expenses of the distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. The Fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders.
In connection with the offering of the Fund's shares, aggregate underwriting
commissions for the fiscal years ended December 31, 1995, 1994 and 1993, were
$35,803, $0 and $2,645, respectively. After allowances to dealers, Distributors
retained $1,790, $238 and $116,319 in net underwriting discounts, commissions
and compensation received in connection with redemptions or repurchases of
shares, for the respective years. Distributors may be entitled to reimbursement
under the Rule 12b-1 plan for each class, as discussed below. Except as noted,
Distributors received no other compensation from the Fund for acting as
underwriter.
THE RULE 12B-1 PLANS
The Fund has adopted a distribution plan or "Rule 12b-1 plan" with respect to
each class of shares pursuant to Rule 12b-1 of the 1940 Act.
THE CLASS I PLAN. Under the Class I plan the Fund may reimburse Distributors or
others up to a maximum of 0.35% per year of Class I's average daily net assets,
payable quarterly, for costs and expenses incurred in connection with any
activity which is primarily intended to result in the sale of the Fund's shares.
Under the Class I plan, the costs and expenses not reimbursed in any one given
quarter (including costs and expenses not reimbursed because they exceed 0.35%
of the Fund's average daily net assets attributable to Class I shares) may be
reimbursed in subsequent quarters or years.
THE CLASS II PLAN. Under the Class II plan, the Fund pays Distributors up to
0.75% per year of Class II's average daily net assets, payable quarterly, for
costs and expenses incurred by Distributors or others in connection with any
activity which is primarily intended to result in the sale of the Fund's shares.
The Fund may also pay a servicing fee of up to 0.25% per year of Class II's
average daily net assets to dealers for personal service and/or maintenance of
shareholder accounts.
During the first year following the purchase of Class II shares for shares
purchased on or after May 1, 1995, and until May 1, 1997 for Class II shares
purchased before May 1, 1995, Distributors will retain 0.75% per annum of Class
II's average daily net assets to partially recoup fees Distributors pays to
Securities Dealers.
THE CLASS I AND CLASS II PLANS. For both the Class I and Class II plans,
payments to Distributors or others could be for various types of activities,
including (i) payments to broker-dealers who provide certain services of value
to the Fund's shareholders (sometimes referred to as a "trail fee"); (ii)
reimbursement of expenses relating to selling and servicing efforts or of
organizing and conducting sales seminars; (iii) payments to employees or agents
of the Distributors who engage in or support distribution of shares; (iv)
payments of the costs of preparing, printing and distributing prospectuses and
reports to prospective investors and of printing and advertising expenses; (v)
payment of dealer commissions and wholesaler compensation in connection with
sales of the Fund's shares and interest or carrying charges in connection
therewith; and (vi) such other similar services as the Board determines to be
reasonably calculated to result in the sale of shares.
In no event shall the aggregate asset-based sales charges, which include
payments made under each plan, plus any other payments deemed to be made
pursuant to a plan, exceed the amount permitted to be paid under the rules of
the NASD.
To the extent fees are for distribution or marketing functions, as distinguished
from administrative servicing or agency transactions, certain banks will not be
entitled to participate in the plans as a result of applicable federal law
prohibiting certain banks from engaging in the distribution of mutual fund
shares. These banking institutions, however, are permitted to receive fees under
the plans for administrative servicing or for agency transactions. If you are a
customer of a bank that is prohibited from providing these services, you would
be permitted to remain a shareholder of the Fund, and alternate means for
continuing the servicing would be sought. In this event, changes in the services
provided might occur and you might no longer be able to avail yourself of any
automatic investment or other services then being provided by the bank. It is
not expected that you would suffer any adverse financial consequences as a
result of any of these changes.
