FRANKLIN INTERNATIONAL TRUST, 485A24E, 1995-12-29

FRANKLIN INTERNATIONAL TRUST
485A24E, 1995-12-29

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As filed with the Securities and Exchange Commission on December 29, 1995
File Nos.
33-41340
811-6336

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Post-Effective Amendment No. 6 (x)

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 8 (x)

FRANKLIN INTERNATIONAL TRUST
(Exact Name of Registrant as Specified in Charter)

777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code (415) 312-2000

Harmon E. Burns, 777 Mariners Island Blvd., San Mateo, CA 94404
(Name and Address of Agent for Service of Process)

Approximate Date of Proposed Public Offering:

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (Date) pursuant to paragraph (b)
[X ] on March 1, 1996 pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (Date) pursuant to paragraph (a)(ii) of Rule 485

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment

Calculation of Registration Fee Under the Securities Act of 1933

Title of Proposed Amount
Securities Amount Maximum Proposed of
Being Being Offering Price Aggregate Offering
Registered Registered* Per Share Price* Fee*
________________________________________________________________
Beneficial 571,483 $14.45 $289,997 $100
Interest______shares____________________________________________

*Registrant elects to calculate the maximum aggregate offering price pursuant
to Rule 24e-2. 6,625,532 shares were redeemed during the fiscal year ended
October 31, 1995. 6,074,118 shares were used for reductions pursuant to
Paragraph (d) of Rule 24f-2 during the current year. 551,414 shares is the
amount of redeemed shares used for reduction in this amendment. Pursuant to
457(d) under the Securities Act of 1933, the maximum public offering price of
$14.45 per share on December 21, 1995, is the price used as the basis for
these calculations. The maximum public offering price per share varies and,
thus, may be higher or lower than $14.45 in the future. While no fee is
required for the 551,414 shares, the registrant has elected to register, for
$100, an additional $289,997 of shares (approximately 20,069 shares at $14.45
per share).

As part of its initial registration statement, the registrant has elected to
register an indefinite number of shares pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, and hereby continues such
election. The registrant filed the notice required by Rule 24f-2 for its most
recent fiscal year on December 28, 1995.

FRANKLIN INTERNATIONAL TRUST

CROSS REFERENCE SHEET
FORM N- 1A

Part A: Information Required in Prospectus
(TEMPLETON PACIFIC GROWTH FUND)

N-1A Location in
Item No. Item Registration Statement

1. Cover Page Cover Page

2. Synopsis "Expense Table"

3. Condensed Financial "Financial Highlights-
Information How Has the Fund Performed?" How
Does the Fund Measure
Performance?"

4. General Description of "What Is the Templeton Pacific
Registrant Growth Fund?"; "How Does the
Fund Invest Its Assets?"; "What
Are the Fund's Potential
Risks?"; "General Information"

5. Management of the Fund "Who Manages the Fund?"

5A. Management's Discussion of The response to this item is
Fund Performance contained in the Registrant's
Annual Report to Shareholders

6. Capital Stock and Other "What Distributions Might I
Securities Receive from the Fund?"; "How
Taxation Affects You and the
Fund"; "General Information";
"Registering Your Account"

7. Purchase of Securities Being "Who Manages the Fund?";"How Do
Offered I Buy Shares?"; "What Programs
and Privileges Are Available to
Me as a Shareholder?"; "What If
My Investment Outlook
Changes?-Exchange Privilege";
"Telephone Transactions"; "How
Are Fund Shares Valued?"

8. Redemption or Repurchase "What If My Investment Outlook
Changes? - Exchange Privilege";
"How Do I Sell Shares?";
"Telephone Transactions"; "How
Do I Get More Information About
My Investment?"; "General
Information"

9. Pending Legal Proceedings Not Applicable

FRANKLIN INTERNATIONAL TRUST

CROSS REFERENCE SHEET
FORM N- 1A

Part A: Information Required in Prospectus
(FRANKLIN INTERNATIONAL EQUITY FUND)

N-1A Location in
Item No. Item Registration Statement

1. Cover Page Cover Page

2. Synopsis "Expense Table"

3. Condensed Financial "Financial Highlights-
Information How Has the Fund Performed?" How
Does the Fund Measure
Performance?"

4. General Description of "What Is the Franklin
Registrant International Equity Fund?";
"How Does the Fund Invest Its
Assets?"; "What Are the Fund's
Potential Risks?"; "General
Information"

5. Management of the Fund "Who Manages the Fund?"

5A. Management's Discussion of The response to this item is
Fund Performance contained in the Registrant's
Annual Report to Shareholders

6. Capital Stock and Other "What Distributions Might I
Securities Receive from the Fund?"; "How
Taxation Affects You and the
Fund"; "General Information";
"Registering Your Account"

9. Pending Legal Proceedings Not Applicable

FRANKLIN INTERNATIONAL TRUST

CROSS REFERENCE SHEET
FORM N- 1A

Part B: Information Required in
Statement of Additional Information

10. Cover Page Cover Page

11. Table of Contents Contents

12. General Information and "General Information"
History

13. Investment Objectives and "How Do the Funds Invest Their
Policies Assets?" "Investment Restrictions"

14. Management of the Fund "Officers and Trustees";
"Investment Advisory and Other
Services"

15. Control Persons and "Officers and Trustees";
Principal Holders of "Investment Advisory and Other
Securities Services"; "General Information"

16. Investment Advisory and "Investment Advisory and Other
Other Services Services"; "The Funds' Underwriter"

17. Brokerage Allocation and "How Do the Funds Purchase
Other Practices Securities For Their Portfolios?"

18. Capital Stock and Other "How Do I Buy and Sell Shares?";
Securities "How are Fund Shares Valued?";
"Financial Statements"

19. Purchase, Redemption and "How Do I Buy and Sell Shares?";
Pricing of Securities Being "How Are Fund Shares Valued?";
Offered "Financial Statements""

20. Tax Status "Additional Information Regarding
Taxation"

21. Underwriters "The Fund's Underwriter"

22. Calculation of Performance "General Information"
Data

23. Financial Statements "Financial Statements"

TEMPLETON
PACIFIC
GROWTH FUND

FRANKLIN TEMPLETON INTERNATIONAL TRUST

PROSPECTUS

MARCH 1, 1996

777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN

Franklin Templeton International Trust (the "Trust") is an open-end management
investment company consisting of two separate diversified series. Each series of
the Trust in effect represents a separate fund with its own investment objective
and policies, with varying possibilities for income or capital appreciation, and
subject to varying market risks. Through the different series, the Trust
attempts to satisfy different investment objectives.

This Prospectus pertains only to the Templeton Pacific Growth Fund (the "Fund"),
a diversified series, which seeks long-term growth of capital. Under normal
market conditions, the Fund invests at least 65% of its total assets in equity
securities which trade on markets in the Pacific Rim and are (i) issued by
companies domiciled in the Pacific Rim or (ii) issued by companies that derive
at least 50% of either their revenues or pre-tax income from activities in the
Pacific Rim. The Fund invests in domestic and foreign securities as described
under "How Does the Fund Invest Its Assets?"

Under normal market conditions, the Fund's assets are substantially invested in
equity securities consisting of common and preferred stock, securities (bonds or
preferred stock) convertible into common stock, warrants and securities
representing underlying international securities such as American Depositary
Receipts, or ADRs ("Equity Securities").

This Prospectus is intended to set forth in a clear and concise manner
information about the Fund that you should know before investing. After reading
the Prospectus, you should retain it for future reference; it contains
information about the purchase and sale of shares and other items which you will
find useful to have.

A Statement of Additional Information ("SAI") concerning the Trust, dated March
1, 1996, as may be amended from time to time, provides a further discussion of
certain areas in this Prospectus and other matters which may be of interest to
you. It has been filed with the Securities and Exchange Commission ("SEC") and
is incorporated herein by reference. A copy is available without charge from the
Fund or the Fund's principal underwriter, Franklin/Templeton Distributors, Inc.
("Distributors"), at the address or telephone number shown above.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE IN WHICH THE OFFERING IS NOT AUTHORIZED. NO SALES REPRESENTATIVE, DEALER,
OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. FURTHER
INFORMATION MAY BE OBTAINED FROM THE UNDERWRITER.

CONTENTS PAGE

Expense Table

Financial Highlights - How Has the Fund Performed?

What Is the Templeton Pacific Growth Fund?

How Does the Fund Invest Its Assets?

What Are the Fund's Potential Risks?

Who Manages the Fund?

What Distributions Might I Receive from the Fund?

How Taxation Affects You and the Fund

How Do I Buy Shares?

What Programs and Privileges Are
Available to Me as a Shareholder?

What If My Investment Outlook Changes? - Exchange Privilege

How Do I Sell Shares?

Telephone Transactions

How Are Fund Shares Valued?

How Do I Get More Information About My Investment?

How Does the Fund Measure Performance?

General Information

Registering Your Account

Important Notice Regarding
Taxpayer IRS Certifications

Useful Terms and Definitions
in this Prospectus

EXPENSE TABLE

The purpose of this table is to assist you in understanding the various costs
and expenses that you will bear directly or indirectly in connection with an
investment in the Fund. These figures are based on aggregate operating expenses
of the Fund for the Fund's fiscal year ended October 31, 1995.

SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50%
Deferred Sales Charge NONE+
Exchange Fee (per transaction) $5.00*

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 1.00%
12b-1 Fees 0.19%**
Other Expenses:
Custodian Fees 0.12%
Shareholder Servicing costs 0.12%
Other 0.29%
-----

Total Other Expenses 0.53%

Total Fund Operating Expenses 1.72%

+Investments of $1 million or more are not subject to a front-end sales charge;
however, a contingent deferred sales charge of 1% is imposed on certain
redemptions within 12 months of the calendar month of such investments. See "How
Do I Sell Shares? - Contingent Deferred Sales Charge." *$5.00 fee imposed only
on Timing Accounts as described under "What If My Investment Outlook Changes? -
Exchange Privilege." All other exchanges are processed without a fee. **The
maximum amount of Rule 12b-1 fees allowed pursuant to the Fund's distribution
plan is 0.25%. See "Who Manages the Fund? - Plan of Distribution." Consistent
with National Association of Securities Dealers, Inc.'s rules, it is possible
that the combination of front-end sales charges and Rule 12b-1 fees could cause
long-term shareholders to pay more than the economic equivalent of the maximum
front-end sales charges permitted under those same rules.

You should be aware that the above table is not intended to reflect in precise
detail the fees and expenses associated with an investment in the Fund. Rather,
the table has been provided only to assist you in gaining a more complete
understanding of fees, charges and expenses. For a more detailed discussion of
these matters, you should refer to the appropriate sections of this Prospectus.

EXAMPLE

As required by SEC regulations, the following example illustrates the expenses,
including the maximum front-end sales charge, that apply to a $1,000 investment
in the Fund over various time periods assuming (1) a 5% annual rate of return
and (2) redemption at the end of each time period.

ONE YEAR* THREE YEARS FIVE YEARS TEN YEARS
$62 $97 $134 $239

*Assumes that a contingent deferred sales charge will not apply.

This example is based on the aggregate annual operating expenses of the Fund
shown above and should not be considered a representation of past or future
expenses, which may be more or less than those shown. The operating expenses are
borne by the Fund and only indirectly by you as a result of your investment in
the Fund. In addition, federal securities regulations require the example to
assume an annual return of 5%, but the Fund's actual return may be more or less
than 5%.

FINANCIAL HIGHLIGHTS - HOW HAS THE FUND PERFORMED?

Set forth below is a table containing the financial highlights for a share of
the Fund. The information for each of the four fiscal years in the period ended
October 31, 1995 and for the period from September 20, 1991 (effective date of
registration) to October 31, 1991 has been audited by Coopers & Lybrand L.L.P.,
independent auditors, whose audit report appears in the Trust's Annual Report to
Shareholders dated October 31, 1995. See the discussion "Reports to
Shareholders" under "General Information" in this Prospectus.

Per Share Operating Performance** Ratios/Supplemental Data
----------------------------------------------------- ---------------------------
Net Net Ratio
Asset Realized & Total Distri- Distri- Net Ratio of of Net
Values Net Unrealized From butions butions Asset Net Assets Expenses Investment
Year at Begin-Invest- Gain Invest- From Net From Values at End to Average Income Portfolio
Ended ning ment (Loss) on ment Investment Capital Total at End Total of Year Net to AverageTurnover
Oct. 31 of Year IncomeSecurities Operations Income Gains Distributionsof Year Return++ (in 000's) Assets Net Assets Rate
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991+ $10.01 $.06 $-- $ .060 $-- $-- $-- $10.07 .60% $ 1,165 --%*** 5.01%* --%
1992 10.07 .14 .836 .976 (.146) -- (.146) 10.90 9.77 5,724 .29*** 1.80 62.96
1993 10.90 .19 3.825 4.015 (.193) (.282) (.475) 14.44 38.46 22,619 .50*** 2.03 47.52
1994 14.44 .21 1.008 1.218 (.198) (.060) (.258) 15.40 8.46 58,241 1.22*** 1.54 9.16
1995 15.40 .15 (1.013) (.863) (.156) (.271) (.427) 14.11 (5.54) 50,247 1.72 1.04 36.21

</TABLE>

+For the period September 20, 1991 (effective date of registration) to October
31, 1991. ++Total return measures the change in value of an investment over the
periods indicated. It does not include the maximum initial sales charge and
assumes reinvestment of dividends and capital gains, if any, at net asset value
and is not annualized. *Annualized. **Selected data for a share of beneficial
interest outstanding throughout the year. ***During the periods indicated below,
Franklin Advisers, Inc., the investment manager, agreed in advance to waive a
portion of its management fees. Had such action not been taken, ratios of
operating expenses to average net assets would have been as follows:

RATIO OF
EXPENSES
TO AVERAGE
NET ASSETS
1991+ 2.50%*
1992 2.50
1993 2.31
1994 1.72

WHAT IS THE TEMPLETON PACIFIC GROWTH FUND?

The Trust is an open-end management investment company which consists of two
diversified series, commonly called "mutual funds." The Trust is a Delaware
business trust, organized on March 22, 1991, and registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund is
managed by Franklin Advisers, Inc. (the "Manager" or "Advisers") and up until
December 31, 1992, received portfolio advice and management assistance from
Barclays de Zoete Wedd Investment Management Inc. ("BZWIM"). Since January 1,
1993, Templeton Investment Counsel, Inc. ("TICI" or the "Sub-advisor"), an
indirect subsidiary of Templeton Worldwide, Inc., which is a direct,
wholly-owned subsidiary of Franklin Resources, Inc. ("Resources"), serves as
the sub-advisor under a contract with the Manager providing services similar
to those provided by BZWIM and with no increase in fees to shareholders. See
"Who Manages the Fund?"

The Board of Trustees of the Trust (the "Board") may determine, at a future
date, to offer shares of the Fund in one or more "classes" to permit the Fund to
take advantage of alternative methods of selling Fund shares. "Classes" of
shares represent proportionate interests in the same portfolio of investment
securities but with different rights, privileges and attributes, as determined
by the trustees. Certain funds in the Franklin Templeton Funds currently offer
their shares in two classes, designated "Class I" and "Class II." Because the
Fund's sales charge structure and plan of distribution are similar to those of
Class I shares, shares of the Fund may be considered Class I shares for
redemption, exchange and other purposes.

You may purchase shares of the Fund (minimum investment of $100 initially and
$25 thereafter) at the current public offering price. The current public
offering price of the Fund's shares is equal to the net asset value plus a
variable sales charge not exceeding 4.50% of the offering price depending upon
the amount invested. Please see "How Do I Buy Shares?"

HOW DOES THE FUND INVEST ITS ASSETS?

The Fund's principal investment objective is to seek to provide long-term growth
of capital. Under normal market conditions, the Fund invests at least 65% of its
total assets in Equity Securities which trade on markets in the Pacific Rim, and
which are (i) issued by companies domiciled in the Pacific Rim or (ii) issued by
companies that derive at least 50% of either their revenues or pre-tax income
from activities in the Pacific Rim. The objective is a fundamental policy and
may not be changed without shareholder approval. Of course, there is no
assurance that the Fund's objective will be achieved.

For purposes of the Fund's 65% investment policy, the countries in the Pacific
Rim are Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New
Zealand, Pakistan, Philippines, Singapore, South Korea and Thailand. It is
currently expected that under normal conditions at least 65% of the Fund's total
assets will be invested in securities of foreign issuers in at least three of
the countries listed herein. The Fund, may, from time to time, hold significant
cash positions until suitable investment opportunities are available, consistent
with its policy on temporary investments.

The Fund may invest up to 35% of its assets in the securities of issuers
domiciled outside of the Pacific Rim. The investments may consist of: (i)
securities of issuers in countries that are not located in the Pacific Rim but
are linked by tradition, economic markets, cultural similarities or geography to
the countries in the Pacific Rim; and (ii) securities of issuers located
elsewhere in the world which have operations in the Pacific Rim or which stand
to benefit from political and economic events in the Pacific Rim. For example,
the Fund may invest in a company outside of the Pacific Rim when the Sub-advisor
believes at the time of investment that the value of the company's securities
may be enhanced by conditions or developments in the Pacific Rim even though the
company's production facilities are located outside of the Pacific Rim.

Up to 35% of the Fund's total assets may be invested in investment grade bonds,
fixed-income debt securities and synthetic securities, rated "Baa" or better by
Moody's Investors Service ("Moody's") or "BBB" or better by Standard & Poor's
Corporation ("S&P") or that are not rated but determined by management to be of
comparable quality. The Fund may seek capital appreciation by investing in such
debt securities which would occur through changes in relative foreign currency
exchange rates, changes in relative interest rates or improvement in the
creditworthiness of an issuer. The receipt of income from such debt securities
is incidental to the Fund's investment objective of growth of capital. These
debt obligations consist of U.S. and foreign government securities and corporate
debt securities, including Samurai and Yankee bonds, Eurobonds and depository
receipts. The issuers of such debt securities may or may not be domiciled in the
Pacific Rim.

In the event the rating on an issue held in the Fund's portfolio is lowered by a
rating service, such change will be considered by the Fund in its evaluation of
the overall investment merits of that security but will not necessarily result
in an automatic sale of the security.

TRADING IN OPTIONS

The Fund may purchase put and call options and write covered put and call
options on securities and securities indices. Such options may be traded on U.S.
exchanges and, to the extent permitted by law, over-the-counter and on foreign
exchanges. The Fund will not purchase or sell futures contracts or purchase or
sell related options, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of margin deposits on the Fund's
outstanding futures and related options positions and the amount of premiums
paid for outstanding options on futures would exceed 5% of the market value of
the Fund's total assets.

WRITING CALL AND PUT OPTIONS ON SECURITIES. The Fund may write options to
generate additional income and to hedge its investment portfolio against
anticipated adverse market and/or exchange rate movements. Call options written
by the Fund give the holder the right to buy the underlying securities from the
Fund at a stated exercise price. Put options written by the Fund give the holder
the right to sell the underlying security to the Fund at a stated exercise
price. All options written by the Fund will be "covered."

A call option 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 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 (i) is
equal to or less than the exercise price of the call written or (ii) is greater
than the exercise price of the call written if the difference is maintained by
the Fund in cash and high-grade debt securities in a segregated account with its
custodian.

A put option written by the Fund is "covered" if the Fund maintains cash and
high-grade debt 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 premium paid by the purchaser of an option will reflect, among other things,
the relationship of the exercise price to the market price and volatility of the
underlying security, the remaining term of the option, supply and demand, and
interest rates.

The writer of an option that wishes to terminate its obligation may effect a
"closing purchase transaction." This is accomplished by buying an option of the
same series as the option previously written. The effect of the purchase is that
the writer's position will be canceled by the clearing corporation. However, a
writer may not effect a closing purchase transaction after being notified of the
exercise of an option. Likewise, an investor who is the holder of an option may
liquidate its position by effecting a "closing sale transaction." This is
accomplished by selling an option of the same series as the option previously
purchased.

The Fund will realize a profit from a closing transaction if the price of the
transaction is less than the premium received from writing the option or is more
than the premium paid to purchase the option; the Fund will realize a loss from
a closing transaction if the price of the transaction is more than the premium
received from writing the option or is less than the premium paid to purchase
the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the Fund.
There is no guarantee that either a closing purchase or a closing sale
transaction can be effected when the Fund so desires.

PURCHASING CALL OPTIONS. The Fund may purchase call options on securities which
it intends to purchase in order to limit the risk of a substantial increase in
the market price of such security. The Fund may also purchase call options on
securities held in its portfolios and on which it has written call options. A
call option gives the holder the right to buy the underlying securities from the
option writer at a stated exercise price. Prior to its expiration, a call option
may be sold in a closing sale transaction. Profit or loss from such a sale will
depend on whether the amount received is more or less than the premium paid for
the call option plus the related transaction costs.

PURCHASING PUT OPTIONS. The Fund may purchase put options on particular
securities in order to protect against a decline in the market value of the
underlying security below the exercise price less the premium paid for the
option. A put option gives the holder the right to sell the underlying security
at the option exercise price at any time during the option period. The ability
to purchase put options will allow the Fund to protect the unrealized gain in an
appreciated security in its portfolio without actually selling the security. In
addition, the Fund will continue to receive interest or dividend income on the
security. The Fund may sell a put option which it has previously purchased prior
to the sale of the securities underlying such option. Such sales will result in
a net gain or loss depending on whether the amount received on the sale is more
or less than the premium and other transaction costs paid for the put option
that is sold. Such gain or loss may be wholly or partially offset by a change in
the value of the underlying security which the Fund owns or has the right to
acquire.

OPTIONS ON STOCK INDICES. The Fund may also purchase and write call and put
options on stock indices in order to hedge against the risk of market or
industry-wide stock price fluctuations or to increase income to the Fund. Call
and put options on stock indices are similar to options on securities except
that, rather than the right to purchase or sell particular securities at a
specified price, options on a stock index give the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the
underlying stock index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain or loss depends on
price movements in the stock market generally (or in a particular industry or
segment of the market) rather than price movements in individual securities.

All options written on stock indices must be covered. When the Fund writes an
option on a stock index, it will establish a segregated account containing cash
or high quality, fixed-income securities with its custodian in an amount at
least equal to the market value of the option and will maintain the account
while the option is open or will otherwise cover the transaction.

FORWARD CONVERSIONS. The Fund may engage in "forward conversion" transactions.
In a forward conversion, the Fund will purchase securities and write call
options and purchase put options on such securities. All options written by the
Fund will be covered. By purchasing puts, the Fund protects the underlying
security from depreciation in value. By selling or writing calls on the same
security, the Fund receives premiums which may offset part or all of the cost of
purchasing the puts while foregoing the opportunity for appreciation in the
value of the underlying security. The Fund will not exercise a put it has
purchased while a call option on the same security is outstanding. The use of
options in connection with forward conversions is intended to hedge against
fluctuations in the market value of the underlying security. Although it is
generally intended in forward conversion transactions that the exercise price of
put and call options would be identical, situations might occur in which some
option positions are acquired with different exercise prices. Therefore, the
Fund's return may depend in part on movements in the price of the underlying
security because of the different exercise prices of the call and put options.
Such price movements may also affect the Fund's total return if the conversion
is terminated prior to the expiration date of the options. In such event, the
Fund's return may be greater or less than it would otherwise have been if it had
hedged the security only by purchasing put options.

OVER-THE-COUNTER OPTIONS ON SECURITIES ("OTC" OPTIONS). The Fund may write
covered put and call options and purchase put and call options which trade in
the over-the-counter market to the same extent that it may engage in exchange
traded options. OTC options differ from exchange traded options in certain
material respects. OTC options are arranged directly with dealers and not, as is
the case with exchange traded options, with a clearing corporation. Thus, there
is a risk of non-performance by the dealer. Because there is no exchange,
pricing is typically done by reference to information from market makers.
However, OTC options are available for a greater variety of securities and in a
wider range of expiration dates and exercise prices than exchange traded
options; and the writer of an OTC option is paid the premium in advance by the
dealer.

There can be no assurance that a continuous, liquid secondary market will exist
for any particular option at any specific time. Consequently, the Fund may be
able to realize the value of an OTC option it has purchased only by exercising
it or entering into a closing sale transaction with the dealer that issued the
option. Similarly, when the Fund writes an OTC option, it generally can close
out that option prior to its expiration only by entering into a closing purchase
transaction with the dealer to whom the Fund originally wrote the option.

The Fund understands the current position of the staff of the SEC to be that
purchased OTC options and the assets used as "cover" for written OTC options are
illiquid securities. The Fund and its advisers disagree with this position.
Nevertheless, pending a change in the staff's position, the Fund will treat OTC
options as subject to the Fund's limitation on illiquid securities. (See "How
Does the Fund Invest Its Assets? - Illiquid Investments.")

SPREAD AND STRADDLE TRANSACTIONS. The Fund may engage in "spread" transactions
in which it purchases and writes a put or call option on the same underlying
security, with the options having different exercise prices and/or expiration
dates. All options written by the Fund will be covered. The Fund may also engage
in so-called "straddles," in which it purchases or writes combinations of put
and call options on the same security. Because the purchase of options by the
Fund in connection with these transactions may, under certain circumstances,
involve a limited degree of investment leverage, the Fund will not enter into
any spreads or straddles if, as a result, more than 5% of its net assets will be
invested at any time in such option transactions. The Fund's ability to engage
in spread or straddle transactions may be further limited by state securities
laws.

FUTURES TRANSACTIONS

The Fund may purchase or sell (i) financial futures contracts; (ii) interest
rate futures contracts; (iii) options on interest rate futures contracts; (iv)
stock index futures contracts; and (v) options on stock index futures contracts
(collectively, "Futures Transactions") for bona fide hedging purposes. The Fund
may enter into such Futures Transactions on domestic exchanges and, to the
extent such transactions have been approved by the Commodity Futures Trading
Commission ("CFTC") for sale to customers in the U.S., on foreign exchanges. The
Fund will not engage in Futures Transactions for speculation but only as a hedge
against changes resulting from market conditions in the value of its securities
or securities which it intends to purchase. The Fund will not enter into any
Futures Transactions if, immediately thereafter, more than 20% of the Fund's net
assets would be represented by futures contracts or options thereon. In
addition, the Fund will not engage in any Futures Transactions if, immediately
thereafter, the sum of the amount of initial margin deposits on the Fund's
futures positions and premiums paid for options on its futures contracts would
exceed 5% of the market value of the Fund's total assets.

FINANCIAL FUTURES CONTRACTS. Financial futures are commodity contracts that
obligate the holder to take or make delivery of a specified quantity of a
financial instrument, such as a U.S. Treasury security or foreign currencies,
during a specified future period at a specified price. A "sale" of a financial
futures contract means the acquisition of a contractual obligation to deliver
the securities called for by the contract at a specified price on a specified
date. A "purchase" of a financial futures contract means the acquisition of a
contractual obligation to acquire the securities called for by the contract at a
specified price on a specified date.

To the extent the Fund enters into a futures contract, it will deposit in a
segregated account with its custodian cash or U.S. Treasury obligations equal to
a specified percentage of the value of the futures contract (the "initial
margin"), as required by the relevant contract market and futures commission
merchant. The futures contract will be marked-to-market daily. Should the value
of the futures contract decline relative to the Fund's position, the Fund will
be required to pay to the futures commission merchant an amount equal to such
change in value.

INTEREST RATE FUTURES CONTRACTS. Interest Rate Futures Contracts are futures
contracts on debt securities. The value of these instruments changes in response
to changes in the value of the underlying debt security, which depends primarily
on prevailing interest rates.

The Fund may enter into interest rate futures contracts in order to protect its
portfolio securities from fluctuations in interest rates without necessarily
buying or selling the underlying fixed-income securities. For example, if the
Fund owns bonds, and interest rates are expected to increase, it might sell
futures contracts on debt securities having characteristics similar to those
held in the portfolio. Such a sale would have much the same effect as selling an
equivalent value of the bonds owned by the Fund. If interest rates did increase,
the value of the debt securities in the portfolio would decline, but the value
of the futures contracts to the Fund would increase at approximately the same
rate, thereby keeping the net asset value of the Fund from declining as much as
it otherwise would have.

OPTIONS ON INTEREST RATE FUTURES CONTRACTS. The Fund may also purchase put and
call options and write covered put and call options on interest rate futures
contracts to hedge against risks associated with shifts in interest rates.

STOCK INDEX FUTURES CONTRACTS. A stock index futures contract obligates the
seller to deliver (and the purchaser to take) an amount of cash equal to a
specific dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract and the price
at which the agreement was made. Open futures contracts are valued on a daily
basis, and the Fund may be obligated to provide or receive cash reflecting any
decline or increase in the contract's value. No physical delivery of the
underlying stocks in the index is made in the future.

The Fund may sell stock index futures contracts in anticipation of or during a
market decline in an attempt to offset the decrease in market value of its
Equity Securities that might otherwise result. When the Fund is not fully
invested in stocks and anticipates a significant market advance, it may purchase
stock index futures in order to gain rapid market exposure that may offset
increases in the cost of common stocks that it intends to purchase.

OPTIONS ON STOCK INDEX FUTURES CONTRACTS. Call and put options on stock index
futures are similar to options on securities except that, rather than the right
to purchase or sell stock at a specified price, options on a stock index futures
contract give the holder the right to receive cash. Upon exercise of the option,
the delivery of the futures position by the writer of the option to the holder
of the option will be accompanied by delivery of the accumulated balance in the
writer's futures margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract. If an option is exercised on the last trading day prior to the
expiration date of the option, the settlement will be made entirely in cash
equal to the difference between the exercise price of the option and the closing
price of the futures contract on the expiration date.

The need to hedge against such risks will depend on the extent of
diversification of the Fund's common stock portfolio and the sensitivity of such
investments to factors influencing the stock market as a whole.

CURRENCY HEDGING TRANSACTIONS. In order to hedge against currency exchange rate
risks, the Fund may enter into forward currency exchange contracts and currency
futures contracts and options on such futures contracts, as well as purchase put
or call options and write covered put and call options on currencies traded in
U.S. or foreign markets.

A forward currency exchange contract involves an obligation to purchase or sell
a specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks). A currency
futures contract is a standardized contract for the future delivery of a
specified amount of currency at a future date at a price set at the time of the
contract. The Fund may enter into currency futures contracts traded on regulated
commodity exchanges, including non-U.S. exchanges.

The Fund may either accept or make delivery of the currency specified at the
maturity of a forward or futures contract or, prior to maturity, enter into a
closing transaction involving the purchase or sale of an offsetting contract.
Closing transactions with respect to forward contracts are usually effected with
the currency trader who is a party to the original forward contract. Closing
transactions with respect to futures contracts and options thereon are effected
on the exchange on which the contract was entered into (or on a linked
exchange).

The Fund may enter into forward currency exchange contracts and currency futures
contracts in several circumstances. For example, when the Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency (or options contracts with respect to such futures contracts), or when
the Fund anticipates the receipt in a foreign currency of dividends or interest
payments on such a security that it holds, it may desire to "lock in" the U.S.
dollar price of the security or the U.S. dollar equivalent of such dividend or
interest payment, as the case may be. In addition, when the Sub-advisor believes
that the currency of a particular country may suffer a substantial decline
against the U.S. dollar, it may enter into a forward or futures contract to
sell, for a fixed amount of U.S. dollars, the amount of that currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such currency. In addition, the Fund may engage in cross-hedging
transactions by using forward contracts in one currency to hedge against
fluctuations in value of securities denominated in a different currency when
there is a pattern of correlation between the two currencies.

The Fund may attempt to accomplish objectives similar to those described above
with respect to forward and futures contracts for currency by means of
purchasing put or call options and writing, on a covered basis, put and call
options on currencies traded on exchanges. A put option can give the Fund the
right to sell a currency at the exercise price on or before the expiration of
the option. A call option can give the purchaser of the option the right to
purchase a currency at the exercise price on or before the expiration of the
option. The purchase or writing of a foreign currency option may constitute an
effective hedge against foreign exchange rate fluctuations. As with other kinds
of option transactions, however, the writing of a foreign currency option will
constitute only a partial hedge, up to the amount of the premium received, and
the Fund could be required to purchase or sell currencies at disadvantageous
exchange rates, thereby incurring losses. Likewise, with respect to foreign
currency options purchased by the Fund, the Fund may forfeit the entire amount
of the premium plus related transaction costs if exchange rates move in a manner
adverse to the Fund's position. The Fund may use foreign currency options to
cross-hedge, which involves writing or purchasing options on one currency to
hedge against changes in exchange rates for a different currency with a pattern
of correlation to the first currency. Foreign currency options to be written or
purchased by the Fund will be traded on U.S. or foreign exchanges or
over-the-counter. The Fund will not enter into such forward currency exchange
contracts or currency futures contracts or purchase or write such options or
maintain a net exposure to such contracts where the completion of the contracts
would obligate the Fund to deliver an amount of currency other than U.S. dollars
in excess of the value of the Fund's portfolio securities or other assets
denominated in that currency or, in the case of cross-hedging, in a currency
closely correlated to that currency.

Transactions in options, futures, options on futures and forward contracts
are generally considered "derivative securities."

SECURITIES WARRANTS. The Fund may invest up to 10% of its net assets in
warrants, including such warrants that are not listed on an exchange. A warrant
is typically a long-term option issued by a corporation which gives the holder
the privilege of buying a specified number of shares of the underlying common
stock at a specified exercise price at any time on or before an expiration date.
Stock index warrants entitle the holder to receive, upon exercise, an amount in
cash determined by reference to fluctuations in the level of a specified stock
index. If the Fund does not exercise or dispose of a warrant prior to its
expiration, it will expire worthless.

CONVERTIBLE SECURITIES. The Fund may invest in debt obligations and preferred
stocks that are convertible within a specified period of time into a certain
quantity of the common stock of the same or different issuer. A convertible
security may be called by the issuer but only after a specified date and under
certain circumstances established at the time the security is issued.
Convertible securities provide a fixed-income stream and the opportunity,
through their conversion feature, to participate in any capital appreciation
resulting from a market price advance in the convertible security's underlying
common stock. Holders of a convertible security will have recourse only to the
issuer of the security, which will be either an operating company or an
investment bank.

Because convertible securities have features of both common stock and
fixed-income securities, their value can be influenced by both interest rate and
market movements. As with a fixed-income security, a convertible security tends
to increase in market value when interest rates decline and decrease in value
when interest rates rise. The price of a convertible security is also influenced
by the market value of the security's underlying common stock and tends to
increase as the market value of the underlying stock rises, whereas it tends to
decrease as the market value of the underlying stock declines.

When issued by an operating company, a convertible security tends to be senior
to common stock, but at the same time is often subordinate to other types of
fixed-income securities issued by the respective company. When convertible
securities issued by operating companies are converted, the operating company
typically issues new common stock to the holder of the security. However, if the
security is called by the issuer and the parity price of the convertible
security is less than the call price, the operating company will often pay out
cash instead of common stock. If the security is issued by an investment bank,
the security is an obligation of and is also convertible through such investment
bank.

The convertible debt obligations in which the Fund may invest are subject to the
same rating criteria as the Fund's investments in fixed-income securities.
However, unlike convertible debt obligations, convertible preferred stocks are
equity securities. Like common stocks, preferred stocks are subordinated to all
debt obligations in the event of insolvency, and an issuer's failure to make a
dividend payment is generally not an event of default entitling the preferred
shareholder to take action. Preferred stocks generally have no maturity date and
they pay dividends, rather than interest payments. For more information on
convertible securities, including enhanced convertible securities, please see
the SAI.

SYNTHETIC CONVERTIBLES. The Fund may invest up to 35% of its assets in
"synthetic convertible" securities. A synthetic convertible is created by
combining distinct securities which together possess the two principal
characteristics of a true convertible, that is, fixed income and the right to
acquire the underlying equity security. This combination is achieved by
investing in nonconvertible fixed-income securities and in warrants or stock or
stock index call options which grant the holder the right to purchase a
specified quantity of securities within a specified period of time at a
specified price or to receive cash in the case of stock index options. Synthetic
convertible securities are not considered to be Equity Securities for purposes
of the Fund's 65% investment policy.

Synthetic convertible securities differ from the true convertible security in
several respects. The value of a synthetic convertible is the sum of the values
of its fixed-income component and its convertibility component. Thus, the values
of a synthetic convertible and a true convertible security will respond
differently to market fluctuations. Further, although the Fund expects normally
to create synthetic convertibles whose two components represent one issuer, the
character of a synthetic convertible allows the Fund to combine components
representing distinct issuers or to combine a fixed-income security with a call
option on a stock index, when it is determined that such a combination would
better promote the Fund's investment objectives. In addition, the component
parts of a synthetic convertible security may be purchased simultaneously or
separately, and the holder of a synthetic convertible faces the risk that the
price of the stock, or the level of the market index underlying the
convertibility component, will decline.

LOANS OF PORTFOLIO SECURITIES. Consistent with procedures approved by the Board
of Trustees and subject to the following conditions, the Fund may lend its
portfolio securities to qualified securities dealers or other institutional
investors, provided that such loans do not exceed 33 1/3% of the value of the
Fund's total assets at the time of the most recent loan. The borrower must
deposit with the Fund's custodian bank collateral with an initial market value
of at least 102% of the initial market value of the securities loaned, including
any accrued interest, with the value of the collateral and loaned securities
marked-to-market daily to maintain collateral coverage of at least 100%. Such
collateral shall consist of cash, securities issued by the U.S. Government, its
agencies or instrumentalities, or irrevocable letters of credit. The lending of
securities is a common practice in the securities industry. The Fund may engage
in security loan arrangements with the primary objective of increasing the
Fund's income either through investing the cash collateral in short-term
interest bearing obligations or by receiving a loan premium from the borrower.
Under the securities loan agreement, the Fund continues to be entitled to all
dividends or interest on any loaned securities. As with any extension of credit,
there are risks of delay in recovery and loss of rights in the collateral should
the borrower of the security fail financially.

BORROWING. As a fundamental policy, the Fund will not borrow money or mortgage
or pledge any of its assets, except that borrowings and the pledging of assets
therefor to meet redemption requests and for other temporary or emergency
purposes may be made from banks in an amount up to 10% of total asset value.
While borrowings exceed 5% of the Fund's total assets, it will not make any
additional investments.

ILLIQUID INVESTMENTS. The Fund reserves the right to invest up to 10% of its net
assets in illiquid securities (a term which means securities that cannot be
disposed of within seven days in the normal course of business at approximately
the amount at which the Fund has valued the securities). It is the current
policy of the Fund, however (which may be changed without the approval of the
Fund's shareholders), to limit any such investments (including illiquid Equity
Securities, repurchase agreements of more than seven days duration, OTC options,
illiquid real estate investment trusts, securities of issuers with less than
three years continuous operation and other securities which are not readily
marketable) to 5% of the Fund's net assets. The Board of Trustees has authorized
the Fund to invest in restricted securities where such investments are
consistent with the Fund's investment objective and has authorized such
securities to be considered to be liquid and thus not within the foregoing 10%
limit, to the extent the Sub-advisor or the Manager, as the case may be,
determines on a daily basis that there is a liquid institutional or other market
for such securities. Notwithstanding the determinations of the Manager and the
Sub-advisor in this regard, the Board of Trustees remains responsible for such
determinations and considers appropriate action to maximize the Fund's liquidity
and its ability to meet redemption demands if a security should become illiquid
subsequent to its purchase. To the extent the Fund invests in restricted
securities that are deemed liquid, the general level of illiquidity in the Fund
may be increased if qualified institutional buyers become uninterested in
purchasing these securities or the market for these securities contracts. (See
"How Do the Funds Invest Their Assets? - Other Investment Policies" in the SAI.)

SHORT-TERM INVESTMENTS. Occasionally, in order to honor redemptions, pending
investment of proceeds from new sales of Fund shares or to satisfy other
short-term needs, the Fund may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and/or invest a portion of its assets in high
quality money-market instruments. In any period of market weakness or of
uncertain market or economic conditions, or while awaiting attractive investment
opportunities, the Fund may establish a temporary defensive position by
investing in high quality money-market instruments if the Manager or Sub-advisor
anticipates that developments in any market may seriously jeopardize the value
of most Equity Securities in such market. Any decision to substantially withdraw
from the equity market is reviewed by the Board of Trustees. Money-market
instruments in which the Fund may invest include, but are not limited to, the
following instruments of U.S. or foreign issuers: government securities;
commercial paper; bank certificates of deposit; bankers' acceptances; and
repurchase agreements secured by any of the foregoing. It is impossible to
predict when or for how long the Fund would employ defensive strategies. All
such securities will be rated "A-1" or "A-2" by S&P or "P-1" or "P-2" by Moody's
or, if not rated, determined by the Manager or Sub-advisor to be of comparable
quality.

REPURCHASE AGREEMENTS. The Fund may engage in repurchase transactions in which
the Fund purchases a U.S. government security subject to resale to a bank or
dealer at an agreed-upon price and date. The transaction requires the
collateralization of the seller's obligation by the transfer of securities with
an initial market value, including accrued interest, equal to at least 102% of
the dollar amount invested by the Fund in each agreement, with the value of the
underlying security marked-to-market daily to maintain coverage of at least
100%. A default by the seller might cause the Fund to experience a loss or delay
in the liquidation of the collateral securing the repurchase agreement. The Fund
might also incur disposition costs in liquidating the collateral. The Fund,
however, intends to enter into repurchase agreements only with financial
institutions such as broker-dealers and banks which are deemed creditworthy by
the Fund's investment manager. A repurchase agreement is deemed to be a loan by
the Fund under the 1940 Act. The U.S. government security subject to resale (the
collateral) will be held on behalf of the Fund by a custodian approved by the
Board and will be held pursuant to a written agreement.

The methods often employed by the Sub-advisor to identify opportunities in the
equity markets may result in frequent recommendations to add or remove
securities from the Fund's portfolio, thus increasing the portfolio turnover
rate. High portfolio turnover may increase transaction costs which must be paid
by the Fund. High turnover may also result in the realization of net capital
gains, which are taxable when distributed to shareholders.

The Fund is subject to a number of additional investment restrictions, some of
which may be changed only with the approval of shareholders, which limit its
activities to some extent. For a list of these restrictions and more information
concerning the policies discussed herein, please see "How Do the Funds Invest
Their Assets?" and "Investment Restrictions" in the SAI.

HOW YOU PARTICIPATE IN
THE RESULTS OF THE FUND'S ACTIVITIES

The assets of the Fund are invested in portfolio securities. If the securities
owned by the Fund increase in value, the value of the shares of the Fund which
you own will increase. If the securities owned by the Fund decrease in value,
the value of your shares will also decline. In this way, you participate in any
change in the value of the securities owned by the Fund.

In addition to the factors which affect the value of individual securities, as
described in the preceding sections, you may anticipate that the value of Fund
shares will fluctuate with movements in the broader equity and bond markets.

A decline in the stock market of any country in which the Fund is invested may
also be reflected in declines in the Fund's share price. Changes in currency
valuations will also affect the price of Fund shares. History reflects both
decreases and increases in worldwide stock markets and currency valuations, and
these may reoccur unpredictably in the future.

Changes in the prevailing rates of interest in any of the countries in which the
Fund is invested will likely affect the value of the Fund's holdings and thus
the value of Fund shares. Increased rates of interest which frequently accompany
higher 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
impact the price of Fund shares. History reflects both increases and decreases
in interest rates in individual countries and throughout the world, and in
currency valuations, and these may reoccur unpredictably in the future.

WHAT ARE THE FUND'S POTENTIAL RISKS?

RISKS RELATED TO INVESTING IN FOREIGN SECURITIES

Foreign securities involve certain risks which should be considered carefully by
prospective investors in the Fund. These risks include political, social or
economic instability in the country of the issuer, the difficulty of predicting
international trade patterns, the possibility of the imposition of exchange
controls, expropriation, restrictions on removal of currency or other assets,
nationalization of assets, foreign withholding and income taxation, and foreign
trading practices (including higher trading commissions, custodial charges and
delayed settlements). Such securities may be subject to greater fluctuations in
price than securities issued by U.S. corporations or issued or guaranteed by the
U.S. government, its instrumentalities or agencies. The markets on which such
securities trade may have less volume and liquidity, and may be more volatile
than securities markets in the U.S. In addition, there may be less publicly
available information about a foreign company than about a U.S. domiciled
company. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
U.S. domestic companies. There is generally less government regulation of
securities exchanges, brokers and listed companies abroad than in the U.S.
Confiscatory taxation or diplomatic developments could also affect investment in
those countries.

In many instances, foreign debt securities may provide higher yields than
securities of domestic issuers which have similar maturities and quality. Under
certain market conditions, these investments may be less liquid than the
securities of U.S. corporations and are certainly less liquid than securities
issued or guaranteed by the U.S. government, its instrumentalities or agencies.
Finally, in the event of a default of any such foreign debt obligations, it may
be more difficult for the Fund to obtain or to enforce a judgment against the
issuers of such securities. If a security is denominated in foreign currency,
the value of the security to the Fund will be affected by changes in currency
exchange rates and in exchange control regulations, and costs will be incurred
in connection with conversions between currencies. A change in the value of any
foreign currency against the U.S. dollar will result in a corresponding change
in the U.S. dollar value of the Fund's securities denominated in that currency.
Such changes will also affect the Fund's income and distributions to
shareholders. In addition, although the Fund will receive income on foreign
securities in such currencies, the Fund will be required to compute and
distribute its income in U.S. dollars. Therefore, if the exchange rate for any
such currency declines materially after the Fund's income has been accrued and
translated into U.S. dollars, the Fund could be required to liquidate portfolio
securities to make required distributions. Similarly, if an exchange rate
declines between the time the Fund incurs expenses in U.S. dollars and the time
such expenses are paid, the amount of such currency required to be converted
into U.S. dollars in order to pay such expenses in U.S. dollars will be greater.

The relative performance of foreign currencies in which securities held by the
Fund are denominated is an important factor in the Fund's overall performance.
TICI intends to manage the Fund's exposure to various currencies to take
advantage of different yield, risk, and return characteristics that different
currencies, currency denominations, and countries can provide for U.S.
investors.

To hedge exposure to currency fluctuations or to increase income, the Fund may
enter into forward foreign currency exchange contracts, and may buy and sell
options, futures contracts and options on futures contracts relating to foreign
currencies. The Fund will use forward currency exchange contracts in the normal
course of business to lock in an exchange rate in connection with purchases and
sales of securities denominated in foreign currencies. Other currency management
strategies allow the Sub-advisor to hedge portfolio securities, to shift
investment exposure from one currency to another, or to attempt to profit from
anticipated declines in the value of a foreign currency relative to the U.S.
dollar. Some of these strategies will require the Fund to set aside liquid
assets in a segregated custodial account to cover its obligations. See "Currency
Hedging Transactions" below. Options and Futures and Options on Futures are
limited as discussed below.

Although the Fund will not invest more than 25% of its assets in any one
industry or the government of any one country, the Fund may invest more than 25%
of its assets in the securities of issuers in one or more countries. Investors
should consider the greater risk of such policy versus the safety that may come
with an investment that involves a wider range of geographic localities and
countries. Accordingly, an investor should compare the Fund with other
investment vehicles before making an investment decision. There is, of course,
no assurance that the Fund's objective will be achieved.

Some of the countries in which the Fund invests may not permit direct
investment. Investments in such countries may only be permitted through
government approved investment vehicles. Investing through such vehicles may
involve duplicative or layered fees or expenses and may, as well, be subject to
limitations under the 1940 Act. Under the 1940 Act, the Fund may invest up to
10% of its assets in shares of other investment companies and up to 5% of its
assets in any one investment company as long as the investment does not
represent more than 3% of the voting stock of the acquired investment company.

RISKS OF OPTIONS AND FUTURES CONTRACTS AND RELATED OPTIONS.

The purchase and sale of futures contracts and options thereon, as well as the
purchase and writing of options on securities and securities indices and
currencies, involve risks different from those involved with direct investments
in securities. While utilization of options, futures contracts and similar
instruments may be advantageous to the Fund, the Fund's ability to hedge
effectively all or a portion of its securities through such transactions and to
increase income to the Fund through the use of options on securities and
securities indices depends on the degree to which price movements in the
underlying index, securities or currencies correlate with price movements in the
relevant portion of the Fund's securities. Perfect correlation is generally not
attainable. Consequently, the Fund bears the risk that the prices of the
securities being hedged will not move in the same amount as the hedging
instrument. It is also possible that there may be a negative correlation between
the index, securities or currencies underlying the hedging instrument and the
hedged securities which would result in a loss on both such securities and the
hedging instrument. In addition, it is not possible to hedge fully or perfectly
against currency fluctuations affecting the value of securities denominated in
foreign currencies because the value of such securities is also likely to
fluctuate as a result of independent factors not related to currency
fluctuations. Therefore, perfect correlation between the Fund's futures
positions and portfolio positions will be impossible to achieve. Accordingly,
successful use by the Fund of options on stock indices, financial and currency
futures contracts and related options, and currency options will be subject to
Advisers' and the Sub-adviser's ability to predict correctly movements in the
direction of the securities and currency markets generally or of a particular
segment. If Advisers or the Sub-advisor is not successful in employing such
instruments in managing the Fund's investments, the Fund's performance will be
worse than if it did not employ such strategies. In addition, the Fund will pay
commissions and other costs in connection with such investments, which may
increase the Fund's expenses and reduce the return. In writing options on
futures, the Fund's loss is potentially unlimited and may exceed the amount of
the premium received.

In certain cases, the options and futures markets provide investment or risk
management opportunities that are not available from direct investments in
securities. In addition, some strategies can be performed more effectively and
at lower cost by utilizing the options and futures markets rather than
purchasing or selling portfolio securities. However, there are risks involved in
these transactions as discussed above.

Positions in stock index options, stock index futures contracts, financial
futures contracts, foreign currency futures contracts, related options on
futures and options on currencies may be closed out only on an exchange which
provides a secondary market. There can be no assurance that a liquid secondary
market will exist for any particular option, futures contract or option thereon
at any specific time. Thus, it may not be possible to close such an option or
futures position. The inability to close options or futures positions could have
an adverse impact on the Fund's ability to effectively hedge its securities or
foreign currency exposure. The Fund will enter into options or futures positions
only if TICI believes that a liquid secondary market for such options or futures
contracts exist.

In the case of OTC options on securities there can be no assurance that a
continuous liquid secondary market will exist for any particular OTC option at
any specific time. Consequently, the Fund may be able to realize the value of an
OTC option it has purchased only by exercising it or entering into a closing
sale transaction with the dealer that issued it. Similarly, when the Fund writes
an OTC option, it generally can close out that option prior to its expiration
only by entering into a closing purchase transaction with the dealer to which
the Fund originally wrote it. If the Fund, on a covered call option, cannot
effect a closing transaction, it cannot sell the underlying security until the
option expires or the option is exercised. Therefore, when the Fund writes an
OTC call option, it may not be able to sell the underlying security even though
it might otherwise be advantageous to do so. Likewise, the Fund may be unable to
sell the securities it has pledged to secure OTC put options while it is
obligated as a put writer. Similarly, when the Fund is a purchaser of such put
or call option, the Fund might find it difficult to terminate its position on a
timely basis in the absence of a secondary market.

The writing of covered put options involves certain risks. For example, if the
market price of the underlying security rises or otherwise is above the exercise
price, the put option will expire worthless and the Fund's gain will be limited
to the premium received. If the market price of the underlying security declines
or otherwise is below the exercise price, the Fund may attempt to close the
position or take delivery of the security at the exercise price and the Fund's
return will be the premium received from the put options minus the amount by
which the market price of the security is below the exercise price.

The risk of loss in trading foreign futures contracts and foreign options can be
substantial. Investors should be aware of the following:

(1) Participation in foreign futures contracts and foreign options transactions
involves the execution and clearing of trades on, or subject to, the rules of a
foreign board of trade.

(2) Neither the CFTC, the National Futures Association nor any domestic exchange
regulates activities of any foreign boards of trade, including the execution,
delivery and clearing of transactions, or has the power to compel enforcement of
the rules of a foreign board of trade or any applicable foreign laws. Generally,
the foreign transaction will be governed by applicable foreign law. This is true
even if the exchange is formally linked to a domestic market so that a position
taken on the market may be liquidated by a transaction on another market.
Moreover, such laws or regulations will vary, depending on the foreign country
in which the foreign futures or foreign options transaction occurs.

(3) For these reasons, if the Fund trades foreign futures or foreign options
contracts, it might not be afforded certain of the protective measures provided
by the Commodity Exchange Act, the CFTC's regulations and the rules of the
National Futures Association and any domestic exchange, including the right to
use reparations proceedings before the Commission and arbitration proceedings
provided by the National Futures Association or any domestic futures exchange.
In particular, funds received from the Fund for foreign futures or foreign
options transactions may not be provided the same protections as funds received
in respect of transactions on U.S. futures exchanges.

(4) The price of any foreign futures or foreign options contract and, therefore,
the potential profit and loss thereon, may be affected by any variance in the
foreign exchange rate between the time a particular order is placed and the time
it is liquidated, offset or exercised.

The Fund's investment in options, futures contracts, forward contracts, options
on stock indices and futures contracts, and foreign currencies and securities
may be limited by the requirements of the Internal Revenue Code of 1986, as
amended (the "Code") for qualification as a regulated investment company. These
securities require the application of complex and special tax rules and
elections, more information about which is included in the SAI.