Each plan has been approved in accordance with the provisions of Rule 12b-1. The
plans are renewable annually by a vote of the Board, including a majority vote
of the Board members who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the plans, cast in
person at a meeting called for that purpose. It is also required that the
selection and nomination of such Board members be done by the non-interested
members of the Board. The plans and any related agreement may be terminated at
any time, without penalty, by vote of a majority of the non-interested Board
members on not more than 60 days' written notice, by Distributors on not more
than 60 days' written notice, by any act that constitutes an assignment of the
investment management agreement with TICI, or by vote of a majority of the
outstanding shares of the class. Distributors or any dealer or other firm may
also terminate their respective distribution or service agreement at any time
upon written notice.
The plans and any related agreements may not be amended to increase materially
the amount to be spent for distribution expenses without approval by a majority
of the outstanding shares of the class, and all material amendments to the plans
or any related agreements shall be approved by a vote of the non-interested
members of the Board, cast in person at a meeting called for the purpose of
voting on any such amendment.
Distributors is required to report in writing to the Board at least quarterly on
the amounts and purpose of any payment made under the plans and any related
agreements, as well as to furnish the Board with such other information as may
reasonably be requested in order to enable the Board to make an informed
determination of whether the plans should be continued.
For the fiscal year ended December 31, 1995, the total amounts paid by the Fund
pursuant to the Class I and Class II plans were $1,602 and $429,294,
respectively, which were used for the following purposes:
<TABLE>
<CAPTION>
CLASS I CLASS II
<S> <C> <C>
Advertising $ 13 $ 484
Printing and mailing of prospectuses
other than to current shareholders 116 19,175
Payments to underwriters 266 241,664
Payments to broker-dealers 1,203 167,799
Other 3 173
</TABLE>
HOW DOES THE FUND MEASURE PERFORMANCE?
Performance quotations are subject to SEC rules. These rules require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the SEC.
Current yield and average annual total return quotations used by the Fund are
based on the standardized methods of computing performance mandated by the SEC.
If a Rule 12b-1 plan is adopted, performance figures reflect fees from the date
of the plan's implementation. An explanation of these and other methods used by
the Fund to compute or express performance for each class follows. Regardless of
the method used, past performance is not necessarily indicative of future
results, but is an indication of the return to shareholders only for the limited
historical period used.
TOTAL RETURN
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is determined by
finding the average annual rates of return over one-, five- and ten-year
periods, or fractional portion thereof, that would equate an initial
hypothetical $1,000 investment to its ending redeemable value. The calculation
assumes the maximum front-end sales charge is deducted from the initial $1,000
purchase, and income dividends and capital gain distributions are reinvested at
Net Asset Value. The quotation assumes the account was completely redeemed at
the end of each one-, five- and ten-year period and the deduction of all
applicable charges and fees. If a change is made to the sales charge structure,
historical performance information will be restated to reflect the maximum
front-end sales charge currently in effect.
When considering the average annual total return quotations, you should keep in
mind that the maximum front-end sales charge reflected in each quotation is a
one time fee charged on all direct purchases, which will have its greatest
impact during the early stages of your investment. This charge will affect
actual performance less the longer you retain your investment in the Fund. For
Class I shares, the average annual total return for the period from inception
(May 1, 1995) through December 31, 1995 was 3.62%. For Class II shares, the
average annual total return for the one-year period ended December 31, 1995 and
for the period from February 27, 1991 (commencement of operations) to December
31, 1995 was 15.25% and 11.28%, respectively.
These figures were calculated according to the SEC formula:
P(1+T)n = ERV
where:
P =a hypothetical initial payment of $1,000
T =average annual total return
n =number of years
ERV =ending redeemable value of a hypothetical $1,000
made at the beginning of the one-, five- or
end of the one-, five- or ten-year periods
(or fractional portion thereof)
CUMULATIVE TOTAL RETURN. Like average annual total return, cumulative total
return assumes the maximum front-end sales charge is deducted from the initial
$1,000 purchase, and income dividends and capital gain distributions are
reinvested at Net Asset Value. Cumulative total return, however, will be based
on the actual return for each class for a specified period rather than on the
average return over one-, five- and ten-year periods, or fractional portion
thereof. For Class I shares, the cumulative total return for the period from
inception (May 1, 1995) through December 31, 1995 was 3.62%. For Class II
shares, the cumulative total return for the one-year period ended December 31,
1995 and for the period from February 27, 1991 (commencement of operations) to
December 31, 1995 was 15.25% and 167.75%, respectively.
VOLATILITY
Occasionally statistics may be used to show the Fund's volatility or risk.
Measures of volatility or risk are generally used to compare the Fund's Net
Asset Value or performance to a market index. One measure of volatility is beta.
Beta is the volatility of a fund relative to the total market, as represented by
an index considered representative of the types of securities in which the fund
invests. A beta of more than 1.00 indicates volatility greater than the market
and a beta of less than 1.00 indicates volatility less than the market. Another
measure of volatility or risk is standard deviation. Standard deviation is used
to measure variability of Net Asset Value or total return around an average over
a specified period of time. The idea is that greater volatility means greater
risk undertaken in achieving performance.
OTHER PERFORMANCE QUOTATIONS
For investors who are permitted to buy Class I shares without a sales charge,
sales literature about Class I may quote a current distribution rate, yield,
cumulative total return, average annual total return and other measures of
performance as described elsewhere in this SAI with the substitution of Net
Asset Value for the public Offering Price.
Sales literature referring to the use of the Fund as a potential investment for
Individual Retirement Accounts (IRAs), Business Retirement Plans, and other
tax-advantaged retirement plans may quote a total return based upon compounding
of dividends on which it is presumed no federal income tax applies.
The Fund may include in its advertising or sales material information relating
to investment objectives and performance results of funds belonging to the
Templeton Group of Funds. Resources is the parent company of the advisors and
underwriter of both the Franklin Group of Funds and Templeton Group of Funds.
COMPARISONS
From time to time, advertisements or information for the Fund may include a
discussion of certain attributes or benefits to be derived from an investment in
the Fund. The advertisements or information may include symbols, headlines, or
other material that highlights or summarizes the information discussed in more
detail in the communication.
Advertisements or information may also compare a class' performance to the
return on CDs or other investments. You should be aware, however, that an
investment in the Fund involves the risk of fluctuation of principal value, a
risk generally not present in an investment in a CD issued by a bank. For
example, as the general level of interest rates rise, the value of the Fund's
fixed-income investments, if any, as well as the value of its shares that are
based upon the value of such portfolio investments, can be expected to decrease.
Conversely, when interest rates decrease, the value of the Fund's shares can be
expected to increase. CDs are frequently insured by an agency of the U.S.
government. An investment in the Fund is not insured by any federal, state or
private entity.
In assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to the Fund's portfolio, the indices and averages are generally
unmanaged, and the items included in the calculations of the averages may not be
identical to the formula used by the Fund to calculate its figures. In addition,
there can be no assurance that the Fund will continue its performance as
compared to these other averages.
Performance information for the Fund may be compared, in reports and promotional
literature, to: (i) 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; (ii) 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 (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in the Fund. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for 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 TICI may also refer to the following
information:
(1) TICI's and its affiliates' market share of international equities
managed in mutual funds prepared or published by Strategic Insight or a
similar statistical organization.
(2) The performance of U.S. equity and debt markets relative to foreign
markets prepared or published by Morgan Stanley Capital International
or a similar financial organization.
(3) The capitalization of U.S. and foreign stock markets as prepared or
published by the International Finance Corporation, Morgan Stanley
Capital International or a similar financial organization.
(4) The geographic and industry distribution of the Fund's portfolio and
the Fund's top ten holdings.
(5) The gross national product and populations, including age
characteristics, literacy rates, foreign investment improvements due to
a liberalization of securities laws and a reduction of foreign exchange
controls, and improving communication technology, of various countries
as published by various statistical organizations.