The Fund's investment in options (including but not limited to written and
purchased put and call options, options on stock indices, forward conversions,
OTC options, the use of options in spread and straddle transactions, options on
foreign currencies or on futures contracts on such foreign currencies, and
options on financial, interest rate and stock index futures contracts), futures
and forward contracts (including but not limited to financial, interest rate and
stock index futures contracts, and forward currency exchange contracts and other
currency hedging devices), and foreign securities and currencies (including the
above options, forwards and futures contracts on such currencies), and certain
other securities transactions involving actual or deemed short sales, spreads,
straddles or foreign exchange gains or losses may give rise to taxable income,
gain or loss and may be subject to special tax treatment under certain
mark-to-market and straddle rules, the effect of which may be to accelerate
income to the Fund, defer Fund losses, cause adjustments in the holding periods
of Fund securities, convert capital gains and losses into ordinary income and
losses, convert long-term capital gains into short-term capital gains, and
convert short-term capital losses into long-term capital losses. These rules
could, therefore, affect the amount, timing and character of distributions to
shareholders. Certain elections may be available to the Fund to mitigate some of
the unfavorable consequences of the provisions described in this paragraph.
These investments and transactions are discussed in the SAI.

WHO MANAGES THE FUND?

The Board has the primary responsibility for the overall management of the Trust
and for electing the officers of the Trust who are responsible for administering
its day-to-day operations.

Advisers serves as the Fund's investment manager. Advisers is a wholly-owned
subsidiary of Resources, a publicly owned holding company, the principal
shareholders of which are Charles B. Johnson and Rupert H. Johnson, Jr., who own
approximately 20% and 16%, respectively, of Resources' outstanding shares.
Resources is engaged in various aspects of the financial services industry
through its subsidiaries (the "Franklin Templeton Group"). Advisers acts as
investment manager or administrator to 34 U.S. registered investment companies
(117 separate series) with aggregate assets of over $78 billion. Under a
management agreement, the Manager also serves as investment manager and advisor
to the Trust's Franklin International Equity Fund.

TICI is an indirect subsidiary of Templeton Worldwide, Inc., which, operating
through its subsidiaries, is a major investment management organization with
approximately $50.9 billion of assets currently under management and a long
history of global investing. Under a sub-advisory agreement, TICI also serves as
sub-advisor to the Trust's Franklin International Equity Fund.

Templeton Global Investors, Inc. ("Business Manager"), Broward Financial Centre,
Suite 2100, Fort Lauderdale, Florida 33394, provides certain administrative
facilities and services for certain of the Funds, including payment of salaries
of officers, preparation and maintenance of books and records, preparation of
tax reports, preparation of financial reports, and monitoring compliance with
regulatory requirements. The Business Manager is employed through subcontracts
by the Managers of the Templeton Pacific Growth Fund. The Business Manager
receives a monthly fee equivalent on an annual basis to 0.15% of the combined
average daily net assets of the Fund, reduced to 0.135% of such assets in excess
of $200 million, to 0.10% of such assets in excess of $700 million, and to
0.075% of such assets in excess of $1.2 billion. These fees are not separate
expenses of these Funds but are paid by their Managers from the management fees
they receive from their management agreements with the Funds.

The team responsible for the day-to-day management of the Fund's portfolio
is: William T. Howard, Jr., Mark Beveridge and Gary Clemons.

William T. Howard, Jr.
Vice President and Portfolio Manager
Templeton Investment Counsel, Inc.

Mr. Howard is a Chartered Financial Analyst and holds a Master of Business
Administration degree from Emory University. He earned his Bachelor of Arts
degree from Rhodes College. Prior to joining Templeton in 1993, Mr. Howard
was the international portfolio manager for the State of Tennessee
Consolidated Retirement System.

Mark R. Beveridge
Vice President and Portfolio Manager
Templeton Investment Counsel, Inc.

Mr. Beveridge is a Chartered Financial Analyst and holds a Bachelor of Business
Administration degree in finance from the University of Miami. He joined
Templeton in 1985 and started managing the Fund in January 1994.

Gary Clemons
Portfolio Manager
Templeton Investment Counsel, Inc.

Mr. Clemons is a Chartered Financial Analyst and holds a Master of Business
Administration degree from the University of Wisconsin at Madison. He earned
his Bachelor of Science degree in Earth Science from the University of Nevada
at Reno. Mr. Clemons was a research analyst for Structured Asset Management.
He joined Templeton in 1990.

Pursuant to a management agreement, the Manager supervises and implements the
Fund's investment activities and provides certain administrative services and
facilities which are necessary to conduct the Fund's business. The Manager
performs similar services for other funds and there may be times when the
actions taken with respect to the Fund's portfolio will differ from those taken
by the Manager on behalf of other funds. Neither the Manager (including its
affiliates) nor its officers, directors or employees nor the officers and
trustees of the Fund are prohibited from investing in securities held by the
Fund or other funds which are managed or administered by the Manager to the
extent such transactions comply with the Fund's Code of Ethics. Please see
"Investment Advisory and Other Services" and "General Information" in the SAI
for further information on securities transactions and a summary of the Fund's
Code of Ethics.

Pursuant to the sub-advisory agreement between Advisers and TICI, and subject to
the overall policies, control, direction and review of the Board of Trustees and
to the instructions and supervision of Advisers, TICI is responsible for
recommending an optimal geographic equity allocation, for providing advice with
respect to the Fund's investments and, subject to the Board's and Advisers'
direction and supervision, for determining which securities will be purchased,
retained or sold, as well as for execution of portfolio transactions.
Investments may be shifted among the world's various capital markets and among
different types of securities in accordance with ongoing analysis of trends and
developments affecting such markets and securities.

Under the management agreement with the Fund, for the services provided and
expenses assumed by it the Manager is entitled to receive a fee, computed and
payable monthly, based upon the Fund's average net assets. The management fee is
higher than the management fees paid by most mutual funds, although the Board of
Trustees believes it to be comparable to fees paid by many international funds
having similar investment objectives and policies.

Under the sub-advisory agreement with the Manager, for its sub-advisory fee TICI
is entitled to receive from the Manager an amount equal to approximately 50% of
the fees paid by the Fund to the Manager (subject to certain adjustments). The
sub-advisory fees paid by the Manager have no effect on the fees payable by the
Fund to the Manager.

During the fiscal year ended October 31, 1995, management fees totaled 1.00% of
the average net assets of the Fund. Total operating expenses, including
management fees totaled 1.72% of the average net assets of the Fund.

Further information on the services provided by Advisers and TICI and the fees
payable by the Fund for these services is included in the SAI under "Investment
Advisory and Other Services."

Among the responsibilities of Advisers and TICI under their respective
agreements are the selection of brokers and dealers through whom transactions in
the Fund's portfolio securities for which each is responsible are effected. The
Manager and Sub-advisor seek to obtain the best execution on all such
transactions. If it is felt that more than one broker is able to provide the
best execution, Advisers and TICI will consider the furnishing of quotations and
of other market services, research, statistical and other data for Advisers and
TICI and their affiliates, as well as the sale of shares of the Fund, as factors
in selecting a broker. Further information is included under "How Do the Funds
Purchase Securities For Their Portfolios?" in the SAI.

Except as noted above and in the SAI under "Investment Advisory and Other
Services", the Fund's service contractors bear all expenses in connection with
the performance of their services, except that Distributors and Advisors are
reimbursed for expenses incurred under the Plan of Distribution (as described
below). Similarly, the Fund bears the expenses incurred in its operation. See
the SAI - "Investment Advisory and Other Services" for further information
describing the Fund's expenses.

Shareholder accounting and many of the clerical functions for the Fund are
performed by Franklin/Templeton Investor Services, Inc. ("Investor Services" or
"Shareholder Services Agent"), in its capacity as transfer agent and
dividend-paying agent. Investor Services is a wholly-owned subsidiary of
Resources.

PLAN OF DISTRIBUTION

A plan of distribution has been approved and adopted for the Fund (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund may
reimburse Distributors or others for all expenses incurred by Distributors or
others in the promotion and distribution of the Fund's shares. Such expenses may
include, but are not limited to, the printing of prospectuses and reports used
for sales purposes, expenses of preparing and distributing sales literature and
related expenses, advertisements, and other distribution-related expenses,
including a prorated portion of Distributor's overhead expenses attributable to
the distribution of Fund shares, as well as any distribution or service fees
paid to securities dealers or their firms or others who have executed a
servicing agreement with the Fund, Distributors or its affiliates.

The maximum amount which the Fund may reimburse to Distributors or others for
such distribution expenses is 0.25% per annum of its average daily net assets,
payable on a quarterly basis. All expenses of distribution in excess of 0.25%
per annum will be borne by Distributors, or others who have incurred them,
without reimbursement from the Fund.

The Plan also covers any payments to or by the Fund, Advisers, Distributors, or
other parties on behalf of the Fund, Advisers or Distributors, to the extent
such payments are deemed to be for the financing of any activity primarily
intended to result in the sale of shares issued by the Fund within the context
of Rule 12b-1. The payments under the Plan are included in the maximum operating
expenses which may be borne by the Fund. For more information, please see "The
Fund's Underwriter" in the SAI.

WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?

You may receive two types of distributions from the Fund:

1. INCOME DIVIDENDS. The Fund generally receives income 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 net capital loss carryovers) may generally
be made once a year in December to reflect any net short-term and net long-term
capital gains realized by the Fund as of October 31 of the current fiscal year
and any undistributed capital gains from the prior fiscal year. These
distributions, when made, will generally be fully taxable to the Fund's
shareholders. The Fund may make more than one distribution derived from net
short-term and net long-term capital gains in any year or adjust the timing of
these distributions for operational or other reasons.

DISTRIBUTION DATE

Although subject to change by the Board without prior notice to or approval by
shareholders, the Fund's current policy is to declare income dividends, payable
semi-annually in June and December, to shareholders of record generally on the
first business day preceding the 15th day of these months, payable on or about
the last business day of such months. The amount of income dividend payments by
the Fund is dependent upon the amount of net income received by the Fund from
its portfolio holdings, is not guaranteed and is subject to the discretion of
the Board. Fund shares are quoted ex-dividend on the first business day
following the record date (generally the 15th day of the month or prior business
day depending on the record DATE). THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE
ANY FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.

In order to be entitled to a dividend, you must have acquired Fund shares prior
to the close of business on the record date. If you are considering purchasing
Fund shares shortly before the record date of a distribution, you should be
aware that because the value of the Fund's shares is based directly on the
amount of its net assets, rather than on the principle of supply and demand, any
distribution of income or capital gain will result in a decrease in the value of
the Fund's shares equal to the amount of the distribution. While a dividend or
capital gain distribution received shortly after purchasing shares represents,
in effect, a return of a portion of your investment, it may be taxable as
dividend income or capital gain.

DISTRIBUTION OPTIONS

You may choose to receive your distributions from the Fund in any of these ways:

1. PURCHASE ADDITIONAL SHARES OF THE FUND - You may purchase additional shares
of the Fund (without a sales charge or imposition of a contingent deferred sales
charge) by reinvesting capital gain distributions, or both dividend and capital
gain distributions. This is a convenient way to accumulate additional shares and
maintain or increase your earnings base.

2. PURCHASE SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
distributions to purchase the same class of shares of another Franklin Templeton
Fund (without a sales charge or imposition of a contingent deferred sales
charge). Many shareholders find this a convenient way to diversify their
investments.

3. RECEIVE DISTRIBUTIONS IN CASH - You may choose to receive dividends, or both
dividend and capital gain distributions in cash. You may have the money sent
directly to you, to another person, or to a checking account. If you choose to
send the money to a checking account, please see "Electronic Fund Transfers"
under "What Programs and Privileges Are Available to Me as a Shareholder?"

TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE SECTIONS 6 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF NO OPTION IS SELECTED, DIVIDEND AND
CAPITAL GAIN DISTRIBUTIONS WILL BE AUTOMATICALLY REINVESTED IN THE FUND. You may
change the distribution option selected at any time by notifying the Fund by
mail or by telephone. Please allow at least seven days prior to the record date
for the Fund to process the new option.

HOW TAXATION AFFECTS YOU AND THE FUND

The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For additional information on tax matters
relating to the Fund and its shareholders, see "Additional Information Regarding
Taxation" in the SAI.

The Fund intends to continue to qualify for treatment as a regulated investment
company under Subchapter M of the Code. By distributing all of its income and
meeting certain other requirements relating to the sources of its income and
diversification of its assets, the Fund will not be liable for federal income or
excise taxes.

Foreign securities, which meet the definition in the Code of a Passive Foreign
Investment Company ("PFIC") may subject the Fund to an income tax and interest
charge with respect to such investments. To the extent possible, the Fund will
avoid such treatment by not investing in PFIC securities or by adopting other
tax strategies for any PFIC securities it does purchase.

For federal income tax purposes, any income dividends which the shareholder
receives from the Fund, as well as any distributions derived from the excess of
net short-term capital gain over net long-term capital loss, are treated as
ordinary income whether the shareholder has elected to receive them in cash or
in additional shares. Distributions derived from the excess of net long-term
capital gain over net short-term capital loss are treated as long-term capital
gain regardless of the length of time the shareholder has owned Fund shares and
regardless of whether such distributions are received in cash or in additional
shares.

Pursuant to the Code, certain distributions which are declared in October,
November or December but which, for operational reasons, may not be paid to the
shareholder until the following January, will be treated for tax purposes as if
paid by the Fund and received by the shareholder on December 31 of the calendar
year in which they are declared.

Redemptions and exchanges of Fund shares are taxable events on which a
shareholder may realize a gain or a loss. Any loss incurred on sale or exchange
of the Fund's shares, held for six months or less, will be treated as a
long-term capital loss to the extent of capital gain dividends received with
respect to such shares.

For corporate shareholders, it is anticipated that only a small portion of the
Fund's dividends during the current fiscal year will qualify for the corporate
dividends-received deduction because of the Fund's principal investment
objective of investing in foreign equity securities and non-equity investments.
To the extent that the Fund pays dividends which qualify for this deduction, the
availability of the deduction is subject to certain holding period and debt
financing restrictions imposed under the Code on the corporation claiming the
deduction.

The Fund will inform shareholders of the source of their dividends and
distributions at the time they are paid, and will promptly after the close of
each calendar year advise them of the tax status for federal income tax purposes
of such dividends and distributions.

Shareholders who are not U.S. persons for purposes of federal income taxation
should consult with their financial or tax advisors regarding the applicability
of U.S. withholding or other taxes on distributions received by them from the
Fund and the application of foreign tax laws to these distributions.

Shareholders should consult their tax advisors with respect to the applicability
of state and local intangible property or income taxes to their shares in the
Fund and to distributions and redemption proceeds received from the Fund.

The Fund's investment in options, futures and forward contracts, foreign
securities and currencies and in multiple combinations of these securities are
subject to man complex and special tax rules. These securities are described
under "How Does the Fund Invest Its Assets?" in this Prospectus. More
information on the tax treatment of these securities, and on the gain, loss,
income or expense associated with transactions in these securities is included
under "Additional Information Regarding Taxation" in the SAI.

HOW DO I BUY SHARES?

You may buy shares to open a Fund account with as little as $100 and make
additional investments at any time with as little as $25. If you are purchasing
shares through a retirement plan established by the Franklin Templeton Group,
these minimums may be waived. 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.

PURCHASE PRICE OF FUND SHARES

You may buy shares at the public offering price. The public offering price is
equal to the net asset value plus the 4.50% sales charge, unless you qualify to
purchase shares at a discount or without a sales charge as discussed below. The
offering price will be calculated to two decimal places using standard rounding
criteria.

QUANTITY DISCOUNTS IN SALES CHARGES

The sales charge you pay when you buy shares may be reduced based upon the size
of your purchase, as shown in the table below.

TOTAL SALES CHARGE
AS A PERCENTAGE OF
------------------
AMOUNT ALLOWED TO
DEALER AS A
SIZE OF TRANSACTION AT NET AMOUNT PERCENTAGE OF
OFFERING PRICE OFFERING PRICE INVESTED OFFERING PRICE*
- -------------- -------------- -------- ---------------
Under $100,000 4.50% 4.71% 4.00%
$100,000 - 249,999 3.75% 3.90% 3.25%
$250,000 - 499,999 2.75% 2.83% 2.50%
$500,000 - 999,999 2.25% 2.30% 2.00%
$1,000,000 or more None** None None***

*Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages indicated. Distributors may at times allow
the entire sales charge to the securities dealer. A securities dealer who
receives 90% or more of the sales commission may be deemed an underwriter under
the Securities Act of 1933, as amended. **A contingent deferred sales charge of
1% may be imposed on certain redemptions of all or a part of an investment of $1
million or more. See "How Do I Sell Shares? - Contingent Deferred Sales Charge."
***Please see "General - Other Payments to Securities Dealers" below for a
discussion of commissions Distributors may pay to securities dealers out of its
own resources.

RIGHTS OF ACCUMULATION. To determine if you may pay a reduced sales charge, you
may add 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, to
the amount of your current purchase. To receive the reduction, you or your
investment representative must notify Distributors that your investment
qualifies for a discount.

LETTER OF INTENT. You may purchase 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. You or your investment representative must inform us that the Letter is in
effect each time you purchase shares.

BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:

You authorize Distributors to reserve five percent (5%) of the amount of the
total intended purchase in Fund shares registered in your name.

You grant Distributors a security interest in these shares and appoint
Distributors as attorney-in-fact with full power of substitution to redeem
any or all of these reserved shares to pay any unpaid sales charge if you do
not fulfill the terms of the Letter.

We will include the reserved shares in the total shares you own as reflected
on your periodic statements.

You will receive dividend and capital gain distributions on the reserved
shares; we will pay or reinvest these distributions as you direct.

Although you may exchange your shares, you may not liquidate reserved shares
until you complete the Letter or pay the higher sales charge.

Our policy of reserving shares does not apply to certain benefit plans
described under "Purchases at Net Asset Value."

If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy and Sell Shares? - Letter of Intent" in the SAI or call our
Shareholder Services Department.

GROUP PURCHASES. If you are a member of a qualified group, you may purchase Fund
shares at the reduced sales charge applicable to the group as a whole. The sales
charge is based on the combined dollar value of the group members' existing
investments, plus the amount of the current purchase. For example, if group
members previously invested and still hold $80,000 of Fund shares and invest
$25,000, the sales charge will be 3.75%.

We define a qualified group as one which (i) has been in existence for more than
six months, (ii) has a purpose other than acquiring Fund shares at a discount
and (iii) satisfies uniform criteria which enable Distributors to realize
economies of scale in its costs of distributing shares.

In addition, a qualified group must have more than 10 members, and be available
to arrange for meetings between our representatives and group members. It must
also agree to include sales and other materials related to the Franklin
Templeton Funds in publications and mailings to its members at reduced or no
cost to Distributors, and arrange for payroll deduction or other bulk
transmission of investments to the Fund.

If you select a payroll deduction plan, your investments will continue
automatically until you notify the Fund and your employer to discontinue further
investments. Due to the varying procedures used by employers to handle payroll
deductions, there may be a delay between the time of the payroll deduction and
the time the money reaches the Fund. We invest your purchase at the applicable
offering price per share determined on the day that the Fund receives both the
check and the payroll deduction data in required form.

PURCHASES AT NET ASSET VALUE

You may invest money from the following sources in shares of the Fund without
paying front-end or contingent deferred sales charges:

(i) a distribution that you have received from a Franklin Templeton Fund if it
is returned within 365 days of its payment date. When you return the
distribution, please include a written request to reinvest the money at net
asset value. You may reinvest Class II distributions in either Class I or Class
II shares, but Class I distributions may only be invested in Class I shares
under this privilege. For more information, see "Distribution Options" under
"What Distributions Might I Receive from the Fund?" or call Shareholder Services
at 1-800/632-2301;

(ii) a redemption from a mutual fund with investment objectives similar to those
of the Fund, if (a) your investment in that fund was subject to either a
front-end or contingent deferred sales charge at the time of purchase, (b) the
fund is not part of the Franklin Templeton Funds, and (c) your redemption
occurred within the past 60 days;

(iii) a distribution from an existing retirement plan already invested in the
Franklin Templeton Funds (including the Franklin Templeton Profit Sharing 401(k)
plan), up to the total amount of the distribution. When you return the
distribution, please include a written request to reinvest the money at net
asset value. The distribution must be returned to the Fund within 365 days of
the distribution date; or

(iv) a redemption from Templeton Institutional Funds, Inc., if you then reinvest
the redemption proceeds under an employee benefit plan qualified under Section
401 of the Code, in shares of the Fund.

You may also reinvest the proceeds from a redemption of any of the Franklin
Templeton Funds at net asset value. To do so, you must (a) have paid a sales
charge on the purchase or sale of the original shares, (b) reinvest the
redemption money in the same class of shares, and (c) request the reinvestment
of the money in writing to the Fund within 365 days of the redemption date. You
may reinvest up to the total amount of the redemption proceeds under this
privilege. IF A DIFFERENT CLASS OF SHARES IS PURCHASED, THE FULL FRONT-END SALES
CHARGE MUST BE PAID AT THE TIME OF PURCHASE OF THE NEW SHARES. While you will
receive credit for any contingent deferred sales charge paid on the shares
redeemed, a new contingency period will begin. Shares that were no longer
subject to a contingent deferred sales charge will be reinvested at net asset
value and will not be subject to a new contingent deferred sales charge. Shares
exchanged into other Franklin Templeton Funds are not considered "redeemed" for
this privilege (see "What If My Investment Outlook Changes? - Exchange
Privilege").

If you immediately reinvested your redemption proceeds in a Franklin Bank
Certificate of Deposit ("CD") but you would like to reinvest them back into the
Franklin Templeton Funds as described above, you will have 365 days from the
date the CD (including any rollover) matures to do so.

If your securities dealer or another financial institution reinvests your money
in the Fund at net asset value for you, that person or institution may charge
you a fee for this service.

A redemption is a taxable transaction, but reinvestment without a sales charge
may affect the amount of gain or loss you recognize and the tax basis of the
shares reinvested. If you have a loss on the redemption, the loss may be
disallowed if you reinvest in the same fund within a 30-day period. If you would
like more information regarding the possible tax consequences of such a
reinvestment, please see the tax section of this Prospectus and the SAI.

Certain categories of investors also qualify to purchase shares of the Fund at
net asset value regardless of the source of the investment proceeds. If you are
or your account is included in one of the categories below, none of the shares
of the Fund you purchase will be subject to front-end or contingent deferred
sales charges:

(i) companies exchanging shares or selling assets pursuant to a merger,
acquisition or exchange offer;

(ii) accounts managed by the Franklin Templeton Group;

(iii) certain unit investment trusts and unit holders of such trusts reinvesting
distributions from the trusts in the Fund;

(iv) registered securities dealers and their affiliates, for their investment
accounts only;

(v) current employees of securities dealers and their affiliates and their
family members, in accordance with the internal policies and procedures of the
employing securities dealer and affiliate;

(vi) broker-dealers who have entered into a supplemental agreement with
Distributors, or registered investment advisors affiliated with such
broker-dealers, on behalf of their clients who are participating in a
comprehensive fee program (sometimes known as a wrap fee program);

(vii) any state, county, or city, or any instrumentality, department, authority
or agency thereof which has determined that the Fund is a legally permissible
investment and which is prohibited by applicable investment laws from paying a
sales charge or commission in connection with the purchase of shares of any
registered management investment company ("an eligible governmental authority").
IF YOU ARE SUCH AN INVESTOR, PLEASE CONSULT YOUR OWN LEGAL ADVISORS TO DETERMINE
WHETHER AND TO WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS.
Municipal investors considering investment of proceeds of bond offerings into
the Fund should consult with expert counsel to determine the effect, if any, of
various payments made by the Fund or its investment manager on arbitrage rebate
calculations. If you are a securities dealer who has executed a dealer agreement
with Distributors and, through your services, an eligible governmental authority
invests in the Fund at net asset value, Distributors or one of its affiliates
may make a payment, out of its own resources, to you in an amount not to exceed
0.25% of the amount invested. Please contact the Franklin Templeton
Institutional Services Department for additional information;

(viii) officers, trustees, directors and full-time employees of the Franklin
Templeton Funds, or of the Franklin Templeton Group, and their family members.
Although you may pay sales charges on investments in accounts opened after your
association with us has ended, you may continue to invest in accounts opened
while you were with us without paying sales charges;

(ix) trust companies and bank trust departments that exercise exclusive
discretionary investment authority over funds held in a fiduciary, agency,
advisory, custodial or similar capacity and agree to invest at least $1 million
in Franklin Templeton Funds over a 13-month period. We will accept orders for
such 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 such order;

(x) insurance company separate accounts investing for pension plan contracts;

(xi) trustees or other fiduciaries purchasing securities for certain retirement
plans of organizations with collective retirement plan assets of $10 million or
more, without regard to where such assets are currently invested; or

(xii) Designated Retirement Plans. Non-Designated Retirement Plans may also
qualify to purchase shares of the Fund if they meet the requirements
described under "Group Purchases," above.

If you would like more information, please see "How Do I Buy and Sell Shares?"
in the SAI.

HOW DO I BUY SHARES IN CONNECTION WITH TAX-DEFERRED RETIREMENT PLANS?

Your individual or employer-sponsored tax-deferred retirement plans may invest
in the Fund. You may use the Fund for an existing retirement plan, or, because
Trust Company can serve as custodian or trustee for retirement plans, you may
ask Trust Company to provide the plan documents and serve as custodian or
trustee. A plan document must be adopted in order for a retirement plan to be in
existence.

Brochures for Trust Company plans contain important information regarding
eligibility, contribution and deferral limits and distribution requirements.
Please note that you must use an application other than the one contained in
this Prospectus to establish a retirement plan account with Trust Company. To
obtain a retirement plan brochure or application, please call 1-800/DIAL BEN
(1-800/342-5236). Trust Company is an affiliate of Distributors.

Please see "How Do I Sell Shares?" for information regarding redemptions from
retirement plan accounts. You must complete specific forms in order to receive
distributions from Trust Company retirement plans.

Individuals and plan sponsors should consult with legal, tax or benefits and
pension plan consultants before choosing a retirement plan. In addition, if you
are a retirement plan investor, you should consider consulting your investment
representatives or advisors about investment decisions within your plans.

GENERAL

The Fund continuously offers it shares through securities dealers who have an
agreement with Distributors. The Fund and Distributors may refuse any order for
the purchase of shares.

Securities laws of states in which the Fund offers its shares may differ from
federal law. Banks and financial institutions that sell shares of the Fund may
be required to register as securities dealers pursuant to state law.

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 $1 million or more: 1% on sales of $1 million
but less than $2 million, plus 0.80% on sales of $2 million but less than $3
million, plus 0.50% on sales of $3 million but less than $50 million, plus 0.25%
on sales of $50 million but less than $100 million, plus 0.15% on sales of $100
million or more. These breakpoints are reset every 12 months for purposes of
additional purchases.

Distributors or one of its affiliates may also pay up to 1% of the amount
purchased to securities dealers who initiate and are responsible for purchases
made at net asset value by any of the entities described in paragraphs (ix),
(xi) or (xii) under "Purchases at Net Asset Value" above. Please see "How Do I
Buy and Sell Shares?" in the SAI for the breakpoints applicable to these
purchases.

Either Distributors or one of its affiliates, out of its own resources, may also
provide additional compensation to securities dealers in connection with the
sale of shares of the Franklin Templeton Funds. In some cases, this compensation
may be available only to securities dealers whose representatives have sold or
are expected to sell significant amounts of shares of the Franklin Templeton
Funds. Compensation may include financial assistance and payments made in
connection with conferences, sales or training programs for employees of the
securities dealer, seminars for the public, advertising, sales campaigns and/or
shareholder services, programs regarding one or more of the Franklin Templeton
Funds and other programs or events sponsored by securities dealers, and payment
for travel expenses of invited registered representatives and their families,
including lodging, in connection with business meetings or seminars located
within or outside the United States. 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 National Association of Securities
Dealers, Inc. None of this compensation is paid for by the Fund or its
shareholders.

For additional information about shares of the Fund, please see "How Do I Buy
and Sell Shares?" in the SAI. The SAI also includes a listing of the officers
and trustees of the Fund who are affiliated with Distributors. See "Officers
and Trustees."

WHAT PROGRAMS AND PRIVILEGES ARE
AVAILABLE TO ME AS A SHAREHOLDER?

CERTAIN OF THE PROGRAMS AND PRIVILEGES DESCRIBED IN THIS SECTION MAY NOT BE
AVAILABLE DIRECTLY FROM THE FUND IF YOUR SHARES ARE HELD, OF RECORD, BY A
FINANCIAL INSTITUTION OR IN A "STREET NAME" ACCOUNT, OR NETWORKED ACCOUNT
THROUGH THE NATIONAL SECURITIES CLEARING CORPORATION ("NSCC") (SEE "REGISTERING
YOUR ACCOUNT" IN THIS PROSPECTUS).

SHARE CERTIFICATES

Shares from an initial investment, as well as subsequent investments, including
the reinvestment of dividends and capital gain distributions, are generally
credited to an account in your name on the books of the Fund, without the
issuance of a share certificate. Maintaining shares in uncertificated form (also
known as "plan balance") minimizes the risk of loss or theft of a share
certificate. A lost, stolen or destroyed certificate cannot be replaced without
obtaining a sufficient indemnity bond. The cost of such a bond, which is
generally borne by you, can be 2% or more of the value of the lost, stolen or
destroyed certificate. A certificate will be issued if requested by you or your
securities dealer.

CONFIRMATIONS

A confirmation statement will be sent to you semi-annually to reflect the
dividends reinvested during the period and after each other transaction which
affects your account. This statement will also show the total number of shares
you own, including the number of shares in "plan balance" for your account.

AUTOMATIC INVESTMENT PLAN

The Automatic Investment Plan offers a convenient way to invest in the Fund.
Under the plan, you can arrange to have money transferred automatically from
your checking account to the Fund each month to purchase additional shares. If
you are interested in this program, please refer to the Automatic Investment
Plan Application at the back of this Prospectus for the requirements of the
program or contact your investment representative. Of course, 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 terminate the
program at any time by notifying Investor Services by mail or by phone.

SYSTEMATIC WITHDRAWAL PLAN

The Systematic Withdrawal Plan allows you to receive regular payments from your
account on a monthly, quarterly, semiannual or annual basis. To establish a
Systematic Withdrawal Plan, the value of your account must be at least $5,000
and the minimum payment amount for each withdrawal must be at least $50. Please
keep in mind that $50 is merely the minimum amount and is not a recommended
amount. 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 receive your payments in any of the following ways:

1. PURCHASE SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
payments to purchase the same class of shares of another Franklin Templeton
Fund.

2. RECEIVE PAYMENTS IN CASH - You may choose to receive your payments in cash.
You may have the money sent directly to you, to another person, or to a checking
account. If you choose to have the money sent to a checking account, please see
"Electronic Fund Transfers" below.

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. You will generally receive your payments within three to five days
after the shares are redeemed.

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. Redemptions under a
Systematic Withdrawal Plan are considered a sale for federal income tax
purposes. 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.

While a Systematic Withdrawal Plan is in effect, no share certificates will be
issued. You should ordinarily not make additional investments in the Fund of
less than $5,000 or three times the amount of annual withdrawals under the plan
because of the sales charge on additional purchases. Shares redeemed 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 terminate a Systematic Withdrawal Plan, change the amount and schedule
of withdrawal payments, or suspend a payment by notifying Investor Services in
writing at least seven business days prior to the end of the month preceding a
scheduled payment. The Fund may also terminate a Systematic Withdrawal Plan by
notifying you in writing and will automatically terminate 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.

ELECTRONIC FUND TRANSFERS

You may choose to have distributions from the Fund or payments under a
Systematic Withdrawal Plan sent directly to a checking account. If the checking
account is maintained at a bank that is a member of the Automated Clearing
House, the payments may be made automatically by electronic funds transfer. If
you choose this option, please allow at least fifteen days for initial
processing. Any payments made during that time will be sent to the address of
record on your account.

INSTITUTIONAL ACCOUNTS

There may be additional methods of purchasing, redeeming or exchanging shares
of the Fund available to institutional accounts. For further information,
contact the Franklin Templeton Institutional Services Department at
1-800/321-8563.

WHAT IF MY INVESTMENT OUTLOOK CHANGES? - EXCHANGE PRIVILEGE

The Franklin Templeton Funds consist of a number of mutual funds with various
investment objectives and policies. The shares of most of these funds are
offered to the public with a sales charge. If your investment objective or
outlook for the securities markets changes, Fund shares may be exchanged for the
same class of shares of other Franklin Templeton Funds which are eligible for
sale in your state of residence and in conformity with such fund's stated
eligibility requirements and investment minimums.

No exchanges between different classes of shares will be allowed. Shareholders
may choose to redeem shares of the Fund and purchase Class II shares of another
Franklin Templeton Fund but such purchase will be subject to that fund's Class
II front-end and contingent deferred sales charges. Although there are no
exchanges between different classes of shares, Class II shareholders of a
Franklin Templeton Fund may elect to direct their dividends and capital gain
distributions to the Fund at net asset value.

A contingent deferred sales charge will not be imposed on exchanges. If,
however, the exchanged shares were subject to a contingent deferred sales charge
in the original fund purchased and shares are subsequently redeemed within the
contingency period, a contingent deferred sales charge will be imposed.

Before making an exchange, you should review the prospectus of the fund you wish
to exchange from and the fund you wish to exchange into for all specific
requirements or limitations on exercising the exchange privilege, for example,
limitations on a fund's sale of its shares, minimum holding periods for
exchanges at net asset value, or applicable sales charges.

You may exchange shares in any of the following ways:

BY MAIL

Send written instructions signed by all account owners and accompanied by any
outstanding share certificates properly endorsed. The transaction will be
effective upon receipt of the written instructions together with any outstanding
share certificates.

BY TELEPHONE

YOU, OR YOUR INVESTMENT REPRESENTATIVE OF RECORD, IF ANY, MAY EXCHANGE SHARES OF
THE FUND BY CALLING INVESTOR SERVICES AT 1-800/632-2301 OR THE AUTOMATED
FRANKLIN TELEFACTS(R) SYSTEM (DAY OR NIGHT) AT 1-800/247-1753. IF YOU DO NOT
WISH THIS PRIVILEGE EXTENDED TO A PARTICULAR ACCOUNT, YOU SHOULD NOTIFY THE FUND
OR INVESTOR SERVICES.

The telephone exchange privilege allows you to effect exchanges from the Fund
into an identically registered account of the same class of shares in one of the
other available Franklin Templeton Funds. The telephone exchange privilege is
available only for uncertificated shares or those which have previously been
deposited in your account. The Fund and Investor Services will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Please see "Telephone Transactions - Verification Procedures."

During periods of drastic economic or market changes, it is possible that the
telephone exchange privilege may be difficult to implement and the TeleFACTS
option may not be available. In this event, you should follow the other exchange
procedures discussed in this section, including the procedures for processing
exchanges through securities dealers.

THROUGH SECURITIES DEALERS

As is the case with all purchases and redemptions of the Fund's shares, Investor
Services will accept exchange orders from securities dealers who execute a
dealer or similar agreement with Distributors. See also "By Telephone" above.
Such a dealer-ordered exchange will be effective only for uncertificated shares
on deposit in your account or for which certificates have previously been
deposited. A securities dealer may charge a fee for handling an exchange.

ADDITIONAL INFORMATION REGARDING EXCHANGES

Exchanges are made on the basis of the net asset value of the funds involved,
except as set forth below. Exchanges of shares of the Fund which were purchased
without a sales charge will be charged a sales charge in accordance with the
terms of the prospectus of the fund being purchased, unless the original
investment in the Franklin Templeton Funds was made pursuant to the privilege
permitting purchases at net asset value, as discussed under "How Do I Buy
Shares?" Exchanges of shares of the Fund which were purchased with a lower sales
charge into a fund which has a higher sales charge will be charged the
difference, unless the shares were held in the Fund for at least six months
prior to executing the exchange.

The contingency period during which a contingent deferred sales charge may be
assessed will be tolled (or stopped) for the period shares are exchanged into
and held in a Franklin or Templeton money market fund. If your account has
shares subject to a contingent deferred sales charge, shares will be exchanged
into the new account on a "first-in, first-out" basis. See "How Do I Sell
Shares? - Contingent Deferred Sales Charge" for a discussion of investments
subject to a contingent deferred sales charge.

If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will reinvested in the
Fund at the net asset value on the date of the exchange, and then the entire
share balance will be exchanged into the new fund in accordance with the
procedures set forth above. Declared but unpaid income dividends and capital
gain distributions will be transferred to the fund being exchanged into and will
be invested at net asset value. Because the exchange is considered a redemption
and purchase of shares, you may realize a gain or loss for federal income tax
purposes. Backup withholding and information reporting may also apply.
Information regarding the possible tax consequences of such an exchange is
included in the tax section in this Prospectus and under "Additional Information
Regarding Taxation" in the SAI.

If a substantial portion of the Fund's shareholders should, within a short
period, elect to redeem their shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Fund to initially invest this money in short-term, interest-bearing money market
instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objectives exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.

The exchange privilege may be modified or discontinued by the Fund at any time
upon 60 days' written notice to shareholders.

RETIREMENT PLAN ACCOUNTS

Franklin Templeton IRA and 403(b) retirement plan accounts may exchange
shares directly. Certain restrictions may apply, however, to other types of
retirement plans. See "Restricted Accounts" under "Telephone Transactions."

TIMING ACCOUNTS

Accounts which are administered by allocation or market timing services to
exchange shares based on predetermined market indicators ("Timing Accounts")
will be charged a $5.00 administrative service fee per each such exchange.
All other exchanges are without charge.

RESTRICTIONS ON EXCHANGES

In accordance with the terms of their respective prospectuses, certain funds do
not accept or may place differing limitations than those below on exchanges by
Timing Accounts.

The Fund reserves the right to temporarily or permanently terminate the exchange
privilege or reject any specific purchase order for any Timing Account or any
person whose transactions seem to follow a timing pattern who: (i) makes an
exchange request out of the Fund within two weeks of an earlier exchange request
out of the Fund, (ii) makes more than two exchanges out of the Fund per calendar
quarter, or (iii) exchanges shares equal in value to at least $5 million, or
more than 1% of the Fund's net assets. Accounts under common ownership or
control, including accounts administered so as to redeem or purchase shares
based upon certain predetermined market indicators, will be aggregated for
purposes of the exchange limits.

The Fund also reserves the right to refuse the purchase side of an exchange
request by any Timing Account, person, or group if, in the Manager's judgment,
the Fund would be unable to invest effectively in accordance with its investment
objectives and policies, or would otherwise potentially be adversely affected.
Your purchase exchanges may be restricted or refused if the Fund receives or
anticipates simultaneous orders affecting significant portions of the Fund's
assets. In particular, a pattern of exchanges that coincide with a "market
timing" strategy may be disruptive to the Fund and therefore may be refused.

The Fund and Distributors, as indicated under "How Do I Buy Shares?", reserve
the right to refuse any order for the purchase of shares.

HOW DO I SELL SHARES?

You may liquidate your shares at any time and receive from the Fund the value of
the shares. You may redeem shares in any of the following ways:

BY MAIL

Send a written request signed by all registered owners to Investor Services, at
the address shown on the back cover of this Prospectus, and any share
certificates which have been issued for the shares being redeemed, properly
endorsed and in order for transfer. You will then receive from the Fund the
value of the shares redeemed based upon the net asset value per share (less a
contingent deferred sales charge, if applicable) next computed after the written
request in proper form is received by Investor Services. Redemption requests
received after the time at which the net asset value is calculated will receive
the price calculated on the following business day. The net asset value per
share is determined as of the scheduled close of the New York Stock Exchange
(the "Exchange") (generally 1:00 p.m. Pacific time) each day that the Exchange
is open for trading. You are requested to provide a telephone number where you
may be reached during business hours, or in the evening if preferred. Investor
Services' ability to contact you promptly when necessary will speed the
processing of the redemption.

TO BE CONSIDERED IN PROPER FORM, SIGNATURES MUST BE GUARANTEED IF THE REDEMPTION
REQUEST INVOLVES ANY OF THE FOLLOWING:

(1) the proceeds of the redemption are over $50,000;

(2) the proceeds (in any amount) are to be paid to someone other than the
registered owners of the account;

(3) the proceeds (in any amount) are to be sent to any address other than the
address of record, preauthorized bank account or brokerage firm account;

(4) share certificates, if the redemption proceeds are in excess of $50,000;
or

(5) the Fund or Investor Services believes that a signature guarantee would
protect against potential claims based on the transfer instructions,
including, for example, when (a) the current address of one or more joint
owners of an account cannot be confirmed, (b) multiple owners have a
dispute or give inconsistent instructions to the Fund, (c) the Fund has
been notified of an adverse claim, (d) the instructions received by the
Fund are given by an agent, not the actual registered owner, (e) the Fund
determines that joint owners who are married to each other are separated or
may be the subject of divorce proceedings, or (f) the authority of a
representative of a corporation, partnership, association, or other entity
has not been established to the satisfaction of the Fund.

Signatures must be guaranteed by an "eligible guarantor institution" as defined
under Rule 17Ad-15 under the Securities Exchange Act of 1934. Generally,
eligible guarantor institutions include (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities exchanges,
registered securities associations and clearing agencies; (3) securities dealers
which are members of a national securities exchange or a clearing agency or
which have minimum net capital of $100,000; or (4) institutions that participate
in the Securities Transfer Agent Medallion Program ("STAMP") or other recognized
signature guarantee medallion program. A notarized signature will not be
sufficient for the request to be in proper form.

Where shares to be redeemed are represented by share certificates, the request
for redemption must be accompanied by the share certificate and a share
assignment form signed by the registered owners exactly as the account is
registered, with the signatures guaranteed as referenced above. You are advised,
for your own protection, to send the share certificate and assignment form in
separate envelopes if they are being mailed in for redemption.

Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction require the following
documentation to be in proper form:

Corporation - (1) Signature guaranteed letter of instruction from the authorized
officers of the corporation and (2) a corporate resolution.

Partnership - (1) Signature guaranteed letter of instruction from a general
partner and (2) pertinent pages from the partnership agreement identifying the
general partners or a certification for a partnership agreement.

Trust - (1) Signature guaranteed letter of instruction from the trustees and (2)
a copy of the pertinent pages of the trust document listing the trustees or a
Certification for Trust if the trustees are not listed on the account
registration.

Custodial (other than a retirement account) - Signature guaranteed letter of
instruction from the custodian.

Accounts under court jurisdiction - Check court documents and the applicable
state law since these accounts have varying requirements, depending upon the
state of residence.

Payment for redeemed shares will be sent to you within seven days after receipt
of the request in proper form.

BY TELEPHONE

If you complete the Franklin Templeton Telephone Redemption Authorization
Agreement (the "Agreement"), included with this Prospectus, you may redeem
shares of the Fund by telephone, subject to the Restricted Account exception
noted under "Telephone Transactions - Restricted Accounts." You may obtain
additional information about telephone redemptions by writing to the Fund or
Investor Services at the address shown on the cover or by calling
1-800/632-2301. THE FUND AND INVESTOR SERVICES WILL EMPLOY REASONABLE PROCEDURES
TO CONFIRM THAT INSTRUCTIONS GIVEN BY TELEPHONE ARE GENUINE. YOU, HOWEVER, BEAR
THE RISK OF LOSS IN CERTAIN CASES AS DESCRIBED UNDER "TELEPHONE TRANSACTIONS -
VERIFICATION PROCEDURES."

If your account has a completed Agreement on file, redemptions of uncertificated
shares or shares which have previously been deposited with the Fund or Investor
Services may be made for up to $50,000 per day per Fund account. Telephone
redemption requests received before the scheduled close of the Exchange
(generally 1:00 p.m. Pacific time) on any business day will be processed that
same day. The redemption check will be sent within seven days, made payable to
all the registered owners on the account, and will be sent only to the address
of record.

Redemption requests by telephone will not be accepted within 30 days following
an address change by telephone. In that case, you should follow the other
redemption procedures set forth in this Prospectus. Institutional accounts
(certain corporations, bank trust departments, qualified retirement plans, and
government entities, which qualify to purchase shares at net asset value
pursuant to the terms of this Prospectus) that wish to execute redemptions in
excess of $50,000 must complete an Institutional Telephone Privileges Agreement
which is available from the Franklin Templeton Institutional Services Department
by calling 1-800/321-8563.

THROUGH SECURITIES DEALERS

The Fund will accept redemption orders from securities dealers who have entered
into an agreement with Distributors. This is known as a repurchase. The only
difference between a normal redemption and a repurchase is that if you redeem
shares through a dealer, the redemption price will be the net asset value next
calculated after your dealer receives the order which is promptly transmitted to
the Fund, rather than on the day the Fund receives your written request in
proper form. The documents described under "By Mail" above, as well as a signed
letter of instruction, are required regardless of whether you redeem shares
directly or submit such shares to a securities dealer for repurchase. Your
letter should reference the Fund, the account number, the fact that the
repurchase was ordered by a dealer and the dealer's name. Details of the
dealer-ordered trade, such as trade date, confirmation number, and the amount of
shares or dollars, will help speed processing of the redemption. The seven-day
period within which the proceeds of your redemption will be sent will begin when
the Fund receives all documents required to complete ("settle") the repurchase
in proper form. The redemption proceeds will not earn dividends or interest
during the time between receipt of the dealer's repurchase order and the date
the redemption is processed upon receipt of all documents necessary to settle
the repurchase. Thus, it is in your best interest to have the required
documentation completed and forwarded to the Fund as soon as possible. Your
dealer may charge a fee for handling the order. See "How Do I Buy and Sell
Shares?" in the SAI for more information on the redemption of shares.

CONTINGENT DEFERRED SALES CHARGE

In order to recover commissions paid to securities dealers, all or a portion of
investments of $1 million or more redeemed within the contingency period of 12
months of the calendar month of such investment will be assessed a contingent
deferred sales charge, unless one of the exceptions described below applies. The
charge is 1% of the lesser of the value of the shares redeemed (exclusive of
reinvested dividends and capital gain distributions) or the net asset value at
the time of purchase of such shares, and is retained by Distributors. The
contingent deferred sales charge is waived in certain instances.

In determining whether a contingent deferred sales charge applies, shares not
subject to a contingent deferred sales charge are deemed to be redeemed first,
in the following order: (i) a calculated number of shares representing amounts
attributable to capital appreciation on shares held less than the contingency
period; (ii) shares purchased with reinvested dividends and capital gain
distributions; and (iii) other shares held longer than the contingency period.
Shares subject to a contingent deferred sales charge will then be redeemed on a
"first-in, first-out" basis. For tax purposes, a contingent deferred sales
charge is treated as either a reduction in redemption proceeds or an adjustment
to the cost basis of the shares redeemed.

The contingent deferred sales charge is waived, as applicable, for: exchanges;
any account fees; distributions from an individual retirement plan account 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; redemptions initiated by the Fund due to an account falling below
the minimum specified account size; redemptions following the death of the
shareholder or beneficial owner; and redemptions through a Systematic Withdrawal
Plan set up for shares prior to February 1, 1995, and for Systematic Withdrawal
Plans set up thereafter, redemptions of up to 1% monthly of an account's net
asset value (3% quarterly, 6% semiannually or 12% annually). For example, if an
account maintained an annual balance of $1,000,000, only $120,000 could be
withdrawn through a once-yearly Systematic Withdrawal Plan free of charge. Any
amount over that $120,000 would be assessed a 1% contingent deferred sales
charge.

All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that month
and each subsequent month.

Unless otherwise specified, requests for redemptions of a SPECIFIED DOLLAR
amount will result in additional shares being redeemed to cover any applicable
contingent deferred sales charge while requests for redemption of a SPECIFIC
NUMBER of shares will result in the applicable contingent deferred sales charge
being deducted from the total dollar amount redeemed.

ADDITIONAL INFORMATION REGARDING REDEMPTIONS

The Fund may delay the mailing of the redemption check, or a portion thereof,
until the clearance of the check used to purchase Fund shares, which may take up
to 15 days or more. Although the use of a certified or cashier's check will
generally reduce this delay, shares purchased with these checks will also be
held pending clearance. Shares purchased by federal funds wire are available for
immediate redemption. The right of redemption may be suspended or the date of
payment postponed if the Exchange is closed (other than customary closing) or
upon the determination of the SEC that trading on the Exchange is restricted or
an emergency exists, or if the SEC permits it, by order, for the protection of
shareholders. Of course, the amount received may be more or less than the amount
you invested, depending on fluctuations in the market value of securities owned
by the Fund.

RETIREMENT PLAN ACCOUNTS

Retirement plan account liquidations require the completion of certain
additional forms to ensure compliance with Internal Revenue Service ("IRS")
regulations. To liquidate a retirement plan account, you or your securities
dealer may call Franklin's Retirement Plans Department to obtain the necessary
forms.

Tax penalties will generally apply to any distribution from such plans to a
participant under age 59 1/2, unless the distribution meets one of the
exceptions set forth in the Code.

OTHER INFORMATION

Distribution or redemption checks sent to you do not earn interest or any other
income during the time such checks remain uncashed and neither the Fund nor its
affiliates will be liable for any loss caused by your failure to cash such
checks.

"Cash" payments to or from the Fund may be made by check, draft or wire. The
Fund has no facility to receive, or pay out, cash in the form of currency.

For any information required about a proposed liquidation, you may call
Franklin's Shareholder Services Department. Securities dealers may call
Franklin's Dealer Services Department.

TELEPHONE TRANSACTIONS

By calling Investor Services at 1-800/632-2301, you or your investment
representative of record, if any, may be able to execute various telephone
transactions, including to: (i) effect a change in address, (ii) change a
dividend option (see "Restricted Accounts" below), (iii) transfer Fund shares in
one account to another identically registered account in the Fund, (iv) request
the issuance of certificates, to be sent to the address of record only, and (v)
exchange Fund shares as described in this Prospectus by telephone. In addition,
if you complete and file an Agreement as described under "How Do I Sell Shares?
- - By Telephone" you will be able to redeem shares of the Fund.

VERIFICATION PROCEDURES

The Fund and Investor Services will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These will include:
recording all telephone calls requesting account activity by telephone,
requiring that the caller provide certain personal and/or account information
requested by the telephone service agent at the time of the call for the purpose
of establishing the caller's identification, and sending a confirmation
statement on redemptions to the address of record each time account activity is
initiated by telephone. So long as the Fund and Investor Services follow
instructions communicated by telephone which were reasonably believed to be
genuine at the time of their receipt, neither they nor their affiliates will be
liable for any loss to you caused by an unauthorized transaction. The Fund and
Investor Services may be liable for any losses due to unauthorized or fraudulent
instructions in the event such reasonable procedures are not followed. You are,
of course, under no obligation to apply for or accept telephone transaction
privileges. In any instance where the Fund or Investor Services is not
reasonably satisfied that instructions received by telephone are genuine, the
requested transaction will not be executed, and neither the Fund nor Investor
Services will be liable for any losses which may occur because of a delay in
implementing a transaction.

RESTRICTED ACCOUNTS

Telephone redemptions and dividend option changes may not be accepted on
Franklin Templeton retirement accounts. To assure compliance with all applicable
regulations, special forms are required for any redemption, distribution, or
dividend payment changes. While the telephone exchange privilege is extended to
Franklin Templeton IRA and 403(b) retirement accounts, certain restrictions may
apply to other types of retirement plans.

To obtain further information regarding distribution or transfer procedures,
including any required forms, retirement account shareholders may call to speak
to a Retirement Plan Specialist at 1-800/527-2020.

GENERAL

During periods of drastic economic or market changes, it is possible that the
telephone transaction privilege will be difficult to execute because of heavy
telephone volume. In such situations, you may wish to contact your investment
representative for assistance or send written instructions to the Fund as
detailed elsewhere in this Prospectus.

Neither the Fund nor Investor Services will be liable for any losses resulting
from your inability to execute a telephone transaction.

The telephone transaction privilege may be modified or discontinued by the Fund
at any time upon 60 days' written notice to shareholders.

HOW ARE FUND SHARES VALUED?

The net asset value per share of the Fund is determined as of the scheduled
close of the Exchange (generally 1:00 p.m. Pacific time) each day that the
Exchange is open for trading. Many newspapers carry daily quotations of the
prior trading day's closing "bid" (net asset value) and "ask" (offering price,
which includes the maximum front-end sales charge of the Fund).

The net asset value per share of the Fund is determined by deducting the
aggregate gross value of all liabilities from the aggregate gross value of all
assets, and then dividing the difference by the number of shares outstanding.
Assets in the Funds' portfolio are valued as described under "How Are Fund
Shares Valued?" in the SAI.

HOW DO I GET MORE INFORMATION
ABOUT MY INVESTMENT?

Any questions or communications regarding your account should be directed to
Investor Services at the address shown on the back cover of this Prospectus.

From a touch-tone phone, you may access an automated system (day or night) which
offers the following features.

By calling the Franklin TeleFACTS(R) system at 1-800/247-1753, you may obtain
Class I and Class II account information, current price and, if available, yield
or other performance information specific to the Fund or any Franklin Templeton
Fund. In addition, you may process an exchange, within the same class, into an
identically registered Franklin account; and request duplicate confirmation or
year-end statements, money fund checks and deposit slips.

The Fund code, which will be needed to access system information, is 90. The
system's automated operator will prompt you with easy to follow step-by-step
instructions from the main menu. Other features may be added in the future.

To assist you and securities dealers wishing to speak directly with a
representative, the following list of Franklin departments, telephone numbers
and hours of operation is provided. The same numbers may be used when calling
from a rotary phone.

HOURS OF OPERATION
(PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
Shareholder Services 1-800/632-2301 5:30a.m. to 5:00p.m.
Dealer Services 1-800/524-4040 5:30a.m. to 5:00p.m.
Fund Information 1-800/DIAL BEN 5:30a.m. to 8:00p.m.
8:30a.m. to 5:00p.m.
(Saturday)
Retirement Plans 1-800/527-2020 5:30a.m. to 5:00p.m.
TDD (hearing impaired) 1-800/851-0637 5:30a.m. to 5:00p.m.

In order to ensure that the highest quality of service is being provided,
telephone calls placed to or by representatives in Franklin's service
departments may be accessed, recorded and monitored. These calls can be
determined by the presence of a regular beeping tone.

HOW DOES THE FUND MEASURE PERFORMANCE?

Advertisements, sales literature and communications to you may contain several
measures of the Fund's performance, including current yield, various expressions
of total return and current distribution rate. They may also occasionally cite
statistics to reflect the Fund's volatility or risk.

Average annual total return figures as prescribed by the SEC represent the
average annual percentage change in value of $1,000 invested at the maximum
public offering price (offering price includes sales charge) for one-, five- and
ten-year periods, or portion thereof, to the extent applicable, through the end
of the most recent calendar quarter, assuming reinvestment of all distributions.
The Fund may also furnish total return quotations for other periods or based on
investments at various sales charge levels or at net asset value. For such
purposes, total return equals the total of all income and capital gain paid to
shareholders, assuming reinvestment of all distributions, plus (or minus) the
change in the value of the original investment, expressed as a percentage of the
purchase price.

Current yield reflects the income per share earned by the Fund's portfolio
investments. It is calculated by dividing the Fund's net investment income per
share during a recent 30-day period by the maximum public offering price on the
last day of that period and annualizing the result.

Current yield which is calculated according to a formula prescribed by the SEC
(see "General Information" in the SAI), is not indicative of the dividends or
distributions which were or will be paid to the Fund's shareholders. Dividends
or distributions paid to shareholders of the Fund are reflected in the current
distribution rate, which may be quoted to you. The current distribution rate is
computed by dividing the total amount of dividends per share paid by the Fund
during the past 12 months by a current maximum offering price. Under certain
circumstances, such as when there has been a change in the amount of dividend
payout, or a fundamental change in investment policies, it might be appropriate
to annualize the dividends paid during the period such policies were in effect,
rather than using the dividends during the past 12 months. The current
distribution rate differs from the current yield computation because it may
include distributions to shareholders from sources other than dividends and
interest, such as premium income from option writing, and short-term capital
gain, and is calculated over a different period of time.

In each case, performance figures are based upon past performance, reflect all
recurring charges against Fund income and will assume the payment of the maximum
sales charge on the purchase of shares. When there has been a change in the
sales charge structure, the historical performance figures will be restated to
reflect the new rate. The investment results of the Fund, like all other
investment companies, will fluctuate over time; thus, performance figures should
not be considered to represent what an investment may earn in the future or what
the Fund's total return, current yield, or distribution rate may be in any
future period.

GENERAL INFORMATION

REPORTS TO SHAREHOLDERS

The Fund's fiscal year ends October 31. Annual Reports containing audited
financial statements of the Trust, including the auditors' report, and
Semi-Annual Reports containing unaudited financial statements are automatically
sent to shareholders. To reduce the volume of mail sent to each household, as
well as to reduce Fund expenses, Investor Services will attempt to identify
related shareholders within a household and send only one copy of the report.
Additional copies may be obtained, without charge, upon request to the Fund at
the telephone number or address set forth on the cover page of this Prospectus.

Additional information on Fund performance is included in the Trust's Annual
Report to Shareholders and under "General Information" in the SAI.

ORGANIZATION AND VOTING RIGHTS

The Agreement and Declaration of Trust permits the trustees to issue an
unlimited number of full and fractional shares of beneficial interest of $.01
par value, which may be issued in any number of series and classes. Shares
issued will be fully paid and non-assessable and will have no preemptive,
conversion, or sinking rights. Shares of each series have equal and exclusive
rights as to dividends and distributions as declared by such series and the net
assets of such series upon liquidation or dissolution. Additional series or
classes may be added in the future by the Board.

Voting rights are noncumulative, so that in any election of trustees, the
holders of more than 50% of the shares voting can elect all of the trustees, if
they choose to do so, and in such event the holders of the remaining shares
voting will not be able to elect any person or persons to the Board.

The Fund does not intend to hold annual shareholders meetings. The Fund may,
however, hold a special shareholders meeting for such purposes as changing
fundamental investment restrictions, approving a new management agreement or any
other matters which are required to be acted on by shareholders under the 1940
Act. A meeting may also be called by the trustees in their discretion or by
shareholders holding at least ten percent of the outstanding shares of the Fund.
Shareholders will receive assistance in communicating with other shareholders in
connection with the election or removal of trustees such as that provided in
Section 16(c) of the 1940 Act.

REDEMPTIONS BY THE FUND

The Fund reserves the right to redeem your shares, at net asset value, if your
account has a value of less than $50, but only where the value of your account
has been reduced by the prior voluntary redemption of shares and has been
inactive (except for the reinvestment of distributions) for a period of at least
six months, provided you are given advance notice. For more information, see
"How Do I Buy and Sell Shares?" in the SAI.

REGISTERING YOUR ACCOUNT

An account registration should reflect your intentions as to ownership. Where
there are two co-owners on the account, the account will be registered as "Owner
1" and "Owner 2"; the "or" designation is not used except for money market fund
accounts. If co-owners wish to have the ability to redeem or convert on the
signature of only one owner, a limited power of attorney may be used.

Accounts should not be registered in the name of a minor, either as sole or
co-owner of the account. Transfer or redemption for such an account may require
court action to obtain release of the funds until the minor reaches the legal
age of majority. The account should be registered in the name of one "Adult" as
custodian for the benefit of the "Minor" under the Uniform Transfer or Gifts to
Minors Act.

A trust designation such as "trustee" or "in trust for" should only be used if
the account is being established pursuant to a legal, valid trust document. Use
of such a designation in the absence of a legal trust document may cause
difficulties and require court action for transfer or redemption of the funds.

Shares, whether in certificate form or not, registered as joint tenants or "Jt
Ten" shall mean "as joint tenants with rights of survivorship" and not "as
tenants in common."

Except as indicated, you may transfer an account in the Fund carried in "street"
or "nominee" name by your securities dealer to a comparably registered Fund
account maintained by another securities dealer. Both the delivering and
receiving securities dealers must have executed dealer agreements on file with
Distributors. Unless a dealer agreement has been executed and is on file with
Distributors, the Fund will not process the transfer and will so inform your
delivering securities dealer. To effect the transfer, you should instruct the
securities dealer to transfer the account to a receiving securities dealer and
sign any documents required by the securities dealers to evidence consent to the
transfer. Under current procedures, the account transfer may be processed by the
delivering securities dealer and the Fund after the Fund receives authorization
in proper form from your delivering securities dealer. Account transfers may be
effected electronically through the services of the NSCC.

The Fund may conclusively accept instructions from you or your nominee listed in
publicly available nominee lists, regardless of whether the account was
initially registered in the name of or by you, your nominee, or both. If a
securities dealer or other representative is of record on your account, you will
be deemed to have authorized the use of electronic instructions on the account,
including, without limitation, those initiated through the services of the NSCC,
to have adopted as instruction and signature any such electronic instructions
received by the Fund and Investor Services, and to have authorized them to
execute the instructions without further inquiry. At the present time, such
services which are available include the NSCC's "Networking," "Fund/SERV," and
"ACATS" systems.

Any questions regarding an intended registration should be answered by the
securities dealer handling the investment, or by calling Franklin's Fund
Information Department.

IMPORTANT NOTICE REGARDING
TAXPAYER IRS CERTIFICATIONS

Pursuant to the Code and U.S. Treasury regulations, the Fund may be required to
report to the IRS any taxable dividend, capital gain distribution, or other
reportable payment (including share redemption proceeds) and withhold 31% of any
such payments made to individuals and other non-exempt shareholders who have not
provided a correct taxpayer identification number ("TIN") and made certain
required certifications that appear in the Shareholder Application. You may also
be subject to backup withholding if the IRS or a securities dealer notifies the
Fund that the number furnished by you is incorrect or that you are subject to
backup withholding for previous under-reporting of interest or dividend income.

The Fund reserves the right to (1) refuse to open an account for any person
failing to provide a TIN along with the required certifications and (2) close an
account by redeeming its shares in full at the then current net asset value upon
receipt of notice from the IRS that the TIN certified as correct by you is in
fact incorrect or upon the failure of a shareholder who has completed an
"awaiting TIN" certification to provide the Fund with a certified TIN within 60
days after opening the account.

USEFUL TERMS AND DEFINITIONS IN THIS PROSPECTUS

DESIGNATED RETIREMENT PLANS - certain retirement plans, including
profit-sharing, pension, 401(k) and simplified employee pension plans, that: (i)
are sponsored by an employer with at least 200 employees; (ii) have aggregate
plan assets of at least $1 million; or (iii) agree to invest at least $1 million
in any of the Franklin Templeton Funds over a 13-month period. Distributors
determines the qualifications for Designated Retirement Plans.

DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter.

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.

LETTER - Letter of Intent.

NET ASSET VALUE (NAV) - the value of a mutual fund share determined by deducting
the fund's liabilities from the total assets of the portfolio and dividing this
by the number of shares outstanding. When you buy, sell or exchange shares, we
will use the NAV next calculated after we receive your request in proper form.

NON-DESIGNATED RETIREMENT PLANS - employee benefit plans not included as
"Designated Retirement Plans" and not qualified under Section 401 of the Code.

PROPER FORM (PURCHASES) - generally, the Fund must receive a completed
Shareholder Application accompanied by a negotiable check.

SECURITIES DEALER - financial institutions which, either directly or through
affiliates, have 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., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund.

TRUST COMPANY - Franklin Templeton Trust Company.

FRANKLIN
INTERNATIONAL
EQUITY FUND

FRANKLIN TEMPLETON INTERNATIONAL TRUST

PROSPECTUS

MARCH 1, 1996

777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN

This Prospectus pertains only to the Franklin International Equity Fund (the
"Fund"), a diversified series, which seeks long-term growth of capital. Under
normal market conditions, the Fund invests at least 65% of its total assets in
an internationally mixed portfolio of equity securities which trade on markets
in countries other than the United States ("U.S.") and are issued by companies
domiciled in countries other than the U.S. or that derive at least 50% of either
their revenues or pre-tax income from activities outside of the U.S. The Fund
may invest in domestic and foreign securities as described under "How Does the
Fund Invest Its Assets?

A Statement of Additional Information (the "SAI") concerning the Trust, dated
March 1, 1996, as may be amended from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which may be of
interest to you. It has been filed with the Securities and Exchange Commission
("SEC") and is incorporated herein by reference. A copy is available without
charge from the Fund or the Fund's principal underwriter, Franklin/Templeton
Distributors, Inc. ("Distributors"), at the address or telephone number shown
above.

CONTENTS PAGE

Expense Table

Financial Highlights - How Has the Fund Performed?

What Is the Franklin International Equity Fund?

How Does the Fund Invest Its Assets?

What Are the Fund's Potential Risks?

Who Manages the Fund?

What Distributions Might I Receive from the Fund?

How Taxation Affects You and the Fund

How Do I Buy Shares?

What Programs and Privileges Are Available to Me as a Shareholder?

What If My Investment Outlook Changes? - Exchange Privilege

How Do I Sell Shares.

Telephone Transactions

How Are Fund Shares Valued?

How Do I Get More Information About My Investment?

How Does the Fund Measure Performance?

General Information

Registering Your Account

Important Notice Regarding
Taxpayer IRS Certifications

Useful Terms and Definitions
in this Prospectus

EXPENSE TABLE

The purpose of this table is to assist you in understanding the various costs
and expenses that you will bear directly or indirectly in connection with an
investment in the Fund. These figures are based on the aggregate operating
expenses of the Fund, for the fiscal year ended October 31, 1995.

SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50%
Deferred Sales Charge NONE+
Exchange Fee (per transaction) $5.00*

+Investments of $1 million or more are not subject to a front-end sales
charge; however, a contingent deferred sales charge of 1% is generally
imposed on certain redemptions within a "contingency period" of 12 months of
the calendar month of such investments. See "How Do I Sell Shares of the
Fund? - Contingent Deferred Sales Charge."

*$5.00 fee imposed only on Timing Accounts as described under "What If My
Investment Outlook Changes? - Exchange Privilege." All other exchanges are
processed without a fee.

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 1.00%
Rule 12b-1 Fees 0.22%**
Other Expenses
Shareholder Servicing Costs 0.10%
Custodian Fees 0.09%
Other 0.22%
Total Other Expenses 0.41%
-----

Total Fund Operating Expenses 1.63%

**The maximum amount of Rule 12b-1 fees allowed pursuant to the Fund's
distribution plan is 0.25%. See "Who Manages the Fund? - Plan of Distribution."
Consistent with National Association of Securities Dealers, Inc.'s rules, it is
possible that the combination of front-end sales charges and Rule 12b-1 fees
could cause long-term shareholders to pay more than the economic equivalent of
the maximum front-end sales charges permitted under those same rules.

EXAMPLE

ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
$61* $94 $130 $230

* Assumes that a contingent deferred sales charge will not apply.

THIS EXAMPLE IS BASED ON THE AGGREGATE ANNUAL OPERATING EXPENSES, SHOWN ABOVE
AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH
MAY BE MORE OR LESS THAN THOSE SHOWN. The operating expenses are borne by the
Fund and only indirectly by you as a result of your investment in the Fund. In
addition, federal securities regulations require the example to assume an annual
return of 5%, but the Fund's actual return may be more or less than 5%.

FINANCIAL HIGHLIGHTS - HOW HAS THE FUND PERFORMED?

Set forth below is a table containing the financial highlights for a share of
the Fund. The information for each of the four fiscal years in the period ended
October 31, 1995 and for the period from September 20, 1991 (effective date of
registration) to October 31, 1991 has been audited by Coopers & Lybrand L.L.P.,
independent auditors, whose audit report appears in the financial statements in
the Funds' Annual Report to Shareholders dated October 31, 1995. See the
discussion "Reports to Shareholders" under "General Information" in this
Prospectus.

Per Share Operating Performance* Ratios/Supplemental Data

Ratio of Net
Net Asset Net Realized Distributions Net Asset Net Assets Ratio ofInvestment
Year Values at Net & Unrealized Total FromFrom Net Distributions Values at End Expenses Income Portfolio
Ended BeginningInvestmentGains (Loss)InvestmentInvestment From Total at End Total of Year to Averageto AverageTurnover
Oct. 31 of Year Income on SecuritiesOperationsIncome Capital GainsDistributionsof YearReturn++(in 000's)Net AssetsNet AssetsRate

<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991+ $10.01 $.06 $ _ $.060 $ _ $ _ $10.07 .60% $1,286 _%*** 4.92%** _%
1992 10.07 .19 (.038) .152 (.202) _ (.202) 10.02 1.46 6,944 .29*** 2.36 48.78
1993 10.02 .42 2.253 2.673 (.413) _ (.413) 12.28 27.40 19,217 .50*** 4.22 52.99
1994 12.28 .23 1.540 1.770 (.220) _ (.220) 13.83 14.56 57,854 1.22*** 1.99 21.80
1995 13.83 .25 (.077) .173 (.190) (.588) (.778) 13.23 1.75 50,947 1.63 1.86 9.12

</TABLE>

*Selected data for a share of beneficial interest outstanding throughout the
year.

**Annualized
+For the period September 20, 1991 (effective date of registration) to October
31, 1991.

++Total return measures the change in value of an investment over the periods
indicated. It does not include the maximum front-end sales charge, assumes
reinvestment of dividends and capital gains, if any, at net asset value and is
not annualized.

***During the periods indicated below, the investment manager agreed to waive in
advance a portion of its management fees. Had such action not been taken, ratios
of expenses to average net assets would have been as follows:

RATIO OF
EXPENSES TO
AVERAGE NET
ASSETS

1991+ 2.50%**
1992 2.50
1993 2.27
1994 1.76

WHAT IS THE FRANKLIN INTERNATIONAL EQUITY FUND?

The Trust is an open-end management investment company which consists of two
diversified series, commonly called "mutual funds". The Trust is a Delaware
business trust, organized on March 22, 1991 and registered under the
Investment Company Act of 1940 (the "1940 Act"). The Fund is managed by
Franklin Advisers, Inc. (the "Manager" or "Advisers") and up until December
31, 1992 received portfolio advice and management assistance from Barclays de
Zoete Wedd Investment Management Inc. ("BZWIM"). Since January 1, 1993,
Templeton Investment Counsel, Inc. ("TICI" or the "Sub-advisor"), an indirect
subsidiary of Templeton Worldwide, Inc., which is a direct, wholly-owned
subsidiary of Franklin Resources, Inc. ("Resources"), serves as the
Sub-advisor under a contract with the Manager providing services similar to
those provided by BZWIM with no increase in fees to shareholders. (See "Who
Manages the Fund?.")

The Board of Trustees of the Trust (the "Board") may determine, at a future
date, to offer shares of the Fund in one or more "classes" to permit the Fund to
take advantage of alternative methods of selling Fund shares. "Classes" of
shares represent proportionate interests in the same portfolio of investment
securities but with different rights, privileges and attributes, as determined
by the trustees. Certain funds in the Franklin Templeton Funds, currently offer
their shares in two classes, designated "Class I" and "Class II." Because the
Fund's sales charge structure and plan of distribution are similar to those of
Class I shares, shares of the Fund may be considered Class I shares for
redemption, exchange and other purposes.

You may purchase shares of the Fund (minimum investment of $100 initially and
$25 thereafter) at the current public offering price. The current public
offering price of the Fund's shares is equal to the net asset value plus a
variable sales charge not exceeding 4.5% of the offering price depending upon
the amount invested. Please see "How Do I Buy Shares?"

The Board of Trustees has authorized for shareholder consideration a Plan of
Reorganization providing for the acquisition of substantially all of the assets
of the Fund by the Templeton Foreign Fund series of Templeton Funds, Inc.
Adoption of the Plan of Reorganization requires the approval of a majority vote
of shareholders, as defined under the 1940 Act, which is being sought at a
special meeting of shareholders of the Fund to be held on May 3, 1995.

HOW DOES THE FUND INVEST ITS ASSETS?

The Fund's principal investment objective is to seek long-term growth of
capital. Under normal market conditions, the Fund seeks to achieve its objective
by investing at least 65% of its total assets in a diverse international
portfolio of Equity Securities which trade on markets in countries other than
the U.S. and which are issued by companies (i) domiciled in countries other than
the U.S., or (ii) that derive at least 50% of either their revenues or pre-tax
income from activities outside of the U.S. Thus it is possible, although not
anticipated, that up to 35% of the Fund's assets could be invested in 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.

In selecting portfolio securities, the Fund attempts to take advantage of the
difference between economic trends and the anticipated performance of securities
and securities markets in various countries.

The Fund may invest in securities of issuers in, but not limited to countries
named herein: Argentina, Australia, Austria, Belgium, Bermuda, Brazil, Canada,
Chile, Colombia, Denmark, Finland, France, Germany, Greece, Hong Kong, India,
Indonesia, Italy, Japan, South Korea, Luxembourg, Malaysia, Mexico, the
Netherlands, New Zealand, Norway, Peru, the Philippines, Portugal, Singapore,
Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, and the United Kingdom. It
is currently expected that under normal conditions at least 65% of the Fund's
total assets will be invested in securities traded in at least three foreign
countries listed herein. The Fund may, from time to time, hold significant cash
positions until suitable investment opportunities are available, consistent with
its policy on temporary investments.

Up to 35% of the Fund's assets may be invested in bonds, fixed-income debt
securities and synthetic securities, as discussed below, rated "Baa" or better
by Moody's Investors Service ("Moody's") or "BBB" or better by Standard & Poor's
Corporation ("S&P") or that are not rated but determined by management to be of
comparable quality.

The Fund may seek capital appreciation by investing in such debt securities
which would occur through changes in relative foreign currency exchange rates,
changes in relative interest rates or improvement in the creditworthiness of an
issuer. The receipt of income from such debt securities is incidental to the
Fund's investment objective of growth of capital. These debt obligations consist
of U.S. and foreign government securities and corporate debt securities,
including Samurai and Yankee bonds, Eurobonds and depositary receipts.

Fixed-income debt securities within the top three categories (i.e., "AAA", "AA"
and "A" by S&P or "Aaa", "Aa" or "A" by Moody's) comprise what are known as
high-grade bonds and are regarded as having a strong capacity to pay principal
and interest. Medium-grade bonds (i.e., "BBB" by S&P or "Baa" by Moody's) are
regarded as having an adequate capacity to pay principal and interest but with
greater vulnerability to adverse economic conditions and some speculative
characteristics. The Fund may invest up to 5% of its portfolio in non-investment
grade bonds issued by both U.S. and foreign issuers, commonly known as "junk
bonds," which entail default and other risks greater than those associated with
higher rated securities. An Appendix discussing these ratings is included in the
SAI.

HOW YOU PARTICIPATE IN
THE RESULTS OF THE FUND'S ACTIVITIES

The assets of the Fund are invested in portfolio securities. If the securities
owned by the Fund increase in value, the value of the shares of the Fund which
you own will increase. If the securities owned by the Fund decrease in value,
the value of the your shares will also decline. In this way, you participate in
any change in the value of the securities owned by the Fund.

To the extent the Fund's investments consist of debt securities, changes in
interest rates will affect the value of the Fund's portfolio and thus its share
price. Increased rates of interest which frequently accompany higher inflation
and/or a growing economy are likely to have a negative effect on the value of
Fund shares. To the extent the Fund's investments consist of common stocks, a
decline in the market, expressed for example by a drop in the Dow Jones
Industrials or the Standard & Poor's 500 average or any other equity based
index, may also be reflected in declines in the Fund's share price. History
reflects both increases and decreases in the prevailing rate of interest and in
the valuation of the market and these may reoccur unpredictably in the future.

TRADING IN OPTIONS

FUTURES TRANSACTIONS

The Fund may enter into forward currency exchange contracts and currency futures
contracts in several circumstances. For example, when the Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency (or options contracts with respect to such futures contracts), or when
the Fund anticipates the receipt in a foreign currency of dividends or interest
payments on such a security that it holds, it may desire to "lock in" the U.S.
dollar price of the security or the U.S. dollar equivalent of such dividend or
interest payment, as the case may be. In addition, when the Sub-adviser believes
that the currency of a particular country may suffer a substantial decline
against the U.S. dollar, it may enter into a forward or futures contract to
sell, for a fixed amount of U.S. dollars, the amount of that currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such currency. In addition, the Fund may engage in cross-hedging
transactions by using forward contracts in one currency to hedge against
fluctuations in value of securities denominated in a different currency when
there is a pattern of correlation between the two currencies.

Transactions in options, futures, options on futures and forward contracts
are generally considered "derivative securities."

ILLIQUID INVESTMENTS. The Fund reserves the right to invest up to 10% of its net
assets in illiquid securities (a term which means securities that cannot be
disposed of within seven days in the normal course of business at approximately
the amount at which the Fund has valued the securities). It is the current
policy of the Fund, however (which may be changed without the approval of the
Fund's shareholders), to limit any such investments (including illiquid Equity
Securities, repurchase agreements of more than seven days duration, OTC options,
illiquid real estate investment trusts, securities of issuers with less than
three years continuous operation and other securities which are not readily
marketable) to 5% of the Fund's net assets. The Board of Trustees has authorized
the Fund to invest in restricted securities where such investments are
consistent with the Fund's investment objective and has authorized such
securities to be considered to be liquid and thus not within the foregoing 10%
limit, to the extent the Sub-adviser or the Manager, as the case may be,
determines on a daily basis that there is a liquid institutional or other market
for such securities. Notwithstanding the determinations of the Manager and the
Sub-adviser in this regard, the Board of Trustees remains responsible for such
determinations and considers appropriate action to maximize the Fund's liquidity
and its ability to meet redemption demands if a security should become illiquid
subsequent to its purchase. To the extent the Fund invests in restricted
securities that are deemed liquid, the general level of illiquidity in the Fund
may be increased if qualified institutional buyers become uninterested in
purchasing these securities or the market for these securities contracts. (See
"How Do the Funds Invest Their Assets? - Other Investment Policies" in the SAI.)

SHORT-TERM INVESTMENTS. Occasionally, in order to honor redemptions, pending
investment of proceeds from new sales of Fund shares or to satisfy other
short-term needs, the Fund may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and/or invest a portion of its assets in high
quality money-market instruments. In any period of market weakness or of
uncertain market or economic conditions, or while awaiting attractive investment
opportunities, the Fund may establish a temporary defensive position by
investing in high quality money-market instruments if the Manager or Sub-adviser
anticipates that developments in any market may seriously jeopardize the value
of most Equity Securities in such market. Any decision to substantially withdraw
from the equity market is reviewed by the Board of Trustees. Money-market
instruments in which the Fund may invest include, but are not limited to, the
following instruments of U.S. or foreign issuers: government securities;
commercial paper; bank certificates of deposit; bankers' acceptances; and
repurchase agreements secured by any of the foregoing. It is impossible to
predict when or for how long the Fund would employ defensive strategies. All
such securities will be rated "A-1" or "A-2" by S&P or "P-1" or "P-2" by Moody's
or, if not rated, determined by the Manager or Sub-adviser to be of comparable
quality.

WHAT ARE THE FUND'S POTENTIAL RISKS?

RISKS RELATED TO INVESTING IN FOREIGN SECURITIES

RISKS OF OPTIONS AND FUTURES CONTRACTS AND RELATED OPTIONS.

The risk of loss in trading foreign futures contracts and foreign options can be
substantial. Investors should be aware of the following:

(1) Participation in foreign futures contracts and foreign options transactions
involves the execution and clearing of trades on, or subject to, the rules of a
foreign board of trade.

WHO MANAGES THE FUND?

The Board has the primary responsibility for the overall management of the Trust
and for electing the officers of the Trust who are responsible for administering
its day-to-day operations.

Franklin Advisers, Inc. ("Advisers" or Manager") serves as the Fund's investment
manager. Advisers is a wholly-owned subsidiary of Franklin Resources Inc.
(resources"), a publicly owned holding company, the principal shareholders of
which are Charles B. Johnson and Rupert H. Johnson, Jr., who own approximately
20% and 16%, respectively, of Resources' outstanding shares. Resources is
engaged in various aspects of the financial services industry through its
subsidiaries (the "Franklin Templeton Group"). Advisers acts as investment
manager or administrator to 34 U.S. registered investment companies (117
separate series) with aggregate assets of over $78 billion. Under a management
agreement, the Manager also serves as investment manager and advisor to the
Trust's Franklin Pacific Growth Fund.

The Business Manager is employed through subcontracts by the Managers of the
Pacific Growth Fund. The Business Manager receives a monthly fee equivalent on
an annual basis to 0.15% of the combined average daily net assets of the Fund,
reduced to 0.135% of such assets in excess of $200 million, to 0.10% of such
assets in excess of $700 million, and to 0.075% of such assets in excess of $1.2
billion. These fees are not separate expenses of these Funds but are paid by
their Managers from the management fees they receive from their management
agreements with the Funds.

The team responsible for the day-to-day management of the Fund's portfolio is:
Marc S. Joseph since 1993, Mark R. Beveridge since 1994, and Gary Clemons since
1993.

Marc S. Joseph
Vice President and Portfolio Manager
Templeton Investment Counsel, Inc.

Mr. Joseph holds a Doctor of Jurisprudence degree from Harvard Law School. He
earned a Master of Business Administration degree from Harvard Business School
and a Bachelor of Science degree in computer science from William and Mary.
Prior to joining Templeton, Mr. Joseph was a vice president with Pacific
Financial Research and management consultant at McKinsey Co. He started managing
the International Equity Fund since joining Templeton in September 1993.

Mark R. Beveridge
Vice President and Portfolio Manager
Templeton Investment Counsel, Inc.

Mr. Beveridge is a Chartered Financial Analyst and holds a Bachelor of Business
Administration degree in finance from the University of Miami. He has been with
Templeton since 1985. He is a member of several securities industry-related
associations.

Gary Clemons
Portfolio Manager
Templeton Investment Counsel, Inc.

Mr. Clemons is a Chartered Financial Analyst and holds a Master of Business
Administration degree from the University of Wisconsin at Madison. He earned his
Bachelor of Science degree in Earth Science from the University of Nevada at
Reno. He joined the Templeton Organization in 1990, as a research analyst for
Structured Asset Management, a subsidiary of Templeton International.

Pursuant to a management agreement, the Manager supervises and implements the
Fund's investment activities and provides certain administrative services and
facilities which are necessary to conduct the Fund's business. The Manager
performs similar services for other funds and there may be times when the
actions taken with respect to the Fund's portfolio will differ from those taken
by the Manager on behalf of other funds. Neither the Manager (including its
affiliates) nor its officers, directors or employees nor the officers and
trustees of the Fund are prohibited from investing in securities held by the
Fund or other funds which are managed or administered by the Manager to the
extent such transactions comply with the Fund's Code of Ethics. Please see "How
Do the Funds Invest Their Assets?" in the SAI for further information on
securities transactions and a summary of the Fund's Code of Ethics.

Further information on the services provided by Advisers and TICI and the fees
payable by the Fund for these services is included in the SAI under "Investment
Advisory and Other Services."

Among the responsibilities of Advisers and TICI under their respective
agreements are the selection of brokers and dealers through whom transactions in
the Fund's portfolio securities will be effected. The Manager and Sub-advisor
would try to obtain the best execution on all such transactions. If it is felt
that more than one broker would be able to provide the best execution, Advisers
and TICI will consider the furnishing of quotations and of other market
services, research, statistical and other data for Advisers and TICI and their
affiliates, as well as the sale of shares of the Fund, as factors in selecting a
broker. Further information is included under "How Do the Funds Purchase
Securities For Their Portfolios?" in the SAI.

Except as noted above and in the SAI under "Investment Advisory and Other
Services", the Fund's service contractors bear all expenses in connection with
the performance of their services, except that Distributors and Advisers are
reimbursed for expenses incurred under the Plan of Distribution (as described
below). Similarly, the Fund bears the expenses incurred in its operation. (See
the SAI - "Investment Advisory and Other Services" for further information
describing the Fund's expenses.)

During the fiscal year ended October 31, 1995, expenses borne by the Fund,
including fees paid to Advisers and to Investor Services, totaled 1.63% of the
average net assets of the Fund.

PLAN OF DISTRIBUTION

A plan of distribution has been approved and adopted for the Fund (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund may
reimburse Distributors or others for all expenses incurred by Distributors or
others in the promotion and distribution of the Fund's shares. Such expenses may
include, but are not limited to, the printing of prospectuses and reports used
for sales purposes, expenses of preparing and distributing sales literature and
related expenses, advertisements, and other distribution-related expenses,
including a prorated portion of Distributors' overhead expenses attributable to
the distribution of Fund shares, as well as any distribution or service fees
paid to securities dealers or their firms or others who have executed a
servicing agreement with the Fund, Distributors or its affiliates.

The maximum amount which the Fund may reimburse to Distributors or others for
such distribution expenses is 0.25% per annum of its average daily net assets,
payable on a quarterly basis. All expenses of distribution excess of 0.25% per
annum will be borne by Distributors, or others who have incurred them, without
reimbursement from the Fund.

WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?

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 net capital loss carryovers) may generally
be made once a year in December to reflect any net short-term and net long-term
capital gains realized by the Fund as of October 31, of the current fiscal year,
and any undistributed net capital gains from the prior fiscal year. These
distributions, when made, will generally be fully taxable to the Fund's
shareholders. The Fund may make more than one distribution derived from net
short-term and net long-term capital gains in any year or adjust the timing of
these distributions for operational or other reasons.

DISTRIBUTION DATE

Although subject to change by the Board, without prior notice to or approval by
shareholders, the Fund's current policy is to declare income dividends, payable
semi-annually in June and December, to shareholders of record generally on the
first business day preceding the 15th day of these months, payable on or about
the last business day of such months. The amount of income dividend payments by
the Fund is dependent upon the amount of net income received by the Fund from
its portfolio holdings, is not guaranteed and is subject to the discretion of
the Trust's Board of Trustees. Fund shares are quoted ex-dividend on the first
business day following the record date (generally the 15th day of such months or
prior business day depending on the record date). THE FUND DOES NOT PAY
"INTEREST" OR GUARANTEE ANY FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.

DISTRIBUTION OPTIONS

You may choose to receive your distributions from the Fund in any of these ways:

1.....PURCHASE ADDITIONAL SHARES OF THE FUND - You may purchase additional
shares of the Fund (without a sales charge or imposition of a contingent
deferred sales charge) by reinvesting capital gain distributions, or both
dividend and capital gain distributions. This is a convenient way to accumulate
additional shares and maintain or increase your earnings base.

2.....PURCHASE SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
distributions to purchase the same class of shares of another Franklin Templeton
Fund (without a sales charge or imposition of a contingent deferred sales
charge). Many shareholders find this a convenient way to diversify their
investments.

3.....RECEIVE DISTRIBUTIONS IN CASH - You may choose to receive dividends, or
both dividend and capital gain distributions in cash. You may have the money
sent directly to you, to another person, or to a checking account. If you choose
to send the money to a checking account, please see "Electronic Fund Transfers"
under "What Programs and Privileges Are Available to Me as a Shareholder?"

HOW TAXATION AFFECTS YOU AND THE FUND

The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For additional information on tax matters
relating to the Fund and its shareholders see, "Additional Information Regarding
Taxation" in the SAI.

The Fund intends to continue to qualify for treatment as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). By distributing all of its income and meeting certain other
requirements relating to the sources of its income and diversification of its
assets, the Fund will not be liable for federal income or excise taxes.

Foreign securities which meet the definition in the Code of a Passive Foreign
Investment Company ("PFIC") may subject the Fund to an income tax and interest
charge with respect to such investments. To the extent possible, the Fund will
avoid such treatment by not investing in PFIC securities or by adopting other
tax strategies for any PFIC securities it does purchase.

Distributions derived from the excess of net long-term capital gain over net
short-term capital loss are treated as long-term capital gain regardless of the
length of time the shareholder has owned Fund shares and regardless of whether
such distributions are received in cash or in additional shares.

HOW DO I BUY SHARES?

PURCHASE PRICE OF FUND SHARES

You may buy shares at the public offering price. The public offering price is
equal to the net asset value plus the 4.5 4.54444444444444% sales charge, unless
you qualify to purchase shares at a discount or without a sales charge as
discussed below. The offering price will be calculated to two decimal places
using standard rounding criteria.

QUANTITY DISCOUNTS IN SALES CHARGES

The sales charge you pay when you buy shares may be reduced based upon the size
of your purchase, as shown in the table below.

**A contingent deferred sales charge of 1% may be imposed on certain redemptions
of all or a part of an investment of $1 million or more. See "How Do I Sell
Shares? - Contingent Deferred Sales Charge."

***Please see "General - Other Payments to Securities Dealers" below for a
discussion of commissions Distributors may pay to securities dealers out of its
own resources.

RIGHTS OF ACCUMULATION. To determine if you may pay a reduced sales charge, you
may add the cost or current value, whichever is higher, of your Class I and
Class II shares in other Franklin Templeton Investments, as well as those of
your spouse, children under the age of 21 and grandchildren under the age of 21,
to the amount of your current purchase. To receive the reduction, you or your
investment representative must notify Distributors that your investment
qualifies for a discount.

BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:

You authorize Distributors to reserve five percent (5%) of the amount of the
total intended purchase in Fund shares registered in your name.

We will include the reserved shares in the total shares you own as reflected
on your periodic statements.

You will receive dividend and capital gain distributions on the reserved
shares; we will pay or reinvest these distributions as you direct.

Although you may exchange your shares, you may not liquidate reserved shares
until you complete the Letter or pay the higher sales charge.

Our policy of reserving shares does not apply to certain benefit plans
described under "Purchases at Net Asset Value."

If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy and Sell Shares? - Letter of Intent" in the SAI or call our
Shareholder Services Department.

PURCHASES AT NET ASSET VALUE

You may invest money from the following sources in shares of the Fund without
paying front-end or contingent deferred sales charges:

(i) a distribution that you have received from a Franklin Templeton Fund if it
is returned within 365 days of its payment date. When you return the
distribution, please include a written request to reinvest the money at net
asset value. You may reinvest Class II distributions in either Class I or Class
II shares, but Class I distributions may only be invested in Class I shares
under this privilege. For more information, see "Distribution Options" under
"What Distributions Might I Receive From the Fund?" or call Shareholder Services
at 1-800/632-2301; or

(iv) a redemption from Templeton Institutional Funds, Inc., if you then reinvest
the redemption proceeds under an employee benefit plan qualified under Section
401 of the Code, in shares of the Fund.

If your securities dealer or another financial institution reinvests your money
in the Fund at net asset value for you, that person or institution may charge
you a fee for this service.

(i) companies exchanging shares or selling assets pursuant to a merger,
acquisition or exchange offer;

(ii) accounts managed by the Franklin Templeton Group;

(iii) certain unit investment trusts and unit holders of such trusts reinvesting
distributions from the trusts in the Fund;

(iv) registered securities dealers and their affiliates, for their
investment accounts only;

(v) current employees of securities dealers and their affiliates and their
family members, in accordance with the internal policies and procedures of the
employing securities dealer and affiliate;

(ix) trust companies and bank trust departments that exercise exclusive
discretionary investment authority over funds held in a fiduciary, agency,
advisory, custodial or similar capacity and agree to invest at least $1 million
in Franklin Templeton Investments over a 13-month period. We will accept orders
for such 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 such order;

[(x) insurance company separate accounts investing for pension plan contracts;

(xii) Designated Retirement Plans. Non-Designated Retirement Plans may also
qualify to purchase shares of the Fund if they meet the requirements
described under "Group Purchases," above.

If you would like more information, please see "How Do I Buy and Sell Shares?"
in the SAI.

HOW DO I BUY SHARES IN CONNECTION WITH TAX-DEFERRED RETIREMENT PLANS?

GENERAL

The Fund continuously offers it shares through securities dealers who have an
agreement with Distributors. The Fund and Distributors may refuse any order for
the purchase of shares. Currently, the Fund does not allow investments by
"Timing Accounts". Timing Accounts generally include accounts administered so as
to buy, sell or exchange shares based upon certain predetermined market
indicators.

WHAT PROGRAMS AND PRIVILEGES
ARE AVAILABLE TO ME AS A SHAREHOLDER?

Certain of the programs and privileges described in this section may not be
available directly from the Fund if your shares are held, of record, by a
financial institution or in a "street name" account, or networked account
through the National Securities Clearing Corporation ("NSCC") (see Registering
Your Account" in this Prospectus).

SHARE CERTIFICATES

CONFIRMATIONS

A confirmation statement will be sent to you semi-annually to reflect the
dividends reinvested during the period and after each other transaction which
affects your account. This statement will also show the total number of shares
owned by the shareholder, including the number of shares in "plan balance" for
the account of the shareholder.

AUTOMATIC INVESTMENT PLAN

SYSTEMATIC WITHDRAWAL PLAN

1. PURCHASE SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
payments to purchase the same class of shares of another Franklin Templeton
Fund.

ELECTRONIC FUND TRANSFERS

INSTITUTIONAL ACCOUNTS

WHAT IF MY INVESTMENT OUTLOOK CHANGES? - EXCHANGE PRIVILEGE

You may exchange shares in any of the following ways:

BY MAIL

BY TELEPHONE

During periods of drastic economic or market changes, it is possible that the
telephone exchange privilege may be difficult to implement and the TeleFACTS(R)
option may not be available. In this event, you should follow the other exchange
procedures discussed in this section, including the procedures for processing
exchanges through securities dealers.

THROUGH SECURITIES DEALERS

ADDITIONAL INFORMATION REGARDING EXCHANGES

If you request the exchange of the total value of your account, [accrued but
unpaid income dividends and capital gain distributions will be reinvested in the
Fund at the net asset value on the date of the exchange, and then the entire
share balance will be exchanged into the new fund in accordance with the
procedures set forth above.] [declared but unpaid income dividends and capital
gain distributions will be transferred to the fund being exchanged into and will
be invested at net asset value.] Because the exchange is considered a redemption
and purchase of shares, you may realize a gain or loss for federal income tax
purposes. Backup withholding and information reporting may also apply.
Information regarding the possible tax consequences of such an exchange is
included in the tax section in this Prospectus and under "Additional Information
Regarding Taxation" in the SAI.

If a substantial portion of the Fund's shareholders should, within a short
period, elect to redeem their shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Fund to initially invest this money in short-term, interest-bearing money market
instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objective[s] exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.

The exchange privilege may be modified or discontinued by the Fund at any time
upon 60 days' written notice to shareholders.

RETIREMENT PLAN ACCOUNTS

TIMING ACCOUNTS

RESTRICTIONS ON EXCHANGES

In accordance with the terms of their respective prospectuses, certain funds do
not accept or may place differing limitations than those below on exchanges by
Timing Accounts.

The Fund also reserves the right to refuse the purchase side of an exchange
request by any Timing Account, person, or group if, in the Manager's judgment,
the Fund would be unable to invest effectively in accordance with its investment
objective[s] and policies, or would otherwise potentially be adversely affected.
Your purchase exchanges may be restricted or refused if the Fund receives or
anticipates simultaneous orders affecting significant portions of the Fund's
assets. In particular, a pattern of exchanges that coincide with a "market
timing" strategy may be disruptive to the Fund and therefore may be refused.

The Fund and Distributors, as indicated under "How Do I Buy Shares?", reserve
the right to refuse any order for the purchase of shares.

HOW DO I SELL SHARES?

You may liquidate your shares at any time and receive from the Fund the value of
the shares. You may redeem shares in any of the following ways:

BY MAIL

Send a written request, signed by all registered owners, to Investor Services,
at the address shown on the back cover of this Prospectus, and any share
certificates which have been issued for the shares being redeemed, properly
endorsed and in order for transfer. You will then receive from the Fund the
value of the shares redeemed based upon the net asset value per share (less a
contingent deferred sales charge, if applicable) next computed after the written
request in proper form is received by Investor Services. Redemption requests
received after the time at which the net asset value is calculated will receive
the price calculated on the following business day. The net asset value per
share is determined as of the scheduled close of the New York Stock Exchange
(the "Exchange") (generally 1:00 p.m. Pacific time) each day that the Exchange
is open for trading. You are requested to provide a telephone number where you
may be reached during business hours, or in the evening if preferred. Investor
Services' ability to contact you promptly when necessary will speed the
processing of the redemption.

TO BE CONSIDERED IN PROPER FORM, SIGNATURES MUST BE GUARANTEED IF THE REDEMPTION
REQUEST INVOLVES ANY OF THE FOLLOWING:

(1) the proceeds of the redemption are over $50,000;

(2) the proceeds (in any amount) are to be paid to someone other than the
registered owners of the account;

(3) the proceeds (in any amount) are to be sent to any address other than the
address of record, preauthorized bank account or brokerage firm account;

(4) share certificates, if the redemption proceeds are in excess of $50,000;
or

Where shares to be redeemed are represented by share certificates, the request
for redemption must be accompanied by the share certificate and a share
assignment form signed by the registered owners exactly as the account is
registered, with the signatures guaranteed as referenced above. You are advised,
for your protection, to send the share certificate and assignment form in
separate envelopes if they are being mailed in for redemption.

Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction require the following
documentation to be in proper form:

Corporation - (1) Signature guaranteed letter of instruction from the authorized
officers of the corporation, and (2) a corporate resolution.

Custodial (other than a retirement account) - Signature guaranteed letter of
instruction from the custodian.

Accounts under court jurisdiction - Check court documents and the applicable
state law since these accounts have varying requirements, depending upon the
state of residence.

Payment for redeemed shares will be sent to you within seven days after receipt
of the request in proper form.

BY TELEPHONE

Redemption requests by telephone will not be accepted within 30 days following
an address change by telephone. In that case, you should follow the other
redemption procedures set forth in this Prospectus. Institutional accounts
(certain corporations, bank trust departments, qualified retirement plans and
government entities which qualify to purchase shares at net asset value pursuant
to the terms of this Prospectus) that wish to execute redemptions in excess of
$50,000 must complete an Institutional Telephone Privileges Agreement which is
available from the Franklin Templeton Institutional Services Department by
calling 1-800/321-8563.

THROUGH SECURITIES DEALERS

CONTINGENT DEFERRED SALES CHARGE

All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that month
and each subsequent month.

Unless otherwise specified, requests for redemptions of a SPECIFIED DOLLAR
amount will result in additional shares being redeemed to cover any applicable
contingent deferred sales charge, while requests for redemption of a SPECIFIC
NUMBER of shares will result in the applicable contingent deferred sales charge
being deducted from the total dollar amount redeemed.

ADDITIONAL INFORMATION REGARDING REDEMPTIONS

The right of redemption may be suspended or the date of payment postponed if the
Exchange is closed (other than customary closing) or upon the determination of
the SEC that trading on the Exchange is restricted or an emergency exists, or if
the SEC permits it, by order, for the protection of shareholders. Of course, the
amount received may be more or less than the amount you invested, depending on
fluctuations in the market value of securities owned by the Fund.

RETIREMENT PLAN ACCOUNTS

Retirement plan account liquidations require the completion of certain
additional forms to ensure compliance with IRS regulations. To liquidate a
retirement plan account, you or your securities dealer may call Franklin's
Retirement Plans Department to obtain the necessary forms.

Tax penalties will generally apply to any distribution from such plans to a
participant under age 59 1/2, unless the distribution meets one of the
exceptions set forth in the Code.

OTHER INFORMATION

"Cash" payments to or from the Fund may be made by check, draft or wire. The
Fund has no facility to receive, or pay out, cash in the form of currency.

For any information required about a proposed liquidation, you may call
Franklin's Shareholder Services Department. Securities dealers may call
Franklin's Dealer Services Department.

TELEPHONE TRANSACTIONS

By calling Investor Services at 1-800/632-2301, you or your investment
representative of record, if any, may be able to execute various telephone
transactions, including to: (i) effect a change in address, (ii) change a
dividend option [(see "Restricted Accounts" below)], (iii) transfer Fund shares
in one account to another identically registered account in the Fund,
(iv)877787750 877787750request the issuance of certificates (to be sent to the
address of record only) and (v) exchange Fund shares as described in this
Prospectus by telephone. In addition, if you complete and file an Agreement as
described under "How Do I Sell Shares? - By Telephone" you will be able to
redeem shares of the Fund.

VERIFICATION PROCEDURES

The Fund and Investor Services will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These will include:
recording all telephone calls requesting account activity by telephone,
requiring that the caller provide certain personal and/or account information
requested by the telephone service agent at the time of the call for the purpose
of establishing the caller's identification, and by sending a confirmation
statement on redemptions to the address of record each time account activity is
initiated by telephone. So long as the Fund and Investor Services follow
instructions communicated by telephone which were reasonably believed to be
genuine at the time of their receipt, neither they nor their affiliates will be
liable for any loss to you caused by an unauthorized transaction. The Fund and
Investor Services may be liable for any losses due to unauthorized or fraudulent
instructions in the event such reasonable procedures are not followed. You are,
of course, under no obligation to apply for or accept telephone transaction
privileges. In any instance where the Fund or Investor Services is not
reasonably satisfied that instructions received by telephone are genuine, the
requested transaction will not be executed, and neither the Fund nor Investor
Services will be liable for any losses which may occur because of a delay in
implementing a transaction.

RESTRICTED ACCOUNTS

Telephone redemptions and dividend option changes may not be accepted on
Franklin Templeton retirement accounts. To assure compliance with all applicable
regulations, special forms are required for any redemption distribution, or
dividend payment changes. While the telephone exchange privilege is extended to
Franklin Templeton IRA and 403(b) retirement accounts, certain restrictions may
apply to other types of retirement plans.

GENERAL

During periods of drastic economic or market changes, it is possible that the
telephone transaction privilege will be difficult to execute because of heavy
telephone volume. In such situations, you may wish to contact your investment
representative for assistance, or to send written instructions to the Fund as
detailed elsewhere in this Prospectus.

Neither the Fund nor Investor Services will be liable for any losses resulting
from your inability to execute a telephone transaction.

HOW ARE FUND SHARES VALUED?

The net asset value per share of the Fund is determined by deducting the
aggregate gross value of all liabilities from the aggregate gross value of all
assets, and then dividing the difference by the number of shares outstanding.
Assets in the Fund's portfolio are valued as described under "How Are Fund
Shares Valued?" in the SAI.

HOW DO I GET MORE INFORMATION ABOUT MY INVESTMENT?

Any questions or communications regarding your account should be directed to
Investor Services at the address shown on the back cover of this Prospectus.

From a touch-tone phone, you may access an automated system (day or night) which
offers the following features.

By calling the Franklin TeleFACTS(R) system at 1-800/247-1753, you may obtain
account information, current price and, if available, yield or other performance
information specific to the Fund or any Franklin Templeton Fund. In addition,
you may process an exchange, within the same class, into an identically
registered Franklin account and request duplicate confirmation or year-end
statements and deposit slips.

The Fund code, which will be needed to access system information, is 91. The
system's automated operator will prompt you with easy to follow step-by-step
instructions from the main menu. Other features may be added in the future.

HOURS OF OPERATION
(PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
8:30 a.m. to 5:00 p.m.
(Saturday)
Retirement Plans 1-800/527-2020 5:30 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.

HOW DOES THE FUND MEASURE PERFORMANCE?

Advertisements, sales literature and communications to you may contain several
measures of the Fund's performance, including current yield, various expressions
of total return and current distribution rate. They may occasionally cite
statistics to reflect its volatility or risk.

Average annual total return figures as prescribed by the SEC represent the
average annual percentage change in value of $1,000 invested at the maximum
public offering price (offering price includes sales charge) for one-, five- and
ten-year periods, or portion thereof, to the extent applicable, through the end
of the most recent calendar quarter, assuming reinvestment of all distributions.
The Fund may also furnish total return quotations for other periods, or based on
investments at various sales charge levels or at net asset value. For such
purposes, total return equals the total of all income and capital gain paid to
shareholders, assuming reinvestment of all distributions, plus (or minus) the
change in the value of the original investment, expressed as a percentage of the
purchase price.

Current yield for the Fund, which is calculated according to a formula
prescribed by the SEC (see "General Information" in the SAI), is not indicative
of the dividends or distributions which were or will be paid to the Fund's
shareholders. Dividends or distributions paid to shareholders of the Fund are
reflected in the current distribution rate, which may be quoted to you. The
current distribution rate is computed by dividing the total amount of dividends
per share paid by the Fund during the past 12 months by a current maximum
offering price. Under certain circumstances, such as when there has been a
change in the amount of dividend payout, or a fundamental change in investment
policies, it might be appropriate to annualize the dividends paid during the
period such policies were in effect, rather than using the dividends during the
past 12 months. The current distribution rate differs from the current yield
computation because it may include distributions to shareholders from sources
other than dividends and interest, such as premium income from option writing,
and short-term capital gain, and is calculated over a different period of time.

GENERAL INFORMATION

REPORTS TO SHAREHOLDERS

The Fund's fiscal year ends October 31. Annual Reports containing audited
financial statements of the Trust, including the auditors' report, and
Semi-Annual Reports containing unaudited financial statements are automatically
sent to shareholders. To reduce the volume of mail sent to each household, as
well as to reduce Fund expenses, Investor Services will attempt to identify
related shareholders within a household and send only one copy of the report.
Additional copies may be obtained, without charge, upon request to the trust at
the telephone number or address set forth on the cover page of this Prospectus.

Additional information on Fund performance is included in the Trust's Annual
Report to Shareholders and under "General Information" in the SAI.

ORGANIZATION AND VOTING RIGHTS

REDEMPTIONS BY THE FUND

REGISTERING YOUR ACCOUNT

Shares, whether in certificate form or not, registered as joint tenants or "Jt
Ten" shall mean "as joint tenants with rights of survivorship" and not "as
tenants in common."

The Fund may conclusively accept instructions from you or your nominee listed in
publicly available nominee lists, regardless of whether the account was
initially registered in the name of or by you, your nominee, or both. If a
securities dealer or other representative is of record on your account, you will
be deemed to have authorized the use of electronic instructions on the account,
including, without limitation, those initiated through the services of the NSCC,
to have adopted as instruction and signature any such electronic instructions
received by the Fund and the Investor Services, and to have authorized them to
execute the instructions without further inquiry. At the present time, such
services which are available include the NSCC's "Networking," "Fund/SERV," and
"ACATS" systems.

Any questions regarding an intended registration should be answered by the
securities dealer handling the investment, or by calling Franklin's Fund
Information Department.

IMPORTANT NOTICE REGARDING
TAXPAYER IRS CERTIFICATIONS

The Fund reserves the right to (1) refuse to open an account for any person
failing to provide a TIN along with the required certifications and (2) close an
account by redeeming its shares in full at the then-current net asset value upon
receipt of notice from the IRS that the TIN certified as correct by you is in
fact incorrect or upon the failure of a shareholder who has completed an
"awaiting TIN" certification to provide the Fund with a certified TIN within 60
days after opening the account.

USEFUL TERMS AND DEFINITIONS IN THIS PROSPECTUS

DESIGNATED RETIREMENT PLANS - certain retirement plans, including
profit-sharing, pension, 401(k) and simplified employee pension plans, that: (i)
are sponsored by an employer with at least 200 employees; (ii) have aggregate
plan assets of at least $1 million; or (iii) agree to invest at least $1 million
in any of the Franklin Templeton Investments over a 13-month period.
Distributors determines the qualifications for Designated Retirement Plans.

DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter.

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.

FRANKLIN TEMPLETON INVESTMENTS - the Franklin Funds, the Templeton Funds and
other investment products underwritten by Distributors or its affiliates.

LETTER - Letter of Intent.

NON-DESIGNATED RETIREMENT PLANS - employee benefit plans not included as
"Designated Retirement Plans" and not qualified under Section 401 of the Code.

PROPER FORM (PURCHASES) - generally, the Fund must receive a completed
Shareholder Application accompanied by a negotiable check.

TRUST COMPANY - Franklin Templeton Trust Company.