(6) To assist investors in understanding the different returns and risk
characteristics of various investments, the Fund may show historical
returns of various investments and published indices (E.G., Ibbotson
Associates, Inc. Charts and Morgan Stanley EAFE - Index).
(7) The major industries located in various jurisdictions as published by
the Morgan Stanley Index.
(8) Rankings by DALBAR Surveys, Inc. with respect to mutual fund
shareholder services.
(9) Allegorical stories illustrating the importance of persistent
long-term investing.
(10) Each Fund's portfolio turnover rate and its ranking relative to
industry standards as published by Lipper Analytical Services, Inc.
or Morningstar, Inc.
(11) A description of the Templeton organization's investment management
philosophy and approach, including its worldwide search for undervalued
or "bargain" securities and its diversification by industry, nation and
type of stocks or other securities.
(12) The number of shareholders in the Fund or the aggregate number of
shareholders of the Franklin Templeton Group of Funds or the dollar
amount of fund and private account assets under management.
(13) Comparison of the characteristics of various emerging markets,
including population, financial and economic conditions.
(14) Quotations from the Templeton organization's founder, Sir John
Templeton,* advocating the virtues of diversification and long-term
investing, including the following:
(infinity) "Never follow the crowd. Superior performance is
possible only if you invest differently from the
crowd."
(infinity) "Diversify by company, by industry and by country."
(infinity) "Always maintain a long-term perspective."
(infinity) "Invest for maximum total real return."
(infinity) "Invest - don't trade or speculate."
(infinity) "Remain flexible and open-minded about types of
investment."
(infinity) "Buy low."
(infinity) "When buying stocks, search for bargains among
quality stocks."
(infinity) "Buy value, not market trends or the economic
outlook."
(infinity) "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."
(infinity) "Do your homework or hire wise experts to help you."
(infinity) "Aggressively monitor your investments."
(infinity) "Don't panic."
(infinity) "Learn from your mistakes."
(infinity) "Outperforming the market is a difficult task."
(infinity) "An investor who has all the answers doesn't even
understand all the questions."
(infinity) "There's no free lunch."
(infinity) "And now the last principle: Do not be fearful or
negative too often."
MISCELLANEOUS INFORMATION
The Fund may help you achieve various investment goals such as accumulating
money for retirement, saving for a down payment on a home, college costs and
other long-term goals. The Franklin College Costs Planner may help you in
determining how much money must be invested on a monthly basis in order to have
a projected amount available in the future to fund a child's college education.
(Projected college cost estimates are based upon current costs published by the
College Board.) The Franklin Retirement Planning Guide leads you through the
steps to start a retirement savings program. Of course, an investment in the
Fund cannot guarantee that these goals will be met.
The Fund is a member of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., and may be considered in a
program for diversification of assets. Founded in 1947, Franklin, one of the
oldest mutual fund organizations, has managed mutual funds for over 48 years and
now services more than 2.5 million shareholder accounts. In 1992, Franklin, a
leader in managing fixed-income mutual funds and an innovator in creating
domestic equity funds, joined forces with Templeton Worldwide, Inc., a pioneer
in international investing. Together, the Franklin Templeton Group has over $151
billion in assets under management for more than 4.2 million U.S. based mutual
fund shareholder and other accounts. The Franklin Templeton Group of Funds
offers 115 U.S. based mutual funds to the public. The Fund may identify itself
by its NASDAQ symbol or CUSIP number.
The Dalbar Surveys, Inc. broker-dealer survey has ranked Franklin number one in
service quality for five of the past eight years.