FRANKLIN INTERNATIONAL EQUITY FUND

777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, California 94403-7777

INVESTMENT MANAGER

Franklin Advisers, Inc.
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, California 94403-7777

INVESTMENT SUB-ADVISOR
Templeton Investment Counsel, Inc.
Broward Financial Center, Suite 2100
Fort Lauderdale, Florida 33394-3091

PRINCIPAL UNDERWRITER

Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, California 94403-7777

SHAREHOLDER SERVICES AGENT

Franklin/Templeton Investor Services, Inc.
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, California 94403-7777

CUSTODIAN

Bank of America
555 California Street, 4th Floor
San Francisco, California 94104

INDEPENDENT AUDITORS

Coopers & Lybrand L.L.P.
333 Market Street
San Francisco, California 94105

LEGAL COUNSEL

Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098

For an enlarged version of this prospectus please call 1-800/DIAL BEN.

Your Representative Is:

FRANKLIN
TEMPLETON
INTERNATIONAL
TRUST

STATEMENT OF
ADDITIONAL INFORMATION
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN

MARCH 1, 1996

CONTENTS PAGE

How Do the Funds Invest Their Assets?

What Are the Funds' Potential Risks?

Investment Restrictions

Officers and Trustees

Investment Advisory and Other Services

How Do the Funds Purchase Securities For Their Portfolios?

How Do I Buy and Sell Shares?

How Are Fund Shares Valued?

Additional Information Regarding Taxation

The Funds' Underwriter

General Information

Appendix

Financial Statements

Franklin Templeton International Trust (the "Trust") is an open-end management
investment company consisting of two separate series or funds: the Franklin
International Equity Fund (the "International Fund") and the Templeton Pacific
Growth Fund (the "Pacific Fund" and together, the "Funds").

The International Fund is a diversified, open-end management series, the
objective of which is to seek long-term growth of capital. Under normal
conditions, the International Fund invests at least 65% of its total assets in
an internationally mixed portfolio of equity securities which trade on markets
in countries other than the United States ("U.S.") and which are issued by
companies (i) domiciled in countries other than the U.S. or (ii) that derive at
least 50% of either their revenues or pre-tax income from activities outside of
the U.S. Generally, the International Fund's assets are invested primarily in
common and preferred stock, securities (bonds or preferred stock) convertible
into common stock, warrants and securities representing underlying international
securities such as American Depositary Receipts and European Depositary
Receipts.

The Pacific Fund is a diversified, open-end management fund, the objective of
which is to seek long-term growth of capital. Under normal conditions, the
Pacific Fund invests at least 65% of its total assets in equity securities which
trade on markets in the Pacific Rim, that is (i) issued by companies domiciled
in the Pacific Rim or (ii) issued by companies that derive at least 50% of
either their revenues or pre-tax income from activities in the Pacific Rim.
Securities in which the Pacific Fund may invest include common and preferred
stock, securities (bonds or preferred stock) convertible into common stock,
warrants and securities representing underlying international securities such as
American Depositary Receipts.

A prospectus for each Fund, dated March 1, 1996, as may be amended from time to
time, provides the basic information you should know before investing in either
Fund, and may be obtained without charge from the Trust or from the Funds'
principal underwriter, Franklin/Templeton Distributors, Inc. ("Distributors"),
at the address or telephone number shown above.

THIS STATEMENT OF ADDITIONAL INFORMATION (THE "SAI") IS NOT A PROSPECTUS. IT
CONTAINS INFORMATION IN ADDITION TO AND IN MORE DETAIL THAN SET FORTH IN EACH
FUND'S PROSPECTUS. THIS SAI IS INTENDED TO PROVIDE YOU WITH ADDITIONAL
INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF EACH FUND AND SHOULD BE
READ IN CONJUNCTION WITH THE FUNDS' PROSPECTUSES.

HOW DO THE FUNDS INVEST THEIR ASSETS?

As noted in their respective Prospectuses, each Fund's principal investment
objective is to seek long-term growth of capital. That is, each Fund seeks to
purchase securities with the potential to increase in value, so that shares of
each Fund will in turn increase in value.

FOREIGN INVESTMENTS. Each Fund invests in securities of foreign issuers.
Investing in the securities of foreign issuers involves certain special
considerations, including those set forth below, which are not typically
associated with investing in U.S. issuers. Since investments in the securities
of foreign issuers may involve currencies of foreign countries, and since each
Fund may temporarily hold funds in bank deposits in foreign currencies during
completion of investment programs, a Fund may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations and
may incur costs in connection with conversions between various currencies.

Since foreign companies are not subject to uniform accounting, auditing and
financial reporting practices and requirements comparable to those applicable to
U.S. companies, there may be less publicly available information about a foreign
company than about a U.S. company. Volume and liquidity in most foreign bond
markets are less than in the U.S., and securities of many foreign companies are
less liquid and more volatile than securities of comparable U.S. companies.
Fixed commissions on foreign securities exchanges are generally higher than
negotiated commissions on U.S. exchanges, although each Fund endeavors to
achieve the most favorable net results on their portfolio transactions. There is
generally less government supervision and regulation of securities exchanges,
brokers, dealers and listed companies than in the U.S., thus increasing the risk
of delayed settlements of portfolio transactions or loss of certificates for
portfolio securities.

Foreign 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. Such delays in settlement could result in temporary periods
when a portion of the assets of each Fund is uninvested and no return is earned
thereon. The inability of each Fund to make intended security purchases due to
settlement problems could cause a Fund to miss attractive investment
opportunities. Losses to each Fund due to subsequent declines in the value of
portfolio securities, or losses arising out of a Fund's inability to fulfill a
contract to sell such securities, could result in potential liability to the
Fund. In addition, with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect a Fund's investments
in those countries. Moreover, individual foreign economies may differ favorably
or unfavorably from the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.

As noted in each Funds prospectus, on occasion each Fund may invest more than
25% of its assets in the securities of issuers in one industrialized country
which, in the view of the Sub-advisor, poses no unique investment risk.
Consistent with this policy, each Fund may invest up to 30% of its assets in
securities issued by Hong Kong companies. However, neither Fund will invest more
than 25% of its assets in any one industry or securities issued by any foreign
government.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each Fund may enter into forward
foreign currency exchange contracts in several circumstances, as indicated in
the Funds' Prospectuses. Additionally, when the Funds' Advisers believe that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, a Fund may enter into a forward contract to sell, for a
fixed amount of dollars, the amount of foreign currency approximating the value
of some or all of a Fund's portfolio securities denominated in such foreign
currency. The precise matching of the forward contract amounts and the value of
the securities involved is not generally possible because the future value of
such securities in foreign currencies changes as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. Using forward contracts to
protect the value of a Fund's portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices of
the securities. It simply establishes a rate of exchange which each Fund can
achieve at some future point in time. The precise projection of short-term
currency market movements is not possible, and short-term hedging provides a
means of fixing the dollar value of only a portion of each Fund's foreign
assets.

Each Fund may engage in cross-hedging by using forward contracts in one currency
to hedge against fluctuations in the value of securities denominated in a
different currency if the Funds' Advisers determine that there is a pattern of
correlation between the two currencies. Each Fund may also purchase and sell
forward contracts (to the extent they are not deemed "commodities") for
non-hedging purposes when the Manager or Sub-advisor anticipate that the foreign
currency will appreciate or depreciate in value, but securities denominated in
that currency do not present attractive investment opportunities and are not
held in a Fund's portfolio.

The Funds' custodian will place cash or liquid high grade debt securities (i.e.,
securities rated in one of the top three ratings categories by Moody's Investors
Service ("Moody's") or Standard & Poor's Corporation ("S&P") or, if unrated,
deemed by the Manager or Sub-advisor to be of comparable credit quality) into a
segregated account of each Fund in an amount equal to the value of the Fund's
total assets committed to the consummation of forward foreign currency exchange
contracts requiring each Fund to purchase foreign currencies. If the value of
the securities placed in the segregated account declines, additional cash or
securities is placed in the account on a daily basis so that the value of the
account equals the amount of each Fund's commitments with respect to such
contracts. The segregated account is marked-to-market on a daily basis. Although
the contracts are not presently regulated by the Commodity Futures Trading
Commission (the "CFTC"), the CFTC may in the future assert authority to regulate
these contracts. In such event, a Fund's ability to utilize forward foreign
currency exchange contracts may be restricted.

Each Fund generally will not enter into a forward contract with a term of
greater than one year.

While each Fund will enter into forward contracts to reduce currency exchange
rate risks, transactions in such contracts involve certain other risks. Thus,
while each Fund may benefit from such transactions, unanticipated changes in
currency prices may result in a poorer overall performance for each Fund than if
it had not engaged in any such transactions. Moreover, there may be imperfect
correlation between each Fund's portfolio holdings of securities denominated in
a particular currency and forward contracts entered into by the Fund. Such
imperfect correlation may cause a Fund to sustain losses which will prevent the
Fund from achieving a complete hedge or expose the Fund to risk of foreign
exchange loss.

WRITING AND PURCHASING CURRENCY CALL AND PUT OPTIONS. Each Fund may write
covered put and call options and purchase put and call options on foreign
currencies for the purpose of protecting against declines in the dollar value of
portfolio securities and against increases in the dollar cost of securities to
be acquired. Each Fund may use options on currency to cross-hedge, which
involves writing or purchasing options on one currency to hedge against changes
in exchange rates for a different currency with a pattern of correlation. In
addition, a Fund may purchase call options on currency for non-hedging purposes
when the Manager or Sub-advisor anticipate that the currency will appreciate in
value, but the securities denominated in that currency do not present attractive
investment opportunities and are not included in a Fund's portfolio.

A call option written by a Fund obligates the Fund to sell specified currency to
the holder of the option at a specified price at any time before the expiration
date. A put option written by a Fund would obligate the Fund to purchase
specified currency from the option holder at a specified time before the
expiration date. The writing of currency options involves a risk that a Fund
will, upon exercise of the option, be required to sell currency subject to a
call at a price that is less than the currency's market value or be required to
purchase currency subject to a put at a price that exceeds the currency's market
value.

A Fund may terminate its obligations under a call or put option by purchasing an
option identical to the one it has written. Such purchases are referred to as
"closing purchase transactions." A Fund would also be able to enter into closing
sale transactions in order to realize gains or minimize losses on options
purchased by the Fund.

A Fund would normally purchase call options in anticipation of an increase in
the dollar value of the currency in which securities to be acquired by the Fund
are denominated. The purchase of a call option would entitle a Fund, in return
for the premium paid, to purchase specified currency at a specified price during
the option period. A Fund would ordinarily realize a gain if, during the option
period, the value of such currency exceeded the sum of the exercise price, the
premium paid and transaction costs; otherwise the Fund would realize either no
gain or a loss on the purchase of the call option.

A Fund would normally purchase put options in anticipation of a decline in the
dollar value of currency in which securities in its portfolio are denominated
("protective puts"). The purchase of a put option would entitle a Fund, in
exchange for the premium paid, to sell specific currency at a specified price
during the option period. The purchase of protective puts is designed merely to
offset or hedge against a decline in the dollar value of a Fund's portfolio
securities due to currency exchange rate fluctuations. A Fund would ordinarily
realize a gain if, during the option period, the value of the underlying
currency decreased below the exercise price sufficiently to more than cover the
premium and transaction costs; otherwise the Fund would realize either no gain
or a loss on the purchase of the put option. Gains and losses on the purchase of
protective put options would tend to be offset by countervailing changes in the
value of the underlying currency.

OPTIONS ON SECURITIES AND SECURITIES INDICES

WRITING COVERED OPTIONS. Each Fund may write (sell) covered call and put options
on any securities in which it may invest. Each Fund may purchase and write such
options on securities that are listed on domestic or foreign securities
exchanges or traded in the over-the-counter market. All call options written by
each Fund are covered, which means that each Fund will own the securities
subject to the option so long as the option is outstanding. The purpose of
writing covered call options is to realize greater income than would be realized
on portfolio securities transactions alone. However, in writing covered call
options for additional income, a Fund may forego the opportunity to profit from
an increase in the market price of the underlying security.

All put options written by a Fund will be covered, which means that each Fund
will have deposited with its custodian cash, U.S. government securities or other
high-grade debt securities (i.e., securities rated in one of the top three
categories by Moody's or S&P or, if unrated, deemed by the Manager or
Sub-advisor to be of comparable credit quality) with a value at least equal to
the exercise price of the put option. The purpose of writing such options is to
generate additional income for each Fund. However, in return for the option
premium, each Fund accepts the risk that it may be required to purchase the
underlying securities at a price in excess of the securities market value at the
time of purchase.

Each Fund may terminate its obligations under a written call or put option by
purchasing an option identical to the one it has written. Such purchases are
referred to as "closing purchase transactions."

PURCHASING OPTIONS. Each Fund may purchase put and call options on any
securities in which it may invest or options on any securities index based on
securities in which it may invest. A Fund would also be able to enter into
closing sale transactions in order to realize gains or minimize losses on
options it has purchased.

The writer of an option may have no control over when the underlying securities
must be sold, in the case of a call option, or purchased, in the case of a put
option, since, with regard to certain options, the writer may be assigned an
exercise notice at any time prior to the termination of the obligation. Whether
or not an option expires unexercised, the writer retains the amount of the
premium. This amount may, in the case of a covered call option, be offset by a
decline in the market value of the underlying security during the option period.
If a call option is exercised, the writer experiences a profit or loss from the
sale of the underlying security. If a put option is exercised, the writer must
fulfill its obligation to purchase the underlying security at the exercise
price, which will usually exceed the then market value of the underlying
security.

A Fund would normally purchase call options in anticipation of an increase in
the market value of securities of the type in which it may invest. The purchase
of a call option would entitle the Fund, in return for the premium paid, to
purchase specified securities at a specified price during the option period. A
Fund would ordinarily realize a gain if, during the option period, the value of
such securities exceeded the sum of the exercise price, the premium paid and
transaction costs. Otherwise the Fund would realize either no gain or a loss on
the purchase of the call option.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. To hedge against changes in
interest rates, securities prices or currency exchange rates, each Fund may
purchase and sell various kinds of futures contracts. Each Fund may also enter
into closing purchase and sale transactions with respect to any such contracts
and options. The futures contracts may be based on various securities (such as
U.S. government securities), securities indices, foreign currencies and other
financial instruments and indices. Each Fund will engage in futures and related
options transactions only for bona fide hedging or other appropriate risk
management purposes as defined below. All futures contracts entered into by each
Fund are traded on U.S. exchanges or boards of trade that are licensed and
regulated by the CFTC or on foreign exchanges.

FUTURES CONTRACTS. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments for an
agreed price during a designated month (or to deliver the final cash settlement
price, in the case of a contract relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract).

When interest rates are rising or securities prices are falling, each Fund can
seek, through the sale of futures contracts, to offset a decline in the value of
its current portfolio securities. When rates are falling or prices are rising, a
Fund, through the purchase of futures contracts, can attempt to secure better
rates or prices than might later be available in the market when it affects
anticipated purchases. Similarly, a Fund can sell futures contracts on a
specified currency to protect against a decline in the value of such currency
and its portfolio securities which are denominated in such currency. Each Fund
can purchase futures contracts on foreign currency to fix the price in U.S.
dollars of a security denominated in such currency that a Fund has acquired or
expects to acquire.

Although futures contracts by their terms generally call for the actual delivery
or acquisition of underlying securities or the cash value of the index, in most
cases the contractual obligation is fulfilled before the date of the contract
without having to make or take such delivery. The contractual obligation is
offset by buying (or selling, as the case may be) on a commodities exchange an
identical futures contract calling for delivery in the same month. Such a
transaction, which is effected through a member of an exchange, cancels the
obligation to make or take delivery of the securities or the cash value of the
index underlying the contractual obligations. A Fund may incur brokerage fees
when it purchases or sells futures contracts.

Positions taken in the futures markets are not normally held to maturity, but
are instead liquidated through offsetting transactions which may result in a
profit or a loss. While each Fund's futures contracts on securities or currency
will usually be liquidated in this manner, a Fund may instead make or take
delivery of the underlying securities or currency whenever it appears
economically advantageous for it to do so. A clearing corporation associated
with the exchange on which futures on securities or currency are traded
guarantees that, if still open, the sale or purchase will be performed on the
settlement date.

HEDGING STRATEGIES WITH FUTURES. Hedging by use of futures contracts seeks to
establish with more certainty than would otherwise be possible with respect to
the effective price, rate of return or currency exchange rate on portfolio
securities or securities that a Fund owns or proposes to acquire. A Fund may,
for example, take a "short" position in the futures market by selling futures
contracts in order to hedge against an anticipated rise in interest rates or a
decline in market prices of foreign currency rates that would adversely affect
the dollar value of the Fund's portfolio securities. Such futures contracts may
include contracts for the future delivery of securities held by a Fund or
securities with characteristics similar to those of a Fund's portfolio
securities. Similarly, a Fund may sell futures contracts on currency in which
its portfolio securities are denominated or in one currency to hedge against
fluctuations in the value of securities denominated in a different currency if
there is an established historical pattern of correlation between the two
currencies. If, in the opinion of the Funds' Advisers, there is a sufficient
degree of correlation between price trends for a Fund's portfolio securities and
futures contracts based on other financial instruments, securities indices or
other indices, a Fund may also enter into such futures contracts as part of its
hedging strategy. Although under some circumstances prices of securities in a
Fund's portfolio may be more or less volatile than prices of such futures
contracts, the Funds' Advisers will attempt to estimate the extent of this
difference in volatility based on historical patterns and to compensate for it
by having each Fund enter into a greater or fewer number of futures contracts or
by attempting to achieve only a partial hedge against price changes affecting
each Fund's securities portfolio. When hedging of this character is successful,
any depreciation in the value of the portfolio securities will substantially be
offset by appreciation in the value of the futures position. On the other hand,
any unanticipated appreciation in the value of a Fund's portfolio securities
would be substantially offset by a decline in the value of the futures position.

On other occasions, a Fund may take a "long" position by purchasing such futures
contracts. This would be done, for example, when a Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices or rates that are currently available.

The CFTC and U.S. commodities exchanges have established limits referred to as
"speculative position limits" on the maximum net long or net short position
which any person may hold or control in a particular futures contract. Trading
limits are imposed on the maximum number of contracts which any person may trade
on a particular trading day. An exchange may order the liquidation of positions
found to be in violation of these limits and it may impose other sanctions or
restrictions. The Funds do not believe that these trading and positions limits
will have an adverse impact on its strategies for hedging its securities.

OPTIONS ON FUTURES CONTRACTS. The acquisition of put and call options on futures
contracts will give each Fund the right (but not the obligation), for a
specified price, to sell or to purchase, respectively, the underlying futures
contract at any time during the option period. As the purchaser of an option on
a futures contract, a Fund obtains the benefit of the futures position if prices
move in a favorable direction but limits its risk of loss in the event of an
unfavorable price movement to the loss of the premium and transaction costs.

The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of a Fund's assets. By writing a call
option, a Fund becomes obligated, in exchange for the premium, to sell a futures
contract, which may have a value higher than the exercise price. Conversely, the
writing of a put option on a futures contract generates a premium which may
partially offset an increase in the price of securities that a Fund intends to
purchase. However, a Fund becomes obligated to purchase a futures contract,
which may have a value lower than the exercise price. Thus, the loss incurred by
a Fund in writing options on futures is potentially unlimited and may exceed the
amount of the premium received. Each Fund will incur transaction costs in
connection with the writing of options on futures.

The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be effected. Each Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.

Each Fund may use options on futures contracts solely for bona fide hedging or
other appropriate risk management purposes as defined below.

OTHER CONSIDERATIONS. Each Fund will engage in futures and related options
transactions only for bona fide hedging or other appropriate risk management
purposes in accordance with CFTC regulations which permit principals of an
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act") to engage in such transactions without registering as
commodity pool operators. "Appropriate risk management purposes" means
activities in addition to bona fide hedging which the CFTC deems appropriate for
operators of entities, including registered investment companies, that are
excluded from the definition of commodity pool operator. Each Fund is not
permitted to engage in speculative futures trading. Each Fund will determine
that the price fluctuations in the futures contracts and options on futures used
for hedging purposes are substantially related to price fluctuations in
securities held by a Fund or which it expects to purchase. Except as stated
below, each Fund's futures transactions will be entered into for traditional
hedging purposes - that is, futures contracts will be sold to protect against a
decline in the price of securities it intends to purchase (or the currency will
be purchased to protect a Fund against an increase in the price of the
securities (or the currency in which they are denominated)). As evidence of this
hedging intent, each Fund expects that on 75% or more of the occasions on which
it takes a long futures (or option) position involving the purchase of futures
contracts, the Fund will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities (or assets denominated in
the related currency) in the cash market at the time when the futures (or
option) position is closed out. However, in particular cases when it is
economically advantageous for a Fund to do so, a long futures position may be
terminated (or an option may expire) without the corresponding purchase of
securities or other assets. In the alternative, a CFTC regulation permits each
Fund to elect to comply with a different test, under which (i) each Fund's long
futures positions will be used as part of its portfolio management strategy and
will be incidental to its activities in the underlying cash market and (ii) the
aggregate initial margin and premiums required to establish such positions will
not exceed 5% of the liquidation value of the Fund's investment portfolio (a)
after taking into account unrealized profits and losses on any such contracts
into which the Fund has entered and (b) excluding the in-the-money amount with
respect to any option that is in-the-money at the time of purchase.

Each Fund will engage in transactions in futures contracts and related options
only to the extent such transactions are consistent with the requirements of the
Internal Revenue Code for maintaining its qualification as a regulated
investment company for federal income tax purposes. See "How Taxation Affects
You and the Fund" in each Fund's Prospectus.

Each Fund will not purchase or sell futures contracts or purchase or sell
related options, except for closing purchase or sale transactions, if
immediately thereafter the sum of the amount of margin deposits on each Fund's
outstanding futures and related options positions and the amount of premiums
paid for outstanding options on futures would exceed 5% of the market value of
the Fund's total assets. These transactions involve brokerage costs, require
margin deposits and, in the case of contracts and options obligating a Fund to
purchase securities or currencies, require the Fund to segregate assets to cover
such contracts and options.

The ordinary spreads between prices in the cash and futures markets, due to
differences in the natures of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Funds' Advisers may
still not result in a successful transaction.

Perfect correlation between each Fund's futures positions and portfolio
positions may be difficult to achieve because no futures contracts based on
corporate fixed-income securities are currently available. In addition, it is
not possible to hedge fully or perfectly against currency fluctuations affecting
the value of securities denominated in foreign currencies because the value of
such securities is likely to fluctuate as a result of independent factors not
related to currency fluctuations.

OTHER INVESTMENT POLICIES

Securities which are acquired by a Fund outside the U.S. and which are publicly
traded in the U.S. or on a foreign securities exchange or in a foreign
securities market are not considered by the Fund to be illiquid assets, so long
as the Fund acquires and holds the securities with the intention of reselling
the securities in the foreign trading market, the Fund reasonably believes it
can readily dispose of the securities for cash in the U.S. or foreign market,
and current market quotations are readily available. Investments may be in
securities of foreign issuers, whether located in developed or undeveloped
countries.

Investments in foreign securities where delivery takes place outside the U.S.
will have to be made in compliance with any applicable U.S. and foreign currency
restrictions and tax laws (including laws imposing withholding taxes on any
dividend or interest income) and laws limiting the amount and types of foreign
investments. Changes of governmental administrations or of economic or monetary
policies, in the U.S. or abroad, or changed circumstances in dealings between
nations, or currency convertibility or exchange rates could result in investment
losses for each Fund. Investments in foreign securities may also subject each
Fund to losses due to nationalization, expropriation or differing accounting
practices and treatments. Moreover, investors should recognize that foreign
securities are often traded with less frequency and volume, and therefore may
have greater price volatility, than is the case with many U.S. securities.
Notwithstanding the fact that each Fund generally intends to acquire the
securities of foreign issuers where there are public trading markets,
investments by either Fund in the securities of foreign issuers may tend to
increase the risks with respect to the liquidity of a Fund's portfolio and a
Fund's ability to meet a large number of shareholder redemption requests should
there be economic or political turmoil in a country in which a Fund has a
substantial portion of its assets invested or should relations between the U.S.
and foreign countries deteriorate markedly. Furthermore, the reporting and
disclosure requirements applicable to foreign issuers may differ from those
applicable to domestic issuers, and there may be difficulties in obtaining or
enforcing judgments against foreign issuers.

ENHANCED CONVERTIBLE SECURITIES. Each Fund may invest in convertible preferred
stocks that offer enhanced yield features, such as Preferred Equity Redemption
Cumulative Stock ("PERCS"), which provide an investor, such as each Fund, with
the opportunity to earn higher dividend income than is available on a company's
common stock. A PERCS is a preferred stock which generally features a mandatory
conversion date, as well as a capital appreciation limit which is usually
expressed in terms of a stated price. Most PERCS expire three years from the
date of issue, at which time they are convertible into common stock of the
issuer (PERCS are generally not convertible into cash at maturity). Under a
typical arrangement, if after three years the issuer's common stock is trading
at a price below that set by the capital appreciation limit, each PERCS would
convert to one share of common stock. If, however, the issuer's common stock is
trading at a price above that set by the capital appreciation limit, the holder
of the PERCS would receive less than one full share of common stock. The amount
of that fractional share of common stock received by the PERCS holder is
determined by dividing the price set by the capital appreciation limit of the
PERCS by the market price of the issuer's common stock. PERCS can be called at
any time prior to maturity, and hence do not provide call protection. However if
called early the issuer must pay a call premium over the market price to the
investor. This call premium declines at a preset rate daily, up to the maturity
date of the PERCS.

Each Fund may also invest in other classes of enhanced convertible securities.
These include but are not limited to ACES (Automatically Convertible Equity
Securities), PEPS (Participating Equity Preferred Stock), PRIDES (Preferred
Redeemable Increased Dividend Equity Securities), SAILS (Stock Appreciation
Income Linked Securities), TECONS (Term Convertible Notes), QICS (Quarterly
Income Cumulative Securities), and DECS (Dividend Enhanced Convertible
Securities). ACES, PEPS, PRIDES, SAILS, TECONS, QICS, and DECS all have the
following features: they are issued by the company, the common stock of which
will be received in the event the convertible preferred stock is converted;
unlike PERCS, they do not have a capital appreciation limit; they seek to
provide the investor with high current income with some prospect of future
capital appreciation; they are typically issued with three or four-year
maturities; they typically have some built-in call protection for the first two
to three years; investors have the right to convert them into shares of common
stock at a preset conversion ratio or hold them until maturity, and upon
maturity they will necessarily convert into either cash or a specified number of
shares of common stock.

Similarly, there may be enhanced convertible debt obligations issued by the
operating company whose common stock is to be acquired in the event the security
is converted or by a different issuer, such as an investment bank. These
securities may be identified by names such as ELKS (Equity Linked Securities) or
similar names. Typically they share most of the salient characteristics of an
enhanced convertible preferred stock but will be ranked as senior or
subordinated debt in the issuer's corporate structure according to the terms of
the debt indenture. There may be additional types of convertible securities not
specifically referred to herein which may be also similar to those described in
which a Fund may invest, consistent with its objectives and policies.

An investment in an enhanced convertible security or any other security may
involve additional risks to the Fund. The Fund may have difficulty disposing of
such securities because there may be a thin trading market for a particular
security at any given time. Reduced liquidity may have an adverse impact on
market price and the Fund's ability to dispose of particular securities, when
necessary, to meet the Fund's liquidity needs or in response to a specific
economic event, such as the deterioration in the credit worthiness of an issuer.
Reduced liquidity in the secondary market for certain securities may also make
it more difficult for the Fund to obtain market quotations based on actual
trades for purposes of valuing the Fund's portfolio. The Fund, however, intends
to acquire liquid securities, though there can be no assurances that this will
be achieved.

LOANS OF PORTFOLIO SECURITIES. As discussed in each Prospectus, the Funds may
engage in loans of their portfolio securities. Up to one third of either Fund's
portfolio securities may be loaned to qualified borrowers who deposit and
maintain with the Fund cash, securities issued by the U.S. Government, its
agencies or instrumentalities, or irrevocable letters of credit. with a value at
least equal to the value of the securities loaned.

REPURCHASE TRANSACTIONS. Each Fund may enter into repurchase agreements. A
repurchase agreement is an agreement in which the seller of a security agrees to
repurchase the security sold at a mutually agreed upon time and price. Under the
1940 Act, a repurchase agreement is deemed to be the loan of money by the Fund
to the seller, collateralized by the underlying security. The resale price is
normally in excess of the purchase price, reflecting an agreed upon interest
rate. The interest rate is effective for the period of time in which the Fund is
invested in the agreement and is not related to the coupon rate on the
underlying security. The period of these repurchase agreements will usually be
short, from overnight to one week, and at no time will a Fund invest in
repurchase agreements for more than one year. However, the securities which are
subject to repurchase agreements may have maturity dates in excess of one year
from the effective date of the repurchase agreements. The transaction requires
the initial collateralization of the seller's obligation by securities with a
market value, including accrued interest, equal to at least 102% of the dollar
amount invested by the Fund, with the value marked-to-market daily to maintain
100% coverage. A default by the seller might cause the Fund to experience a loss
or delay in the liquidation of the collateral securing the repurchase agreement.
Each Fund might also incur disposition costs in liquidating the collateral. Each
Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of their custodian bank. Each
Fund may not enter into a repurchase agreement with more than seven days
duration if, as a result, the market value of each Fund's net assets, together
with investments in other securities deemed to be not readily marketable, would
be invested in such repurchase agreements in excess of each Fund's policy on
investments in illiquid securities.

Each Fund reserves the right to invest up to 10% of its net assets in illiquid
securities. It is the current policy of each Fund, however (which may be changed
without the approval of either Fund's shareholders), to limit any such
investments to 5% of each Fund's net assets. Generally an "illiquid security" is
any security that cannot be disposed of promptly and in the ordinary course of
business at approximately the amount at which the Fund has valued the
instrument. Subject to this limitation, the Board of Trustees has authorized
each Fund to invest in restricted securities where such investment is consistent
with the Fund's investment objective and has authorized such securities to be
considered to be liquid to the extent the Fund's Manager or Sub-advisor, as the
case may be, determines that there is a liquid institutional or other market for
such securities, for example, restricted securities which may be freely
transferred among qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended (the "1933 Act"), and for which a liquid
institutional market has developed. The Board of Trustees reviews any
determination by the Manager or Sub-advisor to treat a restricted security as
liquid on a quarterly basis, including the Manager's or Sub-adviser's assessment
of current trading activity and the availability of reliable price information.
In determining whether a restricted security is properly considered a liquid
security, the Manager or Sub-advisor and the Board of Trustees will take into
account the following factors: (i) the frequency of trades and quotes for the
security; (ii) the number of dealers willing to purchase or sell the security
and the number of other potential purchasers; (iii) dealer undertakings to make
a market in the security; and (iv) the nature of the security and the nature of
the marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). To the extent a Fund
invests in restricted securities that are deemed liquid, the general level of
illiquidity in the applicable Fund may be increased if qualified institutional
buyers become uninterested in purchasing these securities or the market for
these securities contracts.

WHEN WILL EACH FUND ENGAGE IN SECURITIES TRANSACTIONS?

Normally, each Fund purchases securities for investment with a view to long-term
appreciation. Each Fund may, however, on occasion purchase securities with the
expectation of realizing gains over the short term. Changes in particular
portfolio holdings may be made whenever it is considered that a security no
longer has the optimum growth potential or has reached its anticipated level of
performance, or that another security appears to have a relatively greater
opportunity for capital appreciation, and will be made without regard to the
length of time a security has been held. The differences between the tax
treatment of long-term gains and short-term gains may, however, be considered in
determining the timing of sales of portfolio securities.

WHAT ARE THE FUNDS' POTENTIAL RISKS?

RISKS ASSOCIATED WITH OPTIONS TRANSACTIONS. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If a Fund is unable
to effect a closing purchase transaction with respect to covered options it has
written, the Fund will not be able to sell the underlying securities or dispose
of assets held in a segregated account until the options expire or are
exercised. Similarly, if a Fund is unable to effect a closing sale transaction
with respect to options it has purchased, it would have to exercise the options
in order to realize any profit and will incur transaction costs upon the
purchase or sale of underlying securities.

Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation (the "OCC") may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the OCC as a result of trades on that exchange would continue to
be exercisable in accordance with their terms.

Each Fund may purchase and sell both options that are traded on U.S. and foreign
exchanges and options traded over-the-counter with broker-dealers who make
markets in these options. The ability to terminate over-the-counter options is
more limited than with exchange-traded options and may involve the risk that
broker-dealers participating in such transactions will not fulfill their
obligations. Until such time as the staff of the Securities and Exchange
Commission (the "SEC") changes its position, each Fund will treat purchased
over-the-counter options and all assets used to cover written over-the-counter
options as illiquid securities, except that with respect to options written with
primary dealers in U.S. government securities pursuant to an agreement requiring
a closing purchase transaction at a formula price, the amount of illiquid
securities may be calculated with reference to a formula approved by the staff
of the SEC.

RISKS ASSOCIATED WITH OPTIONS ON CURRENCY. An exchange-traded options position
may be closed out only on an options exchange which provides a secondary market
for an option of the same series. Although each Fund will generally purchase or
write only those options for which there appears to be an active secondary
market, there is no assurance that a liquid secondary market on an exchange will
exist for any particular option or at any particular time. For some options, no
secondary market on an exchange may exist. In such event, it might not be
possible to effect closing transactions in particular options, with the result
that a Fund would have to exercise its options in order to realize any profit
and would incur transaction costs upon the sale of underlying securities
pursuant to the exercise of put options. If a Fund as a covered call option
writer is unable to effect a closing purchase transaction in a secondary market,
it will not be able to sell the underlying currency (or security denominated in
that currency) until the option expires or it delivers the underlying currency
upon exercise.

There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of the
OCC inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers' orders.

Each Fund may purchase and write over-the-counter options to the extent
consistent with its limitation on investments in restricted securities, as
described in its Prospectus. Trading in over-the-counter options is subject to
the risk that the other party will be unable or unwilling to close-out options
purchased or written by a Fund.

The amount of the premiums which each Fund may pay or receive may be adversely
affected as new or existing institutions, including other investment companies,
engage in or increase their option purchasing and writing activities.

While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while each Fund may benefit from the use of futures and options on futures,
unanticipated changes in interest rates, securities prices or currency exchange
rates may result in a poorer overall performance for each Fund than if it had
not entered into any futures contracts or options transactions. In the event of
an imperfect correlation between a future position and portfolio position which
is intended to be protected, the desired protection may not be obtained and the
Fund may be exposed to risk of loss.

HIGH YIELDING, FIXED-INCOME SECURITIES. The International Fund may invest up to
5% of its assets in fixed income securities which are below investment grade or
unrated. Because of the International Fund's policy of investing in higher
yielding, higher risk securities, an investment in the International Fund is
accompanied by a higher degree of risk than is present with an investment in
higher rated, lower yielding securities. Accordingly, an investment in the
International Fund should not be considered a complete investment program and
should be carefully evaluated for its appropriateness in light of your overall
investment needs and goals. If you are on a fixed income or retired, you should
also consider the increased risk of loss to principal which is present with an
investment in higher risk securities such as those in which the International
Fund invests. See "What Are the Funds Potential Risks?" in this SAI.

The market value of lower rated, fixed-income securities and unrated securities
of comparable quality, commonly known as junk bonds, tends to reflect individual
developments affecting the issuer to a greater extent than the market value of
higher rated securities, which react primarily to fluctuations in the general
level of interest rates. Lower rated securities also tend to be more sensitive
to economic conditions than higher rated securities. These lower rated
fixed-income securities are considered by the rating agencies, on balance, to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation and will
generally involve more credit risk than securities in the higher rating
categories. Even bonds rated BBB by S&P or Baa by Moody's, ratings which are
considered investment grade, possess some speculative characteristics.

Issuers of high yielding, fixed-income securities are often highly leveraged and
may not have more traditional methods of financing available to them. Therefore,
the risk associated with acquiring the securities of such issuers is generally
greater than is the case with higher rated securities. For example, during an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of high yielding securities may experience financial stress.
During these periods, such issuers may not have sufficient cash flow to meet
their interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific developments affecting
the issuer, the issuer's inability to meet specific projected business
forecasts, or the unavailability of additional financing. The risk of loss due
to default by the issuer may be significantly greater for the holders of high
yielding securities because such securities are generally unsecured and are
often subordinated to other creditors of the issuer.

High yielding, fixed-income securities frequently have call or buy-back features
which permit an issuer to call or repurchase the securities from the
International Fund. Although such securities are typically not callable for a
period from three to five years after their issuance, if a call were exercised
by the issuer during periods of declining interest rates, the International Fund
would likely have to replace such called securities with lower yielding
securities, thus decreasing the net investment income to the International Fund
and dividends to shareholders. The premature disposition of a high yielding
security due to a call or buy-back feature, the deterioration of the issuer's
creditworthiness, or a default may also make it more difficult for the
International Fund to manage the timing of its receipt of income, which may have
tax implications. The International Fund may be required under the Code and U.S.
Treasury regulations to accrue income for income tax purposes on defaulted
obligations and to distribute such income to the International Fund's
shareholders even though the International Fund is not currently receiving
interest or principal payments on such obligations. In order to generate cash to
satisfy any or all of these distribution requirements, the International Fund
may be required to dispose of portfolio securities that it otherwise would have
continued to hold or to use cash flows from other sources such as the sale of
Fund shares.

The International Fund may have difficulty disposing of certain high yielding
securities because there may be a thin trading market for a particular security
at any given time. The market for lower rated, fixed-income securities generally
tends to be concentrated among a smaller number of dealers than is the case for
securities which trade in a broader secondary retail market. Generally,
purchasers of these securities are predominantly dealers and other institutional
buyers, rather than individuals. To the extent the secondary trading market for
a particular high yielding, fixed-income security does exist, it is generally
not as liquid as the secondary market for higher rated securities. Reduced
liquidity in the secondary market may have an adverse impact on market price and
the International Fund's ability to dispose of particular issues, when
necessary, to meet the International Fund's liquidity needs or in response to a
specific economic event, such as a deterioration in the creditworthiness of the
issuer. Reduced liquidity in the secondary market for certain securities may
also make it more difficult for the International Fund to obtain market
quotations based on actual trades for purposes of valuing the International
Fund's portfolio. Current values for these high yield issues are obtained from
pricing services and/or a limited number of dealers and may be based upon
factors other than actual sales. See "How Are Fund Shares Valued?" in this SAI.

The International Fund is authorized to acquire high yielding, fixed-income
securities that are sold without registration under the federal securities laws
and therefore carry restrictions on resale. While many high yielding securities
have been sold with registration rights, covenants and penalty provisions for
delayed registration, if the International Fund is required to sell such
restricted securities before the securities have been registered, it may be
deemed an underwriter of such securities under the Securities Act of 1933, which
entails special responsibilities and liabilities. The International Fund may
incur special costs in disposing of such securities; however, this Fund will
generally incur no costs when the issuer is responsible for registering the
securities.

The International Fund may acquire high yielding, fixed-income securities during
an initial underwriting. Such securities involve special risks because they are
new issues. The International Fund has no arrangement with its underwriters or
any other person concerning the acquisition of such securities, and the
investment manager will carefully review the credit and other characteristics
pertinent to such new issues.

The high yield securities market is relatively new and much of its growth prior
to 1990 paralleled a long economic expansion. The recent recession disrupted the
market for high yielding securities and adversely affected the value of
outstanding securities and the ability of issuers of such securities to meet
their obligations. Those adverse effects may continue even as the economy
recovers. Factors adversely impacting the market value of high yielding
securities will adversely impact the International Fund's net asset value. For
example, adverse publicity regarding lower rated bonds, which appeared during
1989 and 1990, along with highly publicized defaults of some high yield issuers,
and concerns regarding a sluggish economy which continued in 1993, depressed the
prices for many these securities. In addition, the International Fund may incur
additional expenses to the extent it is required to seek recovery upon a default
in the payment of principal or interest on its portfolio holdings. The
International Fund will rely on the investment manager's judgment, analysis and
experience in evaluating the creditworthiness of an issuer. In this evaluation,
the investment manager will take into consideration, among other things, the
issuer's financial resources, its sensitivity to economic conditions and trends,
its operating history, the quality of the issuer's management and regulatory
matters.

INVESTMENT RESTRICTIONS

Each Fund has adopted the following restrictions as fundamental policies, which
means that they may not be changed without the approval of a majority of such
Fund's voting securities. In order to change any of these restrictions, the
lesser of (i) 67% or more of the voting securities of such Fund present at a
meeting of shareholders if the holders of more than 50% of the voting securities
of the Fund are represented at that meeting or (ii) more than 50% of the
outstanding voting securities of such Fund must vote to make the change. Each
Fund MAY NOT:

1. Purchase the securities of any one issuer (other than cash, cash items and
obligations of the U.S. government) if immediately thereafter and as a result of
the purchase, with respect to 75% of its total assets, the Fund would (a) have
invested more than 5% of the value of its total assets in the securities of the
issuer, or (b) hold more than 10% of any or all classes of the outstanding
voting securities of any one issuer;

2. Make loans to other persons, except by the purchase of bonds, debentures or
similar obligations which are publicly distributed or of a character usually
acquired by institutional investors or through loans of either Fund's portfolio
securities, or to the extent the entry into a repurchase agreement may be deemed
a loan;

3. Borrow money, except for temporary or emergency (but not investment)
purposes from banks and only in an amount up to 10% of the value of the assets.
While borrowings exceed 5% of a Fund's total assets, it will not make any
additional investments;

4. Invest more than 25% of the Fund's assets (at the time of the most recent
investment) in any single industry;

5. Underwrite securities of other issuers, except insofar as a Fund may be
technically deemed an underwriter under the federal securities laws in
connection with the disposition of portfolio securities;

6. Purchase illiquid securities, including illiquid securities which, at the
time of acquisition, could be disposed of publicly by each Fund only after
registration under the 1933 Act, if as a result more than 10% of their net
assets would be invested in such illiquid securities;

7. Invest in securities for the purpose of exercising management or control
of the issuer;

8. Maintain a margin account with a securities dealer, except that either Fund
may obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities, nor invest in commodities or commodities
contracts or interests (other than publicly-traded equity securities) or leases
with respect to any oil, gas or other mineral exploration or development
programs, except that either Fund may enter into contracts for hedging purposes
and make margin deposits in connection therewith;

9. Effect short sales, unless at the time the Fund owns securities
equivalent in kind and amount to those sold;

10. Invest more than 5% of total assets in companies which have a record of
less than three years continuous operation, including the operations of any
predecessor companies;

11. Invest directly in real estate or real estate limited partnerships (although
either Fund may invest in real estate investment trusts) or in the securities of
other investment companies, except to the extent permitted under the 1940 Act or
pursuant to any exemptions therefrom, including any exemption permitting either
Fund to invest in shares of one or more money market funds managed by Advisers
or its affiliates, or except that securities of another investment company may
be acquired pursuant to a plan of reorganization, merger, consolidation or
acquisition; or

12. Purchase or retain in either Fund's portfolio any security if any officer,
trustee or security holder of the issuer is at the same time an officer, trustee
or employee of the Trust or of its investment advisor and such person owns
beneficially more than 1/2 of 1% of the securities, and if all such persons
owning more than 1/2 of 1% own more than 5% of the outstanding securities of the
issuer.

In addition to these fundamental policies, it is the present policy of the Trust
(which may be changed without the approval of either Fund's shareholders) not to
pledge, mortgage or hypothecate either Fund's assets as security for loans nor
to engage in joint and several trading accounts in securities, except that an
order to purchase or sell may be combined with orders from other persons to
obtain lower brokerage commissions and except as either Fund may participate in
a joint repurchase agreement account with other funds in the Franklin Templeton
Funds. In addition, neither Fund will purchase puts, calls, straddles, spreads
or any combination thereof if by reason thereof the value of its aggregate
investment in such securities will exceed 5% of its total assets.

Pursuant to an undertaking given to the Texas State Securities Board, the
International Fund nor the Pacific Fund may not invest in real estate limited
partnerships or in interests (other than publicly traded equity securities) in
oil, gas, or other mineral leases, exploration or development.

If a percentage restriction contained herein is adhered to at the time of
investment, a later increase or decrease in the percentage resulting from a
change in the value of portfolio securities or the amount of net assets will not
be considered a violation of any of the foregoing restrictions.

Each Fund anticipates that its annual portfolio turnover rates generally will
not exceed 100% but this rate should not be construed as a limiting factor. For
the fiscal years ended October 31, 1993, 1994, and 1995 the rates of portfolio
turnover equaled 52.99%, 21.80%, and 9.12% respectively, for the International
Fund and 47.52%, 9.16%, and 36.21% respectively for the Pacific Fund.

OFFICERS AND TRUSTEES

The Board of Trustees (the "Board") has the responsibility for the overall
management of the Trust and each Fund, including general supervision and review
of each Fund's investment activities. The trustees, in turn, elect the officers
of the Trust who are responsible for administering day-to-day operations of the
Trust. The affiliations of the officers and trustees and their principal
occupations for the past five years are listed below. Trustees who are deemed to
be "interested persons" of the Trust, as defined in the 1940 Act, are indicated
by an asterisk (*).

Frank H. Abbott, III (74)
1045 Sansome St.
San Francisco, CA 94111

Trustee

President and Director, Abbott Corporation (an investment company); and
director, trustee or managing general partner, as the case may be, of 31 of the
investment companies in the Franklin Group of Funds.

Harris J. Ashton (63)
General Host Corporation
Metro Center, 1 Station Place
Stamford, CT 06904-2045

Trustee

President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers); Director, RBC Holdings, Inc. (a bank
holding company) and Bar-S Foods; and director, trustee or managing general
partner, as the case may be, of 56 of the investment companies in the Franklin
Templeton Group of Funds.

*Harmon E. Burns (51)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President and Trustee

Executive Vice President, Secretary and Director, Franklin Resources, Inc.;
Executive Vice President and Director, Franklin Templeton Distributors, Inc.;
Executive Vice President, Franklin Advisers, Inc.; Director, Franklin/Templeton
Investor Services, Inc.; officer and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and officer and/or director or trustee
of 43 of the investment companies in the Franklin Templeton Group of Funds.

S. Joseph Fortunato (63)
Park Avenue at Morris County
P. O. Box 1945
Morristown, NJ 07962-1945

Trustee

Member of the law firm of Pitney, Hardin, Kipp & Szuch; Director of General Host
Corporation; director, trustee or managing general partner, as the case may be,
of 58 of the investment companies in the Franklin Templeton Group of Funds.

David W. Garbellano (81)
111 New Montgomery St., #402
San Francisco, CA 94105

Trustee

Private Investor; Assistant Secretary/Treasurer and Director, Berkeley Science
Corporation (a venture capital company); and director, trustee or managing
general partner, as the case may be, of 30 of the investment companies in the
Franklin Group of Funds.

*Charles B. Johnson (63)
777 Mariners Island Blvd.
San Mateo, CA 94404

Chairman of the Board and Trustee

President and Director, Franklin Resources, Inc.; Chairman of the Board and
Director, Franklin Advisers, Inc. and Franklin Templeton Distributors, Inc.;
Director, Franklin/Templeton Investor Services, Inc. and General Host
Corporation; and officer and/or director, trustee or managing general
partner, as the case may be, of most other subsidiaries of Franklin
Resources, Inc. and of 57 of the investment companies in the Franklin
Templeton Group of Funds.

*Rupert H. Johnson, Jr. (55)
777 Mariners Island Blvd.
San Mateo, CA 94404

President and Trustee

Executive Vice President and Director, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; President and Director, Franklin Advisers, Inc.;
Director, 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 of 43 of the investment companies
in the Franklin Templeton Group of Funds.

Frank W. T. LaHaye (66)
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014

Trustee

General Partner, Peregrine Associates and Miller & LaHaye, which are General
Partners of Peregrine Ventures and Peregrine Ventures II (venture capital
firms); Chairman of the Board and Director, Quarterdeck Office Systems, Inc.;
Director, FischerImaging Corporation; and director or trustee, as the case may
be, of 26 of the investment companies in the Franklin Group of Funds.

Gordon S. Macklin (67)
8212 Burning Tree Road
Bethesda, MD 20817

Trustee

Chairman, White River Corporation (information services); Director, Fund
American Enterprises Holdings, Inc., Lockheed Martin Corporation, MCI
Communications Corporation, MedImmune, Inc. (biotechnology), InfoVest
Corporation (information services), and Fusion Systems Corporation (industrial
technology); and director, trustee or managing general partner, as the case may
be, of 53 of the investment companies in the Franklin Templeton Group of Funds;
and formerly held the following positions: Chairman, Hambrecht and Quist Group;
Director, H & Q Healthcare Investors; and President, National Association of
Securities Dealers, Inc.

Kenneth V. Domingues (63)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President - Financial Reporting and Accounting Standards

Senior Vice President, Franklin Resources, Inc., Franklin Advisers, Inc., and
Franklin Templeton Distributors, Inc.; officer and/or director, as the case may
be, of other subsidiaries of Franklin Resources, Inc.; and officer and/or
managing general partner, as the case may be, of 37 of the investment companies
in the Franklin Group of Funds.

Martin L. Flanagan (35)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President and Chief Financial Officer

Senior Vice President, Chief Financial Officer and Treasurer, Franklin
Resources, Inc.; Executive Vice President, Templeton Worldwide, Inc.; Senior
Vice President and Treasurer, Franklin Advisers, Inc. and Franklin Templeton
Distributors, Inc.; Senior Vice President, Franklin/Templeton Investor Services,
Inc.; officer of most other subsidiaries of Franklin Resources, Inc.; and
officer of 61 of the investment companies in the Franklin Templeton Group of
Funds.

Deborah R. Gatzek (47)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President and Secretary

Senior Vice President - Legal, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; Vice President, Franklin Advisers, Inc. and
officer of 37 of the investment companies in the Franklin Group of Funds.

Charles E. Johnson (39)
777 Mariners Island Blvd.
San Mateo CA 94404

Vice President

Senior Vice President and Director, Franklin Resources, Inc.; Senior Vice
President, Franklin Templeton Distributors, Inc.; President and Director,
Templeton Worldwide, Inc. and Franklin Institutional Services Corporation;
officer and/or director, as the case may be, of some of the subsidiaries of
Franklin Resources, Inc. and officer and/or director or trustee, as the case may
be, of 26 of the investment companies in the Franklin Templeton Group of Funds.

Diomedes Loo-Tam (57)
777 Mariners Island Blvd.
San Mateo, CA 94404

Treasurer and Principal Accounting Officer

Employee of Franklin Advisers, Inc.; and officer of 37 of the investment
companies in the Franklin Group of Funds.

Edward V. McVey (58)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President

Senior Vice President/National Sales Manager, Franklin Templeton Distributors,
Inc.; and officer of 32 of the investment companies in the Franklin Group of
Funds.

R. Martin Wiskemann (69)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President

Senior Vice President, Portfolio Manager and Director, Franklin Advisers, Inc.;
Senior Vice President, Franklin Management, Inc.; Vice President, Treasurer and
Director, ILA Financial Services, Inc. and Arizona Life Insurance Company of
America; and officer and/or director, as the case may be, of 20 of the
investment companies in the Franklin Group of Funds.

The preceding table indicates those officers and trustees who are also
affiliated persons of Distributors and Advisers. Trustees not affiliated with
the investment manager ("nonaffiliated directors") are not currently paid fees.
As indicated above, certain of the Trust's nonaffiliated Trustees also serve as
directors, trustees or managing general partners of other investment companies
in the Franklin Group of Funds(R) and the Templeton Group of Funds (the
"Franklin Templeton Group of Funds") from which they may receive fees for their
services. The following table indicates the total fees paid to nonaffiliated
directors by the Fund and by other funds in the Franklin Templeton Group of
Funds.

NUMBER OF BOARDS IN
THE FRANKLIN
TOTAL FEES RECEIVED TEMPLETON GROUP OF
FROM THE FRANKLIN FUNDS ON WHICH EACH
TEMPLETON GROUP OF SERVES**
FUNDS*
NAME
Frank H. Abbott, III $176,870 31
Harris J. Ashton 318,125 56
S. Joseph Fortunato 334,265 58
David W. Garbellano 153,300 30
Frank W.T. LaHaye 150,817 26
Gordon S. Macklin 301,885 53

* For the calendar year ended December 31, 1994.
** The number of boards is based on the number of registered investment
companies in the Franklin Templeton Group of Funds and does not include the
total number of series or funds within each investment company for which the
trustees are responsible. The Franklin Templeton Group of Funds currently
includes 61 registered investment companies, consisting of approximately 163
U.S. based funds or series.

Nonaffiliated trustees are reimbursed for expenses incurred in connection with
attending board meetings, 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 trustee received any other compensation directly from the
Fund. Certain officers or trustees who are shareholders of Franklin Resources,
Inc. ("Resources") may be deemed to receive indirect remuneration by virtue of
their participation, if any, in the fees paid to its subsidiaries.

As of December 7, 1995 the trustees and officers, as a group, owned of record
and beneficially approximately 2,231 shares of the Pacific Fund and 2,531 shares
of the International Fund, or less than 1% of the total outstanding shares of
the respective Funds. Many of the Funds' trustees also own shares in various of
the other funds in the Franklin Templeton Group of Funds. Charles B. Johnson and
Rupert H. Johnson, Jr. are brothers.