As of September 30, 1996, the principal shareholders of the Fund, beneficial or
of record, were as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARE AMOUNT PERCENTAGE
CLASS I
<S> <C> <C>
Hugh G. Robinson, Jr. 6,808 6%
9825 Gaillard Road
Fort Belvoir, VA
22060-1930
Larry H. Hutton 5,859 5%
391 Montclair Drive #228
Big Bear City, CA 92314
Merrill Lynch, Pierce, Fenner & Smith, Inc. 7,004 6%
4800 Deer Lake Drive East
Third Floor
Jacksonville, FL 32246
CLASS II
Merrill Lynch, Pierce, Fenner & Smith, Inc. 206,654 7%
P.O. Box 45286
Jacksonville, FL
32232-5286
</TABLE>
From time to time, the number of Fund shares held in the "street name" accounts
of various Securities Dealers for the benefit of their clients or in centralized
securities depositories may exceed 5% of the total shares outstanding.
In the event of disputes involving multiple claims of ownership or authority to
control your 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; (b) interplead disputed funds or
accounts with a court of competent jurisdiction; or (c) surrender ownership of
all or a portion of the account to the IRS in response to a Notice of Levy.
SUMMARY OF CODE OF ETHICS. Employees of Resources or its subsidiaries who are
access persons under the 1940 Act are permitted to engage in personal securities
transactions subject to the following general restrictions and procedures: (i)
the trade must receive advance clearance from a compliance officer and must be
completed within 24 hours after clearance; (ii) copies of all brokerage
confirmations must be sent to a 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; and (iii) access persons involved in
preparing and making investment decisions must, in addition to (i) and (ii)
above, file annual reports of their securities holdings each January and 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.
FINANCIAL STATEMENTS
The audited financial statements contained in the Annual Report to Shareholders
of the Fund, for the fiscal year ended December 31, 1995, including the
auditors' report, and the unaudited financial statements contained in the
Semi-Annual Report to Shareholders of the Fund, for the six months ended June
30, 1996, are incorporated herein by reference.
USEFUL TERMS AND DEFINITIONS
1933 ACT - SECURITIES ACT OF 1933, AS AMENDED
1940 ACT - Investment Company Act of 1940, as amended
AMEX - American Stock Exchange, Inc.
BOARD - The Board of Directors of the Fund
CD - Certificate of deposit
CFTC - Commodity Futures Trading Commission
CLASS I AND CLASS II - The Fund offers two classes of shares, designated "Class
I" and "Class II." The two classes have proportionate interests in the Fund's
portfolio. They differ, however, primarily in their sales charge structures and
Rule 12b-1 plans.
CODE - Internal Revenue Code of 1986, as amended
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter
FRANKLIN FUNDS - the mutual funds in the Franklin Group of FundsAE except
Franklin Valuemark Funds and the Franklin Government Securities Trust
FRANKLIN TEMPLETON FUNDS - the Franklin Funds and the Templeton Funds
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - all U.S. registered mutual funds in the
Franklin Group of Funds AE and the Templeton Group of Funds
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc.
IRS - Internal Revenue Service
LETTER - Letter of Intent
MOODY'S - Moody's Investors Service, Inc.
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NYSE - New York Stock Exchange, Inc.
OFFERING PRICE - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge. The maximum
front-end sales charge is 5.75% for Class I and 1% for Class II.
PROSPECTUS - the prospectus for the Fund dated May 1, 1996, as may be amended
from time to time
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
S&P - Standard & Poor's Corporation
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - a financial institution which, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
TEMPLETON FUNDS - the U.S. registered mutual funds in the Templeton Group of
Funds except Templeton Capital Accumulator Fund, Inc., the Templeton Variable
Annuity Fund, and the Templeton Variable Products Series Fund
TGII - Templeton Global Investors, Inc., the Fund's business manager
TICI - Templeton Investment Counsel, Inc., the Fund's investment manager, is
located at Broward Financial Centre, Fort Lauderdale, FL 33394-3091.
U.S. - United States
WE/OUR/US - Unless a different meaning is indicated by the context, these terms
refer to the Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
APPENDICES
DESCRIPTION OF RATINGS
CORPORATE BOND RATINGS
MOODY'S
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large, fluctuation of protective elements may be of greater amplitude, or
there may be other elements present which make the long-term risks appear
somewhat larger.
A - Bonds rated A possess many favorable investment attributes and are
considered upper medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered medium grade obligations. They are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well.
BA - Bonds rated Ba are judged to have predominantly speculative elements and
their future cannot be considered well assured. Often the protection of interest
and principal payments is very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond ratings. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; modifier 2 indicates a mid-range ranking; and modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.
S&P
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and, in the majority of instances,
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB, B, CCC, CC - Bonds rated BB, B, CCC and CC 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 obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C - Bonds rated C are typically subordinated debt to senior debt that is
assigned an actual or implied CCC- rating. The C rating may also reflect the
filing of a bankruptcy petition under circumstances where debt service payments
are continuing. The C1 rating is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
COMMERCIAL PAPER RATINGS
MOODY'S
Moody's commercial paper ratings, which are also applicable to municipal paper
investments permitted to be made by the Fund, are opinions of the ability of
issuers to repay punctually their promissory obligations not having an original
maturity in excess of nine months. Moody's employs the following designations,
all judged to be investment grade, to indicate the relative repayment capacity
of rated issuers:
P-1 (PRIME-1): Superior capacity for repayment.
P-2 (PRIME-2): Strong capacity for repayment.
S&P
S&P's ratings are a current assessment of the likelihood of timely payment of
debt having an original maturity of no more than 365 days. Ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues within the "A" category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety, as follows:
A-1: This designation indicates the degree of safety regarding timely payment is
very strong. A "plus" (+) designation indicates an even stronger likelihood of
timely payment.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated A-1.
A-3: Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
- --------
1 In the event that the Board 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.
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.
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.
* Sir John Templeton sold the Templeton organization to Resources in
October 1992 and resigned from the Fund's Board on April 16, 1995. He
is no longer involved with the investment management process.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: Incorporated by reference from
Registrant's 1996 Semi-Annual Report:
Independent Auditor's Report
Investment Portfolio as of December 31, 1995
Statement of Assets and Liabilities as of December 31,
1995
Statement of Operations for the fiscal period ended
December 31, 1995
Statement of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Notes to Financial Statements
Incorporated by reference from the Registrant's
(unaudited) June 30, 1996 Semi-Annual Report:
Investment Portfolios
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
(b) EXHIBITS
(1) (a) Articles of Incorporation 1
(b) Articles of Amendment 1
(c) Articles Supplementary 2
(d) Articles of Amendment 2
(2) By-Laws 1
(3) Not Applicable
(4) Specimen Security 3
(5) Amended and Restated Investment Management
Agreement 2
(6) Distribution Agreement 1
(7) Not Applicable
(8) Custody Agreement 1
(9) (a) Transfer Agent Agreement 1
(b) Business Management Agreement 1
(c) Shareholder Sub-Accounting Services
Agreement 1
(d) Sub-Transfer Agent Services Agreement 1
(10) Opinion and consent of Counsel (filed with
Rule 24f-2 Notice)
(11) Consent of Independent Public Accountants
(12) Not Applicable
(13) Letter concerning initial capital 3
(14) Not Applicable
(15) (a) Distribution Plan -- Class I Shares 2 (b)
Distribution Plan -- Class II Shares 2
(16) Schedule showing computation of performance
quotations provided in response to Item 22
(unaudited)2
(18) Form of Multiclass Plan 2
(27) Financial Data Schedule
- --------------
1 Filed with Post-Effective Amendment No. 8 on April 30, 1996.
2 Filed with Post-Effective Amendment No. 7 on April 28, 1995.
3 Filed with Pre-Effective Amendment No. 2 on February 26, 1991.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF RECORD HOLDERS
Class I Shares of Common Stock, par value $0.01 per share:
159 Shareholders as of September 30, 1996.
Class II Shares of Common Stock, par value $0.01 per share:
2,876 Shareholders as of September 30, 1996.