INVESTMENT ADVISORY AND OTHER SERVICES

The investment manager of each Fund is Franklin Advisers, Inc.("Advisers" or
"Manager"). Advisers is a wholly-owned subsidiary of Resources, a publicly owned
holding company whose shares are listed on the New York Stock Exchange (the
"Exchange"). Resources owns several other subsidiaries that are involved in
investment management and shareholder services. Prior to January 1, 1993,
sub-advisory services were provided to each Fund by Barclays de Zoete Wedd
Investment Management Incorporated, a subsidiary of Barclays de Zoete Wedd U.S.
Holdings Inc., which is an indirect wholly owned subsidiary of Barclays Bank
PLC. On that date, pursuant to a contract, Templeton Investment Counsel, Inc.
("TICI" or "Sub-advisor") became each Fund's Sub-advisor. The Sub-advisor is an
indirect wholly owned subsidiary of Resources.

Pursuant to the management agreement between the Funds and Advisers and pursuant
to the sub-advisory agreement between Advisers and TICI (together the
"Agreements"), the Manager supervises and implements each Fund's investment
objective and provides certain administrative services and facilities which are
necessary to conduct each Fund's business. The Sub-advisor, subject to the
overall review by the Manager and the Board, is responsible for recommending an
optimal geographic equity allocation and for providing advice with respect to
each Fund's investments. Investments may be shifted among capital markets and
different types of securities in accordance with ongoing analysis of trends and
developments affecting such markets and securities as directed by the Manager or
Sub-advisor.

Under the management agreement, Advisers receives a monthly fee equal to an
annual rate of 1% of the value of each Fund's average daily net assets up
through $100,000,000; 0.90% of the value of each Fund's average daily net assets
over $100,000,000 up through $250,000,000; 0.80% of the value of each Fund's
average daily net assets over $250,000,000 up through $500,000,000; and 0.75% of
the value of each Fund's average daily net assets over $500,000,000.

Under the terms of the management agreement, the Manager provides office space
and office furnishings, facilities and equipment required for managing the
business affairs of the Fund; maintains all internal bookkeeping, clerical,
secretarial and administrative personnel and services; and provides certain
telephone and other mechanical services. The Manager is covered by fidelity
insurance on its officers, trustees, directors and employees for the protection
of the Trust.

The Manager also provides management services to numerous other investment
companies or funds pursuant to management agreements with each fund. The Manager
may give advice and take action with respect to any of the other funds it
manages, or for its own account, which may differ from action taken by the
Manager on behalf of the Fund. Similarly, with respect to the Fund, the Manager
is not obligated to recommend, purchase or sell, or to refrain from
recommending, purchasing or selling any security that the Manager and access
persons, as defined by the 1940 Act, may purchase or sell for its or their own
account or for the accounts of any other fund. Furthermore, the Manager is not
obligated to refrain from investing in securities held by the Fund or other
funds which it manages or administers. Of course, any transactions for the
accounts of the Manager and other access persons will be made in compliance with
the Fund's Code of Ethics.

Under the sub-advisory agreement, TICI receives from the Manager a fee equal to
an annual rate of 0.50% of the value of each Fund's average daily net assets up
through $100,000,000; 0.40% of the value of each Fund's average daily net assets
over $100,000,000 up through $250,000,000; 0.30% of the value of each Fund's
average daily net assets over $250,000,000 up through $500,000,000; and 0.25% of
the value of each Fund's average daily net assets over $500,000,000.

Each Fund bears all of its expenses and is responsible for its pro-rata portion
of the Trust's operating expenses, including, but not limited to, the Manager's
fee; any 12b-1 distribution and services expenses; taxes, if any; custodian,
legal and auditing fees; fees and expenses of trustees who are not members of,
affiliated with or interested persons of the Manager; salaries of any personnel
not affiliated with the Manager; insurance premiums; expenses of obtaining
quotations for calculating the value of the Fund's net assets; printing and
other expenses. TICI pays all expenses incurred by it in connection with its
activities under the sub-advisory agreement with Advisers, other than the cost
of securities purchased for each Fund and brokerage commissions in connection
with such purchases. Please see the Statement of Operations in the financial
statements included in the Fund's Annual Report to Shareholders dated October
31, 1995.

The following table sets forth the management fees before advance waiver by
Advisers, for the fiscal years ended October 31, 1993 and 1994 and the
management fees paid by the Funds for the same periods.

YEAR ENDED OCTOBER 31, 1993
MANAGEMENT FEE BEFORE
FUND WAIVER MANAGEMENT FEES PAID
Pacific Fund $93,822 0
International Fund $108,434 0

YEAR ENDED OCTOBER 31, 1994
MANAGEMENT FEE BEFORE
FUND WAIVER MANAGEMENT FEES PAID
Pacific Fund $483,143 $241,445
International Fund $440,061 $206,039

For the fiscal year ended October 31, 1995 the Pacific Fund paid management fees
of $526,350 and the International Fund paid management fees of $517,232.

The management agreement specifies that the management fee will be reduced to
the extent necessary to comply with the most stringent limits on the expenses
which may be borne by a Fund as prescribed by any state in which the Fund's
shares are offered for sale. The most stringent current limit requires the
Manager to reduce or eliminate its fee to the extent that aggregate operating
expenses of each Fund (excluding interest, taxes, brokerage commissions and
extraordinary expenses such as litigation costs) would otherwise exceed in any
fiscal year 2.5% of the first $30 million of average net assets of each Fund, 2%
of the next $70 million of average net assets of each Fund, and 1.5% of average
net assets of each Fund in excess of $100 million.

The Agreements are in effect until April 30, 1996. Thereafter, they may continue
in effect for successive annual periods providing such continuance is
specifically approved at least annually by a vote of the Board or by a vote of
the holders of a majority of each Fund's outstanding voting securities, and in
either event by a majority vote of the trustees who are not parties to the
Agreements or interested persons of any such party (other than as trustees of
the Trust), cast in person at a meeting called for that purpose. The Agreements
may be terminated without payment of a penalty at any time by each Fund or by
the Manager or Sub-advisor on 60-days' written notice and will automatically
terminate in the event of assignment, as defined in the 1940 Act.

Templeton Global Investors, Inc. ("Business Manager"), Broward Financial Centre,
Suite 2100, Fort Lauderdale, Florida 33394, provides certain administrative
facilities and services for certain of the Funds as described in each
Prospectus. The Business Manager is employed through subcontracts by the
Managers of the International and Pacific Funds.

Franklin/Templeton Investor Services, Inc. ("Investor Services" or "Shareholder
Services Agent"), a wholly-owned subsidiary of Resources, is the shareholder
servicing agent for the Funds and acts as the Funds' transfer agent and
dividend-paying agent. Investor Services is compensated on the basis of a fixed
fee per account.

Bank of America NT & SA, 555 California Street, 4th Floor, San Francisco,
California 94104, acts as custodian of each Funds' securities and other assets
of the Funds. Citibank Delaware, One Penn's Way, New Castle, Delaware 19720,
acts as custodian in connection with transfer services through bank automated
clearing houses. The custodians do not participate in decisions relating to the
purchase and sale of portfolio securities.

Coopers & Lybrand L.L.P., 333 Market Street, San Francisco, California 94105,
are the Funds' independent auditors. During the fiscal year ended October 31,
1995, their auditing services consisted of rendering an opinion on the financial
statements of the Trust included in the Trust's Annual Report to shareholders
dated October 31, 1995.

HOW DO THE FUNDS PURCHASE SECURITIES FOR THEIR PORTFOLIOS?

Under the current management agreements with Advisers, the selection of brokers
and dealers to execute transactions in each Fund's portfolio is made by Advisers
or the Sub-advisor, as the case may be, in accordance with criteria set forth in
the Agreements and any directions which the Board may give.

When placing a portfolio transaction, the Manager or Sub-advisor attempts to
obtain the best net price and execution of the transaction. On portfolio
transactions done on a securities exchange, the amount of commission paid by
each Fund is negotiated between Advisers or the Sub-advisor and the broker
executing the transaction. Advisers or the Sub-advisor seeks to obtain the
lowest commission rate available from brokers that are felt to be capable of
efficient execution of the transactions. 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 such transactions. These
opinions are formed on the basis of, among other things, the experience of these
individuals in the securities industry and information available to them
concerning the level of commissions being paid by other institutional investors
of comparable size. Advisers or the Sub-advisor will ordinarily place orders for
the purchase and sale of over-the-counter securities on a principal rather than
agency basis with a principal market maker unless, in the opinion of the Manager
or Sub-advisor, 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. Each Fund seeks to obtain
prompt execution of orders at the most favorable net price.

The amount of commission is not the only relevant factor to be considered in the
selection of a broker to execute a trade. If it is felt to be in each Fund's
best interests, Advisers or the Sub-advisor may place portfolio transactions
with brokers who provide the types of services described below, even if it means
a Fund will have to pay a higher commission than would be the case if no weight
were given to the broker's furnishing of these services. This will be done only
if, in the opinion of Advisers or the Sub-advisor, 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 a Fund or assist its advisers in
carrying out their responsibilities to a Fund, or when it is otherwise in the
best interest of a Fund to do so, whether or not such services may also be
useful to the Manager or Sub-advisor in advising other clients.

When it is felt that several brokers are equally able to provide the best net
price and execution, Advisers or the Sub-advisor may decide to execute
transactions through brokers who provide quotations and other services to each
Fund, specifically including the quotations necessary to determine the value of
each Fund's net assets, in such amount of total brokerage as may reasonably be
required in light of such services, and through brokers who supply research,
statistical and other data to each Fund and the Manager or Sub-advisor in such
amount of total brokerage as may reasonably be required.

It is not possible to place a dollar value on the special executions or on the
research services received by the Manager or Sub-advisor from dealers effecting
transactions in portfolio securities. The allocation of transactions in order to
obtain additional research services permits the Manager or Sub-advisor 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, the Manager, Sub-advisor and their
affiliates may use this research and data in their investment advisory
capacities with other clients. Provided that the Funds' officers are satisfied
that the best execution is obtained, the sale of each Fund's shares may also be
considered as a factor in the selection of broker-dealers to execute each Fund's
portfolio transactions.

Because Distributors is a member of the National Association of Securities
Dealers, it is sometimes entitled to obtain certain fees when either Fund
tenders portfolio securities pursuant to a tender-offer solicitation. As a means
of recapturing brokerage for the benefit of each Fund, any portfolio securities
tendered by a Fund will be tendered through Distributors if it is legally
permissible to do so. In turn, the next management fee payable to Advisers under
the management agreement will be reduced by the amount of any fees received by
Distributors in cash, less any costs and expenses incurred in connection
therewith.

If purchases or sales of securities of either Fund and one or more other
investment companies or clients supervised by Advisers or advised by the
Sub-advisor are considered at or about the same time, transactions in such
securities will be allocated among the several investment companies and clients
in a manner deemed equitable to all by Advisers or the Sub-advisor, taking into
account the respective sizes of the funds and/or clients and the amount of
securities to be purchased or sold. It is recognized that in some cases this
procedure could possibly have a detrimental effect on the price or volume of the
security so far as either 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 each Fund.

During the past three fiscal years ended October 31, 1993, 1994, and 1995 the
Pacific Fund paid brokerage commissions totaling $102,203, $176,925, and
$193,647 respectively, and the International Fund paid brokerage commissions
totaling $57,590, $147,306, and $48,199 respectively.

As of October 31, 1995, the Funds did not own securities of their regular
broker-dealers.

HOW DO I BUY AND SELL SHARES?

All checks, drafts, wires and other payment mediums used for purchasing or
redeeming shares of either Fund must be denominated in U.S. dollars. Each Fund
reserves the right, in its sole discretion, to either (a) reject any order for
the purchase or sale of 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.

In connection with exchanges, it should be noted that since the proceeds from
the sale of shares of an investment company are generally not available until
the fifth business day following the redemption, the funds into which the Fund
shareholders are seeking to exchange reserve the right to delay issuing shares
pursuant to an exchange until said fifth business day. The redemption of shares
of the Fund to complete an exchange will be effected at the close of business on
the day the request for exchange is received in proper form at the net asset
value then effective. Please see "What If My Investment Outlook Changes? -
Exchange Privilege" in the each Prospectus.

If, in connection with the purchase of Fund shares, you submit a check or a
draft that is returned unpaid to the Fund, the Fund may impose a $10 charge
against your account for each returned item.

Dividend checks returned to either Fund marked "unable to forward" by the postal
service will be deemed to be a request to change your dividend option to
reinvest all distributions and the proceeds will be reinvested in additional
shares at net asset value until new instructions are received.

The Fund may deduct from your account the costs of its efforts to locate you if
mail is returned as undeliverable or the Fund is otherwise unable to locate you
or verify your current mailing address. These costs may include a percentage of
the account when a search company charges a percentage fee in exchange for its
location services.

Under agreements with certain banks in Taiwan, Republic of China, each Fund's
shares are available to such banks' discretionary trust funds at net asset
value. The banks may charge service fees to their customers who participate in
the discretionary trusts. Pursuant to agreements, a portion of such 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.

Shares of each Fund may be offered to investors in Taiwan through securities
firms known locally as Securities Investment Consulting Enterprises. In
conformity with local business practices in Taiwan, shares of each Fund will be
offered with the following schedule of sales charges:

SALES
SIZE OF PURCHASE - IN U.S. DOLLARS CHARGE
Up to $100,000 3%
$100,000 to $1,000,000 2%
Over $1,000,000 1%

PURCHASES AND REDEMPTIONS THROUGH SECURITIES DEALERS

Orders for the purchase of shares of each Fund received in proper form prior to
the scheduled close of the Exchange (generally 1:00 p.m. Pacific time) any
business day that the Exchange is open for trading and promptly transmitted to
the Fund will be based upon the public offering price determined that day.
Purchase orders received by securities dealers or other financial institutions
after the scheduled close of the Exchange will be effected at the Fund's public
offering price on the day it is next calculated. The use of the term "securities
dealer" herein shall include other financial institutions which, either directly
or through affiliates, have an agreement with Distributors to handle customer
orders and accounts with a Fund. Such reference, however, is for convenience
only and does not indicate a legal conclusion of capacity.

Orders for the redemption of shares are effected at net asset value subject to
the same conditions concerning time of receipt in proper form. It is the
securities dealer's responsibility to transmit the order in a timely fashion and
any loss to the customer resulting from failure to do so must be settled between
the customer and the securities dealer.

OTHER PAYMENTS TO SECURITIES DEALERS

As discussed in each Prospectus under "How Do I Buy Shares?" either Distributors
or one of its affiliates may make payments, out of its own resources, to
securities dealers who initiate and are responsible for purchases made at net
asset value by certain trust companies and trust departments of banks, certain
designated retirement plans (excluding IRA and IRA Rollovers), certain
non-designated plans, and certain retirement plans of organizations with
collective retirement plan assets of $10 million or more, as described below.
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 securities dealer in the event shares are redeemed 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.

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 made at net asset value by certain designated retirement plans
(excluding IRA and IRA rollovers): 1% on sales of $1 million but less than $2
million, plus 0.80% on sales of $2 million but less than $3 million, plus 0.50%
on sales of $3 million but less than $50 million, plus 0.25% on sales of $50
million but less than $100 million, plus 0.15% on sales of $100 million or more;
and (ii) for purchases made at net asset value by certain non-designated
retirement plans: 0.75% on sales of $1 million but less than $2 million, plus
0.60% on sales of $2 million but less than $3 million, plus 0.50% on sales of $3
million but less than $50 million, plus 0.25% on sales of $50 million but less
than $100 million, plus 0.15% on sales of $100 million or more. These payment
breakpoints are reset every 12 months for purposes of additional purchases. With
respect to purchases made at net asset value by certain trust companies and
trust departments of banks and certain retirement plans of organizations with
collective retirement plan assets of $10 million or more, either Distributors or
one of its affiliates, out of its own resources, may pay up to 1% of the amount
invested.

LETTER OF INTENT

You may qualify for a reduced sales charge on the purchase of shares, as
described in each Fund's Prospectus. At any time within 90 days after the first
investment which you want to qualify for a reduced sales charge, you may file
with the Fund signed Shareholder Application, with the Letter of Intent (the
"Letter") 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 upon purchases
in more than one of the Franklin Templeton Funds 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, unless by a designated retirement
plan, during the 13-month period 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 upon the amount actually
purchased (less redemptions) during the period. The upward adjustment does not
apply to designated retirement plans. If you execute a Letter prior to a change
in the sales charge structure for the Fund, you will be entitled to 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 with such Fund.

As mentioned in the Prospectus, five percent (5%) of the amount of the total
intended purchase will be reserved in shares of the Fund registered in your
name. This policy of reserving shares does not apply to a designated retirement
plan. If the total purchases, less redemptions, equal the amount specified under
the Letter, the reserved shares will be deposited in an account in your name or
delivered to you or your order. If the total purchases, less redemptions, exceed
the amount specified under the Letter and is an amount which 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 such purchases had been made at a single time. Upon
such remittance, the reserved shares held for your account will be deposited to
an account in your name or delivered to you or your order. If within 20 days
after written request such 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 a designated retirment plan, 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.

REDEMPTIONS IN KIND

Each 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 trustees reserve 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 each Fund. In such circumstances, the securities
distributed would be valued at the price used to compute each Fund's net assets.
Should either Fund do so, you may incur brokerage fees in converting the
securities to cash. Either Fund does not intend to redeem illiquid securities in
kind. Should it happen, however, you may not be able to recover your investment
in a timely manner and you may incur brokerage costs in selling the securities.

REDEMPTIONS BY EACH FUND

Due to the relatively high cost of handling small investments, each Fund
reserves the right to involuntarily redeem your shares at net asset value if
your account has a value of less than one-half of your initial required minimum
investment, but only where the value of your account has been reduced by the
prior voluntary redemption of shares. Until further notice, it is the present
policy of each Fund not to exercise this right if your account has a value of
$50 or more. In any event, before the Fund redeems your shares and sends you the
proceeds, it will notify you that the value of the shares in your account is
less than the minimum amount and allow you 30 days to make an additional
investment in an amount which will increase the value of your account to at
least $100.

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 from month to month, and does not affect the
amount or value of the shares acquired.

REPORTS TO SHAREHOLDERS

The Funds send annual and semiannual reports regarding the Fund's performance
and its portfolio holdings. If you would like to receive an interim quarterly
report, you may phone Fund Information at 1-800/DIAL BEN.

SPECIAL SERVICES

The Franklin Templeton Institutional Services Department provides specialized
services, including recordkeeping, for institutional investors of each Fund. The
cost of these services is not borne by either Fund.

Investor Services may pay certain financial institutions that maintain omnibus
accounts with each Fund on behalf of numerous beneficial owners for
recordkeeping operations performed with respect to such owners. For each
beneficial owner in the omnibus account, each Fund may reimburse Investor
Services an amount not to exceed the per account fee which each Fund normally
pays Investor Services. These financial institutions may also charge a fee for
their services directly to their clients.

HOW ARE FUND SHARES VALUED?

As noted in each Prospectus, the Funds calculate net asset value as of the
scheduled close of the Exchange (generally 1:00 p.m. Pacific time) each day that
the Exchange is open for trading. As of the date of this SAI, the Fund is
informed that the Exchange 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 each 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 which 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 the Manager.

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, the options are valued within the range of the
current closing bid and ask prices if such 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 Exchange on each day on which the Exchange is open. Trading in European
or Far Eastern securities generally, or in a particular country or countries,
may not take place on every Exchange business day. Furthermore, trading takes
place in various foreign markets on days that are not business days for the
Exchange and on which the Fund's net asset value is not calculated. Each Fund
calculates net asset value per share, and therefore effects sales and
redemptions of its shares, as of the scheduled close of the Exchange each day
that the Exchange is open for trading. This calculation does not take place
contemporaneously with the determination of the prices of many of the portfolio
securities used in the calculation and, if events occur which materially affect
the values of these foreign securities, they 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 prior to
the scheduled close of the Exchange. The value of these securities used in
computing the net asset value Fund shares is determined as of such times.
Occasionally, events affecting the values of such securities may occur between
the times at which they are determined and the scheduled close of the Exchange
which will not be reflected in the computation of the Fund's net asset value. If
events materially affecting the values of these securities occur during such
period, then 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 trustees, the
Fund may utilize a pricing service, bank or securities dealer to perform any of
the above described functions.

ADDITIONAL INFORMATION REGARDING TAXATION

As stated in each Fund's Prospectus, each Fund has elected to be treated as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). The trustees reserve the right not to maintain
the qualification of either Fund as a regulated investment company if they
determine such course of action to be beneficial to shareholders. In such 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.

Subject to the limitations discussed below, all or a portion of the income
distributions paid by a Fund may be treated by corporate shareholders as
qualifying dividends for purposes of the dividends-received deduction under
federal income tax law. If the aggregate qualifying dividends received by the
Fund (generally, dividends from U.S. domestic corporations, the stock in which
is not debt-financed by the Fund and is held for at least a minimum holding
period) is less than 100% of its distributable income, then the amount of each
Fund's dividends paid to corporate shareholders which may be designated as
eligible for such deduction will not exceed the aggregate qualifying dividends
received by the Fund for the taxable year. The amount or percentage of income
qualifying for the corporate dividends-received deduction will be provided by
each Fund annually in a notice to shareholders mailed shortly after the end of
the Fund's fiscal year.

The Code requires all funds to distribute at least 98% of their taxable ordinary
income earned during the calendar year and at least 98% of their capital gain
net income earned during the twelve-month period ending October 31 of each year
(in addition to amounts from the prior year that were neither distributed nor
taxed to either Fund) to shareholders by December 31 of each year in order to
avoid the imposition of a federal excise tax. Under these rules, certain
distributions which are declared in October, November or December but which, for
operational reasons, may not be paid to you until the following January, will be
treated for tax purposes as if paid by each Fund and received by the you on
December 31 of the calendar year in which they are declared. Each Fund intends
as a matter of policy to declare such dividends, if any, in December and to pay
these dividends in December or January to avoid the imposition of this tax, but
does not guarantee that its distributions will be sufficient to avoid any or all
federal excise taxes.

Redemptions and exchanges of Fund shares are taxable transactions for federal
and state income tax purposes. For most shareholders, gain or loss will be
recognized in an amount equal to the difference between the shareholder's basis
in the shares and the amount received, subject to the rules described below. If
such shares are a capital asset in the hands of the shareholder, gain or loss
will be capital gain or loss and will be long-term for federal income tax
purposes if the shares have been held for more than one year.

All or a portion of the sales charge incurred in purchasing shares of each Fund
will not be included in the federal tax basis of such shares sold or exchanged
within ninety (90) days of their purchase (for purposes of determining gain or
loss with respect to such shares) if the sales proceeds are reinvested in the
Fund or in another fund in the Franklin Templeton Funds and a sales charge which
would otherwise apply to the reinvestment is reduced or eliminated. Any portion
of such sales charge excluded from the tax basis of the shares sold will be
added to the tax basis of the shares acquired in the reinvestment. You should
consult with your tax advisors concerning the tax rules applicable to the
redemption or exchange of Fund shares.

All or a portion of a loss realized upon a redemption of shares will be
disallowed to the extent other shares of each Fund are purchased (through
reinvestment of dividends or otherwise) within 30 days before or after such
redemption. Any loss disallowed under these rules will be added to the tax basis
of the shares purchased.

Each Fund's investment in options (including but not limited to written and
purchased put and call options, options on stock indices, forward conversions,
OTC options, the use of options in spread and straddle transactions, options on
foreign currencies or on futures contracts on such foreign currencies, and
options on financial, interest rate and stock index futures contracts), futures
and forward contracts (including but not limited to financial, interest rate and
stock index futures contracts, and forward currency exchange contracts and other
currency hedging devices), and foreign securities and currencies (including the
above options, and forwards and futures contracts on such currencies), and
certain other securities transactions involving actual or deemed short sales,
spreads, straddles or foreign currency gains or losses are subject to many
complex and special tax rules. For example, over-the-counter options on debt
securities and equity options, including options on stock and on narrow-based
stock indices, will be subject to tax under Section 1234 of the Code, generally
producing a long-term or short-term capital gain or loss upon exercise, lapse or
closing out of the option or sale of the underlying stock or security. By
contrast, each Fund's treatment of certain other options, futures and forward
contracts entered into by the Fund is generally governed by Section 1256 of the
Code. These "Section 1256" positions generally include listed options on debt
securities, options on broad-based stock indices, options on securities indices,
options on futures contracts, regulated futures contracts and certain foreign
currency contracts and options thereon.

Absent a tax election to the contrary, each such Section 1256 position held by
either Fund will be marked-to-market (i.e., treated as if it were sold for fair
market value) on the last business day of each Fund's fiscal year, and all gain
or loss associated with mark-to-market positions at fiscal year end (except
certain foreign currency gain or loss covered by Section 988 of the Code) will
generally be treated as 60% long-term capital gain or loss and 40% short-term
capital gain or loss. The effect of Section 1256 mark-to-market rules may be to
accelerate income or to convert what otherwise would have been long-term capital
gains into short-term capital gains or short-term capital losses into long-term
capital losses within either Fund. The acceleration of income on Section 1256
positions may require each Fund to recognize taxable income without the
corresponding receipt of cash. In order to generate cash to satisfy the
distribution requirements of the Code, each Fund may be required to dispose of
portfolio securities that it otherwise would have continued to hold or to use
cash flows from other sources such as the sale of Fund shares. In these ways,
any or all of these rules may affect both the amount, character and timing of
income distributed to shareholders by either Fund.

When either Fund holds an option or contract which substantially diminishes the
Fund's risk of loss with respect to another position of the Fund (as might occur
in some hedging transactions), this combination of positions could be treated as
a "straddle" for tax purposes, resulting in possible deferral of losses,
adjustments in the holding periods of Fund securities and conversion of
short-term capital losses into long-term capital losses. Certain tax elections
exist for mixed straddles (i.e., straddles comprised of at least one Section
1256 position and at least one non-Section 1256 position) which may reduce or
eliminate the operation of these straddle rules.

As a regulated investment company, each Fund is also subject to the requirement
that less than 30% of its annual gross income be derived from the sale or other
disposition of securities and certain other investments held for less than three
months ("short-short income").

This requirement may limit either Fund's ability to engage in options,
straddles, hedging transactions and forward or futures contracts because these
transactions are often consummated in less than three months, may require the
sale of portfolio securities held less than three months and may, as in the case
of short sales of portfolio securities, reduce the holding periods of certain
securities within either Fund, resulting in additional short-short income for
either Fund.

Each Fund will monitor its transactions in such options and contracts and may
make certain other tax elections in order to mitigate the effect of the above
rules and to prevent disqualification of the Fund as a regulated investment
company under Subchapter M of the Code.

Foreign exchange gains and losses realized by the Funds in connection with
certain transactions involving foreign currencies, foreign currency payables or
receivables, foreign currency-denominated debt securities, foreign currency
forward contracts, and options or futures contracts on foreign currencies are
subject to special tax rules which may cause such gains and losses to be treated
as ordinary income and losses rather than capital gains and losses and may
affect the amount and timing of the Funds' income or loss from such transactions
and in turn its distributions to you.

In order for each Fund to qualify as a regulated investment company, at least
90% of the Fund's annual gross income must consist of dividends, interest and
certain other types of qualifying income and no more than 30% of its annual
gross income may be derived from the sale or other disposition of securities or
certain other instruments held for less than three months. Foreign exchange
gains, derived by a Fund with respect to the Fund's business of investing in
stock or securities, or options or futures with respect to such stock or
securities, constitute qualifying income for purposes of the 90% limitation.

Currency speculation or the use of currency forward contracts or other currency
instruments for non-hedging purposes may generate gains deemed to be not
directly related to each Fund's principal business of investing in stock or
securities and related options or futures. Under current law,
non-directly-related gains arising from foreign currency positions or
instruments held for less than three months are treated as derived from the
disposition of securities held less than three months in determining each Fund's
compliance with the 30% limitation. Each Fund will limit its activities
involving foreign exchange gains to the extent necessary to comply with these
requirements.

The federal income tax treatment of interest rate and currency swaps is unclear
in certain respects and may in some circumstances result in the realization of
income not qualifying under the 90% test described above or be deemed to be
derived from the disposition of securities held less than three months in
determining each Fund's compliance with the 30% limitation. Each Fund will limit
its interest rate and currency swaps to the extent necessary to comply with
these requirements.

If a Fund owns shares in a foreign corporation that constitutes a "passive
foreign investment company" (a "PFIC") for federal income tax purposes and the
Fund does not elect to treat the foreign corporation as a "qualified electing
fund" within the meaning of the Code, the Fund may be subject to U.S. federal
income taxation on a portion of any "excess distribution" it receives from the
PFIC or any gain it derives from the disposition of such shares, even if such
income is distributed as a taxable dividend by the Fund to its U.S.
shareholders. A Fund may also be subject to additional interest charges in
respect of deferred taxes arising from such distributions or gains. Any federal
income tax paid by a Fund as a result of its ownership of shares in a PFIC will
not give rise to a deduction or credit to the Fund or to any shareholder. A PFIC
means any foreign corporation if, for the taxable year involved, either (i) it
derives at least 75 percent of its gross income from "passive income"
(including, but not limited to, interest, dividends, royalties, rents and
annuities), or (ii) on average, at least 50 percent of the value (or adjusted
basis, if elected) of the assets held by the corporation produce "passive
income."

On April 1, 1992, proposed U.S. Treasury regulations were issued regarding a
special mark-to-market election for regulated investment companies. Under these
regulations, the annual mark-to-market gain, if any, on shares of stock held by
the Funds in a PFIC would be treated as an excess distribution received by a
Fund in the current year, eliminating the deferral and the related interest
charge. Such excess distribution amounts are treated as ordinary income, which a
Fund will be required to distribute to shareholders even though the fund has not
received any cash to satisfy this distribution requirement. These regulations
would be effective for taxable years ending after promulgation of the proposed
regulations as final regulations.

The Funds may be subject to foreign withholding taxes on income from certain of
their foreign securities. If more than 50% of the total assets of the Fund at
the end of its fiscal year are invested in securities of foreign corporations,
the Fund may elect to pass-through to its shareholders the pro rata share of
foreign taxes paid by the Fund. If this election is made, shareholders will be
(i) required to include in their gross income their pro rata share of foreign
source income (including any foreign taxes paid by the Fund), and (ii) entitled
to either deduct their share of such foreign taxes in computing their taxable
income or to claim a credit for such taxes against their U.S. income tax,
subject to certain limitations under the Code. You will be informed by the Funds
at the end of each calendar year regarding the availability of any credits and
the amount of foreign source income (including any foreign taxes paid by the
Funds) to be included on their income tax returns.

THE FUNDS' UNDERWRITER

Pursuant to an underwriting agreement in effect until April 30, 1995,
Distributors acts as principal underwriter in a continuous public offering for
shares of the Funds. The underwriting agreement will continue in effect for
successive annual periods provided that 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 each Fund's outstanding voting securities, and in either event by a
majority vote of the trustees who are not parties to the underwriting agreement
or interested persons of any such party (other than as trustees of the Trust),
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 90-days' written notice.

Distributors pays the expenses of distributing each Fund's shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. Each Fund pays the expenses of preparing and
printing amendments to the registration statement 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 Pacific Fund's shares, aggregate
underwriting commissions for the fiscal years ended October 31, 1993, 1994, and
1995 were $214,144, $824,060 and $255,959 respectively. After allowances to
dealers, Distributors retained $27,047, $101,327 and $28,742 respectively. For
the International Fund's shares, aggregate underwriting commissions for the same
fiscal periods were $170,962, $597,708 and $222,274 respectively. After
allowances to dealers, Distributors retained $25,157, $77,152 and $25,127
respectively. Distributors may be entitled to reimbursement under the
distribution plan of the Funds as discussed below. Except as noted, Distributors
received no other compensation from the Funds for acting as underwriter.

DISTRIBUTION PLAN

Each Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940
Act (collectively, "the Plan(s)") whereby each Fund may pay up to a maximum of
0.25% per annum of its average daily net assets for expenses incurred in the
promotion and distribution of its shares.

Pursuant to the Plans, Distributors or others will be entitled to be reimbursed
each quarter (up to the maximum as stated above) for actual expenses incurred in
the distribution and promotion of each Fund's shares, including but not limited
to the printing of prospectuses and reports used for sales purposes, expenses of
preparing and distributing sales literature and related expenses,
advertisements, and other distribution related expenses, including a prorated
portion of Distributors' overhead expenses attributable to the distribution of
Fund shares, as well as any distribution or service fees paid to securities
dealers or their firms or others who have executed a servicing agreement with
the Funds, Distributors or its affiliates.

In addition to the payments to which Distributors or others are entitled under
the Plans, the Plans also provide that to the extent the Funds, the Manager,
TICI or Distributors or other parties on behalf of the Funds, the Manager, TICI
or Distributors, make payments that are deemed to be payments for the financing
of any activity primarily intended to result in the sale of shares of a Fund
within the context of Rule 12b-1 under the 1940 Act, then such payments shall be
deemed to have been made pursuant to the Plans.

In no event shall the aggregate asset-based sales charges which include payments
made under the Plans, plus any other payments deemed to be made pursuant to the
Plans, exceed the amount permitted to be paid pursuant to the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., Article III,
Section 26(d)4.

The terms and provisions of the Plans relating to required reports, term, and
approval are consistent with Rule 12b-1. The Plans do not permit unreimbursed
expenses incurred in a particular year to be carried over to or reimbursed in
subsequent years.

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. Such 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 such services, you would be
permitted to remain a shareholder of the Fund and alternate means for continuing
the servicing would be sought. In such an 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.

The Plans have been approved in accordance with the provisions of Rule 12b-1.
The Plans are effective through April 30, 1996, and renewable annually by a vote
of the Board, including a majority vote of the trustees who are non-interested
persons of the Trust 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 trustees be done
by the non-interested trustees. The Plans and any related agreement may be
terminated at any time, without any penalty, by vote of a majority of the
non-interested trustees 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 management agreement with the Manager or the
underwriting agreement with Distributors, or by vote of a majority of each
Fund's outstanding shares. 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 such Fund's outstanding shares, and all material amendments to the Plans or
any related agreements shall be approved by a vote of the non-interested
trustees, 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 October 31, 1995, the Pacific Fund and the
International Fund paid $101,772 and $113,904, respectively to underwriters
pursuant to the Plans.

GENERAL INFORMATION

PERFORMANCE

As noted in the Prospectuses, each Fund may from time to time quote various
performance figures to illustrate the Fund's past performance and may
occasionally cite statistics to reflect their volatility or risk. Performance
quotations by investment companies are subject to rules adopted by the SEC.
These rules require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation furnished by
either Fund, be accompanied by certain standardized performance information
computed as required by the SEC. Current yield and average annual compounded
total return quotations used by each Fund are based on the standardized methods
of computing performance mandated by the SEC. An explanation of those and other
methods used by each Fund to compute or express performance follows.

TOTAL RETURN

The average annual total return is determined by finding the average annual
compounded 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 order, and income dividends
and capital gains 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
on the sales charge structure, historical performance information will be
restated to reflect the maximum front-end sales charge currently in effect.

In considering the quotations of total return by the Funds, you should remember
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 in either Fund. This charge will
affect actual performance less the longer you retain your investment in the
Fund. Each Funds' average annual compounded rates of return for the indicated
periods ended on October 31, 1995 were as follows:

AVERAGE ANNUAL TOTAL RETURNS
FUND NAME ONE-YEAR PERIOD PERIOD SINCE INCEPTION
ENDING 10/31/95 (9/20/91 TO 10/31/95)
PUBLIC OFFERING PRICE
Pacific Fund -9.75% 10.30%
International Fund -2.82% 9.40%
NET ASSET VALUE
Pacific Fund -5.48% 11.53%
International Fund 1.75% 10.63%

These figures were calculated according to the SEC formula:

n
P(1+T) = 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 payment made at the
beginning of the one- five-, or ten-year periods at the end of the one-,
five-, or ten-year periods (or fractional portion thereof)

As discussed in each Prospectus, a Fund may quote total rates of return in
addition to its average annual total return. These quotations are computed in
the same manner as each Fund's average annual compounded rate, except they will
be based on a Fund's actual return for a specified period rather than on its
average return over one-, five-, and ten-year periods (or fractional portion
thereof). The rates of total return from commencement of operations of each Fund
to October 31, 1995 were as follows:

AVERAGE ANNUAL TOTAL RETURNS
FUND NAME ONE-YEAR PERIOD PERIOD SINCE INCEPTION
ENDING 10/31/95 (9/20/91 TO 10/31/95)
PUBLIC OFFERING PRICE
Pacific Fund -9.75% 49.73%
International Fund -2.82% 44.77%
NET ASSET VALUE
Pacific Fund -5.48% 56.76%
International Fund 1.75% 51.56%

YIELD

Current yield reflects the income per share earned by the Fund's portfolio
investments and is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base period. The
yield for each Fund for the 30-day period ended on the date of the financial
statements included herein was as follows:

FUND NAME 30 DAY YIELDS
- --------- -------------
Pacific Growth 3.80%
International Equity 2.78%

These figures were obtained using the following SEC formula:

6
Yield = 2 [( a-b + 1 ) - 1]
----
cd

where:

a = dividends and interest earned during the period

b = expenses accrued for the period (net of reimbursements)

c = the average daily number of shares outstanding during the period that
were entitled to receive dividends

d = the maximum offering price per share on the last day of the period

CURRENT DISTRIBUTION RATE

Yield, which is calculated according to a formula prescribed by the SEC, is not
indicative of the amounts which were or will be paid to each Fund's
shareholders. Amounts paid to shareholders are reflected in the quoted "current
distribution rate." The current distribution rate is computed by dividing the
total amount of dividends per share paid by the Fund during the past 12 months
by a current maximum offering price. Under certain circumstances, such as when
there has been a change in the amount of dividend payout, or a fundamental
change in investment policies, it might be appropriate to annualize the
dividends paid over the period such policies were in effect, rather than using
the dividends during the past 12 months. The current distribution rate differs
from the current yield computation because it may include distributions to
shareholders from sources other than dividends and interest, such as premium
income from option writing and short-term capital gains and is calculated over a
different period of time.

FISCAL YEAR-END DISTRIBUTION RATES

PUBLIC NET ASSET
FUND NAME OFFERING PRICE VALUE
- --------- -------------- -----
Pacific Fund 1.05% 1.10%
International Fund 1.37% 1.44%

VOLATILITY

Occasionally statistics may be used to specify Fund volatility or risk. Measures
of volatility or risk are generally used to compare Fund net asset value or
performance relative 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 the
S&P's 500 Stock Index. 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 purchase shares of each Fund at net asset
value, sales literature pertaining to each Fund may quote a current distribution
rate, yield, 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 each 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.

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.

A 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 Manager,
Sub-advisor and underwriter of both the Franklin Group of Funds and Templeton
Group of Funds.

COMPARISONS

To help you better evaluate how an investment in either Fund may satisfy your
investment objective, advertisements and other materials regarding either Fund
may discuss certain measures of Fund performance as reported by various
financial publications. Materials may also compare performance (as calculated
above) to performance as reported by other investments, indices, and averages.
Such comparisons may include, but are not limited to, the following examples:

a) Dow Jones Composite Average or its component averages - an unmanaged index
composed of 30 blue-chip industrial corporation stocks (Dow Jones Industrial
Average), 15 utilities company stocks (Dow Jones Utilities Average), and 20
transportation company stocks. Comparisons of performance assume reinvestment of
dividends.

b) Standard & Poor's 500 Stock Index or its component indices - an unmanaged
index composed of 400 industrial stocks, 40 financial stocks, 40 utilities
stocks, and 20 transportation stocks. Comparisons of performance assume
reinvestment of dividends.

c) The New York Stock Exchange composite or component indices - unmanaged
indices of all industrial, utilities, transportation, and finance stocks listed
on the New York Stock Exchange.

d) Wilshire 5000 Equity Index - represents the return on the market value of all
common equity securities for which daily pricing is available. Comparisons of
performance assume reinvestment of dividends.

e) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income Fund
Performance Analysis - measure total return and average current yield for the
mutual fund industry. Rank individual mutual fund performance over specified
time periods, assuming reinvestment of all distributions, exclusive of any
applicable sales charges.

f) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc. -
analyzes price, current yield, risk, total return, and average rate of return
(average annual compounded growth rate) over specified time periods for the
mutual fund industry.

g) Mutual Fund Source Book, published by Morningstar, Inc. - analyzes price,
yield, risk, and total return for equity funds.

h) Financial publications: The Wall Street Journal, Business Week, Changing
Times, Financial World, Forbes, Fortune and Money magazines - provide
performance statistics over specified time periods.

i) Consumer Price Index (or Cost of Living Index), published by the U.S. Bureau
of Labor Statistics - a statistical measure of change, over time, in the price
of goods and services in major expenditure groups.

j) Salomon Brothers Broad Bond Index or its component indices - The Broad Index
measures yield, price, and total return for Treasury, Agency, Corporate, and
Mortgage bonds.

k) Salomon Brothers World Government Bond Index - measures capitalization and
performance return of foreign bond markets.

l) Lehman Brothers Aggregate Bond Index or its component indices - the Aggregate
Bond Index measures yield, price and total return for Treasury, Agency,
Corporate, Mortgage, and Yankee bonds.

m) Historical data supplied by the research departments of First Boston
Corporation, the J. P. Morgan companies, Salomon Brothers, Merrill Lynch,
Pierce, Fenner & Smith, Datastream International, Frank Russell, Goldman
Sachs, Morgan Stanley Capital International, Lehman Brothers and Bloomberg
L.P.

n) Yields and total return of other taxable investments including certificates
of deposit (CDs), money market deposit accounts (MMDAs), checking accounts,
savings accounts, money market mutual funds, and repurchase agreements.

o) Yields of other countries' government and corporate bonds as compared to
U.S. government and corporate bonds to illustrate the potentially higher
returns available outside the U.S.

p) Standard & Poor's 100 Stock Index - an unmanaged index based on the prices of
100 blue-chip stocks, including 92 industrials, one utility, two transportation
companies, and 5 financial institutions. The S&P 100 Stock Index is a smaller
more flexible index for options trading.

q) Stocks, Bonds, Bills, and Inflation, published by Ibbotson Associates -
historical measure of yield, price, and total return for common and small
company stock, long-term government bonds, Treasury bills, and inflation.

r) Financial Times Actuaries Indices, including the FTA - World Index (and
components thereof), which is based on stocks in the major world equity markets.

s) Morgan Stanley Capital International Indices, including the EAFE Index (and
components thereof), which are based on stocks in major equity markets in
Europe, Australia, and the Far East.

From time to time, advertisements or information for a Fund may include a
discussion of certain attributes or benefits to be derived by an investment in
such Fund. Such advertisements or information may include symbols, headlines, or
other material which highlights or summarizes the information discussed in more
detail in the communication.

Advertisements or information may also compare a Fund's performance to the
return on certificates of deposit or other investments. You should be aware,
however, that an investment in a Fund involves the risk of fluctuation of
principal value, a risk generally not present in an investment in a certificate
of deposit issued by a bank. For example, as the general level of interest rates
rise, the value of such Fund's fixed-income investments, as well as the value of
its shares which are based upon the value of such portfolio investments, can be
expected to decrease. Conversely, when interest rates decrease, the value of a
Fund's shares can be expected to increase. Certificates of deposit 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 such comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to each Fund's portfolio, the indices and averages are generally
unmanaged, and the items included in the calculations of such averages may not
be identical to the formula used by each Fund to calculate its figures. In
addition there can be no assurance that either Fund will continue this
performance as compared to such other averages.

OTHER FEATURES AND BENEFITS

Each 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/or
other long-term goals. The Franklin College Costs Planner may assist 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 either
Fund cannot guarantee that such goals will be met.

MISCELLANEOUS INFORMATION

The Funds of the Trust are members of the Franklin Templeton Group of Funds, one
of the largest mutual fund organizations in the United States, 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 47 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 $130 billion in assets under management for more than
3.9 million U.S. based mutual fund shareholder and other accounts. The Franklin
Group of Funds and the Templeton Group of Funds offers to the public 115 U.S.
based mutual funds. A 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 seven years.

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. As of
December 7, 1995, the only shareholder known to hold beneficially or of record
more than 5% of the Pacific Fund's outstanding shares was Franklin Resources,
Inc., 777 Mariners Island Blvd., San Mateo, CA 94404, which held 324,110.978
shares of record or 9.2%.

Access persons of the Franklin Templeton Group, as defined in SEC Rule 17(j)
under the 1940 Act, who are employees of Resources or their subsidiaries, are
permitted to engage in personal securities transactions subject to the following
general restrictions and procedures: (1) The trade must receive advance
clearance from a Compliance Officer and must be completed within 24 hours after
this clearance; (2) Copies of all brokerage confirmations must be sent to the
Compliance Officer and within 10 days after the end of each calendar quarter, a
report of all securities transactions must be provided to the Compliance
Officer; (3) In addition to items (1) and (2), access persons involved in
preparing and making investment decisions must file annual reports of their
securities holdings each January and also inform the Compliance Officer (or
other designated personnel) if they own a security that is being considered for
a fund or other client transaction or if they are recommending a security in
which they have an ownership interest for purchase or sale by a fund or other
client.

OWNERSHIP AND AUTHORITY DISPUTES

In the event of disputes involving multiple claims of ownership or authority to
control your account, each Fund has the right (but has no obligation) to: (a)
freeze the account and require the written agreement of all persons deemed by
either 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 Internal Revenue Service in response to a
Notice of Levy.

APPENDIX

DESCRIPTION OF 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 which are 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.

D - Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.

FINANCIAL STATEMENTS

The audited financial statements contained in the Annual Report to Shareholders
of the Trust dated October 31, 1995, including the auditors' report, are
incorporated herein by reference.

FRANKLIN INTERNATIONAL TRUST
FORM N-1A
PART C

Other Information

Item 24 Financial Statements and Exhibits

a) Financial Statements incorporated herein by reference to the
Registrant's Annual Report to Shareholders dated October 31, 1995,
as filed with the SEC electronically on Form Type N-30D on December
27, 1995.

(i) Report of Independent Auditors - November 30, 1995

(ii) Statements of Investments in Securities and Net Assets, October
31, 1995

(iii) Statements of Assets and Liabilities, October 31, 1995

(iv) Statements of Operations for the year ended October 31, 1995

(v) Statements of Changes in Net Assets for the years ended October
31, 1995 and 1994

(vi) Notes to Financial Statements

b) Exhibits:

The following exhibits are attached hereto, with the exception of 8(ii) and
14(i) which are incorporated by reference as noted.

(1) copies of the charter as now in effect;

(i) Certificate of Trust of Franklin International Trust dated
March 19, 1991

(ii) Certificate of Amendment to the Certificate of Trust of
Franklin International Trust dated March 22, 1991

(iii) Agreement and Declaration of Trust of Franklin International
Trust dated March 19, 1991

(iv) Certificate of Amendment to the Certificate of Trust of
Franklin International Trust dated August 20, 1991

(v) Certificate of Amendment to the Certificate of Trust of
Franklin International Trust dated May 14, 1992

(2) copies of the existing By-Laws or instruments corresponding thereto;

(i) By-Laws of Franklin International Trust

(ii) Amendment to By-Laws of Franklin International Trust dated
October 27, 1994

(3) copies of any voting trust agreement with respect to more than five
percent of any class of equity securities of the Registrant;

Not Applicable

(4) specimens or copies of each security issued by the Registrant,
including copies of all constituent instruments, defining the rights
of the holders of such securities, and copies of each security being
registered;

Not Applicable

(5) copies of all investment advisory contracts relating to the
management of the assets of the Registrant;

(i) Management Agreement between Registrant and Franklin Advisers,
Inc. dated September 20, 1991

(ii) Franklin Pacific Growth Fund Subadvisory Agreement between
Franklin Advisers, Inc., and Templeton Investment Counsel,
Inc. dated January 1, 1993

(iii) Franklin International Equity Fund Subadvisory Agreement
between Franklin Advisers, Inc., and Templeton Investment
Counsel, Inc. dated January 1, 1993

(6) copies of each underwriting or distribution contract between the
Registrant and a principal underwriter, and specimens or copies of
all agreements between principal underwriters and dealers;

(i) Distribution Agreement between Registrant and
Franklin/Templeton Distributors, Inc. dated September 20,
1991

(ii) Forms of dealer agreements between Registrant and
Franklin/Templeton Distributors, Inc.

(7) copies of all bonus, profit sharing, pension or other similar
contracts or arrangements wholly or partly for the benefit of
trustees or officers of the Registrant in their capacity as such;
any such plan that is not set forth in a formal document, furnish a
reasonably detailed description thereof;

Not Applicable

(8) copies of all custodian agreements and depository contracts under
Section 17(f) of the 1940 Act, with respect to securities and similar
investments of the Registrant, including the schedule of remuneration;

(i) Custodian Agreement between Registrant and Bank of America
dated August 20, 1991

(ii) Custodian Agreement between Registrant and Citibank Delaware:
1. Citicash Management ACH Customer Agreement
2. Citibank Cash Management Services Master Agreement
3. Short Form Bank Agreement - Deposits and Disbursements of
Funds
Registrant: Franklin Premier Return Fund
Filing: Post Effective Amendment No. 54 to Registration on
Form N-1A
File No. 2-12647
Filing Date: February 27, 1995

(iii) Amendment to Custodian Agreement between Registrant and Bank of
America dated April 12, 1995

(iv) Custody Agreement between Franklin International Trust and
Chase Manhattan Bank, NT & SA dated July 28, 1995

(9) copies of all other material contracts not made in the ordinary
course of business which are to be performed in whole or in part at
or after the date of filing the Registration Statement;

Not Applicable

(10) an opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will when sold
be legally issued, fully paid and nonassessable;

(i) Opinion and Consent of Counsel

(11) copies of any other opinions, appraisals or rulings and consents to
the use thereof relied on in the preparation of this registration
statement and required by Section 7 of the 1933 Act;

(i) Consent of Independent Auditors

(12) all financial statements omitted from Item 23;

Not applicable

(13) copies of any agreements or understandings made in consideration for
providing the initial capital between or among the Registrant, the
underwriter, advisor, promoter or initial stockholders and written
assurances from promoters or initial stockholders that their
purchases were made for investment purposes without any present
intention of redeeming or reselling;

(i) Letter of Understanding dated September 10, 1991

(14) copies of the model plan used in the establishment of any retirement
plan in conjunction with which Registrant offers its securities, any
instructions thereto and any other documents making up the model
plan. Such form(s) should disclose the costs and fees charged in
connection therewith;

(i) Copy of model retirement plan
Registrant: AGE High Income Fund, Inc.
Filing: Post-Effective Amendment No. 26 to Registration
Statement on Form N-1A
File No. 2-30203
Filing Date: August 1, 1989

(15) copies of any plan entered into by Registrant pursuant to Rule 12b-1
under the 1940 Act, which describes all material aspects of the
financing of distribution of Registrant's shares, and any agreements
with any person relating to implementation of such plan.

(i) Amended and Restated Distribution Plan Pursuant to Rule 12b-1
dated July 1, 1993

(16) schedule for computation of each performance quotation provided in
the registration statement in response to Item 22 (which need not be
audited).

(i) Schedule for computation of performance quotations

(17) Power of Attorney

(i) Power of Attorney dated July 18, 1995

(ii) Certificate of Secretary dated July 18, 1995

(27) Financial Data Schedule

(i) Financial Data Schedule for Franklin Pacific Growth Fund

(ii) Financial Data Schedule for Franklin International Equity Fund

Item 25 Persons Controlled by or under Common Control with Registrant

None

Item 26 Number of Holders of Securities

As of October 31, 1995 the number of record holders of the
Registrant's Funds were as follows:

Number of
Title of Class Record Holders

Beneficial Interest

Franklin International
Equity Fund 11,306

Franklin Pacific Growth Fund 12,451

Item 27 Indemnification

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, 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 a trustee, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with securities 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 is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Item 28 Business and Other Connections of Investment Advisers

a) Franklin Advisers, Inc.

The officers and directors of the Registrant's manager also serve as
officers and/or directors for (1) the manager's corporate parent, Franklin
Resources, Inc., and/or (2) other investment companies in the Franklin
Templeton Group of Funds. In addition, Mr. Charles B. Johnson is a director
of General Host Corporation. For additional information please see Part B
and Schedules A and D of Form ADV of the Funds Investment Manager (SEC File
801-26292), incorporated herein by reference, which sets forth the officers
and directors of the Investment Manager and information as to any business,
profession, vocation or employment of a substantial nature engages in by
those officers and directors during the past two years.

b) Templeton Investment Counsel, Inc.

Templeton Investment Counsel, Inc. ("TICI"), an indirect, wholly owned
subsidiary of Franklin Resources, Inc., serves as each Fund's Sub-adviser,
furnishing to Franklin Advisers, Inc. in that capacity, portfolio
management services and investment research. For additional information
please see Part B and Schedules A and D of Form ADV of the Fund's
Sub-adviser (SEC File 801-15125), incorporated herein by reference, which
sets forth the officers and directors of the Sub-adviser and information as
to any business, profession, vocation or employment of a substantial nature
engages in by those officers and directors during the past two years.

Item 29 Principal Underwriters

a) Franklin/Templeton Distributors, Inc., ("Distributors") also acts as
principal underwriter of shares of Franklin Gold Fund, Franklin Premier
Return Fund, Franklin Equity Fund, AGE High Income Fund, Inc., Franklin
Custodian Funds, Inc., Franklin Money Fund, Franklin California Tax-Free
Income Fund, Inc., Franklin Federal Money Fund, Franklin Tax-Exempt Money
Fund, Franklin New York Tax-Free Income Fund, Inc., Franklin Federal Tax-Free
Income Fund, Franklin Tax-Free Trust, Franklin California Tax-Free Trust,
Franklin New York Tax-Free Trust, Franklin Investors Securities Trust,
Institutional Fiduciary Trust, Franklin Value Investors Trust, Franklin
Tax-Advantaged International Bond Fund, Franklin Tax-Advantaged U.S.
Government Securities Fund, Franklin Tax-Advantaged High Yield Securities
Fund, Franklin Municipal Securities Trust, Franklin Managed Trust, Franklin
Strategic Series, Franklin Real Estate Securities Trust, Franklin Templeton
Global Trust, Franklin Templeton Money Fund Trust, Franklin Templeton Japan
Fund, Templeton American Trust, Inc., 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 Real Estate Securities Fund, Templeton Smaller Companies
Growth Fund, Inc., and Templeton Variable Products Series Fund.

b) The information required by this Item 29 with respect to each director
and officer of FTDI is incorporated by reference to Schedule A of Form BD
filed by FTDI with the Securities and Exchange Commission pursuant to the
Securities Act of 1934 (SEC File No. 8-5889).

c) Not applicable. Registrant's principal underwriter is an affiliated
person of an affiliated person of the Registrant.

Item 30 Location of Accounts and Records

The accounts, books or other documents required to be maintained by Section
31 (a) of the Investment Company Act of 1940 are kept by the Registrant or
its shareholder services agent, Franklin/Templeton Investor Services, Inc.,
both of whose address is 777 Mariners Island Blvd., San Mateo, CA 94404

Item 31 Management Services

There are no management-related service contracts not discussed in Part A
or Part B.

Item 32 Undertakings

a) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of
any trustee or trustees when requested in writing to do so by the
record holders of not less than 10 per cent of the Registrant's
outstanding shares and to assist its shareholders in the communicating
with other shareholders in accordance with the requirements of Section
16(c) of the Investment Company Act of 1940.

b) The Registrant hereby undertakes to comply with the information
requirement in Item 5A of the Form N-1A by including the required
information in the Trust's annual report and to furnish each person to
whom a prospectus is delivered a copy of the 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 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 San Mateo and the State of
California, on the 29th day of December, 1995.

Franklin International Trust
(Registrant)

By: Rupert H. Johnson, Jr.*
Rupert H. Johnson, Jr., President

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
and on the dates indicated:

Rupert H. Johnson, Jr.* Principal Executive Officer and Trustee
Rupert H. Johnson, Jr. Dated: December 29, 1995

Martin L Flanagan Principal
Martin L. Flanagan Accounting Officer
Dated: December 29, 1995

Frank H. Abbott III* Trustee
Frank H. Abbott III Dated: December 29, 1995

Harris J. Ashton* Trustee
Harris J. Ashton Dated: December 29, 1995

Harmon E. Burns* Trustee
Harmon E. Burns Dated: December 29, 1995

S. Joseph Fortunato* Trustee
S. Joseph Fortunato Dated: December 29, 1995

David W. Garbellano* Trustee
David W. Garbellano Dated: December 29, 1995

Charles B. Johnson* Trustee
Charles B. Johnson Dated: December 29, 1995

Frank W.T. LaHaye* Trustee
Frank W.T. LaHaye Dated: December 29, 1995

Diomedes Loo-Tam* Principal Accounting Officer
Diomedes Loo-Tam Dated: December 29, 1995

Gordon S. Macklin* Trustee
Gordon S. Macklin Dated: December 29, 1995

*By /s/Larry L. Greene
Larry L. Greene, Attorney-in-Fact
(Pursuant to Powers of Attorney filed herewith)

FRANKLIN TEMPLETON INTERNATIONAL TRUST
REGISTRATION STATEMENT
EXHIBITS INDEX

EXHIBIT NO. DESCRIPTION LOCATION

EX-99.B1(i) Certificate of Trust for Franklin Attached
International Trust dated March 19,
1991

EX-99.B1(iii) Agreement and Declaration of Trust for Attached
Franklin International Trust dated
March 19, 1991

EX-99.B1(iv) Certificate of Amendment to Attached
Certificate of Trust for Franklin
International Trust dated August 20,
1991

EX-99.B1(v) Certificate of Amendment to Attached
Certificate of Trust for Franklin
International Trust dated May 14, 1992

EX-99.B2(i) By-Laws Attached

EX-99.B2(ii) Amendment to By-Laws for Franklin Attached
International Trust dated October 27,
1994

EX-99.B5(i) Management Agreement between Attached
Registrant and Franklin Advisers, Inc.
dated September 20, 1991

EX-99.B5(ii) Franklin Pacific Growth Fund Attached
Subadvisory Agreement between Franklin
Advisers, Inc. and Templeton
Investment Counsel, Inc. dated January
1, 1993

EX-99.B5(iii) Franklin International Equity Fund Attached
Subadvisory Agreement between Franklin
Advisers, Inc. and Templeton
Investment Counsel, Inc. dated January
1, 1993

EX-99.B6(i) Distribution Agreement dated April 12, Attached
1990

EX-99.B6(ii) Forms of Dealer Agreements between Attached
Registrant and Franklin/Templeton
Distributors, Inc. dated September 20,
1991

EX-99.B8(i) Custodian Agreement between Registrant Attached
and Bank of America dated June 12, 1991

EX-99.B8(ii) Custodian Agreement between Registrant *
and Citibank Delaware

EX-99.B8(iii) Amendment to Custodian Agreement Attached
between Registrant and Bank of America
NT & SA dated April 12, 1995

EX-99.B8(iv) Custody Agreement Between Franklin Attached
International Trust and Chase
Manhattan Bank, NT & SA dated July 28,
1995

EX-99.B10(i) Opinion and Consent of Counsel Attached

EX-99.B11(i) Consent of Independent Auditors Attached

EX-99.B13(i) Letter of Understanding relating to Attached
Initial Capital dated September 10,
1991

EX-99.B14(i) Model Retirement Plan *

EX-99.B15(i) Amended and Restated Distribution Plan Attached
Pursuant to Rule 12b-1 dated July 1,
1993

EX-99.B16(i) Schedule for computation of Attached
performance quotations

EX-99.17(i) Power of Attorney dated July 18, 1995 Attached

EX-99.17(ii) Certificate of Secretary dated July Attached
18, 1995

EX-99.27(i) Financial Data Schedule for Franklin Attached
Pacific Growth Fund

EX-99.27(ii) Financial Data Schedule for Franklin Attached
International Equity Fund

*Incorporated by Reference

CERTIFICATE OF TRUST

FRANKLIN INTERNATIONAL TRUST

This Certificate of Trust of FRANKLIN INTERNATIONAL TRUST, a
business trust (hereunder called the "Business Trust"), executed by the
undersigned trustees, one of whom has a residence in the State of Delaware,
and filed under and in accordance with the provisions of the Delaware
Business Trust Act (12 Del. C. Section 3801 et seq.), sets forth the
following:

FIRST: The name of the Business Trust is FRANKLIN INTERNATIONAL
TRUST.

SECOND: The name and business address of the Delaware resident
trustee of the Business Trust required by 12 Del. C. Section 3807 is as
follows:

Name Business Address

Johannes R. Krahmer Morris, Nichols, Arsht & Tunnell
1201 N. Market Street
Wilmington, Delaware 19899-1347

The name and business address of each of the other trustees of
the Business Trust is as follows:

Name Business Address

Frank H. Abbott, III 1045 Sansome Street
San Francisco, California 94111

Harris H. Ashton 22 Gate House Road
Stamford, Connecticut 06902

S. Joseph Fortunato Park Avenue at Morris County
P.O. Box 1945
Morristown, New Jersey 07962-1945

David W. Garbellano 111 New Montgomery St. # 402
San Francisco, California 94105

Henry L. Jamieson 777 Mariners Island Blvd.
San Mateo, California 94404

Charles B. Johnson 777 Mariners Island Blvd.
San Mateo, California 94404

Rupert H. Johnson, Jr. 777 Mariners Island Blvd.
San Mateo, California 94404

Edmund H. Kerr 1 Liberty Plaza
New York, New York 10006

Frank W. T. LaHaye 20833 Stevens Creek Blvd.
Suite 102
Cupertino, California 95014

THIRD: The nature of the business or purpose or purposes of the
Business Trust as set forth in its governing instrument is to conduct,
operate and carry on the business of a management investment company
registered under the Investment Company Act of 1940, as amended, through one
or more series of shares of beneficial interest, investing primarily in
securities.

FOURTH: The trustees of the Business Trust, as set forth in its
governing instrument, reserve the right to amend, alter, change or repeal any
provision contained in this Certificate of Trust, in the manner now or
hereafter prescribed by statute.

FIFTH: This Certificate of Trust shall become effective
immediately upon filing with the office of the Secretary of State of the
State of Delaware.

[The remainder of this page has been
left intentionally blank.]

IN WITNESS WHEREOF, the undersigned, being all of the trustees of
Franklin International Trust, have duly executed this Certificate of Trust as
of this 19th day of March 1991.

/s/ Frank H. Abbott, III
Frank H. Abbott, III

/s/ Harris J. Ashton
Harris J. Ashton

/s/ S. Joseph Fortunato
S. Joseph Fortunato

/s/ David W. Garbellano
David W. Garbellano

/s/ Henry L. Jamieson
Henry L. Jamieson

/s/ Charles B. Johnson
Charles B. Johnson

/s/ Rupert H. Johnson, Jr.
Rupert H. Johnson, Jr.

/s/ Edmund H. Kerr
Edmund H. Kerr

/s/ Frank W. T. LaHaye
Frank W. T. LaHaye

/s/ Johannes R. Krahmer
Johannes R. Krahmer

AGREEMENT AND DECLARATION OF TRUST

FRANKLIN INTERNATIONAL TRUST

a Delaware Business Trust

Principal Place of Business:

777 Mariners Island Boulevard
San Mateo, California 94404

TABLE OF CONTENTS

FRANKLIN INTERNATIONAL TRUST
AGREEMENT AND DECLARATION OF TRUST
Page
ARTICLE I Name and Definitions 1

1. Name 1
2. Definitions 1
(a) Trust 1
(b) Trust Property 1
(c) Trustees 1
(d) Shares 2
(e) Shareholder 2
(f) Person 2
(g) 1940 Act 2
(h) Commission and Principal Underwriter 2
(i) Declaration of Trust 2
(j) By-Laws 2
(k) Interested Person 2
(l) Investment Manager 2
(m) Series 2

ARTICLE II Purpose of Trust 2

ARTICLE III Shares 3

1. Division of Beneficial Interest 3
2. Ownership of Shares 3
3. Investments in the Trust 4
4. Status of Shares and Limitation of Personal Liability
4
5. Power of Board of Trustees to Change Provisions
Relating to Shares 4
6. Establishment and Designation of Series 5
(a) Assets With Respect to a Particular Series
5
(b) Liabilities Held With Respect to a Particular
Series 6
(c) Dividends, Distributions, Redemptions, and
Repurchases 6
(d) Voting 7
(e) Equality 7
(f) Fractions 7
(g) Exchange Privilege 7
(h) Combination of Series 7
(i) Elimination of Series 8
7. Indemnification of Shareholders 8

ARTICLE IV The Board of Trustees 8

1. Number, Election and Tenure 8
2. Effect of Death, Resignation, etc. of a Trustee
9
3. Powers 9
4. Payment of Expenses by the Trust 12
5. Payment of Expenses by Shareholders 13
6. Ownership of Assets of the Trust 13
7. Service Contracts 13

ARTICLE V Shareholders' Voting Powers and Meetings 15

1. Voting Powers 15
2. Voting Powers and Meetings 15
3. Quorum and Required Vote 16
4. Action by Written Consent 16
5. Record Dates 17
6. Additional Provisions 17

ARTICLE VI Net Asset Value, Distributions, and Redemptions 17

1. Determination of Net Asset Value, Net Income and
Distribution 17
2. Redemptions and Repurchases 17
3. Redemptions at the Option of the Trust 18

ARTICLE VII Compensation and Limitation of Liability of
Trustees 19

1. Compensation 19
2. Indemnification and Limitation of Liability 19
3. Trustee's Good Faith Action, Expert Advice, No Bond
or Surety 19
4. Insurance 20

ARTICLE VIII Miscellaneous 20

1. Liability of Third Persons Dealing with Trustees
20
2. Termination of Trust or Series 20
3. Merger and Consolidation 20
4. Amendments 21
5. Filing of Copies, References, Headings 21
6. Applicable Law 22
7. Provisions in Conflict with Law or Regulations
22
8. Business Trust Only 22
9. Use of the Name "Franklin" 23

AGREEMENT AND DECLARATION OF TRUST

FRANKLIN INTERNATIONAL TRUST

WHEREAS, THIS AGREEMENT AND DECLARATION OF TRUST is made and
entered into as of the date set forth below by the Trustees named hereunder
for the purpose of forming a Delaware business trust in accordance with the
provisions hereinafter set forth,

NOW, THEREFORE, the Trustees hereby direct that a Certificate of
Trust be filed with Office of the Secretary of State of the State of Delaware
and do hereby declare that the Trustees will hold IN TRUST all cash,
securities and other assets which the Trust now possesses or may hereafter
acquire from time to time in any manner and manage and dispose of the same
upon the following terms and conditions for the pro rata benefit of the
holders of Shares in this Trust.

ARTICLE I

Name and Definitions

Section 1. Name. This Trust shall be known as FRANKLIN
INTERNATIONAL TRUST and the Trustees shall conduct the business of the Trust
under that name or any other name as they may from time to time determine.

Section 2. Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:

(a) The "Trust" refers to the Delaware business trust established
by this Agreement and Declaration of Trust, as amended from time to time;

(b) The "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the
account of the Trust, including without limitation the rights referenced in
Article VIII, Section 9 hereof;

(c) "Trustees" refers to the persons who have signed this
Agreement and Declaration of Trust, so long as they continue in office in
accordance with the terms hereof, and all other persons who may from time to
time be duly elected or appointed to serve on the Board of Trustees in
accordance with the provisions hereof, and reference herein to a Trustee or
the Trustees shall refer to such person or persons in their capacity as
trustees hereunder;

(d) "Shares" means the shares of beneficial interest into which
the beneficial interest in the Trust shall be divided from time to time and
includes fractions of Shares as well as whole Shares;

(e) "Shareholder" means a record owner of outstanding Shares;

(f) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures, estates and other
entities, whether or not legal entities, and governments and agencies and
political subdivisions thereof, whether domestic or foreign;

(g) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time to time;

(h) The terms "Commission" and "Principal Underwriter" shall have
the meanings given them in the 1940 Act;

(i) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust, as amended or restated from time to time;

(j) "By-Laws" shall mean the By-Laws of the Trust as amended from
time to time and incorporated herein by reference;

(k) The term "Interested Person" has the meaning given it in
Section 2(a)(19) of the 1940 Act;

(1) "Investment Manager" or "Manager" means a party furnishing
services to the Trust pursuant to any contract described in Article IV,
Section 7(a) hereof;

(m) "Series" refers to each Series of Shares established and
designated under or in accordance with the provisions of Article III.

ARTICLE II

Purpose of Trust

The purpose of the Trust is to conduct, operate and carry on the
business of a management investment company registered under the 1940 Act
through one or more Series investing primarily in securities.

ARTICLE III

Section 1. Division of Beneficial Interest. The beneficial
interest in the Trust shall at all times be divided into an unlimited number
of Shares, with a par value of $.01 per Share. The Trustees may authorize the
division of Shares into separate Series and the division of Series into
separate classes of Shares. The different Series shall be established and
designated, and the variations in the relative rights and preferences as
between the different Series shall be fixed and determined, by the Trustees.
If only one or no Series (or classes) shall be established, the Shares shall
have the rights and preferences provided for herein and in Article III,
Section 6 hereof to the extent relevant and not otherwise provided for
herein, and all references to Series (and classes) shall be construed (as the
context may require) to refer to the Trust.

Subject to the provisions of Section 6 of this Article III, each
Share shall have voting rights as provided in Article V hereof, and holders
of the Shares of any Series shall be entitled to receive dividends, when, if
and as declared with respect thereto in the manner provided in Article VI,
Section 1 hereof. No Shares shall have any priority or preference over any
other Share of the same Series with respect to dividends or distributions
upon termination of the Trust or of such Series made pursuant to Article
VIII, Section 4 hereof. All dividends and distributions shall be made ratably
among all Shareholders of a particular (class of a) particular Series from
the assets held with respect to such Series according to the number of Shares
of such (class of such) Series held of record by such Shareholder on the
record date for any dividend or distribution or on the date of termination,
as the case may be. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust or
any Series. The Trustees may from time to time divide or combine the Shares
of any particular Series into a greater or lesser number of Shares of that
Series without thereby materially changing the proportionate beneficial
interest of the Shares of that Series in the assets held with respect to that
Series or materially affecting the rights of Shares of any other Series.

Section 2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each
Series (or class). No certificates certifying the ownership of Shares shall
be issued except as the Board of Trustees may otherwise determine from time
to time. The Trustees may make such rules as they consider appropriate for
the transfer of Shares of each Series (or class) and similar matters. The
record books of the Trust as kept by the Trust or any transfer or similar
agent, as the case may be, shall be conclusive as to who are the Shareholders
of each Series (or class) and as to the number of Shares of each Series (or
class) held from time to time by each.

Section 3. Investments in the Trust. Investments may be accepted
by the Trust from such Persons, at such times, on such terms, and for such
consideration as the Trustees from time to time may authorize.

Section 4. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights
provided in this instrument. Every Shareholder by virtue of having become a
Shareholder shall be held to have expressly assented and agreed to the terms
hereof and to have become a party hereto. The death of a Shareholder during
the existence of the Trust shall not operate to terminate the Trust, nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
entitles such representative only to the rights of said deceased Shareholder
under this Trust. Ownership of Shares shall not entitle the Shareholder to
any title in or to the whole or any part of the Trust Property or right to
call for a partition or division of the same or for an accounting, nor shall
the ownership of Shares constitute the Shareholders as partners. Neither the
Trust nor the Trustees, nor any officer, employee or agent of the Trust shall
have any power to bind personally any Shareholders, nor, except as
specifically provided herein, to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder
may at any time personally agree to pay.

Section 5. Power of Board of Trustees to Change Provisions
Relating to Shares. Notwithstanding any other provision of this Declaration
of Trust and without limiting the power of the Board of Trustees to amend the
Declaration of Trust as provided elsewhere herein, the Board of Trustees
shall have the power to amend this Declaration of Trust, at any time and from
time to time, in such manner as the Board of Trustees may determine in their
sole discretion, without the need for Shareholder action, so as to add to,
delete, replace or otherwise modify any provisions relating to the Shares
contained in this Declaration of Trust, provided that before adopting any
such amendment without Shareholder approval the Board of Trustees shall
determine that it is consistent with the fair and equitable treatment of all
Shareholders or that Shareholder approval is not otherwise required by the
1940 Act or other applicable law. If Shares have been issued, Shareholder
approval shall be required to adopt any amendments to this Declaration of
Trust which would adversely affect to a material degree the rights and
preferences of the Shares of any Series (or class) or to increase or decrease
the par value of the Shares of any Series (or class).

Subject to the foregoing Paragraph, the Board of Trustees may
amend the Declaration of Trust to amend any of the provisions set forth in
paragraphs (a) through (i) of Section 6 of this Article III.

Section 6. Establishment and Designation of Series. The
establishment and designation of any Series (or class) of Shares shall be
effective upon the resolution by a majority of the then Trustees, adopting a
resolution which sets forth such establishment and designation and the
relative rights and preferences of such Series (or class). Each such
resolution shall be incorporated herein by reference upon adoption.

Shares of each Series (or class) established pursuant to this
Section 6, unless otherwise provided in the resolution establishing such
Series, shall have the following relative rights and preferences:

(a) Assets Held With Respect to a Particular Series. All
consideration received by the Trust for the issue or sale of Shares of a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof
from whatever source derived, including, without limitation, any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds in whatever form
the same may be, shall irrevocably be held with respect to that Series for
all purposes, subject only to the rights of creditors, and shall be so
recorded upon the books of account of the Trust. Such consideration, assets,
income, earnings, profits and proceeds thereof, from whatever source derived,
including, without limitation, any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, are herein
referred to as "assets held with respect to" that Series. In the event that
there are any assets, income, earnings, profits and proceeds thereof, funds
or payments which are not readily identifiable as assets held with respect to
any particular Series (collectively "General Assets"), the Trustees shall
allocate such General Assets to, between or among any one or more of the
Series in such manner and on such basis as the Trustees, in their sole
discretion, deem fair and equitable, and any General Asset so allocated to a
particular Series shall be held with respect to that Series. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.

(b) Liabilities Held With Respect to a Particular Series. The
assets of the Trust held with respect to each particular Series shall be
charged against the liabilities of the Trust held with respect to that Series
and all expenses, costs, charges and reserves attributable to that Series,
and any general liabilities of the Trust which are not readily identifiable
as being held with respect to any particular Series shall be allocated and
charged by the Trustees to and among any one or more of the Series in such
manner and on such basis as the Trustees in their sole discretion deem fair
and equitable. The liabilities, expenses, costs, charges, and reserves so
charged to a Series are herein referred to as "liabilities held with respect
to" that Series. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the holders of
all Series for all purposes. All Persons who have extended credit which has
been allocated to a particular Series, or who have a claim or contract which
has been allocated to any particular Series, shall look, and shall be
required by contract to look exclusively, to the assets of that particular
Series for payment of such credit, claim, or contract. In the absense of an
express contractual agreement so limiting the claims of such creditors,
claimants and contract providers, each creditor, claimant and contract
provider will be deemed nevertheless to have impliedly agreed to such
limitation unless an express provision to the contrary has been incorporated
in the written contract or other document establishing the claimant
relationship.

(c) Dividends, Distributions, Redemptions, and Repurchases.
Notwithstanding any other provisions of this Declaration of Trust, including,
without limitation, Article VI, no dividend or distribution including,
without limitation, any distribution paid upon termination of the Trust or of
any Series (or class) with respect to, nor any redemption or repurchase of,
the Shares of any Series (or class) shall be effected by the Trust other than
from the assets held with respect to such Series, nor, except as specifically
provided in Section 7 of this Article III, shall any Shareholder of any
particular Series otherwise have any right or claim against the assets held
with respect to any other Series except to the extent that such Shareholder
has such a right or claim hereunder as a Shareholder of such other Series.
The Trustees shall have full discretion, to the extent not inconsistent with
the 1940 Act, to determine which items shall be treated as income and which
items as capital; and each such determination and allocation shall be
conclusive and binding upon the Shareholders.

(d) Voting. All Shares of the Trust entitled to vote on a matter
shall vote separately by Series (and, if applicable, by class): that is, the
Shareholders of each Series (or class) shall have the right to approve or
disapprove matters affecting the Trust and each respective Series (or class)
as if the Series (or classes) were separate companies. There are, however,
two exceptions to voting by separate Series (or classes). First, if the 1940
Act requires all Shares of the Trust to be voted in the aggregate without
differentiation between the separate Series (or classes), then all the
Trust's Shares shall be entitled to vote on a one-vote-per-Share basis.
Second, if any matter affects only the interests of some but not all Series
(or classes), then only the Shareholders of such affected Series (or classes)
shall be entitled to vote on the matter.

(e) Equality. All the Shares of each particular Series shall
represent an equal proportionate interest in the assets held with respect to
that Series (subject to the liabilities held with respect to that Series and
such rights and preferences as may have been established and designated with
respect to classes of Shares within such Series), and each Share of any
particular Series shall be equal to each other Share of that Series.

(f) Fractions. Any fractional Share of a Series shall carry
proportionately all the rights and obligations of a whole share of that
Series, including rights with respect to voting, receipt of dividends and
distributions, redemption of Shares and termination of the Trust.

(g) Exchange Privilege. The Trustees shall have the authority to
provide that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series of Shares in
accordance with such requirements and procedures as may be established by the
Trustees.

(h) Combination of Series. The Trustees shall have the authority,
without the approval of the Shareholders of any Series unless otherwise
required by applicable law, to combine the assets and liabilities held with
respect to any two or more Series into assets and liabilities held with
respect to a single Series.

(i) Elimination of Series. At any time that there are no Shares
outstanding of any particular Series (or class) previously established and
designated, the Trustees may by resolution of a majority of the then Trustees
abolish that Series (or class) and rescind the establishment and designation
thereof.

Section 7. Indemnification of Shareholders. If any Shareholder or
former Shareholder shall be exposed to liability by reason of a claim or
demand relating to his or her being or having been a Shareholder, and not
because of his or her acts or omissions, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators, or other legal
representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled to be held harmless
from and indemnified out of the assets of the Trust against all loss and
expense arising from such claim or demand.

ARTICLE IV

The Board of Trustees

Section 1. Number, Election and Tenure. The number of Trustees
constituting the Board of Trustees shall be fixed from time to time by a
written instrument signed, or by resolution approved at a duly constituted
meeting, by a majority of the Board of Trustees, provided, however, that the
number of Trustees shall in no event be less than one (1) nor more than
fifteen (15). The Board of Trustees, by action of a majority of the then
Trustees at a duly constituted meeting, may fill vacancies in the Board of
Trustees or remove Trustees with or without cause. Each Trustee shall serve
during the continued lifetime of the Trust until he or she dies, resigns, is
declared bankrupt or incompetent by a court of appropriate jurisdiction, or
is removed, or, if sooner, until the next meeting of Shareholders called for
the purpose of electing Trustees and until the election and qualification of
his or her successor. Any Trustee may resign at any time by written
instrument signed by him and delivered to any officer of the Trust or to a
meeting of the Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. Except to the extent
expressly provided in a written agreement with the Trust, no Trustee
resigning and no Trustee removed shall have any right to any compensation for
any period following his or her resignation or removal, or any right to
damages on account of such removal. The Shareholders may fix the number of
Trustees and elect Trustees at any meeting of Shareholders called by the
Trustees for that purpose. Any Trustee may be removed at any meeting of
Shareholders by a vote of two-thirds of the outstanding Shares of the Trust.
A meeting of Shareholders for the purpose of electing or removing one or more
Trustees may be called (i) by the Trustees upon their own vote, or (ii) upon
the demand of Shareholders owning 10% or more of the Shares of the Trust in
the aggregate.

Section 2. Effect of Death, Resignation, etc. of a Trustee. The
death, declination, resignation, retirement, removal, or incapacity of one or
more Trustees, or all of them, shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms of this Declaration
of Trust. Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled as provided in Article IV, Section 1, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration of Trust. As conclusive evidence of such vacancy, a written
instrument certifying the existence of such vacancy may be executed by an
officer of the Trust or by a majority of the Board of Trustees. In the event
of the death, declination, resignation, retirement, removal, or incapacity of
all the then Trustees within a short period of time and without the
opportunity for at least one Trustee being able to appoint additional
Trustees to fill vacancies, the Trust's Investment Manager(s) are empowered
to appoint new Trustees subject to the provisions of Section 16(a) of the
1940 Act.

Section 3. Powers. Subject to the provisions of this Declaration
of Trust, the business of the Trust shall be managed by the Board of
Trustees, and such Board shall have all powers necessary or convenient to
carry out that responsibility including the power to engage in securities
transactions of all kinds on behalf of the Trust. Without limiting the
foregoing, the Trustees may: adopt By-Laws not inconsistent with this
Declaration of Trust providing for the regulation and management of the
affairs of the Trust and may amend and repeal them to the extent that such
By-Laws do not reserve that right to the Shareholders; fill vacancies in or
remove from their number, and may elect and remove such officers and appoint
and terminate such agents as they consider appropriate; appoint from their
own number and establish and terminate one or more committees consisting of
two or more Trustees which may exercise the powers and authority of the Board
of Trustees to the extent that the Trustees determine; employ one or more
custodians of the assets of the Trust and may authorize such custodians to
employ subcustodians and to deposit all or any part of such assets in a
system or systems for the central handling of securities or with a Federal
Reserve Bank, retain a transfer agent or a shareholder servicing agent, or
both; provide for the issuance and distribution of Shares by the Trust
directly or through one or more Principal Underwriters or otherwise; redeem,
repurchase and transfer Shares pursuant to applicable law; set record dates
for the determination of Shareholders with respect to various matters;
declare and pay dividends and distributions to Shareholders of each Series
from the assets of such Series; and in general delegate such authority as
they consider desirable to any officer of the Trust, to any committee of the
Trustees and to any agent or employee of the Trust or to any such custodian,
transfer or shareholder servicing agent, or Principal Underwriter. Any
determination as to what is in the interests of the Trust made by the
Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration of Trust, the presumption shall be in favor of a grant of
power to the Trustees. Unless otherwise specified or required by law, any
action by the Board of Trustees shall be deemed effective if aproved or taken
by a majority of the Trustees then in office.

Without limiting the foregoing, the Trust shall have power and
authority:

(a) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire, own,
hold, pledge, sell, assign, transfer, exchange, distribute, write options on,
lend or otherwise deal in or dispose of contracts for the future acquisition
or delivery of fixed income or other securities, and securities of every
nature and kind, including, without limitation, all types of bonds,
debentures, stocks, negotiable or non-negotiable instruments, obligations,
evidences of indebtedness, certificates of deposit or indebtedness,
commercial paper, repurchase agreements, bankers' acceptances, and other
securities of any kind, issued, created, guaranteed, or sponsored by any and
all Persons, including, without limitation, states, territories, and
possessions of the United States and the District of Columbia and any
political subdivision, agency, or instrumentality thereof, any foreign
government or any political subdivision of the U.S. Government or any foreign
government, or any international instrumentality, or by any bank or savings
institution, or by any corporation or organization organized under the laws
of the United States or of any state, territory, or possession thereof, or by
any corporation or organization organized under any foreign law, or in "when
issued" contracts for any such securities, to change the investments of the
assets of the Trust; and to exercise any and all rights, powers, and
privileges of ownership or interest in respect of any and all such
investments of every kind and description, including, without limitation, the
right to consent and otherwise act with respect thereto, with power to
designate one or more Persons, to exercise any of said rights, powers, and
privileges in respect of any of said instruments;

(b) To sell, exchange, lend, pledge, mortgage, hypothecate,
lease, or write options with respect to or otherwise deal in any property
rights relating to any or all of the assets of the Trust or any Series;

(c) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power and
discretion with relation to securities or property as the Trustees shall deem
proper;

(d) To exercise powers and right of subscription or otherwise
which in any manner arise out of ownership of securities;

(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its
own name or in the name of a custodian or subcustodian or a nominee or
nominees or otherwise;

(f) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer of any
security which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer; and to
pay calls or subscriptions with respect to any security held in the Trust;

(g) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such portion of
the expenses and compensation of such committee, depositary or trustee as the
Trustees shall deem proper;

(h) To compromise, arbitrate or otherwise adjust claims in favor
of or against the Trust or any matter in controversy, including but not
limited to claims for taxes;

(i) To enter into joint ventures, general or limited partnerships
and any other combinations or associations;

(j) To borrow funds or other property in the name of the Trust
exclusively for Trust purposes;

(k) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;

(1) To purchase and pay for entirely out of Trust Property such
insurance as the Trustees may deem necessary or appropriate for the conduct
of the business, including, without limitation, insurance policies insuring
the assets of the Trust or payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, principal
underwriters, or independent contractors of the Trust, individually against
all claims and liabilities of every nature arising by reason of holding
Shares, holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such Person
as Trustee, officer, employee, agent, investment adviser, principal
underwriter, or independent contractor, including any action taken or omitted
that may be determined to constitute negligence, whether or not the Trust
would have the power to indemnify such Person against liability; and

(m) To adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement, incentive
and benefit plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such retirement and
other benefits, for any or all of the Trustees, officers, employees and
agents of the Trust.

The Trust shall not be limited to investing in obligations
maturing before the possible termination of the Trust or one or more of its
Series. The Trust shall not in any way be bound or limited by any present or
future law or custom in regard to investment by fiduciaries. The Trust shall
not be required to obtain any court order to deal with any assets of the
Trust or take any other action hereunder.

Section 4. Payment of Expenses by the Trust. The Trustees are
authorized to pay or cause to be paid out of the principal or income of the
Trust, or partly out of the principal and partly out of income, as they deem
fair, all expenses, fees, charges, taxes and liabilities incurred or arising
in connection with the Trust, or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and such expenses
and charges for the services of the Trust's officers, employees, investment
adviser or manager, principal underwriter, auditors, counsel, custodian,
transfer agent, Shareholder servicing agent, and such other agents or
independent contractors and such other expenses and charges as the Trustees
may deem necessary or proper to incur.

Section 5. Payment of Expenses by Shareholders. The Trustees
shall have the power, as frequently as they may determine, to cause each
Shareholder, or each Shareholder of any particular Series, to pay directly,
in advance or arrears, for charges of the Trust's custodian or transfer,
Shareholder servicing or similar agent, an amount fixed from time to time by
the Trustees, by setting off such charges due from such Shareholder from
declared but unpaid dividends owed such Shareholder and/or by reducing the
number of shares in the account of such Shareholder by that number of full
and/or fractional Shares which represents the outstanding amount of such
charges due from such Shareholder.

Section 6. Ownership of Assets of the Trust. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trust,
except that the Trustees shall have power to cause legal title to any Trust
Property to be held by or in the name of one or more of the Trustees, or in
the name of the Trust, or in the name of any other Person as nominee, on such
terms as the Trustees may determine. The right, title and interest of the
Trustees in the Trust Property shall vest automatically in each Person who
may hereafter become a Trustee. Upon the resignation, removal or death of a
Trustee he or she shall automatically cease to have any right, title or
interest in any of the Trust Property, and the right, title and interest of
such Trustee in the Trust Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether or
not conveyancing documents have been executed and delivered.

Section 7. Service Contracts.

(a) Subject to such requirements and restrictions as may be set
forth in the By-Laws, the Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory, management and/or
administrative services for the Trust or for any Series with any corporation,
trust, association or other organization; and any such contract may contain
such other terms as the Trustees may determine, including without limitation,
authority for the Investment Manager or administrator to determine from time
to time without prior consultation with the Trustees what investments shall
be purchased, held, sold or exchanged and what portion, if any, of the assets
of the Trust shall be held uninvested and to make changes in the Trust's
investments, or such other activities as may specifically be delegated to
such party.

(b) The Trustees may also, at any time and from time to time,
contract with any corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or Principal Underwriter
for the Shares of one or more of the Series (or classes) or other securities
to be issued by the Trust. Every such contract shall comply with such
requirements and restrictions as may be set forth in the By-Laws; and any
such contract may contain such other terms as the Trustees may determine.

(c) The Trustees are also empowered, at any time and from time to
time, to contract with any corporations, trusts, associations or other
organizations, appointing it or them the custodian, transfer agent and/or
shareholder servicing agent for the Trust or one or more of its Series. Every
such contract shall comply with such requirements and restrictions as may be
set forth in the By-Laws or stipulated by resolution of the Trustees.

(d) The Trustees are further empowered, at any time and from time
to time, to contract with any entity to provide such other services to the
Trust or one or more of the Series, as the Trustees determine to be in the
best interests of the Trust and the applicable Series.

(e) The fact that:

(i) any of the Shareholders, Trustees, or officers of the
Trust is a shareholder, director, officer, partner, trustee,
employee, Manager, adviser, Principal Underwriter, distributor,
or affiliate or agent of or for any corporation, trust,
association, or other organization, or for any parent or
affiliate of any organization with which an advisory, management
or administration contract, or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or
other type of service contract may have been or may hereafter be
made, or that any such organization, or any parent or affiliate
thereof, is a Shareholder or has an interest in the Trust, or that

(ii) any corporation, trust, association or other
organization with which an advisory, management or administration
contract or principal underwriter's or distributor's contract, or
transfer, shareholder servicing or other type of service contract
may have been or may hereafter be made also has an advisory,
management or administration contract, or principal underwriter's
or distributor's contract, or transfer, shareholder servicing or
other service contract with one or more other corporations,
trust, associations, or other organizations, or has other
business or interests,

shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing
the same, or create any liability or accountability to the Trust or its
Shareholders, provided approval of each such contract is made pursuant to the
requirements of the 1940 Act.

ARTICLE V

Shareholders' Voting Powers and Meetings

Section 1. Voting Powers. Subject to the provisions of Article
III, Section 6(d), the Shareholders shall have power to vote only (i) for the
election or removal of Trustees as provided in Article IV, Section 1, and
(ii) with respect to such additional matters relating to the Trust as may be
required by this Declaration of Trust, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate fractional vote.
There shall be no cumulative voting in the election of Trustees. Shares may
be voted in person or by proxy. A proxy with respect to Shares held in the
name of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger.

Section 2. Voting Power and Meetings. Meetings of the
Shareholders may be called by the Trustees for the purpose of electing
Trustees as provided in Article IV, Section 1 and for such other purposes as
may be prescribed by law, by this Declaration of Trust or by the By-Laws.
Meetings of the Shareholders may also be called by the Trustees from time to
time for the purpose of taking action upon any other matter deemed by the
Trustees to be necessary or desirable. A meeting of Shareholders may be held
at any place designated by the Trustees. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by mailing
such notice at least seven (7) days before such meeting, postage prepaid,
stating the time and place of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust. Whenever
notice of a meeting is required to be given to a Shareholder under this
Declaration of Trust or the By-Laws, a written waiver thereof, executed
before or after the meeting by such Shareholder or his or her attorney
thereunto authorized and filed with the records of the meeting, shall be
deemed equivalent to such notice.

Section 3. Quorum and Required Vote. Except when a larger quorum
is required by applicable law, by the By-Laws or by this Declaration of
Trust, forty percent (40%) of the Shares entitled to vote shall constitute a
quorum at a Shareholders' meeting. When any one or more Series (or classes)
is to vote as a single class separate from any other Shares, forty percent
(40%) of the Shares of each such Series (or classes) entitled to vote shall
constitute a quorum at a Shareholder's meeting of that Series. Any meeting of
Shareholders may be adjourned from time to time by a majority of the votes
properly cast upon the question of adjourning a meeting to another date and
time, whether or not a quorum is present, and the meeting may be held as
adjourned within a reasonable time after the date set for the original
meeting without further notice. Subject to the provisions of Article III,
Section 6(d), when a quorum is present at any meeting, a majority of the
Shares voted shall decide any questions and a plurality shall elect a
Trustee, except when a larger vote is required by any provision of this
Declaration of Trust or the By-Laws or by applicable law.

Section 4. Action by Written Consent. Any action taken by
Shareholders may be taken without a meeting if Shareholders holding a
majority of the Shares entitled to vote on the matter (or such larger
proportion thereof as shall be required by any express provision of this
Declaration of Trust or by the By-Laws) and holding a majority (or such
larger proportion as aforesaid) of the Shares of any Series (or class)
entitled to vote separately on the matter consent to the action in writing
and such written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote taken
at a meeting of Shareholders.

Section 5. Record Dates. For the purpose of determining the
Shareholders of any Series (or class) who are entitled to vote or act at any
meeting or any adjournment thereof, the Trustees may from time to time fix a
time, which shall be not more than ninety (90) days before the date of any
meeting of Shareholders, as the record date for determining the Shareholders
of such Series (or class) having the right to notice of and to vote at such
meeting and any adjournment thereof, and in such case only Shareholders of
record on such record date shall have such right, notwithstanding any
transfer of shares on the books of the Trust after the record date. For the
purpose of determining the Shareholders of any Series (or class) who are
entitled to receive payment of any dividend or of any other distribution, the
Trustees may from time to time fix a date, which shall be before the date for
the payment of such dividend or such other payment, as the record date for
determining the Shareholders of such Series (or class) having the right to
receive such dividend or distribution. Without fixing a record date the
Trustees may for voting and/or distribution purposes close the register or
transfer books for one or more Series for all or any part of the period
between a record date and a meeting of Shareholders or the payment of a
distribution. Nothing in this Section shall be construed as precluding the
Trustees from setting different record dates for different Series (or
classes).

Section 6. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.

ARTICLE VI

Net Asset Value, Distributions, and Redemptions

Section 1. Determination of Net Asset Value, Net Income, and
Distributions. Subject to Article III, Section 6 hereof, the Trustees, in
their absolute discretion, may prescribe and shall set forth in the By-laws
or in a duly adopted vote of the Trustees such bases and time for determining
the per Share or net asset value of the Shares of any Series or net income
attributable to the Shares of any Series, or the declaration and payment of
dividends and distributions on the Shares of any Series, as they may deem
necessary or desirable.

Section 2. Redemptions and Repurchases. The Trust shall purchase
such Shares as are offered by any Shareholder for redemption, upon the
presentation of a proper instrument of transfer together with a request
directed to the Trust or a Person designated by the Trust that the Trust
purchase such Shares or in accordance with such other procedures for
redemption as the Trustees may from time to time authorize; and the Trust
will pay therefor the net asset value thereof, in accordance with the By-Laws
and applicable law. Payment for said Shares shall be made by the Trust to the
Shareholder within seven days after the date on which the request is made in
proper form. The obligation set forth in this Section 2 is subject to the
provision that in the event that any time the New York Stock Exchange (the
"Exchange") is closed for other than weekends or holidays, or if permitted by
the Rules of the Commission during periods when trading on the Exchange is
restricted or during any emergency which makes it impracticable for the Trust
to dispose of the investments of the applicable Series or to determine fairly
the value of the net assets held with respect to such Series or during any
other period permitted by order of the Commission for the protection of
investors, such obligations may be suspended or postponed by the Trustees.

The redemption price may in any case or cases be paid wholly or
partly in kind if the Trustees determine that such payment is advisable in
the interest of the remaining Shareholders of the Series for which the Shares
are being redeemed. Subject to the foregoing, the fair value, selection and
quantity of securities or other property so paid or delivered as all or part
of the redemption price may be determined by or under authority of the
Trustees. In no case shall the Trust be liable for any delay of any
corporation or other Person in transferring securities selected for delivery
as all or part of any payment in kind.

Section 3. Redemptions at the option of the Trust. The Trust
shall have the right at its option and at any time to redeem Shares of any
Shareholder at the net asset value thereof as described in Section 1 of this
Article VI: (i) if at such time such Shareholder owns Shares of any Series
having an aggregate net asset value of less than an amount determined from
time to time by the Trustees prior to the acquisition of said Shares; or (ii)
to the extent that such Shareholder owns Shares of a particular Series equal
to or in excess of a percentage of the outstanding Shares of that Series
determined from time to time by the Trustees; or (iii) to the extent that
such Shareholder owns Shares equal to or in excess of a percentage,
determined from time to time by the Trustees, of the outstanding Shares of
the Trust or of any Series.

ARTICLE VII

Compensation and Limitation of Liability of Trustees

Section l. Compensation. The Trustees as such shall be entitled
to reasonable compensation from the Trust, and they may fix the amount of
such compensation. Nothing herein shall in any way prevent the employment of
any Trustee for advisory, management, legal, accounting, investment banking
or other services and payment for the same by the Trust.

Section 2. Indemnification and Limitation of Liability. The
Trustees shall not be responsible or liable in any event for any neglect or
wrong-doing of any officer, agent, employee, Manager or Principal Underwriter
of the Trust, nor shall any Trustee be responsible for the act or omission of
any other Trustee, and the Trust out of its assets shall indemnify and hold
harmless each and every Trustee from and against any and all claims and
demands whatsoever arising out of or related to each Trustee's performance of
his or her duties as a Trustee of the Trust; provided that nothing herein
contained shall indemnify, hold harmless or protect any Trustee from or
against any liability to the Trust or any Shareholder to which he or she
would otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office.

Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever issued, executed or done
by or on behalf of the Trust or the Trustees or any of them in connection
with the Trust shall be conclusively deemed to have been issued, executed or
done only in or with respect to their or his or her capacity as Trustees or
Trustee, and such Trustees or Trustee shall not be personally liable thereon.

Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall be
liable to the Trust and to any Shareholder solely for his or her own wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take advice
of counsel or other experts with respect to the meaning and operation of this
Declaration of Trust, and shall be under no liability for any act or omission
in accordance with such advice nor for failing to follow such advice. The
Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.

Section 4. Insurance. The Trustees shall be entitled and
empowered to the fullest extent permitted by law to purchase with Trust
assets insurance for liability and for all expenses reasonably incurred or
paid or expected to be paid by a Trustee or officer in connection with any
claim, action, suit or proceeding in which he or she becomes involved by
virtue of his or her capacity or former capacity with the Trust.

ARTICLE VIII

Miscellaneous

Section 1. Liability of Third Persons Dealing with Trustees. No
Person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the Trustees
or to see to the application of any payments made or property transferred to
the Trust or upon its order.

Section 2. Termination of Trust or Series. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The
Trust may be terminated at any time by vote of a majority of the Shares of
each Series entitled to vote, voting separately by Series, or by the Trustees
by written notice to the Shareholders. Any Series may be terminated at any
time by vote of a majority of the Shares of that Series or by the Trustees by
written notice to the Shareholders of that Series.

Upon termination of the Trust (or any Series, as the case may
be), after paying or otherwise providing for all charges, taxes, expenses and
liabilities held, severally, with respect to each Series (or the applicable
Series, as the case may be), whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall, in accordance with such
procedures as the Trustees consider appropriate, reduce the remaining assets
held, severally, with respect to each Series (or the applicable Series, as
the case may be), to distributable form in cash or shares or other
securities, or any combination thereof, and distribute the proceeds held with
respect to each Series (or the applicable Series, as the case may be), to the
Shareholders of that Series, as a Series, ratably according to the number of
Shares of that Series held by the several Shareholders on the date of
termination.

Section 3. Merger and Consolidation. The Trustees may cause (i)
the Trust or one or more of its Series to the extent consistent with
applicable law to be merged into or consolidated with another Trust or
company, (ii) the Shares of the Trust or any Series to be converted into
beneficial interests in another business trust (or series thereof) created
pursuant to this Section 3 of Article VIII, or (iii) the Shares to be
exchanged under or pursuant to any state or federal statute to the extent
permitted by law. Such merger or consolidation, Share conversion or Share
exchange must be authorized by vote of a majority of the outstanding Shares
of the Trust, as a whole, or any affected Series, as may be applicable;
provided that in all respects not governed by statute or applicable law, the
Trustees shall have power to prescribe the procedure necessary or appropriate
to accomplish a sale of assets, merger or consolidation including the power
to create one or more separate business trusts to which all or any part of
the assets, liabilities, profits or losses of the Trust may be transferred
and to provide for the conversion of Shares of the Trust or any Series into
beneficial interests in such separate business trust or trusts (or series
thereof).

Section 4. Amendments. This Declaration of Trust may be restated
and/or amended at any time by an instrument in writing signed by a majority
of the then Trustees and, if required, by approval of such amendment by
Shareholders in accordance with Article V, Section 3 hereof. Any such
restatement and/or amendment hereto shall be effective immediately upon
execution and approval. The Certificate of Trust of the Trust may be restated
and/or amended by a similar procedure, and any such restatement and/or
amendment shall be effective immediately upon filing with the Office of the
Secretary of State of the State of Delaware or upon such future date as may
be stated therein.

Section 5. Filing of Copies, References, Headings. The original
or a copy of this instrument and of each restatement and/or amendment hereto
shall be kept at the office of the Trust where it may be inspected by any
Shareholder. Anyone dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether or not any such restatements and/or
amendments have been made and as to any matters in connection with the Trust
hereunder; and, with the same effect as if it were the original, may rely on
a copy certified by an officer of the Trust to be a copy of this instrument
or of any such restatements and/or amendments. In this instrument and in any
such restatements and/or amendment, references to this instrument, and all
expressions like "herein", "hereof" and "hereunder", shall be deemed to refer
to this instrument as amended or affected by any such restatements and/or
amendments. Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. Whenever the singular number is
used herein, the same shall include the plural; and the neuter, masculine and
feminine genders shall include each other, as applicable. This instrument may
be executed in any number of counterparts each of which shall be deemed an
original.

Section 6. Applicable Law. This Agreement and Declaration of Trust
is created under and is to be governed by and construed and administered
according to the laws of the State of Delaware and the Delaware Business
Trust Act, as amended from time to time (the "Act"). The Trust shall be a
Delaware business trust pursuant to such Act, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a business trust.

Section 7. Provisions in Conflict with Law or Regulations.

(a) The provisions of the Declaration of Trust are
severable, and if the Trustees shall determine, with the advice of counsel,
that any of such provisions is in conflict with the 1940 Act, the regulated
investment company provisions of the Internal Revenue Code or with other
applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of the Declaration of Trust; provided,
however, that such determination shall not affect any of the remaining
provisions of the Declaration of Trust or render invalid or improper any
action taken or omitted prior to such determination.

(b) If any provision of the Declaration of Trust shall be
held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or
any other provision of the Declaration of Trust in any jurisdiction.

Section 8. Business Trust Only. It is the intention of the
Trustees to create a business trust pursuant to the Delaware Business Trust
Act, as amended from time to time (the "Act"), and thereby to create only the
relationship of trustee and beneficial owners within the meaning of such Act
between the Trustees and each Shareholder. It is not the intention of the
Trustees to create a general partnership, limited partnership, joint stock
association, corporation, bailment, or any form of legal relationship other
than a business trust pursuant to such Act. Nothing in this Declaration of
Trust shall be construed to make the Shareholders, either by themselves or
with the Trustees, partners or members of a joint stock association.

Section 9. Use of the Name "Franklin". The name "Franklin" and all
rights to the use of the name "Franklin" belongs to Franklin Resources, Inc.
("Franklin"), the sponsor of the Trust. Franklin has consented to the use by
the Trust of the identifying word "Franklin" and has granted to the Trust a
non-exclusive license to use the name "Franklin" as part of the name of the
Trust and the name of any Series of Shares. In the event Franklin or an
affiliate of Franklin is not appointed as Manager and/or Principal
Underwriter or ceases to be the Manager and/or Principal Underwriter of the
Trust or of any Series using such names, the non-exclusive license granted
herein may be revoked by Franklin and the Trust shall cease using the name
"Franklin" as part of its name or the name of any Series of Shares, unless
otherwise consented to by Franklin or any successor to its interests in such
names.

[The remainder of this page has been
left blank intentionally.]

IN WITNESS WHEREOF, the Trustees named below do hereby make and
enter into this Declaration of Trust as of the 19th day of March 1991.

/s/ Frank H. Abbott, III /s/ Charles B. Johnson
Frank H. Abbott, III Charles B. Johnson
1045 Sansome Street 777 Mariners Island Blvd.
San Francisco, California San Mateo, California 94404
94111

/s/ Harris J. Ashton /s/ Rupert H. Johnson, Jr.
Harris J. Ashton Rupert H. Johnson, Jr.
22 Gate House Road 777 Mariners Island Blvd.
Stamford, Connecticut 06902 San Mateo, California 94404

/s/ S. Joseph Fortunato /s/ Edmund H. Kerr
S. Joseph Fortunato Edmund H. Kerr
Park Avenue at Morris County One Liberty Plaza
P.O. Box 1945 New York, New York 10006
Morristown, New Jersey
07962-1945

/s/ David W. Garbellano /s/ Frank W. T. LaHaye
David W. Garbellano Frank W. T. LaHaye
111 New Montgomery St. #402 20833 Stevens Creek Blvd.
San Francisco, California Suite 102
94105 Cupertino, California 95014

/s/ Henry L. Jamieson /s/ Johannes R. Krahmer
Henry L. Jamieson Johannes R. Krahmer
777 Mariners Island Blvd. c/o Morris, Nichols, Arsht
San Mateo, California 94404 & Tunnel1
1201 N. Market Street
Wilmington, Delaware 19899-
1347

THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS 777 Mariners Island
Boulevard, San Mateo, California 94404

CERTIFICATE OF AMENDMENT

TO THE

CERTIFICATE OF TRUST

FRANKLIN INTERNATIONAL TRUST

The undersigned certifies that:

1. The name of the business trust is FRANKLIN INTERNATIONAL TRUST ( the
"Business Trust").

2. The amendments to the Certificate of Trust of he Business Trust set
forth below have been duly authorized by the Board of Trustees of the
Business Trust:

The Preamble is hereby amended to read as follows:

"This Certificate of Trust of the FRANKLIN INTERNATIONAL TRUST, a
business trust registered under the Investment Company Act of
1940 (the "Business Trust"), is filed in accordance with the
provisions of the Delaware Business Trust Act (12 Del. Code
Section 3801 et seq.) and sets forth the following:

The Second Article is hereby amended to read as follows:

"SECOND: As required by 12 Del. Code Section 3807 (b) and
3810(a)(1)b, the name and business address of the Business
Trust's Registered Agent for Services of Process and the address
of the Business Trust's Registered Office are:

Address of Business Trust's
Registered Office and
Business Address of
Registered Agent Registered Agent

The Corporation 1209 Orange Street
Trust Company Wilmington, Delaware 19801

The name and business address of each trustee of the Business
Trust, effective on August 22, 1991, is as follows:

Name Business Address

Frank H. Abbott, III 1045 Sansome Street
San Francisco, California
94111

Harris J. Ashton 22 Gate House Road
Stamford, Connecticut 06902

S. Joseph Fortunato Park Avenue at Morris County
P.O. Box 1945
Morristown, New Jersey
07962-1945

David W. Garbellano 111 New Montgomery St. #402
San Francisco, California
94105

Henry L. Jamieson 777 Mariners Island Blvd.
San Mateo, California 94404

Charles B. Johnson 777 Mariners Island Blvd.
San Mateo, California 94404

Rupert H. Johnson, Jr. 777 Mariners Island Blvd.
San Mateo, California 94404

Edmund H. Kerr 1 Liberty Plaza
New York, California 94404

Frank W. T. LaHaye 20833 Stevens Creek Blvd.
Suite 102
Cupertino, California 95014

3. Pursuant to 12 Del. Code Section 3810(b)(1)c, this Certificate of
Amendment to the Certificate of Trust of the Business Trust shall
become effective on August 22, 1991.

4. This Amendment is made pursuant to the Fourth Article of the Certificate
of Trust which reserves to the Trustees the right to amend, alter,
change or repeal any provision contained in the Certificate of Trust.