ITEM 27. INDEMNIFICATION
Reference is made to Articles Eight and Eleven of the
Registrant's Articles of Incorporation, which are 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
Franklin Templeton Distributors, Inc. also acts as principal
underwriter of shares of the following investment companies:
AGE High Income Fund, Inc.
Franklin Balance Sheet InvestmentFund
Franklin California Tax-Free Income Fund, Inc.
Franklin California Tax-Free Trust Franklin Custodian Funds,
Inc.
Franklin Equity Fund
Franklin Federal Money Fund
Franklin Federal Tax-Free Income Fund
Franklin Gold Fund
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Trust
Franklin Premier Return Fund
Franklin Real Estate Securities Trust
Franklin Strategic Series
Franklin Tax-Advantaged High Yield Securities Fund
Franklin Tax-Advantaged International Bond Fund
Franklin Tax-Advantaged U.S. Government Securities Fund
Franklin Tax Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Value Investors Trust
Institutional Fiduciary Trust
Franklin Templeton Money Fund Trust
Franklin Templeton Japan Fund
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Opportunities Trust
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, Inc.
Templeton Global Real Estate Fund
Templeton Global Smaller Companies, Fund Inc.
Templeton Variable Products Series Fund
(b) The directors and officers of FTD, located at 777 Mariners Island Blvd., San
Mateo, California 94404, are as follows:
<TABLE>
<CAPTION>
Position with Position with
NAME UNDERWRITER THE REGISTRANT
<S> <C> <C>
Charles B. Johnson Chairman of the Chairman
Board and Director Vice President and
Director
Gregory E. Johnson President None
Rupert H. Johnson, Jr. Executive Vice Vice President
President and
Director
Harmon E. Burns Executive Vice Vice President
President and
Director
Edward V. McVey Senior Vice None
President
Kenneth V. Domingues Senior Vice None
President
William J. Lippman Senior Vice None
President
Deborah R. Gatzek Senior Vice Vice President
President and
Assistant
Secretary
Richard C. Stoker Senior Vice None
President
Charles E. Johnson Senior Vice Vice President
500 E. Broward Blvd. President
Ft. Lauderdale, FL
Peter Jones Senior Vice None
700 Central Avenue President
St. Petersburg, Fl
James K. Blinn Vice President None
Richard O. Conboy Vice President None
James A. Escobedo Vice President None
Loretta Fry Vice President None
Richard N. Geppner Vice President None
Mike Hackett Vice President None
Philip J. Kearns Vice President None
Bert W. Feuss Vice President None
Ken Leder Vice President None
Jack Lemein Vice President None
John R. McGee Vice President None
Harry G. Mumford Vice President None
Vivian J. Palmieri Vice President None
Kent P. Strazza Vice President None
Francie Arnone Assistant Vice None
President
John R. Kay Assistant Vice Vice President
500 E. Broward Blvd. President
Ft. Lauderdale, FL
Alison Hawksley Assistant Vice None
President
Annette Mulcaire Assistant Vice None
President
Kenneth A. Lewis Treasurer None
Leslie M. Kratter Secretary None
Philip A. Scatena Assistant None
Treasurer
Karen P. DeBellis Assistant Assistant
700 Central Avenue Treasurer Treasurer
St. Petersburg, FL
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 30th
day of October, 1996.
TEMPLETON AMERICAN TRUST, INC.
(REGISTRANT)
By: _________________________
Gary P. Motyl, President*
*By:/s/WILLIAM J. KOTAPISH
William J. Kotapish,
Attorney-in-fact**
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated:
</TABLE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
- ---------------------------
Gary P. Motyl* President October 30, 1996
(Chief Executive Officer
- ---------------------------
Charles B. Johnson* Director October 30, 1996
- ---------------------------
Harmon E. Burns* Director October 30, 1996
- ---------------------------
Betty P. Krahmer* Director October 30, 1996
- --------------------------
Constantine Dean Tseretopoulos* Director October 30, 1996
- --------------------------
Frank Crothers* Director October 30, 1996
- --------------------------
Fred R. Millsaps* Director October 30, 1996
Harris J. Ashton* Director October 30, 1996
- --------------------------
S. Joseph Fortunato* Director October 30, 1996
- --------------------------
Andrew H. Hines, Jr.* Director October 30, 1996
- --------------------------
John Wm. Galbraith* Director October 30, 1996
- -------------------------
Gordon S. Macklin* Director October 30, 1996
- -------------------------
Nicholas F. Brady* Director October 30, 1996
- ------------------------
James R. Baio* Treasurer October 30, 1996
(Chief Financial and
Accounting Officer)
</TABLE>
*By:/s/WILLIAM J. KOTAPISH
William J. Kotapish
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 or filed
herewith.
McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated January 31,
1996 on the financial statements of Templeton American Trust, Inc.
referred to therein, which appears in the 1995 Annual Report to
Shareholders, and which is incorporated herein by reference, in
Post-Effective Amendment No. 9 to the Registration Statement on
Form N-1A, File No. 33-37511, as filed with the Securities and
Exchange Commission.
We also consent to the reference to our firm in the Prospectus
under the caption "Financial Highlights" and in the Statement of
Additional Information under the caption "Auditors."
/s/MCGLADREY & PULLEN, LLP
McGladrey & Pullen, LLP
New York, New York
October 14, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE TEMPLETON
AMERICAN TRUST INC. JUNE 30, 1996 SEMI-ANNUAL REPORT AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> TEMPLETON AMERICAN TRUST CLASS I
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 34640608
<INVESTMENTS-AT-VALUE> 44621957
<RECEIVABLES> 80649
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 888
<TOTAL-ASSETS> 44703494
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 133743
<TOTAL-LIABILITIES> 133743
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32246966
<SHARES-COMMON-STOCK> 97701
<SHARES-COMMON-PRIOR> 61870
<ACCUMULATED-NII-CURRENT> 241208
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2100228
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9981349
<NET-ASSETS> 44569751
<DIVIDEND-INCOME> 364017
<INTEREST-INCOME> 357598
<OTHER-INCOME> 0
<EXPENSES-NET> 480407
<NET-INVESTMENT-INCOME> 241208
<REALIZED-GAINS-CURRENT> 2102001
<APPREC-INCREASE-CURRENT> 1261868
<NET-CHANGE-FROM-OPS> 3605077
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 62053
<NUMBER-OF-SHARES-REDEEMED> (26222)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (493981)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1773)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33724
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 480407
<AVERAGE-NET-ASSETS> 1337642
<PER-SHARE-NAV-BEGIN> 14.23
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> 1.12
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.47
<EXPENSE-RATIO> 1.46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON AMERICAN TRUST INC. JUNE 30, 1996 SEMI-ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> TEMPLETON AMERICAN TRUST CLASS II
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 34640608
<INVESTMENTS-AT-VALUE> 44621957
<RECEIVABLES> 80649
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 888
<TOTAL-ASSETS> 44703494
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 133743
<TOTAL-LIABILITIES> 133743
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32246966
<SHARES-COMMON-STOCK> 2791506
<SHARES-COMMON-PRIOR> 3101475
<ACCUMULATED-NII-CURRENT> 241208
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2100228
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9981349
<NET-ASSETS> 44569751
<DIVIDEND-INCOME> 364017
<INTEREST-INCOME> 357598
<OTHER-INCOME> 0
<EXPENSES-NET> 480407
<NET-INVESTMENT-INCOME> 241208
<REALIZED-GAINS-CURRENT> 2102001
<APPREC-INCREASE-CURRENT> 1261866
<NET-CHANGE-FROM-OPS> 3605077
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 102178
<NUMBER-OF-SHARES-REDEEMED> (412147)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (493981)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1773)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33724
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 480407
<AVERAGE-NET-ASSETS> 43661053
<PER-SHARE-NAV-BEGIN> 14.25
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> 1.09
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.42
<EXPENSE-RATIO> 2.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