IN WITNESS WHEREOF, the undersigned, being a trustee of the Business
Trust, has duly executed this certificate of Amendment this 20th day of
August 1991.

/s/ Charles B. Johnson
Charles B. Johnson

CERTIFICATE OF AMENDMENT

TO THE

CERTIFICATE OF TRUST

FRANKLIN INTERNATIONAL TRUST

The undersigned certifies that:

1. The name of the business trust is the Franklin International Trust (the
"Business Trust").

2. The amendment to the Certificate of Trust of the Business Trust set
forth below (the "Amendment") has been duly authorized by the Board of
Trustees of the Business Trust.

The following Article is hereby added to the Certificate of Trust:

SIXTH: Pursuant to section 3804 of the Delaware Business Trust Act,
Del. Code. Ann. tit. 12, sec. 3801-3819 (the "Act"), the debts,
liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to each particular series of the Trust,
whether such series is now existing or is hereinafter created, shall be
enforceable against the assets of such series only, and not against the
assets of the Trust generally.

3. Pursuant to Section 3801 (b)(1)(c) of the Act, this Certificate of
Amendment to the Certificate of Trust of the Business Trust shall
become effective immediately upon filing with the Office of the
Secretary of State of the State of Delaware.

4. The Amendment is made pursuant to the authority granted to the Trustees
of the Business Trust under Section 3810(b)(2) of the Act and pursuant
to the authority set forth in the governing instrument of the Business
Trust.

IN WITNESS WHEREOF, the undersigned, being a trustee of the Business
Trust, has duly executed this Certificate of Amendment this 14th day of May
1992.

/s/ Charles B. Johnson
Charles B. Johnson
Trustee

BY-LAWS

for the regulation, except as
otherwise provided by statute or
the Agreement and Declaration of Trust of

FRANKLIN INTERNATIONAL TRUST

a Delaware Business Trust

TABLE OF CONTENTS

BY-LAWS
FRANKLIN INTERNATIONAL TRUST

Page
ARTICLE I Offices 1

1. Principal Office 1
2. Delaware office 1
3. Other Offices 1

ARTICLE II Meetings of Shareholders 1

1. Place of Meetings 1
2. Call of Meeting 1
3. Notice of Shareholders' Meeting 1
4. Manner of Giving Notice; Affidavit
of Notice 2
5. Adjourned Meeting; Notice 3
6. Voting 3
7. Waiver of Notice of Consent by
absent Shareholders 3
8. Shareholder Action by Written
Consent without a Meeting 4
9. Record Date for Shareholder Notice,
Voting and Giving Consents 4
10. Proxies 5
11. Inspectors of Election 5

ARTICLE III Trustees 6

1. Powers 6
2. Number of Trustees 6
3. Vacancies 7
4. Place of Meetings and Meetings by
Telephone 7
5. Regular Meetings 7
6. Special Meetings 7
7. Quorum 8
8. Waiver of Notice 8
9. Adjournment 8
10. Notice of Adjournment 8
11. Action Without a Meeting 9
12. Fees and Compensation of Trustees 9
13. Delegation of Power to Other
Trustees 9

ARTICLE IV Committees 9

1. Committees of Trustees 9
2. Meetings and Action of Committees 10

ARTICLE V Officers 10

1. Officers 10
2. Election of Officers 11
3. Subordinate Officers 11
4. Removal and Resignation of Officers 11
5. Vacancies in Offices 11
6. Chairman of the Board 11
7. President 12
8. Vice President 12
9. Secretary 12
10. Treasurer 13

ARTICLE VI Indemnification of Trustees, Officers, Employees
and Other Agents 13

1. Agents, Proceedings and Expenses 13
2. Actions Other than by Trust 13
3. Actions by the Trust 14
4. Exclusion and Indemnification 14
5. Successful Defense by Agent 15
6. Required Approval 15
7. Advance of Expenses 16
8. Other Contractual Rights 16
9. Limitations 16
10. Insurance 16
11. Fiduciaries of Corporate Employee
Benefit Plan 17

ARTICLE VII Records and Reports 17

1. Maintenance and Inspection of Share
Register 17
2. Maintenance and Inspection of
By-Laws 17
3. Maintenance and Inspection of Other
Records 17
4. Inspection by Trustees 17
5. Financial Statements 18

ARTICLE VIII GENERAL MATTERS 18

1. Checks, Drafts, Evidence of
Indebtedness 18
2. Contracts and Instruments; How
Executed 18
3. Certificate of Shares 18
4. Lost Certificates 19
5. Representation of Shares of Other
Entities 19
6. Fiscal Year 19

ARTICLE IX Amendments 20

1. Amendments by Shareholders 20
2. Amendments by Trustees 20
3. Incorporation by Reference into Agreement
and Declaration of Trust of the Trust
20

BY-LAWS
OF

FRANKLIN INTERNATIONAL TRUST
A Delaware Business Trust

ARTICLE I
OFFICES

Section 1. PRINCIPAL OFFICE. The Board of Trustees shall fix and,
from time to time, may change the location of the principal executive office of
the Franklin International Trust (the "Trust") at any place within or outside
the State of Delaware.

Section 2. DELAWARE OFFICE. The Board of Trustees shall establish a
registered office in the State of Delaware and shall appoint as the Trust's
registered agent for service of process in the State of Delaware an individual
resident of the State of Delaware or a Delaware corporation or a corporation
authorized to transact business in the State of Delaware; in each case the
business office of such registered agent for service of process shall be
identical with the registered Delaware office of the Trust.

Section 3. OTHER OFFICES. The Board of Trustees may at any time establish
branch or subordinate offices at any place or places where the Trust intends to
do business.

ARTICLE II
MEETINGS OF SHAREHOLDERS

Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at any
place designated by the Board of Trustees. In the absence of any such
designation, shareholders' meetings shall be held at the principal executive
office of the Trust.

Section 2. CALL OF MEETING. A meeting of the shareholders may be called at
any time by the Board of Trustees or by the Chairman of the Board or by the
President.

Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings
of shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not less than seven (7) nor more than seventy-five (75) days
before the date of the meeting. The notice shall specify (i) the place, date and
hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which Trustees are to be elected also
shall include the name of any nominee or nominees whom at the time of the notice
are intended to be presented for election.

If action is proposed to be taken at any meeting for approval of (i)
a contract or transaction in which a Trustee has a direct or indirect financial
interest, (ii) an amendment of the Agreement and Declaration of Trust of the
Trust, (iii) a reorganization of the Trust, or (iv) a voluntary dissolution of
the Trust, the notice shall also state the general nature of that proposal.

Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of
any meeting of shareholders shall be given either personally or by first-class
mail or telegraphic or other written communication, charges prepaid, addressed
to the shareholder at the address of that shareholder appearing on the books of
the Trust or its transfer agent or given by the shareholder to the Trust for the
purpose of notice. If no such address appears on the Trust's books or is given,
notice shall be deemed to have been given if sent to that shareholder by
first-class mail or telegraphic or other written communication to the Trust's
principal executive office, or if published at least once in a newspaper of
general circulation in the county where that office is located. Notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written communication.

If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Trust is returned to the Trust by the
United States Postal Service marked to indicate that the Postal Service is
unable to deliver the notice to the shareholder at that address, all future
notices or reports shall be deemed to have been duly given without further
mailing if these shall be available to the shareholder on written demand of the
shareholder at the principal executive office of the Trust for a period of one
year from the date of the giving of the notice.

An affidavit of the mailing or other means of giving any notice of
any shareholder's meeting shall be executed by the Secretary, Assistant
Secretary or any transfer agent of the Trust giving the notice and shall be
filed and maintained in the minute book of the Trust.

Section 5. ADJOURNED MEETING; NOTICE. Any shareholder's meeting,
whether or not a quorum is present, may be adjourned from time to time by the
vote of the majority of the shares represented at that meeting, either in person
or by proxy.

When any meeting of shareholders is adjourned to another time or
place, notice need not be given of the adjourned meeting at which the
adjournment is taken, unless a new record date of the adjourned meeting is fixed
or unless the adjournment is for more than sixty (60) days from the date set for
the original meeting, in which case the Board of Trustees shall set a new record
date. Notice of any such adjourned meeting shall be given to each shareholder of
record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 3 and 4 of this Article II. At any adjourned meeting, the
Trust may transact any business which might have been transacted at the original
meeting.

Section 6. VOTING. The shareholders entitled to vote at any meeting
of shareholders shall be determined in accordance with the provisions of the
Agreement and Declaration of Trust of the Trust, as in effect at such time. The
shareholders' vote may be by voice vote or by ballot, provided, however, that
any election for Trustees must be by ballot if demanded by any shareholder
before the voting has begun. On any matter other than elections of Trustees, any
shareholder may vote part of the shares in favor of the proposal and refrain
from voting the remaining shares or vote them against the proposal, but if the
shareholder fails to specify the number of shares which the shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to the total shares that the shareholder is
entitled to vote on such proposal.

Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
transactions of the meeting of shareholders, however called and noticed and
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice if a quorum be present either in person or by proxy and
if either before or after the meeting, each person entitled to vote who was not
present in person or by proxy signs a written waiver of notice or a consent to a
holding of the meeting or an approval of the minutes. The waiver of notice or
consent need not specify either the business to be transacted or the purpose of
any meeting of shareholders.

Attendance by a person at a meeting shall also constitute a waiver
of notice of that meeting, except when the person objects at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters not included in
the notice of the meeting if that objection is expressly made at the beginning
of the meeting.

Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Any action which may be taken at any meeting of shareholders may be taken
without a meeting and without prior notice if a consent in writing setting forth
the action so taken is signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize or
take that action at a meeting at which all shares entitled to vote on that
action were present and voted. All such consents shall be filed with the
Secretary of the Trust and shall be maintained in the Trust's records. Any
shareholder giving a written consent or the shareholder's proxy holders or a
transferee of the shares or a personal representative of the shareholder or
their respective proxy holders may revoke the consent by a writing received by
the Secretary of the Trust before written consents of the number of shares
required to authorize the proposed action have been filed with the Secretary.

If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the shareholders without a meeting. This notice
shall be given in the manner specified in Section 4 of this Article II. In the
case of approval of (i) contracts or transactions in which a Trustee has a
direct or indirect financial interest, (ii) indemnification of agents of the
Trust, and (iii) a reorganization of the Trust, the notice shall be given at
least ten (10) days before the consummation of any action authorized by that
approval.

Section 9. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING
CONSENTS. For purposes of determining the shareholders entitled to notice of any
meeting or to vote or entitled to give consent to action without a meeting, the
Board of Trustees may fix in advance a record date which shall not be more than
ninety (90) days nor less than seven (7) days before the date of any such
meeting as provided in the Agreement and Declaration of Trust of the Trust.

If the Board of Trustees does not so fix a record date:

(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at
the close of business on the business day next preceding the
day on which notice is given or if notice is waived, at the
close of business on the business day next preceding the day
on which the meeting is held.

(b) The record date for determining shareholders entitled to give
consent to action in writing without a meeting, (i) when no prior
action by the Board of Trustees has been taken, shall be the day
on which the first written consent is given, or (ii) when prior
action of the Board of Trustees has been taken, shall be at the
close of business on the day on which the Board of Trustees adopt
the resolution relating to that action or the seventy-fifth day
before the date of such other action, whichever is later.

Section 10. PROXIES. Every person entitled to vote for Trustees or
on any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the Secretary of the Trust. A proxy shall be deemed signed if the shareholder's
name is placed on the proxy (whether by manual signature, typewriting,
telegraphic transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) revoked by the
person executing it before the vote pursuant to that proxy by a writing
delivered to the Trust stating that the proxy is revoked or by a subsequent
proxy executed by or attendance at the meeting and voting in person by the
person executing that proxy; or (ii) written notice of the death or incapacity
of the maker of that proxy is received by the Trust before the vote pursuant to
that proxy is counted; provided however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy unless otherwise
provided in the proxy.

Section 11. INSPECTORS OF ELECTION. Before any meeting of
shareholders, the Board of Trustees may appoint any persons other than nominees
for office to act as inspectors of election at the meeting or its adjournment.
If no inspectors of election are so appointed, the chairman of the meeting may
and on the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (1) or three (3). If inspectors are appointed at a meeting on the request of
one or more shareholders or proxies, the holders of a majority of shares or
their proxies present at the meeting shall determine whether one (1) or three
(3) inspectors are to be appointed. If any person appointed as inspector fails
to appear or fails or refuses to act, the Chairman of the meeting may and on the
request of any shareholder or a shareholder's proxy, shall appoint a person to
fill the vacancy.

These inspectors shall:

(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the
existence of a quorum and the authenticity, validity and
effect of proxies;

(b) Receive votes, ballots or consents;

(d) Count and tabulate all votes or consents;

(e) Determine when the polls shall close;

(f) Determine the result; and

(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.

ARTICLE III
TRUSTEES

Section 1. POWERS. Subject to the applicable provisions of the
Agreement and Declaration of Trust of the Trust and these By-Laws relating to
action required to be approved by the shareholders or by the outstanding shares,
the business and affairs of the Trust shall be managed and all powers shall be
exercised by or under the direction of the Board of Trustees.

Section 2. NUMBER OF TRUSTEES. The exact number of Trustees within
the limits specified in the Agreement and Declaration of Trust of the Trust
shall be fixed from time to time by a written instrument signed or a resolution
approved at a duly constituted meeting by a majority of the Board of Trustees.

Section 3. VACANCIES. Vacancies in the Board of Trustees may be
filled by a majority of the remaining Trustees, though less than a quorum, or by
a sole remaining Trustee, unless the Board of Trustees calls a meeting of
shareholders for the purposes of electing Trustees. In the event that at any
time less than a majority of the Trustees holding office at that time were so
elected by the holders of the outstanding voting securities of the Trust, the
Board of Trustees shall forthwith cause to be held as promptly as possible, and
in any event within sixty (60) days, a meeting of such holders for the purpose
of electing Trustees to fill any existing vacancies in the Board of Trustees,
unless such period is extended by order of the United States Securities and
Exchange Commission.

Notwithstanding the above, whenever and for so long as the Trust is
a participant in or otherwise has in effect a Plan under which the Trust may be
deemed to bear expenses of distributing its shares as that practice is described
in Rule 12b-1 under the Investment Company Act of 1940, then the selection and
nomination of the Trustees who are not interested persons of the Trust (as that
term is defined in the Investment Company Act of 1940) shall be, and is,
committed to the discretion of such disinterested Trustees.

Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings
of the Board of Trustees may be held at any place that has been designated from
time to time by resolution of the Board. In the absence of such a designation,
regular meetings shall be held at the principal executive office of the Trust.
Any meeting, regular or special, may be held by conference telephone or similar
communication equipment, so long as all Trustees participating in the meeting
can hear one another and all such Trustees shall be deemed to be present in
person at the meeting.

Section 5. REGULAR MEETINGS. Regular meetings of the Board of
Trustees shall be held without call at such time as shall from time to time be
fixed by the Board of Trustees. Such regular meetings may be held without
notice.

Section 6. SPECIAL MEETINGS. Special meetings of the Board of Trustees for
any purpose or purposes may be called at any time by the Chairman of the Board
or the President or any Vice President or the Secretary or any two (2) Trustees.

Notice of the time and place of special meetings shall be delivered
personally or by telephone to each Trustee or sent by first-class mail or
telegram, charges prepaid, addressed to each Trustee at that Trustee's address
as it is shown on the records of the Trust. In case the notice is mailed, it
shall be deposited in the United States mail at least seven (7) calendar days
before the time of the holding of the meeting. In case the notice is delivered
personally or by telephone or to the telegraph company or by express mail or
similar service, it shall be given at least forty-eight (48) hours before the
time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the Trustee or to a person at the office
of the Trustee who the person giving the notice has reason to believe will
promptly communicate it to the Trustee. The notice need not specify the purpose
of the meeting or the place if the meeting is to be held at the principal
executive office of the Trust.

Section 7. QUORUM. A majority of the authorized number of Trustees
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the Trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Board of Trustees, subject to the
provisions of the Agreement and Declaration of Trust of the Trust. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of Trustees if any action taken is approved by a
least a majority of the required quorum for that meeting.

Section 8. WAIVER OF NOTICE. Notice of any meeting need not be given
to any Trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any Trustee who attends the meeting without protesting
before or at its commencement the lack of notice to that Trustee.

Section 9. ADJOURNMENT. A majority of the Trustees present, whether or not
constituting a quorum, may adjourn any meeting to another time and place.

Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given unless the meeting is adjourned
for more than forty-eight (48) hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting in the manner specified
in Section 7 of this Article III to the Trustees who were present at the time of
the adjournment.

Section 11. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the Board of Trustees may be taken without a meeting if
a majority of the members of the Board of Trustees shall individually or
collectively consent in writing to that action. Such action by written consent
shall have the same force and effect as a majority vote of the Board of
Trustees. Such written consent or consents shall be filed with the minutes of
the proceedings of the Board of Trustees.

Section 12. FEES AND COMPENSATION OF TRUSTEES. Trustees and members
of committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Trustees. This Section 12 shall not be construed to preclude any
Trustee from serving the Trust in any other capacity as an officer, agent,
employee, or otherwise and receiving compensation for those services.

Section 13. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may,
by power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall fewer than two (2) Trustees personally exercise the powers granted to
the Trustees under this Agreement and Declaration of Trust of the Trust except
as otherwise expressly provided herein or by resolution of the Board of
Trustees. Except where applicable law may require a Trustee to be present in
person, a Trustee represented by another Trustee pursuant to such power of
attorney shall be deemed to be present for purposes of establishing a quorum and
satisfying the required majority vote.

ARTICLE IV
COMMITTEES

Section 1. COMMITTEES OF TRUSTEES. The Board of Trustees may by
resolution adopted by a majority of the authorized number of Trustees designate
one or more committees, each consisting of two (2) or more Trustees, to serve at
the pleasure of the Board. The Board may designate one or more Trustees as
alternate members of any committee who may replace any absent member at any
meeting of the committee. Any committee to the extent provided in the resolution
of the Board, shall have the authority of the Board, except with respect to:

(a) the approval of any action which under applicable law also
requires shareholders' approval or approval of the outstanding
shares, or requires approval by a majority of the entire Board or
certain members of said Board;

(b) the filling of vacancies on the Board of Trustees or in any
committee:

(d) the amendment or repeal of the Agreement and Declaration of Trust
of the Trust or of the By-Laws or the adoption of new By-Laws;

(e) the amendment or repeal of any resolution of the Board of
Trustees which by its express terms is not so amendable or
repealable;

(f) a distribution to the shareholders of the Trust, except at a rate
or in a periodic amount or within a designated range determined
by the Board of Trustees; or

(g) the appointment of any other committees of the Board of Trustees
or the members of these committees.

Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Board of Trustees and its members, except that the time of regular meetings of
committees may be determined either by resolution of the Board of Trustees or by
resolution of the committee. Special meetings of committees may also be called
by resolution of the Board of Trustees. Alternate members shall be given notice
of meetings of committees and shall have the right to attend all meetings of
committees. The Board of Trustees may adopt rules for the government of any
committee not inconsistent with the provisions of these By-Laws.

ARTICLE V
OFFICERS

Section 1. OFFICERS. The officers of the Trust shall be a President,
a Secretary, and a Treasurer. The Trust may also have, at the discretion of the
Board of Trustees, a Chairman of the Board, one or more Vice Presidents, one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article V. Any number of offices may be held by the same person.

Section 2. ELECTION OF OFFICERS. The officers of the Trust, except
such officers as may appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the Board of Trustees, and each
shall serve at the pleasure of the Board of Trustees, subject to the rights, if
any, of an officer under any contract of employment.

Section 3. SUBORDINATE OFFICERS. The Board of Trustees may appoint
and may empower the President to appoint such other officers as the business of
the Trust may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these By-Laws or as the
Board of Trustees may from time to time determine.

Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by the Board of Trustees at any
regular or special meeting of the Board of Trustees or by the principal
executive officer or by such other officer upon whom such power of removal may
be conferred by the Board of Trustees.

Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a party.

Section 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled in
the manner prescribed in these By-Laws for regular appointment to that office.
The President may make temporary appointments to a vacant office pending action
by the Board of Trustees.

Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such
an Officer is elected, shall if present preside at meetings of the Board of
Trustees, shall be the Chief Executive Officer of the Trust and shall, subject
to the control of the Board of Trustees, have general supervision, direction and
control of the business and the Officers of the Trust and exercise and perform
such other powers and duties as may be from time to time assigned to him by the
Board of Trustees or prescribed by the By-Laws.

Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Trustees to the Chairman of the Board, if there be
such an officer, the president shall be the chief operating officer of the Trust
and shall, subject to the control of the Board of Trustees and the Chairman,
have general supervision, direction and control of the business and the officers
of the Trust. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board or if there be none, at all meetings of the
Board of Trustees. He shall have the general powers and duties of management
usually vested in the office of President of a corporation and shall have such
other powers and duties as may be prescribed by the Board of Trustees or these
By-Laws.

Section 8. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Trustees or if not ranked, the Executive Vice President (who shall be
considered first ranked) and such other Vice Presidents as shall be designated
by the Board of Trustees, shall perform all the duties of the President and when
so acting shall have all powers of and be subject to all the restrictions upon
the President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Trustees or the President or the Chairman of the Board or by these
By-Laws.

Section 9. SECRETARY. The Secretary shall keep or cause to be kept
at the principal executive office of the Trust or such other place as the Board
of Trustees may direct a book of minutes of all meetings and actions of
Trustees, committees of Trustees and shareholders with the time and place of
holding, whether regular or special, and if special, how authorized, the notice
given, the names of those present at Trustees' meetings or committee meetings,
the number of shares present or represented at shareholders' meetings, and the
proceedings.

The Secretary shall keep or cause to be kept at the principal
executive office of the Trust or at the office of the Trust's transfer agent or
registrar, a share register or a duplicate share register showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same and the number and
date of cancellation of every certificate surrendered for cancellation.

The Secretary shall give or cause to be given notice of all meetings
of the shareholders and of the Board of Trustees required to be given by these
By-Laws or by applicable law and shall have such other powers and perform such
other duties as may be prescribed by the Board of Trustees or by these By-Laws.

Section 10. TREASURER. The Treasurer shall be the chief financial
officer and chief accounting officer of the Trust and shall keep and maintain or
cause to be kept and maintained adequate and correct books and records of
accounts of the properties and business transactions of the Trust, including
accounts of its assets, liabilities, receipts, disbursements, gains, losses,
capital, retained earnings and shares. The books of account shall at all
reasonable times be open to inspection by any Trustee.

The Treasurer shall deposit all monies and other valuables in the
name and to the credit of the Trust with such depositaries as may be designated
by the Board of Trustees. He shall disburse the funds of the Trust as may be
ordered by the Board of Trustees, shall render to the President and Trustees,
whenever they request it, an account of all of his transactions as chief
financial officer and of the financial condition of the Trust and shall have
other powers and perform such other duties as may be prescribed by the Board of
Trustees or these By-Laws.

ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS

Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee, officer, employee or
other agent of this Trust or is or was serving at the request of this Trust as a
Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.

Section 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify
any person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed: (a) in the case of conduct in his official
capacity as a Trustee of the Trust, that his conduct was in the Trust's best
interests and (b), in all other cases, that his conduct was at least not opposed
to the Trust's best interests and (c) in the case of a criminal proceeding, that
he had no reasonable cause to believe the conduct of that person was unlawful.
The termination of any proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person did not act in good faith and in a manner which the
person reasonably believed to be in the best interests of this Trust or that the
person had reasonable cause to believe that the person's conduct was unlawful.

Section 3. ACTIONS BY THE TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action by or in the right of this Trust to
procure a judgment in its favor by reason of the fact that that person is or was
an agent of this Trust, against expenses actually and reasonably incurred by
that person in connection with the defense or settlement of that action if that
person acted in good faith, in a manner that person believed to be in the best
interests of this Trust and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances.

Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any
provision to the contrary contained herein, there shall be no right to
indemnification for any liability arising by reason of willful misfeasance, bad
faith, gross negligence, or the reckless disregard of the duties involved in the
conduct of the agent's office with this Trust.

No indemnification shall be made under Sections 2 or 3 of this
Article:

(a) In respect of any claim, issue, or matter as to which that
person shall have been adjudged to be liable on the basis that
personal benefit was improperly received by him, whether or
not the benefit resulted from an action taken in the person's
official capacity; or

(b) In respect of any claim, issue or matter as to which that person
shall have been adjudged to be liable in the performance of that
person's duty to this Trust, unless and only to the extent that
the court in which that action was brought shall determine upon
application that in view of all the circumstances of the case,
that person was not liable by reason of the disabling conduct set
forth in the preceding paragraph and is fairly and reasonably
entitled to indemnity for the expenses which the court shall
determine; or

(c) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval,
or of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval, unless the required approval set forth in Section 6
of this Article is obtained.

Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent
of this Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith, provided that the Board of
Trustees, including a majority who are disinterested, non-party Trustees, also
determines that based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this Article.

Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of
this Article, any indemnification under this Article shall be made by this Trust
only if authorized in the specific case on a determination that indemnification
of the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:

(a) A majority vote of a quorum consisting of Trustees who are not
parties to the proceeding and are not interested persons of
the Trust (as defined in the Investment Company Act of 1940);
or

(b) A written opinion by an independent legal counsel.

Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding upon a written undertaking by or on behalf of the agent, to repay the
amount of the advance if it is ultimately determined that he or she is not
entitled to indemnification., together with at least one of the following as a
condition to the advance: (i) security for the undertaking; or (ii) the
existence of insurance protecting the Trust against losses arising by reason of
any lawful advances; or (iii) a determination by a majority of a quorum of
Trustees who are not parties to the proceeding and are not interested persons of
the Trust, or by an independent legal counsel in a written opinion, based on a
review of readily available facts that there is reason to believe that the agent
ultimately will be found entitled to indemnification. Determinations and
authorizations of payments under this Section must be made in the manner
specified in Section 6 of this Article for determining that the indemnification
is permissible.

Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this
Article shall affect any right to indemnification to which persons other than
Trustees and officers of this Trust or any subsidiary hereof may be entitled by
contract or otherwise.

Section 9. LIMITATIONS. No indemnification or advance shall be made under
this Article, except as provided in Sections 5 or 6 in any circumstances where
it appears:

(a) That it would be inconsistent with a provision of the
Agreement and Declaration of Trust of the Trust, a resolution
of the shareholders, or an agreement in effect at the time of
accrual of the alleged cause of action asserted in the
proceeding in which the expenses were incurred or other
amounts were paid which prohibits or otherwise limits
indemnification; or

(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.

Section 10. INSURANCE. Upon and in the event of a determination by
the Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent of this Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that this Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article and the Agreement and Declaration of Trust of the
Trust.

Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does
not apply to any proceeding against any Trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.

ARTICLE VII
RECORDS AND REPORTS

Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. This Trust
shall keep at its principal executive office or at the office of its transfer
agent or registrar, if either be appointed and as determined by resolution of
the Board of Trustees, a record of its shareholders, giving the names and
addresses of all shareholders and the number and series of shares held by each
shareholder.

Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall
keep at its principal executive office the original or a copy of these By-Laws
as amended to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours.

Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The
accounting books and records and minutes of proceedings of the shareholders and
the Board of Trustees and any committee or committees of the Board of Trustees
shall be kept at such place or places designated by the Board of Trustees or in
the absence of such designation, at the principal executive office of the Trust.
The minutes shall be kept in written form and the accounting books and records
shall be kept either in written form or in any other form capable of being
converted into written form. The minutes and accounting books and records shall
be open to inspection upon the written demand of any shareholder or holder of a
voting trust certificate at any reasonable time during usual business hours for
a purpose reasonably related to the holder's interests as a shareholder or as
the holder of a voting trust certificate. The inspection may be made in person
or by an agent or attorney and shall include the right to copy and make
extracts.

Section 4. INSPECTION BY TRUSTEES. Every Trustee shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a Trustee may be made in person or by an agent or attorney and the
right of inspection includes the right to copy and make extracts of documents.

Section 5. FINANCIAL STATEMENTS. A copy of any financial statements
and any income statement of the Trust for each quarterly period of each fiscal
year and accompanying balance sheet of the Trust as of the end of each such
period that has been prepared by the Trust shall be kept on file in the
principal executive office of the Trust for at least twelve (12) months and each
such statement shall be exhibited at all reasonable times to any shareholder
demanding an examination of any such statement or a copy shall be mailed to any
such shareholder.

The quarterly income statements and balance sheets referred to in
this section shall be accompanied by the report, if any, of any independent
accountants engaged by the Trust or the certificate of an authorized officer of
the Trust that the financial statements were prepared without audit from the
books and records of the Trust.

ARTICLE VIII
GENERAL MATTERS

Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed in such manner and by such person or persons as shall be designated
from time to time in accordance with the resolution of the Board of Trustees.

Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of
Trustees, except as otherwise provided in these By-Laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Trust and this authority may be
general or confined to specific instances; and unless so authorized or ratified
by the Board of Trustees or within the agency power of an officer, no officer,
agent, or employee shall have any power or authority to bind the Trust by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.

Section 3. CERTIFICATES FOR SHARES. A certificate or certificates
for shares of beneficial interest in any series of the Trust may be issued to a
shareholder upon his request when such shares are fully paid. All certificates
shall be signed in the name of the Trust by the Chairman of the Board or the
President or Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or any Assistant Secretary, certifying the number of shares and
the series of shares owned by the shareholders. Any or all of the signatures on
the certificate may be facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed on a
certificate shall have ceased to be that officer, transfer agent, or registrar
before that certificate is issued, it may be issued by the Trust with the same
effect as if that person were an officer, transfer agent or registrar at the
date of issue. Notwithstanding the foregoing, the Trust may adopt and use a
system of issuance, recordation and transfer of its shares by electronic or
other means.

Section 4. LOST CERTIFICATES. Except as provided in this Section 4,
no new certificates for shares shall be issued to replace an old certificate
unless the latter is surrendered to the Trust and cancelled at the same time.
The Board of Trustees may in case any share certificate or certificate for any
other security is lost, stolen, or destroyed, authorize the issuance of a
replacement certificate on such terms and conditions as the Board of Trustees
may require, including a provision for indemnification of the Trust secured by a
bond or other adequate security sufficient to protect the Trust against any
claim that may be made against it, including any expense or liability on account
of the alleged loss, theft, or destruction of the certificate or the issuance of
the replacement certificate.

Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST.
The Chairman of the Board, the President or any Vice President or any other
person authorized by resolution of the Board of Trustees or by any of the
foregoing designated officers, is authorized to vote or represent on behalf of
the Trust any and all shares of any corporation, partnership, trusts, or other
entities, foreign or domestic, standing in the name of the Trust. The authority
granted may be exercised in person or by a proxy duly executed by such
designated person.

Section 6. FISCAL YEAR. The fiscal year of the Trust shall be fixed
and refixed or changed from time to time by resolution of the Trustees. The
fiscal year of the Trust shall be the taxable year of each Series of the Trust.

ARTICLE IX
AMENDMENTS

Section 1. AMENDMENT BY SHAREHOLDERS. These By-Laws may be amended
or repealed by the affirmative vote or written consent of a majority of the
outstanding shares entitled to vote, except as otherwise provided by applicable
law or by the Agreement and Declaration of Trust of the Trust or these By-Laws.

Section 2. AMENDMENT BY TRUSTEES. Subject to the right of
shareholders as provided in Section 1 of this Article to adopt, amend or repeal
By-Laws, and except as otherwise provided by applicable law or by the Agreement
and Declaration of Trust of the Trust, these By-Laws may be adopted, amended, or
repealed by the Board of Trustees.

Section 3. INCORPORATION BY REFERENCE INTO AGREEMENT AND DECLARATION
OF TRUST OF THE TRUST. These By-Laws and any amendments thereto shall be
incorporated by reference to the Agreement and Declaration of Trust of the
Trust.

CERTIFICATE OF SECRETARY

I, Deborah R. Gatzek, Secretary of Franklin International Trust, a
business trust organized under the laws of the State of Delaware, do hereby
certify that the following resolution was adopted by a majority of the
trustees present at a meeting held at the offices of the trust at 777
Mariners Island Boulevard, San Mateo, California, on April 19, 1994:

WHEREAS, the Board of Trustees has determined that it is advisable and
in the best interests of the shareholders of the Trust to revise the
Trust's By-Laws to specifically provide for the use of proxies which
are communicated by an electronic, telephonic, computerized or
telecommunications method;

NOW THEREFORE, BE IT RESOLVED, that Section 10 of Article II is hereby
resolved to read as follows:

"Section 10. PROXIES. Every person entitled to vote for Trustees
or on any other matter shall have the right to do so either in
person or by one or more agents. Except as otherwise provided in
the Agreement and Declaration of Trust or these By-Laws, Matters
relating to the giving, voting or validity of proxies will be
governed by the Delaware General Corporation Law relating to
proxies, and Delaware judicial interpretations thereunder, as if
the Trust were a Delaware corporation and Shareholders of the
Trust were shareholders of a Delaware corporation."

IN WITNESS WHEREOF, I have subscribed my name this 27th day of October, 1994.

/s/ Deborah R. Gatzek
Deborah R. Gatzek
Secretary

FRANKLIN INTERNATIONAL TRUST

MANAGEMENT AGREEMENT

THIS MANAGEMENT AGREEMENT made between FRANKLIN INTERNATIONAL TRUST, a
Delaware business trust, hereinafter called the "Trust", and FRANKLIN
ADVISERS, INC., a California corporation, hereinafter called the "Manager."

WHEREAS, the Trust has been organized and intends to operate as an
investment company registered under the Investment Company Act of 1940 (the
"1940 Act") for the purpose of investing and reinvesting its assets in
securities, as set forth in its Agreement and Declaration of Trust, its
By-Laws and its Registration Statements under the 1940 Act and the Securities
Act of 1933, all as heretofore and hereafter amended and supplemented; and
the Trust desires to avail itself of the services, information, advice,
assistance and facilities of an investment manager and to have an investment
manager perform various management, statistical, research, investment
advisory and other services for each of the funds currently or hereafter
organized as separate series of the Trust (the "Funds"); and,

WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, is engaged in the business of rendering
management, investment advisory, counselling and supervisory services to
investment companies and other investment counselling clients, and desires to
provide these services to the Funds.

NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is mutually agreed as follows:

l. Employment of the Manager. The Trust hereby employs the Manager to
manage the investment and reinvestment of each Fund's assets and to
administer its affairs, subject to the direction of the Board of Trustees and
the officers of the Trust, for the period and on the terms hereinafter set
forth. The Manager hereby accepts such employment and agrees during such
period to render the services and to assume the obligations herein set forth
for the compensation herein provided. The Manager shall for all purposes
herein be deemed to be an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise), have no
authority to act for or represent the Funds in any way or otherwise be deemed
an agent of the Funds or the Trust.

2. Obligations of and Services to be Provided by the Manager. The
Manager undertakes to provide the services hereinafter set forth and to
assume the following obligations:

A. Administrative Services. The Manager shall furnish to each
of the Funds adequate (i) office space, which may be space within the offices
of the Manager or in such other place as may be agreed upon from time to
time, (ii) office furnishings, facilities and equipment as may be reasonably
required for managing the affairs and conducting the business of the Funds,
including conducting correspondence and other communications with the
shareholders of the Funds, maintaining all internal bookkeeping, accounting
and auditing services and records in connection with the Funds' investment
and business activities. The Manager shall employ or provide and compensate
the executive, secretarial and clerical personnel necessary to provide such
services. The Manager shall also compensate all officers and employees of
the Trust who are officers or employees of the Manager or its affiliates.

B. Investment Management Services.

(a) The Manager shall manage the Funds' assets subject to
and in accordance with the respective investment objectives and policies of
each Fund and any directions which the Trust's Board of Trustees may issue
from time to time. In pursuance of the foregoing, the Manager shall make all
determinations with respect to the investment of the Funds' assets and the
purchase and sale of their investment securities, and shall take such steps
as may be necessary to implement the same. Such determinations and services
shall include determining the manner in which any voting rights, rights to
consent to corporate action and any other rights pertaining to the Funds'
investment securities shall be exercised. The Manager shall render or cause
to be rendered regular reports to the Trust, at regular meetings of its Board
of Trustees and at such other times as may be reasonably requested by the
Trust's Board of Trustees, of (i) the decisions made with respect to the
investment of the Funds' assets and the purchase and sale of their investment
securities, (ii) the reasons for such decisions and (iii) the extent to which
those decisions have been implemented.

(b) The Manager, subject to and in accordance with any
directions which the Trust's Board of Trustees may issue from time to time,
shall place, in the name of the Funds, orders for the execution of the Funds'
securities transactions. When placing such orders the Manager shall seek to
obtain the best net price and execution for the Funds, but this requirement
shall not be deemed to obligate the Manager to place any order solely on the
basis of obtaining the lowest commission rate if the other standards set
forth in this section have been satisfied. The parties recognize that there
are likely to be many cases in which different brokers are equally able to
provide such best price and execution and that, in selecting among such
brokers with respect to particular trades, it is desirable to choose those
brokers who furnish research, statistical, quotations and other information
to the Funds and the Manager in accord with the standards set forth below.
Moreover, to the extent that it continues to be lawful to do so and so long
as the Board of Trustees determines that the Funds will benefit, directly or
indirectly, by doing so, the Manager may place orders with a broker who
charges a commission for that transaction which is in excess of the amount of
commission that another broker would have charged for effecting that
transaction, provided that the excess commission is reasonable in relation to
the value of "brokerage and research services" (as defined in Section 28(e)
(3) of the Securities Exchange Act of 1934) provided by that broker.

Accordingly, the Trust and the Manager agree that the Manager shall select
brokers for the execution of the Funds' transactions from among:

(i) Those brokers and dealers who provide
quotations and other services to the Funds,
specifically including the quotations necessary to
determine the Funds' net assets, in such amount of
total brokerage as may reasonably be required in
light of such services; and

(ii) Those brokers and dealers who supply research,
statistical and other data to the Manager or its
affiliates which the Manager or its affiliates may
lawfully and appropriately use in their investment
advisory capacities, which relate directly to
securities, actual or potential, of the Funds, or
which place the Manager in a better position to make
decisions in connection with the management of the
Funds' assets and securities, whether or not such
data may also be useful to the Manager and its
affiliates in managing other portfolios or advising
other clients, in such amount of total brokerage as
may reasonably be required. Provided that the Trust's
officers are satisfied that the best execution is
obtained, the sale of shares of the Funds may also be
considered as a factor in the selection of
broker-dealers to execute the Funds' portfolio
transactions.

(c) It is acknowledged that the Manager may contract with
one or more firms to undertake some or all of the manager's investment
management services as set forth herein pursuant to an agreement which is
subject to substantially the same provisions as contained in paragraphs 6, 7
and 10 herein.

(d) When the Manager has determined that any of the Funds
should tender securities pursuant to a "tender offer solicitation," Franklin
Distributors, Inc. ("Distributors") shall be designated as the "tendering
dealer" so long as it is legally permitted to act in such capacity under the
federal securities laws and rules thereunder and the rules of any securities
exchange or association of which Distributors may be a member. Neither the
Manager nor Distributors shall be obligated to make any additional
commitments of capital, expense or personnel beyond that already committed
(other than normal periodic fees or payments necessary to maintain its
corporate existence and membership in the National Association of Securities
Dealers, Inc.) as of the date of this Agreement. This Agreement shall not
obligate the Manager or Distributors (i) to act pursuant to the foregoing
requirement under any circumstances in which they might reasonably believe
that liability might be imposed upon them as a result of so acting, or (ii)
to institute legal or other proceedings to collect fees which may be
considered to be due from others to it as a result of such a tender, unless
the applicable Fund shall enter into an agreement with the Manager and/or
Distributors to reimburse them for all such expenses connected with
attempting to collect such fees, including legal fees and expenses and that
portion of the compensation due to their employees which is attributable to
the time involved in attempting to collect such fees.

(e) The Manager shall render regular reports to the
Trust, not more frequently than quarterly, of how much total brokerage
business has been placed by the Manager with brokers falling into each of the
categories referred to above and the manner in which the allocation has been
accomplished.

(f) The Manager agrees that no investment decision will
be made or influenced by a desire to provide brokerage for allocation in
accordance with the foregoing, and that the right to make such allocation of
brokerage shall not interfere with the Manager's paramount duty to obtain the
best net price and execution for each of the Funds.

C. Provision of Information Necessary for Preparation of
Securities Registration Statements, Amendments and Other Materials. The Manager,
its officers and employees will make available and provide accounting and
statistical information required by the Funds in the preparation of registration
statements, reports and other documents required by federal and state securities
laws and with such information as the Funds may reasonably request for use in
the preparation of such documents or of other materials necessary or helpful for
the underwriting and distribution of the Funds' shares.

D. Other Obligations and Services. The Manager shall make its
officers and employees available to the Board of Trustees and officers of the
Trust for consultation and discussions regarding the administration and
management of the Funds and their investment activities.

3. Expenses of the Funds. It is understood that each Fund will pay all
of its own expenses other than those expressly assumed by the Manager herein,
which expenses payable by the Funds shall include:

A. Fees and expenses paid to the Manager as provided herein;

B. Expenses of all audits by independent public accountants;

C. Expenses of transfer agent, registrar, custodian, dividend
disbursing agent and shareholder record-keeping services, including the expenses
of issue, repurchase or redemption of their shares;

D. Expenses of obtaining quotations for calculating the value of
each Fund's net assets;

E. Salaries and other compensations of executive officers of the
Trust who are not officers, directors, stockholders or employees of the Manager
or its affiliates;

F. Taxes levied against the Funds;

G. Brokerage fees and commissions in connection with the purchase
and sale of securities for each Fund;.

H. Costs, including the interest expense, of borrowing
money;

I. Costs incident to meetings of Board of Trustees and
shareholders of each Fund, reports to each Fund's shareholders, the filing of
reports with regulatory bodies and the maintenance of each Fund's and the
Trust's legal existence;

J. Legal fees, including the legal fees related to the
registration and continued qualification of each Fund's shares for sale;

K. Trustees' fees and expenses to trustees who are not
directors, officers, employees or stockholders of the Manager or any of its
affiliates;

L. Costs and expense of registering and maintaining the
registration of the Funds and their shares under federal and any applicable
state laws; including the printing and mailing of prospectuses to their
shareholders;

M. Trade association dues; and

N. Each Fund's pro rata portion of fidelity bond, errors and
omissions, and trustees and officer liability insurance premiums.

4. Compensation of the Manager. Each Fund shall pay a monthly
management fee in cash to the Manager based upon a percentage of the value of
the respective Fund's net assets, calculated as set forth below, as
compensation for the services rendered and obligations assumed by the
Manager, during the preceding month, on the first business day of the month
in each year. The initial management fee under this Agreement shall be
payable on the first business day of the first month following the effective
date of this Agreement, and shall be reduced by the amount of any advance
payments made by the Funds relating to the previous month.

A. For purposes of calculating such fee, the value of the net
assets of each Fund shall be the average daily net assets of each Fund during
each month, determined in the same manner as each Fund uses to compute the
value of its net assets in connection with the determination of the net asset
value of its shares, all as set forth more fully in the Trust's current
prospectus and statement of additional information. The rate of the monthly
fee payable to the Manager by each of the Funds shall be based upon the
following annual rates:

1.0% of the value of net assets up to and including
$100,000,000;

0.90% of the value of net assets over $100,000,000 up to
and including $250,000,000;

0.80% of the value of net assets over $250,000,000 up to
and including $500,000,000; and

0.75% of the value of net assets over $500,000,000.

B. The management fee payable by each Fund shall be reduced or
eliminated to the extent that Distributors has actually received cash
payments of tender offer solicitation fees less certain costs and expenses
incurred in connection therewith as set forth in paragraph 2.B.(c) of this
Agreement. The Manager may, from time to time, voluntarily reduce or waive
any management fee due to it hereunder.

C. If this Agreement is terminated prior to the end of any
month, the monthly management fee shall be prorated for the portion of any
month in which this Agreement is in effect which is not a complete month
according to the proportion which the number of calendar days in the fiscal
quarter during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within 10 days after the
date of termination.

5. Activities of the Manager. The services of the Manager to the
Funds hereunder are not to be deemed exclusive, and the Manager and any of
its affiliates shall be free to render similar services to others. Subject
to and in accordance with the Agreement and Declaration of Trust and By-Laws
of the Trust and Section 10(a) of the 1940 Act, it is understood that
trustees, officers, agents and shareholders of the Trust are or may be
interested in the Manager or its affiliates as directors, officers, agents or
stockholders; that directors, officers, agents or stockholders of the Manager
or its affiliates are or may be interested in the Trust as trustees,
officers, agents, shareholders or otherwise; that the Manager or its
affiliates may be interested in the Funds as shareholders or otherwise; and
that the effect of any such interests shall be governed by said Agreement and
Declaration of Trust, By-Laws and the 1940 Act.

6. Liabilities of the Manager.

A. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the
part of the Manager, the Manager shall not be subject to liability to the
Trust or any of the Funds or to any shareholder of the Funds for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security by any of the Funds.

B. Notwithstanding the foregoing, the Manager agrees to
reimburse the Trust for any and all costs, expenses, and counsel and
trustees' fees reasonably incurred by the Trust in the preparation, printing
and distribution of proxy statements, amendments to its Registration
Statement, holdings of meetings of its shareholders or trustees, the conduct
of factual investigations, any legal or administrative proceedings (including
any applications for exemptions or determinations by the Securities and
Exchange Commission) which the Trust incurs as the result of action or
inaction of the Manager or any of its affiliates or any of their officers,
directors, employees or stockholders where the action or inaction
necessitating such expenditures (i) is directly or indirectly related to any
transactions or proposed transaction in the stock or control of the Manager
or its affiliates (or litigation related to any pending or proposed or future
transaction in such shares or control) which shall have been undertaken
without the prior, express approval of the Trust's Board of Trustees; or,
(ii) is within the control of the Manager or any of its affiliates or any of
their officers, directors, employees or stockholders. The Manager shall not
be obligated pursuant to the provisions of this Subparagraph 6(B), to
reimburse the Trust for any expenditures related to the institution of an
administrative proceeding or civil litigation by the Trust or a shareholder
seeking to recover all or a portion of the proceeds derived by any
stockholder of the Manager or any of its affiliates from the sale of his
shares of the Manager, or similar matters. So long as this Agreement is in
effect, the Manager shall pay to the Trust the amount due for expenses
subject to this Subparagraph 6(B) within 30 days after a bill or statement
has been received by the Manager therefor. This provision shall not be
deemed to be a waiver of any claim the Trust may have or may assert against
the Manager or others for costs, expenses or damages heretofore incurred by
the Trust or for costs, expenses or damages the Trust may hereafter incur
which are not reimbursable to it hereunder.

C. No provision of this Agreement shall be construed to protect
any trustee or officer of the Trust, or director or officer of the Manager,
from liability in violation of Sections 17(h) and (i) of the 1940 Act.

7. Renewal and Termination.

A. This Agreement shall become effective on the date written
below and shall continue in effect for two (2) years thereafter, unless
sooner terminated as hereinafter provided and shall continue in effect
thereafter as to each Fund for periods not exceeding one (1) year so long as
such continuation is approved at least annually (i) by a vote of a majority
of the outstanding voting securities of each Fund or by a vote of the Board
of Trustees of the Trust, and (ii) by a vote of a majority of the Trustees of
the Trust who are not parties to the Agreement (other than as Trustees of the
Trust), cast in person at a meeting called for the purpose of voting on the
Agreement.

B. This Agreement:

(i) may at any time be terminated with respect to any of
the Funds without the payment of any penalty either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund seeking to terminate the Agreement, on 60 days'
written notice to the Manager;

(ii) shall immediately terminate with respect to all of
the Funds in the event of its assignment; and

(iii) may be terminated by the Manager with respect to any
of the Funds on 60 days' written notice to the applicable Fund.

C. As used in this Paragraph the terms "assignment,"
"interested person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth for any such terms in the 1940
Act.

D. Any notice under this Agreement shall be given in writing
addressed and delivered, or mailed post-paid, to the other party at any
office of such party.

8. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.

9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 20th day of September, 1991.

FRANKLIN INTERNATIONAL TRUST

/s/ Charles B. Johnson
By: Charles B. Johnson

FRANKLIN ADVISERS, INC.

/s/ Rupert H. Johnson
By: Rupert H. Johnson

SUBADVISORY AGREEMENT

FRANKLIN INTERNATIONAL TRUST
(on behalf of the Franklin Pacific Growth Fund)

THIS SUBADVISORY AGREEMENT made as of the 1st day of January 1993, by
and between FRANKLIN ADVISERS, INC., a corporation organized and existing
under the laws of the State of California (hereinafter called "FAI"), and
TEMPLETON INVESTMENT COUNSEL, INC., a Florida corporation (hereinafter called
"TICI").

W I T N E S S E T H

WHEREAS, FAI is registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act"), and is engaged in the
business of supplying investment advice, and investment management services,
as an independent contractor; and

WHEREAS, FAI has been retained to render investment management services
to Franklin Pacific Growth Fund (the "Fund"), a series of Franklin
International Trust (the "Trust"), an investment management company
registered with the U.S. Securities and Exchange Commission (the "SEC")
pursuant to the Investment Company Act of 1940 (the "1940 Act"); and

WHEREAS, FAI desires to retain TICI to render investment advisory,
research and related services to the Fund pursuant to the terms and
provisions of this Agreement, and TICI is interested in furnishing said
services.

NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto, intending to be legally
bound hereby, mutually agree as follows:

1. FAI hereby retains TICI and TICI hereby accepts such engagement,
to furnish certain investment advisory services with respect to the assets of
the Fund, as more fully set forth herein.

(a) Subject to the overall policies, control, direction and
review of the Trust's Board of Trustees (the "Board") and to the instructions
and supervision of FAI, TICI will provide a continuous investment program for
the Fund, including allocation of the Fund's assets among the various
securities markets of the world and, investment research and advice with
respect to securities and investments and cash equivalents in the Fund. So
long as the Board and FAI determine, on no less frequently than an annual
basis, to grant the necessary delegated authority to TICI, and subject to
paragraph (b) below, TICI will determine what securities and other
investments will be purchased, retained or sold by the Fund, and will place
all purchase and sale orders on behalf of the Fund except that orders
regarding U.S. domiciled securities and money market instruments may also be
placed on behalf of the Fund by FAI.

(b) In performing these services, TICI shall adhere to the
Fund's investment objectives, policies and restrictions as contained in its
Prospectus and Statement of Additional Information, and in the Trust's
Declaration of Trust, and to the investment guidelines most recently
established by FAI and shall comply with the provisions of the 1940 Act and
the rules and regulations of the SEC thereunder in all material respects and
with the provisions of the United States Internal Revenue Code of 1986, as
amended, which are applicable to regulated investment companies.

(c) Unless otherwise instructed by FAI or the Board, and subject
to the provisions of this Agreement and to any guidelines or limitations
specified from time to time by FAI or by the Board, TICI shall report daily
all transactions effected by TICI on behalf of the Fund to FAI and to other
entities as reasonably directed by FAI or the Board.

(d) TICI shall provide the Board at least quarterly, in advance
of the regular meetings of the Board, a report of its activities hereunder on
behalf of the Fund and its proposed strategy for the next quarter, all in
such form and detail as requested by the Board. TICI shall also make an
investment officer available to attend such meetings of the Board as the
Board may reasonably request.

(e) In carrying out its duties hereunder, TICI shall comply with
all reasonable instructions of the Fund or FAI in connection therewith. Such
instructions may be given by letter, telex, telefax or telephone confirmed by
telex, by the Board or by any other person authorized by a resolution of the
Board, provided a certified copy of such resolution has been supplied to TICI.

2. In performing the services described above, TICI shall use its
best efforts to obtain for the Fund the most favorable price and execution
available. Subject to prior authorization of appropriate policies and
procedures by the Board, TICI may, to the extent authorized by law and in
accordance with the terms of the Fund's Prospectus and Statement of
Additional Information, cause the Fund to pay a broker who provides brokerage
and research services an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker
would have charged for effecting that transaction, in recognition of the
brokerage and research services provided by the broker. To the extent
authorized by applicable law, TICI shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of such action.

3. (a) TICI shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent FAI or the Fund in any
way, or in any way be deemed an agent for FAI or the Fund.

(b) It is understood that the services provided by TICI are not
to be deemed exclusive. FAI acknowledges that TICI may have investment
responsibilities, or render investment advice to, or perform other investment
advisory services, for individuals or entities including other investment
companies registered pursuant to the 1940 Act, ("Clients") which may invest
in the same type of securities as the Fund. FAI agrees that TICI may give
advice or exercise investment responsibility and take such other action with
respect to such Clients which may differ from advice given or the timing or
nature of action taken with respect to the Fund.

4. TICI agrees to use its best efforts in performing the services to
be provided by it pursuant to this Agreement.

5. FAI has furnished or will furnish to TICI as soon as available
copies properly certified or authenticated of each of the following documents:

(a) the Trust's Declaration of Trust, as filed with the
Secretary of State of the State of Delaware on March 22, 1991, and any other
organizational documents and all amendments thereto or restatements thereof;

(b) resolutions of the Trust's Board of Trustees authorizing the
appointment of TICI and approving this Agreement;

(c) the Trust's original Notification of Registration on Form
N-8A under the 1940 Act as filed with the SEC and all amendments thereto;

(d) the Trust's current Registration Statement on Form N-1A
under the Securities Act of 1933, as amended and under the 1940 Act as filed
with the SEC, and all amendments thereto, as it relates to the Fund;

(e) the Fund's most recent Prospectus and Statement of
Additional Information; and

(f) the Investment Management Agreement between the Fund and FAI.

FAI will furnish TICI with copies of all amendments of or supplements to the
foregoing documents.

6. TICI will treat confidentially and as proprietary information of
the Fund all records and other information relative to the Fund and prior,
present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in
writing by the Fund, which approval shall not be unreasonably withheld and
may not be withheld where TICI may be exposed to civil or criminal contempt
proceedings for failure to comply when requested to divulge such information
by duly constituted authorities, or when so requested by the Fund.

7. FAI shall pay a monthly fee in cash to TICI based upon a
percentage of the value of the Fund's net assets, calculated as set forth
below, on the first business day of each month in each year as compensation
for the services rendered and obligations assumed by TICI during the
preceding month. The advisory fee under this Agreement shall be payable on
the first business day of the first month following the effective date of
this Agreement, and shall be reduced by the amount of any advance payments
made by FAI relating to the previous month.

(a). For purposes of calculating such fee, the value of the net
assets of the Fund shall be the average daily net assets of the Fund during
each month, determined in the same manner as the Fund uses to compute the
value of its net assets in connection with the determination of the net asset
value of its shares, all as set forth more fully in the Fund's current
Prospectus. The rate of the monthly fee payable to TICI shall be based upon
the following annual rates:

.50% of the value of its average daily net assets up to and
including $100,000,000;

.40% of the value of its average daily net assets over
$100,000,000 up to and including $250,000,000;

.30% of the value of its average daily net assets over
$250,000,000 up to and including $500,000,000; and

.25% of the value of its average daily net assets over
$500,000,000.

(b) FAI and TICI shall share equally in any voluntary reduction
or waiver by FAI of the management fee due FAI under the Management
Agreements between FAI and the Fund.

(c) If this Agreement is terminated prior to the end of any
month, the monthly fee shall be prorated for the portion of any month in
which this Agreement is in effect which is not a complete month according to
the proportion which the number of calendar days in the month during which
the Agreement is in effect bears to the total number of calendar days in the
month, and shall be payable within 10 days after the date of termination.

8. Nothing herein contained shall be deemed to relieve or deprive the
Board of its responsibility for and control of the conduct of the affairs of
the Fund.

9. (a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations or duties hereunder on
the part of TICI, neither TICI nor any of its directors, officers, employees
or affiliates shall be subject to liability to FAI or the Fund or to any
shareholder of the Fund for any error of judgment or mistake of law or any
other act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security by the Fund.

(b) Notwithstanding paragraph 9(a), to the extent that FAI is
found by a court of competent jurisdiction, or the SEC or any other
regulatory agency to be liable to the Fund or any shareholder (a
"liability"), for any acts undertaken by TICI pursuant to authority delegated
as described in Paragraph 1(a), TICI shall indemnify and save FAI and each of
its affiliates, officers, directors and employees (each a "Franklin
Indemnified Party") harmless from, against, for and in respect of all losses,
damages, costs and expenses incurred by a Franklin Indemnified Party with
respect to such liability, together with all legal and other expenses
reasonably incurred by any such Franklin Indemnified Party, in connection
with such liability.

(c) No provision of this Agreement shall be construed to protect
any director or officer of FAI or TICI, from liability in violation of
Sections 17(h) or (i), respectively, of the 1940 Act.

10. During the term of this Agreement, TICI will pay all expenses
incurred by it in connection with its activities under this Agreement other
than the cost of securities (including brokerage commissions, if any)
purchased for the Fund. The Fund and FAI will be responsible for all of
their respective expenses and liabilities.

11. This Agreement shall be effective as of January 1, 1993 and shall
continue in effect for two years. It is renewable annually thereafter for
successive periods not to exceed one year each (i) by a vote of the Board or
by the vote of a majority of the outstanding voting securities of the Fund,
and (ii) by the vote of a majority of the Trustees of the Trust who are not
parties to this Agreement or interested persons thereof, cast in person at a
meeting called for the purpose of voting on such approval.

12. This Agreement may be terminated at any time, without payment of
any penalty, by the Board or by vote of a majority of the outstanding voting
securities of the Fund, upon sixty (60) days' written notice to FAI and TICI,
and by FAI or TICI upon sixty (60) days' written notice to the other party.

13. This Agreement shall terminate automatically in the event of any
transfer or assignment thereof, as defined in the 1940 Act, and in the event
of any act or event that terminates the Management Agreement between FAI and
the Fund.

14. In compliance with the requirements of Rule 31a-3 under the 1940
Act, TICI hereby agrees that all records which it maintains for the Fund are
the property of the Fund and further agrees to surrender promptly to the
Fund, or to any third party at the Fund's direction, any of such records upon
the Fund's request. TICI further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.

15. This Agreement may not be materially amended, transferred,
assigned, sold or in any manner hypothecated or pledged without the
affirmative vote or written consent of the holders of a majority of the
outstanding voting securities of the Fund and may not be amended without the
written consent of FAI and TICI.

16. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule, or otherwise, the remainder of this
Agreement shall not be affected thereby.

17. The terms "majority of the outstanding voting securities" of the
Fund and "interested persons" shall have the meanings as set forth in the
1940 Act.

18. This Agreement shall be interpreted in accordance with and
governed by the laws of the State of California of the United States of
America.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers.

FRANKLIN ADVISERS, INC.

/s/ Harmon E. Burns
By: Harmon E. Burns
Title: Senior Vice President

TEMPLETON INVESTMENT COUNSEL, INC.

/s/ Gregory E. McGowan
By: Gregory E. McGowan
Title: Senior Vice President

Franklin Pacific Growth Fund hereby acknowledges and agrees to the provisions
of paragraphs 9(a) and 10 of this Agreement.

FRANKLIN INTERNATIONAL TRUST on behalf of
FRANKLIN PACIFIC GROWTH FUND

/s/ Deborah R. Gatzek
By: Deborah R. Gatzek
Title: Secretary

SUBADVISORY AGREEMENT

FRANKLIN INTERNATIONAL TRUST
(on behalf of the Franklin International Equity Fund)

W I T N E S S E T H

WHEREAS, FAI has been retained to render investment management services
to Franklin International Equity Fund (the "Fund"), a series of Franklin
International Trust (the "Trust"), an investment management company
registered with the U.S. Securities and Exchange Commission (the "SEC")
pursuant to the Investment Company Act of 1940 (the "1940 Act"); and

NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto, intending to be legally
bound hereby, mutually agree as follows:

1. FAI hereby retains TICI and TICI hereby accepts such engagement,
to furnish certain investment advisory services with respect to the assets of
the Fund, as more fully set forth herein.

3. (a) TICI shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent FAI or the Fund in any
way, or in any way be deemed an agent for FAI or the Fund.

(b) It is understood that the services provided by TICI are not
to be deemed exclusive. FAI acknowledges that TICI may have investment
responsibilities, or render investment advice to, or perform other investment
advisory services, for individuals or entities, including other investment
companies registered pursuant to the 1940 Act, ("Clients") which may invest
in the same type of securities as the Fund. FAI agrees that TICI may give
advice or exercise investment responsibility and take such other action with
respect to such Clients which may differ from advice given or the timing or
nature of action taken with respect to the Fund.

4. TICI agrees to use its best efforts in performing the services to be
provided by it pursuant to this Agreement.

5. FAI has furnished or will furnish to TICI as soon as available
copies properly certified or authenticated of each of the following documents:

(b) resolutions of the Trust's Board of Trustees authorizing the
appointment of TICI and approving this Agreement;

(c) the Trust's original Notification of Registration on Form
N-8A under the 1940 Act as filed with the SEC and all amendments thereto;

(e) the Fund's most recent Prospectus and Statement of
Additional Information; and

(f) the Investment Management Agreement between the Fund and FAI.

FAI will furnish TICI with copies of all amendments of or supplements to the
foregoing documents.

(a) For purposes of calculating such fee, the value of the net
assets of the Fund shall be the average daily net assets of the Fund during
each month, determined in the same manner as the Fund uses to compute the
value of its net assets in connection with the determination of the net asset
value of its shares, all as set forth more fully in the Fund's current
Prospectus. The rate of the monthly fee payable to TICI shall be based upon
the following annual rates:

.50% of the value of its average daily net assets up to and
including $100,000,000;

.40% of the value of its average daily net assets over
$100,000,000 up to and including $250,000,000;

.30% of the value of its average daily net assets over
$250,000,000 up to and including $500,000,000; and

.25% of the value of its average daily net assets over
$500,000,000.

(b) FAI and TICI shall share equally in any voluntary reduction
or waiver by FAI of the management fee due FAI under the Management Agreement
between FAI and the Fund.

8. Nothing herein contained shall be deemed to relieve or deprive the
Board of its responsibility for and control of the conduct of the affairs of
the Fund.

(c) No provision of this Agreement shall be construed to protect
any director or officer of FAI or TICI, from liability in violation of
Sections 17(h) or (i), respectively, of the 1940 Act.

16. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule, or otherwise, the remainder of this
Agreement shall not be affected thereby.

17. The terms "majority of the outstanding voting securities" of the
Fund and "interested persons" shall have the meanings as set forth in the
1940 Act.

18. This Agreement shall be interpreted in accordance with and
governed by the laws of the State of California of the United States of
America.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers.

FRANKLIN ADVISERS, INC.

/s/ Harmon E. Burns
By: Harmon E. Burns
Title: Senior Vice President

TEMPLETON INVESTMENT COUNSEL, INC.

/s/ Gregory E. McGowan
By: Gregory E. McGowan
Title: Senior Vice President

Franklin International Equity Fund hereby acknowledges and agrees to the
provisions of paragraphs 9(a) and 10 of this Agreement.

FRANKLIN INTERNATIONAL TRUST on behalf of
FRANKLIN INTERNATIONAL EQUITY FUND

/s/ Deborah R. Gatzek
By: Deborah R. Gatzek
Title: Secretary

FRANKLIN INTERNATIONAL TRUST
777 Mariners Island Blvd.
San Mateo, California 94404

Franklin Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404

Re: Distribution Agreement

Gentlemen:

We are a Delaware business trust operating as an open-end management
investment company. As such, our company, Franklin International Trust
(referred to herein as the "Trust") is registered under the Investment
Company Act of 1940, (the "1940 Act"), and its shares are registered under
the Securities Act of 1933 (the "1933 Act"). We desire to begin issuing our
authorized but unissued shares of beneficial interest (the "Shares") to
authorized persons in accordance with applicable Federal and State securities
laws. Shares will be made available for the each of the separate Funds
(referred to herein as a "Fund" or collectively as the "Funds") formed as a
Series of the Trust.

You have informed us that your company is registered as a broker-dealer under
the provisions of the Securities Exchange Act of 1934 and that your company
is a member of the National Association of Securities Dealers, Inc. You have
indicated your desire to act as the exclusive selling agent and distributor
for the Shares. We have been authorized to execute and deliver this
Agreement to you by a resolution of our Board of Trustees passed at a meeting
at which a majority of our Trustees, including a majority who are not
otherwise interested persons of the Trust and who are not interested persons
of our investment adviser, its related organizations or with you or your
related organizations, were present and voted in favor of the said resolution
approving this Agreement.

1. Appointment of Underwriter. Upon the execution of this Agreement
and in consideration of the agreements on your part herein expressed and upon
the terms and conditions set forth herein, we hereby appoint you as the
exclusive sales agent for our Shares (except for sales made directly by the
Funds without sales charge) and agree that we will deliver such Shares as you
may sell. You agree to use your best efforts to promote the sale of Shares,
but are not obligated to sell any specific number of Shares.

2. Independent Contractor. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no
authority or power to obligate or bind us by your actions, conduct or
contracts except that you are authorized to accept orders for the purchase or
repurchase of Shares as our agent. You may appoint sub-agents or distribute
through dealers or otherwise as you may determine from time to time, but this
Agreement shall not be construed as authorizing any dealer or other person to
accept orders for sale or repurchase on our behalf or otherwise act as our
agent for any purpose. You may allow such sub-agents or dealers such
commissions or discounts not exceeding the total sales commission as you
shall deem advisable so long as any such commissions or discounts are set
forth in our current prospectus to the extent required by the applicable
Federal and State securities laws.

3. Offering Price. The Shares of the Funds shall be offered for sale
at a price equivalent to their respective net asset value plus a variable
percentage of the public offering price as sales commission. On each
business day on which the New York Stock Exchange is open for business, we
will furnish you with the net asset value of the Shares which shall be
determined in accordance with our then effective prospectus. All Shares will
be sold in the manner set forth in our then effective prospectus.

4. Sales Commission. You shall be entitled to charge a sales
commission on the sale of our Shares in the amount set forth in our then
effective prospectus. Such commission (subject to any quantity or other
discounts or eliminations of commission as set forth in our then current
effective prospectus) shall be an amount mutually agreed upon between us and
equal to the difference between the net asset value and the public offering
price of our Shares.

5. Terms and Conditions of Sales. Shares of the Funds shall be
offered for sale only in those jurisdictions where they have been properly
registered or are exempt from registration, and only to those groups of
people which the Board of Trustees may from time to time determine to be
eligible to purchase such shares.

6. Payment of Shares. At or prior to the time of delivery of any of
our Shares you will pay or cause to be paid to our Custodian or its
successor, for our account, an amount in cash equal to the net asset value of
such Shares. In the event that you pay for Shares sold by you prior to your
receipt of payment from purchasers you are authorized to reimburse yourself
for the net asset value of such Shares from the offering price of such Shares
when received by you.

7. Purchases for Your Own Account. You shall not purchase our Shares
for your own account for purposes of resale to the public, but you may
purchase Shares for your own investment account upon your written assurance
that the purchase is for investment purposes and that the Shares will not be
resold except through redemption by us.

8. Sale of Shares to Affiliates. You may sell our Shares at net
asset value to certain of your and our affiliated persons pursuant to the
applicable provisions of the Federal Securities Statutes and Rules or
Regulations thereunder (the "Rules and Regulations"), including Rule 22d-1
under the 1940 Act, as amended from time to time.

9. Allocation of Expenses. We will pay the expenses:

(a) Of the preparation of the audited and certified financial
statements of our company to be included in any Post-Effective
Amendments ("Amendments") to our Registration Statement under the
1933 Act or 1940 Act, including the prospectus and statement of
additional information included therein;

(b) Of the preparation, including legal fees, and of printing all
Amendments or supplements filed with the Securities and Exchange
Commission, including the copies of the prospectuses included in
the Amendments and the first 10 copies of the definitive
prospectuses or supplements thereto, other than those
necessitated by your (including your "Parent's") activities or
Rules and Regulations related to your activities where such
Amendments or supplements result in expenses which we would not
otherwise have incurred; and

(c) Of the preparation, printing and distribution of any reports or
communications which we send to our existing shareholders.

(d) Of filing and other fees to Federal and State securities
regulatory authorities necessary to continue offering our Shares
of any of the Funds;

You will pay the expenses:

(a) Of printing the copies of the prospectuses and any supplements
thereto and statement of additional information which are
necessary to continue to offer our Shares;

(b) Of the preparation, excluding legal fees, and printing of all
Amendments and supplements to our prospectuses and statement of
additional information if the Amendment or supplement arises from
your (including your "Parent's") activities or Rules and
Regulations related to your activities and those expenses would
not otherwise have incurred by us;

(c) Of printing additional copies, for use by you as sales literature,
of reports or other communications which we have prepared for
distribution to our existing shareholders; and

(d) Incurred by you in advertising, promoting and selling our Shares.

10. Furnishing of Information. We will furnish to you such
information with respect to the Funds and their Shares, in such form and
signed by such of our officers as you may reasonably request, and we warrant
that the statements therein contained when so signed will be true and
correct. We will also furnish you with such information and will take such
action as you may reasonably request in order to qualify our Shares for sale
to the public under the Blue Sky Laws of jurisdictions in which you may wish
to offer them. We will furnish you with annual audited financial statements
of our books and accounts certified by independent public accountants, with
semi-annual financial statements prepared by us, and, from time to time, with
such additional information regarding our financial condition as you may
reasonably request.

11. Conduct of Business. Other than our currently effective
prospectus, you will not issue any sales material or statements except
literature or advertising which conforms to the requirements of Federal and
State securities laws and regulations and which have been filed, where
necessary, with the appropriate regulatory authorities. You will furnish us
with copies of all such materials prior to their use and no such material
shall be published if we shall reasonably and promptly object.

You shall comply with the applicable Federal and State laws and
regulations where our Shares are offered for sale and conduct your affairs
with us and with dealers, brokers or investors in accordance with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.

12. Redemption or Repurchase Within Seven Days. If Shares are
tendered to us for redemption or repurchase by us within seven business days
after your acceptance of the original purchase order for such Shares, you
will immediately refund to us the full sales commission (net of allowances to
dealers or brokers) allowed to you on the original sale, and will promptly,
upon receipt thereof, pay to us any refunds from dealers or brokers of the
balance of sales commissions reallowed by you. We shall notify you of such
tender for redemption within 10 days of the day on which notice of such
tender for redemption is received by us.

13. Other Activities. Your services pursuant to this Agreement shall
not be deemed to be exclusive, and you may render similar services and act as
an underwriter, distributor or dealer for other investment companies in the
offering of their shares.

14. Term of Agreement. This Agreement shall become effective on the
date of its execution, and shall remain in effect for a period of two (2)
years. The Agreement is renewable annually thereafter with respect to the
Fund for successive periods not to exceed one year (i) by a vote of a
majority of the outstanding voting securities of the Funds or by a vote of
the Board of Trustees of the Trust, and (ii) by a vote of a majority of the
trustees of the Trust who are not parties to the Agreement or interested
persons of any parties to the Agreement (other than as Trustees of the
Trust), cast in person at a meeting called for the purpose of voting on the
Agreement.

This Agreement may at any time be terminated by the Funds without the
payment of any penalty, (i) either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Funds, on 90 days' written notice to you; or (ii) by you on 90 days' written
notice to the Fund; and shall immediately terminate with respect to the Fund
in the event of its assignment.

15. Suspension of Sales. We reserve the right at all times to suspend
or limit the public offering of the Shares of the Funds upon two days'
written notice to you.

16. Miscellaneous. This Agreement shall be subject to the laws of the
State of California and shall be interpreted and construed to further promote
the operation of the Trust as an open-end investment company. As used herein
the terms "Net Asset Value", "Offering Price", "Investment Company",
"Open-End Investment Company", "Assignment", "Principal Underwriter",
"Interested Person", "Parents", "Affiliated Person", and "Majority of the
Outstanding Voting Securities" shall have the meanings set forth in the 1933
Act or the 1940 Act and the Rules and Regulations thereunder.

Nothing herein shall be deemed to protect you against any liability to us or
to our securities holders to which you would otherwise be subject by reason
of wilful misfeasance, bad faith or gross negligence in the performance of
your duties hereunder, or by reason of your reckless disregard of your
obligations and duties hereunder.

If the foregoing meets with your approval, please acknowledge your acceptance
by signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.

Very truly yours,

FRANKLIN INTERNATIONAL TRUST

/s/ Charles B. Johnson
By: Charles B. Johnson

Accepted:

FRANKLIN DISTRIBUTORS, INC.

/s/ Rupert H. Johnson, Jr.
By: Rupert H. Johnson, Jr.

DATED: September 20, 1991

DEALER AGREEMENT

Effective: May 1, 1995

Dear Securities Dealer:

Franklin/Templeton Distributors, Inc. ("we" or "us") invites you to participate
in the distribution of shares of the Franklin and Templeton mutual funds (the
"Funds") for which we now or in the future serve as principal underwriter,
subject to the terms of this Agreement. We will notify you from time to time of
the Funds which are eligible for distribution and the terms of compensation
under this Agreement. This Agreement supersedes any prior dealer agreements
between us, as stated in paragraph 18, below.

1. Licensing.

(a) You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and are presently licensed to
the extent necessary by the appropriate regulatory agency of each state in which
you will offer and sell shares of the Funds. You agree that termination or
suspension of such membership with the NASD, or of your license to do business
by any state or federal regulatory agency, at any time shall terminate or
suspend this Agreement forthwith and shall require you to notify us in writing
of such action. If you are not a member of the NASD but are a dealer subject to
the laws of a foreign country, you agree to conform to the rules of fair
practice of such association. This Agreement is in all respects subject to Rule
26 of the Rules of Fair Practice of the NASD which shall control any provision
to the contrary in this Agreement.

(b) You agree to notify us immediately in writing if at any time you are
not a member in good standing of the Securities Investor Protection Corporation
("SIPC").

2. Sales of Fund Shares. You may offer and sell shares of each Fund and class
only at the public offering price which shall be applicable to, and in effect at
the time of, each transaction. The procedures relating to all orders and the
handling of them shall be subject to the terms of the then current prospectus
and statement of additional information (hereafter, the "prospectus") and new
account application, including amendments, for each such Fund, and our written
instructions from time to time. This Agreement is not exclusive, and either
party may enter into similar agreements with third parties.

3. Duties of Dealer: In General. You agree:

(a) To act as principal, or as agent on behalf of your customers, in all
transactions in shares of the Funds except as provided in paragraph 4 hereof.
You shall not have any authority to act as agent for the issuer (the Funds), for
the Principal Underwriter, or for any other dealer in any respect, nor will you
represent to any third party that you have such authority or are acting in such
capacity.

(b) To purchase shares only from us or from your customers.

(c) To enter orders for the purchase of shares of the Funds only from us
and only for the purpose of covering purchase orders you have already received
from your customers or for your own bona fide investment.

(d) To maintain records of all sales and redemptions of shares made
through you and to furnish us with copies of such records on request.

(e) To distribute prospectuses and reports to your customers in
compliance with applicable legal requirements, except to the extent that we
expressly undertake to do so on your behalf.

(f) That you will not withhold placing customers' orders for shares so
as to profit yourself as a result of such withholding or place orders for shares
in amounts just below the point at which sales charges are reduced so as to
benefit from a higher sales charge applicable to an amount below the breakpoint.

(g) That if any shares confirmed to you hereunder are repurchased or
redeemed by any of the Funds within seven business days after such confirmation
of your original order, you shall forthwith refund to us the full concession
allowed to you on such orders. We shall forthwith pay to the appropriate Fund
our share, if any, of the "charge" on the original sale and shall also pay to
such Fund the refund from you as herein provided. We shall notify you of such
repurchase or redemption within a reasonable time after settlement. Termination
or cancellation of this Agreement shall not relieve you or us from the
requirements of this subparagraph.

(h) That if payment for the shares purchased is not received within the
time customary or the time required by law for such payment, the sale may be
canceled forthwith without any responsibility or liability on our part or on the
part of the Funds, or at our option, we may sell the shares which you ordered
back to the Funds, in which latter case we may hold you responsible for any loss
to the Funds or loss of profit suffered by us resulting from your failure to
make payment as aforesaid. We shall have no liability for any check or other
item returned unpaid to you after you have paid us on behalf of a purchaser. We
may refuse to liquidate the investment unless we receive the purchaser's signed
authorization for the liquidation.

(i) That you shall assume responsibility for any loss to the Funds
caused by a correction made subsequent to trade date, provided such correction
was not based on any error, omission or negligence on our part, and that you
will immediately pay such loss to the Funds upon notification.

(j) That if on a redemption which you have ordered, instructions in
proper form, including outstanding certificates, are not received within the
time customary or the time required by law, the redemption may be canceled
forthwith without any responsibility or liability on our part or on the part of
any Fund, or at our option, we may buy the shares redeemed on behalf of the
Fund, in which latter case we may hold you responsible for any loss to the Fund
or loss of profit suffered by us resulting from your failure to settle the
redemption.

4. Duties of Dealer: Retirement Accounts. In connection with orders for the
purchase of shares on behalf of an Individual Retirement Account, Self-Employed
Retirement Plan or other retirement accounts, by mail, telephone, or wire, you
shall act as agent for the custodian or trustee of such plans (solely with
respect to the time of receipt of the application and payments), and you shall
not place such an order until you have received from your customer payment for
such purchase and, if such purchase represents the first contribution to such a
plan, the completed documents necessary to establish the plan. You agree to
indemnify us and Franklin Templeton Trust Company and/or Templeton Funds Trust
Company as applicable for any claim, loss, or liability resulting from incorrect
investment instructions received from you which cause a tax liability or other
tax penalty.

5. Conditional Orders; Certificates. We will not accept from you any conditional
orders for shares of any of the Funds. Delivery of certificates for shares
purchased shall be made by the Funds only against constructive receipt of the
purchase price, subject to deduction for your concession and our portion of the
sales charge, if any, on such sale. No certificates will be issued unless
specifically requested.

6. Dealer Compensation.

(a) On each purchase of shares by you from us, the total sales charges
and your dealer concessions shall be as stated in each Fund's then current
prospectus, subject to NASD rules and applicable state and federal laws. Such
sales charges and dealer concessions are subject to reductions under a variety
of circumstances as described in the Funds' prospectuses. For an investor to
obtain these reductions, we must be notified at the time of the sale that the
sale qualifies for the reduced charge. If you fail to notify us of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither we nor any of the Funds will be liable for amounts necessary to
reimburse any investor for the reduction which should have been effected.

(b) In accordance with the Funds' prospectuses, we or our affiliates
may, but are not obligated to, make payments to dealers from our own resources
as compensation for certain sales which are made at net asset value and are not
subject to any contingent deferred sales charges ("Qualifying Sales"). If you
notify us of a Qualifying Sale, we may make a contingent advance payment up to
the maximum amount available for payment on the sale. If any of the shares
purchased in a Qualifying Sale are redeemed within twelve months of the end of
the month of purchase, we shall be entitled to recover any advance payment
attributable to the redeemed shares by reducing any account payable or other
monetary obligation we may owe to you or by making demand upon you for repayment
in cash. We reserve the right to withhold advances to any dealer, if for any
reason we believe that we may not be able to recover unearned advances from such
dealer. In addition, dealers will generally be required to enter into a
supplemental agreement with us with respect to such compensation and the
repayment obligation prior to receiving any payments.

7. Redemptions. Redemptions or repurchases of shares will be made at the net
asset value of such shares, less any applicable deferred sales or redemption
charges, in accordance with the applicable prospectuses. Except as permitted by
applicable law, you agree not to purchase any shares from your customers at a
price lower than the redemption or repurchase prices then computed by the Funds.
You shall, however, be permitted to sell shares for the account of the record
owner to the Funds at the repurchase price then currently in effect for such
shares and may charge the owner a fair commission for handling the transaction.

8. Exchanges. Telephone exchange orders will be effective only for shares in
plan balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. You may charge the shareholder a fair
commission for handling an exchange transaction. Exchanges from a Fund sold with
no sales charge to a Fund which carries a sales charge, and exchanges from a
Fund sold with a sales charge to a Fund which carries a higher sales charge may
be subject to a sales charge in accordance with the terms of each Fund's
prospectus. You will be obligated to comply with any additional exchange
policies described in each Fund's prospectus, including without limitation any
policy restricting or prohibiting "Timing Accounts" as therein defined.

9. Transaction Processing. All orders are subject to acceptance by us and by the
Fund or its transfer agent, and become effective only upon confirmation by us.
If required by law, each transaction shall be confirmed in writing on a fully
disclosed basis and if confirmed by us, a copy of each confirmation shall be
sent simultaneously to you if you so request. All sales are made subject to
receipt of shares by us from the Funds. We reserve the right in our discretion,
without notice, to suspend the sale of shares or withdraw the offering of shares
entirely. Telephone orders will be effected at the price(s) next computed on the
day they are received from you if, as set forth in each Fund's current
prospectus, they are received prior to the time the price of its shares is
calculated. Orders received after that time will be effected at the price(s)
computed on the next business day. All orders must be accompanied by payment in
U.S. dollars. Orders payable by check must be drawn payable in U.S. dollars on a
U.S. bank, for the full amount of the investment.

10. Multiple Classes. We may from time to time provide to you written compliance
guidelines or standards relating to the sale or distribution of Funds offering
multiple classes of shares with different sales charges and distribution-related
operating expenses. In addition, you will be bound by any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of mutual funds offering multiple classes of
shares.

11. Rule 12b-1 Plans. You are also invited to participate in all Plans adopted
by the Funds (the "Plan Funds") pursuant to Rule 12b-1 under the 1940 Act.

To the extent you provide administrative and other services, including, but not
limited to, furnishing personal and other services and assistance to your
customers who own shares of a Plan Fund, answering routine inquiries regarding a
Fund, assisting in changing account designations and addresses, maintaining such
accounts or such other services as a Fund may require, to the extent permitted
by applicable statutes, rules, or regulations, we shall pay you a Rule 12b-1
servicing fee. To the extent that you participate in the distribution of Fund
shares which are eligible for a Rule 12b-1 distribution fee, we shall also pay
you a Rule 12b-1 distribution fee. All Rule 12b-1 servicing and distribution
fees shall be based on the value of shares attributable to customers of your
firm and eligible for such payment, and shall be calculated on the basis and at
the rates set forth in the compensation schedule then in effect. Without prior
approval by a majority of the outstanding shares of a Fund, the aggregate annual
fees paid to you pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in each Fund's prospectus, which amount shall be a
specified percent of the value of the Fund's net assets held in your customers'
accounts which are eligible for payment pursuant to this Agreement (determined
in the same manner as each Fund uses to compute its net assets as set forth in
its effective Prospectus).

You shall furnish us and each Fund with such information as shall reasonably be
requested by the Boards of Directors, Trustees or Managing General Partners
(hereinafter referred to as "Directors") of such Funds with respect to the fees
paid to you pursuant to the Schedule. We shall furnish to the Boards of
Directors of the Plan Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plans and the purposes for which such
expenditures were made.

The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between us and the Plan Funds, and/or the management or administration agreement
between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and the Plan Funds. In the event of the termination of the Plans for
any reason, the provisions of this Agreement relating to the Plans will also
terminate.

Continuation of the Plans and provisions of this Agreement relating to such
Plans are conditioned on Rule 12b-1 Directors being ultimately responsible for
selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Boards of Directors are able to conclude that
the Plans will benefit the Plan Funds. Absent such yearly determination the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a Fund
pursuant to this Agreement shall be limited in all cases to the assets of such
Fund and no person shall seek satisfaction thereof from shareholders of a Fund.
You agree to waive payment of any amounts payable to you by us under a Fund's
Plan of Distribution pursuant to Rule 12b-1 until such time as we are in receipt
of such fee from the Fund.

The provisions of the Rule 12b-1 Plans between the Plan Funds and us, insofar as
they relate to Plans, shall control over the provisions of this Agreement in the
event of any inconsistency.

12. Registration of Shares. Upon request, we shall notify you of the states or
other jurisdictions in which each Fund's shares are currently registered or
qualified for sale to the public. We shall have no obligation to register or
qualify, or to maintain registration or qualification of, Fund shares in any
state or other jurisdiction. We shall have no responsibility, under the laws
regulating the sale of securities in any U.S. or foreign jurisdiction, for the
qualification or status of persons selling Fund shares or for the manner of sale
of Fund shares. Except as stated in this paragraph, we shall not, in any event,
be liable or responsible for the issue, form, validity, enforceability and value
of such shares or for any matter in connection therewith, and no obligation not
expressly assumed by us in this Agreement shall be implied. Nothing in this
Agreement, however, shall be deemed to be a condition, stipulation or provision
binding any person acquiring any security to waive compliance with any provision
of the Securities Act of 1933, or of the rules and regulations of the Securities
and Exchange Commission, or to relieve the parties hereto from any liability
arising under the Securities Act of 1933.

13. Additional Registrations. If it is necessary to register or qualify the
shares in any foreign jurisdictions in which you intend to offer the shares of
any Funds, it will be your responsibility to arrange for and to pay the costs of
such registration or qualification; prior to any such registration or
qualification, you will notify us of your intent and of any limitations that
might be imposed on the Funds, and you agree not to proceed with such
registration or qualification without the written consent of the Funds and of
ourselves.

14. Fund Information. No person is authorized to give any information or make
any representations concerning shares of any Fund except those contained in the
Fund's current prospectus or in materials issued by us as information
supplemental to such prospectus. We will supply prospectuses, reasonable
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. You agree not to use other advertising or sales material
relating to the Funds except that which (a) conforms to the requirements of any
applicable laws or regulations of any government or authorized agency in the
U.S. or any other country, having jurisdiction over the offering or sale of
shares of the Funds, and (b) is approved in writing by us in advance of such
use. Such approval may be withdrawn by us in whole or in part upon notice to
you, and you shall, upon receipt of such notice, immediately discontinue the use
of such sales literature, sales material and advertising. You are not authorized
to modify or translate any such materials without our prior written consent.

15. Indemnification. You further agree to indemnify, defend and hold harmless
the Principal Underwriter, the Funds, their officers, directors and employees
from any and all losses, claims, liabilities and expenses arising out of (1) any
alleged violation of any statute or regulation (including without limitation the
securities laws and regulations of the United States or any state or foreign
country) or any alleged tort or breach of contract, in or related to the offer
and sale by you of shares of the Funds pursuant to this Agreement (except to the
extent that our negligence or failure to follow correct instructions received
from you is the cause of such loss, claim, liability or expense), (2) any
redemption or exchange pursuant to telephone instructions received from you or
your agent or employees, or (3) the breach by you of any of the terms and
conditions of this Agreement.

16. Termination; Succession; Amendment. Each party to this Agreement may cancel
its participation in this Agreement by giving written notice to the other
parties. Such notice shall be deemed to have been given and to be effective on
the date on which it was either delivered personally to the other parties or any
officer or member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other parties' Chief Legal Officers at the
addresses shown herein or in the most recent NASD Manual. This Agreement shall
terminate immediately upon the appointment of a Trustee under the Securities
Investor Protection Act or any other act of insolvency by you. The termination
of this Agreement by any of the foregoing means shall have no effect upon
transactions entered into prior to the effective date of termination. A trade
placed by you subsequent to your voluntary termination of this Agreement will
not serve to reinstate the Agreement. Reinstatement, except in the case of a
temporary suspension of a dealer, will only be effective upon written
notification by us. Unless terminated, this Agreement shall be binding upon each
party's successors or assigns. This Agreement may be amended by us at any time
by written notice to you and your placing of an order or acceptance of payments
of any kind after the effective date and receipt of notice of any such Amendment
shall constitute your acceptance of such Amendment.

17. Setoff; Dispute Resolution. Should any of your concession accounts with us
have a debit balance, we may offset and recover the amount owed from any other
account you have with us, without notice or demand to you. In the event of a
dispute concerning any provision of this Agreement, either party may require the
dispute to be submitted to binding arbitration under the commercial arbitration
rules of the NASD or the American Arbitration Association. Judgment upon any
arbitration award may be entered by any state or federal court having
jurisdiction. This Agreement shall be construed in accordance with the laws of
the State of California, not including any provision which would require the
general application of the law of another jurisdiction.

18. Acceptance; Cumulative Effect. This Agreement is cumulative and supersedes
any agreement previously in effect. It shall be binding upon the parties hereto
when signed by us and accepted by you. If you have a current dealer agreement
with us, your first trade or acceptance of payments from us after receipt of
this Agreement, as it may be amended pursuant to paragraph 16, above, shall
constitute your acceptance of its terms. Otherwise, your signature below shall
constitute your acceptance of its terms.

FRANKLIN/TEMPLETON DISTRIBUTORS, INC.

By:

Greg Johnson, President

777 Mariners Island Blvd. San Mateo, CA 94404 Attention: Chief Legal Officer
(for legal notices only) 415/312-2000

700 Central Avenue St. Petersburg, Florida 33701-3628 813/823-8712

Dealer: If you have NOT previously signed a Dealer Agreement with us, please
complete and sign this section and return the original to us.

DEALER NAME

By:

(Signature)

Name:

Title:

Address:

Telephone:

NASD CRD #

Franklin Templeton Dealer #

(Internal Use Only)

95.89/104 (05/95)

MUTUAL FUND PURCHASE AND SALES AGREEMENT
FOR ACCOUNTS OF BANK AND TRUST COMPANY CUSTOMERS
Effective: July 1, 1995

1. INTRODUCTION

The parties to this Agreement are a bank or trust company ("Bank") and
Franklin/Templeton Distributors, Inc. ("FTDI"). This Agreement sets forth the
terms and conditions under which FTDI will execute purchases and redemptions of
shares of the Franklin or Templeton mutual funds for which FTDI now or in the
future serves as principal underwriter ("Funds"), at the request of the Bank
upon the order and for the account of Bank's customers ("Customers"). In this
Agreement, "Customer" shall include the beneficial owners of an account and any
agent or attorney-in-fact duly authorized or appointed to act on the owners'
behalf with respect to the account. FTDI will notify Bank from time to time of
the Funds which are eligible for distribution and the terms of compensation
under this Agreement. This Agreement is not exclusive, and either party may
enter into similar agreements with third parties. This Agreement supersedes any
prior agreements between the parties, as stated in paragraph 6(j), below.

2. REPRESENTATIONS AND WARRANTIES OF BANK

Bank warrants and represents to FTDI and the Funds that:

a) Bank is a "bank" as defined in Section 3(a)(6) of the Securities and Exchange
Act of 1934, as amended (the "34 Act"):

"The term 'bank' means (A) a banking institution organized under the laws
of the United States, (B) a member bank of the Federal Reserve System, (C) any
other banking institution, whether incorporated or not, doing business under the
law of any State or of the United States, a substantial portion of the business
of which consists of receiving deposits or exercising a fiduciary power similar
to those permitted to national banks under the authority of the Comptroller of
the Currency pursuant to the first section of Public Law 87-722 (12 U.S.C. 92a),
and which is supervised and examined by State or Federal authority having
supervision over banks, and which is not operated for the purpose of evading the
provisions of this title, and (D) a receiver, conservator, or other liquidating
agent of any institution or firm included in clauses (A), (B) or (C) of this
paragraph."

b) Bank is authorized to enter into this Agreement, and Bank's performance of
its obligations and receipt of consideration under this Agreement will not
violate any law, regulation, charter, agreement, or regulatory restriction to
which Bank is subject.

c) Bank has received all regulatory agency approvals and taken all legal and
other steps necessary for offering the services Bank will provide to Customers
in connection with this Agreement.

3. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL UNDERWRITER

FTDI warrants and represents to Bank that:

a) FTDI is a broker/dealer registered under the '34 Act.

b) FTDI is the principal underwriter of the Funds.

4. COVENANTS OF BANK

For each Transaction under this Agreement, Bank will:

a) be authorized to engage in the Transaction;

b) act as agent for the Customer;

c) act solely at the request of and for the account of the Customer;

d) not submit an order unless Bank has already received the order from the
Customer;

e) not submit a purchase order unless Bank has already delivered to the
Customer a copy of the then current prospectus for the Fund(s) whose
shares are to be purchased;

f) not withhold placing any Customer's order for the purpose of profiting from
the delay;

g) have no beneficial ownership of the securities in any purchase Transaction
(the Customer will have the full beneficial ownership), unless Bank is the
Customer (in which case, Bank will not engage in the Transaction unless the
Transaction is legally permissible for Bank); and

h) not accept or withhold any Fee otherwise allowed under Sections 5(d) and (e)
of this Agreement, if prohibited by the Employee Retirement Income Security Act
("ERISA") or trust or similar laws to which Bank is subject, in the case of
purchases or redemptions (hereinafter, "Transactions") of Fund shares involving
retirement plans, trusts, or similar accounts.

i) maintain records of all sales and redemptions of shares made through Bank and
to furnish FTDI with copies of such records on request.

j) distribute prospectuses, statements of additional information and reports to
Bank's customers in compliance with applicable legal requirements, except to the
extent that FTDI expressly undertakes to do so on behalf of Bank.

While this Agreement is in effect, Bank will:

k) not purchase any shares from any person at a price lower than the redemption
price then quoted by the applicable Fund;

l) repay FTDI the full Fee received by Bank under Sections 5(d) and (e) of this
Agreement, for any shares purchased under this Agreement which are repurchased
by the Fund within 7 business days after the purchase; in turn, FTDI shall pay
to the Fund the amount repaid by Bank and will notify Bank of any such
repurchase within a reasonable time;

m) in connection with orders for the purchase of shares on behalf of an
Individual Retirement Account, Self-Employed Retirement Plan or other retirement
accounts, by mail, telephone, or wire, Bank shall act as agent for the custodian
or trustee of such plans (solely with respect to the time of receipt of the
application and payments) and shall not place such an order until Bank has
received from its customer payment for such purchase and, if such purchase
represents the first contribution to such a plan, the completed documents
necessary to establish the plan. Bank agrees to indemnify FTDI and Franklin
Templeton Trust Company and/or Templeton Funds Trust Company as applicable for
any claim, loss, or liability resulting from incorrect investment instructions
received from Bank which cause a tax liability or other tax penalty.

n) be responsible for compliance with all laws and regulations, including those
of the applicable federal and state bank regulatory authorities, with regard to
Bank and Bank's Customers; and

o) immediately notify FTDI in writing at the address given below, should Bank
cease to be a bank as set forth in Section 2(a) of this Agreement.

5. TERMS AND CONDITIONS FOR TRANSACTIONS

a) Price

Transaction orders received from Bank will be accepted only at the public
offering price and in compliance with procedures applicable to each order as set
forth in the then current prospectus and statement of additional information
(hereinafter, collectively, "prospectus") for the applicable Fund. All orders
must be accompanied by payment in U.S. dollars. Orders payable by check must be
drawn payable in U.S. dollars on a U.S. bank, for the full amount of the
investment. All sales are made subject to receipt of shares by FTDI from the
Funds. FTDI reserves the right in its discretion, without notice, to suspend the
sale of shares or withdraw the offering of shares entirely.

b) Orders and Confirmations

All purchase orders are subject to acceptance or rejection by FTDI and by
the Fund or its transfer agent at their sole discretion, and become effective
only upon confirmation by FTDI. Transaction orders shall be made using the
procedures and forms required by FTDI from time to time. Orders received on any
business day after the time for calculating the price of Fund shares as set
forth in each Fund's current prospectus will be effected at the price determined
on the next business day. A written confirming statement will be sent to Bank
and to Customer upon settlement of each Transaction.

c) Multiple Class Guidelines

FTDI may from time to time provide to Bank written compliance guidelines
or standards relating to the sale or distribution of Funds offering multiple
classes of shares with different sales charges and distribution-related
operating expenses. In addition, Bank will be bound by any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of mutual funds offering multiple classes of
shares.

d) Payments by Bank for Purchases

On the settlement date for each purchase, Bank shall either (i) remit the
full purchase price by wire transfer to an account designated by FTDI, or (ii)
following FTDI's procedures, wire the purchase price less the Fee allowed by
Section 5(e) of this Agreement. Twice monthly, FTDI will pay Bank Fees not
previously paid to or withheld by Bank. Each calendar month, FTDI, as
applicable, will prepare and mail an activity statement summarizing all
Transactions.

e) Fees and Payments

Where permitted by the prospectus for each Fund, a charge, concession, or
fee ("Fee") may be paid to Bank, related to services provided by Bank in
connection with Transactions. The amount of the Fee, if any, is set by the
relevant prospectus. Adjustments in the Fee are available for certain purchases,
and Bank is solely responsible for notifying FTDI when any purchase order is
qualified for such an adjustment. If Bank fails to notify FTDI of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither FTDI nor any of the Funds will be liable for amounts necessary
to reimburse any investor for the reduction which should have been effected.

In accordance with the Funds' prospectuses, FTDI or its affiliates may,
but are not obligated to, make payments from their own resources to banks or
dealers as compensation for certain sales which are made at net asset value and
are not subject to any contingent deferred sales charges ("Qualifying Sales").
If Bank notifies FTDI of a Qualifying Sale, FTDI may make a contingent advance
payment up to the maximum amount available for payment on the sale. If any of
the shares purchased in a Qualifying Sale are redeemed within twelve months of
the end of the month of purchase, FTDI shall be entitled to recover any advance
payment attributable to the redeemed shares by reducing any account payable or
other monetary obligation FTDI may owe to Bank or by making demand upon Bank for
repayment in cash. FTDI reserves the right to withhold advances to any bank or
dealer, if for any reason it believes that it may not be able to recover
unearned advances from such bank or dealer. In addition, banks and dealers will
generally be required to enter into a supplemental agreement with FTDI with
respect to such compensation and the repayment obligation prior to receiving any
payments.

f) Rule 12b-1 Plans

Bank is also invited to participate in all Plans adopted by the Funds (the
"Plan Funds") pursuant to Rule 12b-1 under the 1940 Act.

To the extent Bank provides administrative and other services, including,
but not limited to, furnishing personal and other services and assistance to
Bank's customers who own shares of a Plan Fund, answering routine inquiries
regarding a Fund, assisting in changing account designations and addresses,
maintaining such accounts or such other services as a Fund may require, to the
extent permitted by applicable statutes, rules, or regulations, FTDI shall pay
Bank Rule 12b-1 fees. All Rule 12b-1 fees shall be based on the value of shares
attributable to customers of Bank and eligible for such payment, and shall be
calculated on the basis and at the rates set forth in the compensation schedule
then in effect. Without prior approval by a majority of the outstanding shares
of a Fund, the aggregate annual fees paid to Bank pursuant to each Plan shall
not exceed the amounts stated as the "annual maximums" in each Fund's
prospectus, which amount shall be a specified percent of the value of the Fund's
net assets held in Bank's customers' accounts which are eligible for payment
pursuant to this Agreement (determined in the same manner as each Fund uses to
compute its net assets as set forth in its effective Prospectus).

Bank shall furnish FTDI and each Fund with such information as shall
reasonably be requested by the Board of Directors, Trustees or Managing General
Partners (hereinafter referred to as "Directors") of such Funds with respect to
the fees paid to Bank pursuant to the Schedule. FTDI shall furnish to the Boards
of Directors of the Plan Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plans and the purposes for which such
expenditures were made.

The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between FTDI and the Plan Funds, and/or the management or administration
agreement between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc.
or their affiliates and the Plan Funds. In the event of the termination of the
Plans for any reason, the provisions of this Agreement relating to the Plans
will also terminate.

Continuation of the Plans and provisions of this Agreement relating to
such Plans are conditioned on Rule 12b-1 Directors being ultimately responsible
for selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Boards of Directors are able to conclude that
the Plans will benefit the Plan Funds. Absent such yearly determination, the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a Fund
pursuant to this Agreement shall be limited in all cases to the assets of such
Fund and no person shall seek satisfaction thereof from shareholders of a Fund.
Bank agrees to waive payment of any amounts payable to Bank by FTDI under a
Fund's Plan of Distribution pursuant to Rule 12b-1 until such time as FTDI is in
receipt of such fee from the Fund.

The provisions of the Rule 12b-1 Plans between the Plan Funds and FTDI,
insofar as they relate to Plans, shall control over the provisions of this
Agreement in the event of any inconsistency.

g) Other Distribution Services

From time to time, FTDI may offer telephone and other augmented services
in connection with Transactions under this Agreement. If Bank uses any such
service, Bank will be subject to the procedures applicable to the service,
whether or not Bank has executed any agreement required for the service.

h) Conditional Orders; Certificates

FTDI will not accept any conditional Transaction orders. Delivery of
certificates or confirmations for shares purchased shall be made by the Fund
conditional upon receipt of the purchase price, subject to deduction of any Fee.
No certificates will be issued unless specifically requested.

i) Cancellation of Orders

If payment for shares purchased is not received within the time customary
or the time required by law for such payment, the sale may be canceled without
notice or demand, and neither FTDI nor the Fund(s) shall have any responsibility
or liability for such a cancellation; alternatively, the unpaid shares may be
sold back to the Fund, and Bank shall be liable for any resulting loss to FTDI
or to the Fund(s). FTDI shall have no liability for any check or other item
returned unpaid to Bank after Bank has paid FTDI on behalf of a purchaser. FTDI
may refuse to liquidate the investment unless it receives the purchaser's signed
authorization for the liquidation.

j) Order Corrections

Bank shall assume responsibility for any loss to a Fund(s) caused by a
correction made subsequent to trade date, provided such correction was not based
on any error, omission or negligence on FTDI's part, and Bank will immediately
pay such loss to the Fund(s) upon notification.

k) Redemptions; Cancellation

Redemptions or repurchases of shares will be made at the net asset value
of such shares, less any applicable deferred sales or redemption charges, in
accordance with the applicable prospectuses. As agent, Bank may sell shares for
the account of the record owner to the Funds at the repurchase price then
currently in effect for such shares and may charge the owner a fair fee for
handling the transaction. If on a redemption which Bank has ordered,
instructions in proper form, including outstanding certificates, are not
received within the time customary or the time required by law, the redemption
may be canceled forthwith without any responsibility or liability on the part of
FTDI or any Fund, or at its option FTDI may buy the shares redeemed on behalf of
the Fund, in which latter case it may hold Bank responsible for any loss to the
Fund or loss of profit suffered by FTDI resulting from Bank's failure to settle
the redemption.

l) Exchanges

Telephone exchange orders will be effective only for shares in plan
balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. Bank may charge the shareholder a fair fee
for handling an exchange transaction. Exchanges from a Fund sold with no sales
charge to a Fund which carries a sales charge, and exchanges from a Fund sold
with a sales charge to a Fund which carries a higher sales charge may be subject
to a sales charge in accordance with the terms of each Fund's prospectus. Bank
will be obligated to comply with any additional exchange policies described in
each Fund's prospectus, including without limitation any policy restricting or
prohibiting "Timing Accounts" as therein defined.

m) Qualification of Shares; Indemnification

Upon request, FTDI shall notify Bank of the states or other jurisdictions
in which each Fund's shares are currently registered or qualified for sale to
the public. FTDI shall have no obligation to register or qualify, or to maintain
registration or qualification of, Fund shares in any state or other
jurisdiction. FTDI shall have no responsibility, under the laws regulating the
sale of securities in any U.S. or foreign jurisdiction, for the qualification or
status of persons selling Fund shares or for the manner of sale of Fund shares.
Except as stated in this paragraph, FTDI shall not, in any event, be liable or
responsible for the issue, form, validity, enforceability and value of such
shares or for any matter in connection therewith, and no obligation not
expressly assumed by FTDI in this Agreement shall be implied. If it is necessary
to register or qualify shares of any Fund in any foreign jurisdictions in which
Bank intends to offer such shares, it will be Bank's responsibility to arrange
for and to pay the costs of such registration or qualification; prior to any
such registration or qualification Bank will notify FTDI of its intent and of
any limitations that might be imposed on the Funds and Bank agrees not to
proceed with such registration or qualification without the written consent of
the Funds and of FTDI.

Bank further agrees to indemnify, defend and hold harmless the Principal
Underwriter, the Funds, their officers, directors and employees from any and all
losses, claims, liabilities and expenses, arising out of (1) any alleged
violation of any statute or regulation (including without limitation the
securities laws and regulations of the United States or any state or foreign
country) or any alleged tort or breach of contract, in or related to the offer
and sale by Bank of shares of the Funds pursuant to this Agreement (except to
the extent that FTDI's negligence or failure to follow correct instructions
received from Bank is the cause of such loss, claim, liability or expense), (2)
any redemption or exchange pursuant to telephone instructions received from Bank
or its agents or employees, or (3) the breach by Bank of any of the terms and
conditions of this Agreement.

However, nothing in this Agreement shall be deemed to be a condition,
stipulation, or provision binding any person acquiring any security to waive
compliance with any provision of the Securities Act of 1933, or of the rules and
regulations of the Securities and Exchange Commission, or to relieve the parties
hereto from any liability arising under the Securities Act of 1933.

n) Prospectus and Sales Materials; Limit on Advertising

No person is authorized to give any information or make any
representations concerning shares of any Fund except those contained in the
Fund's current prospectus or in materials issued by FTDI as information
supplemental to such prospectus. FTDI will supply prospectuses, reasonable
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. Bank agrees not to use other advertising or sales
material relating to the Funds except that which (a) conforms to the
requirements of any applicable laws or regulations of any government or
authorized agency in the U.S. or any other country, having jurisdiction over the
offering or sale of shares of the Funds, and (b) is approved in writing by FTDI
in advance of such use. Such approval may be withdrawn by FTDI in whole or in
part upon notice to Bank, and Bank shall, upon receipt of such notice,
immediately discontinue the use of such sales literature, sales material and
advertising. Bank is not authorized to modify or translate any such materials
without the prior written consent of FTDI.

o) Customer Information

(1) Definition. For purposes of this paragraph 5(h)(iv), 'Customer
Information' means customer names and other identifying information pertaining
to Bank's mutual fund customers which is furnished by Bank to FTDI in the
ordinary course of business under this Agreement. Customer Information shall not
include any information obtained from other sources.

(2) Permitted Uses. FTDI may use Customer Information to fulfill its
obligations under this Agreement, the Distribution Agreements between the Funds
and FTDI, the Funds' prospectuses, or other duties imposed by law. In addition,
FTDI or its affiliates may use Customer Information in communications to
shareholders to market the Funds or other investment products or services,
including without limitation variable annuities, variable life insurance, and
retirement plans and related services. FTDI may also use Customer Information if
it obtains Bank's prior written consent.

(3) Prohibited Uses. Except as stated above, FTDI shall not disclose
Customer Information to third parties, and shall not use Customer Information in
connection with any advertising, marketing or solicitation of any products or
services, provided that Bank offers or soon expect to offer comparable products
or services to mutual fund customers and have so notified FTDI.

(4) Survival; Termination. The agreements described in this paragraph
5(h)(iv) shall survive the termination of this Agreement, but shall terminate as
to any account upon FTDI's receipt of valid notification of either the
termination of that account with Bank or the transfer of that account to another
bank or dealer.

6. GENERAL

a) Successors and Assignments

This Agreement binds Bank and FTDI and their respective heirs, successors
and assigns. Bank may not assign its right and duties under this Agreement
without the advance, written authorization of FTDI.

b) Paragraph Headings

The paragraph headings of this Agreement are for convenience only, and
shall not be deemed to define, limit, or describe the scope or intent of this
Agreement.

c) Severability

Should any provision of this Agreement be determined to be invalid or
unenforceable under any law, rule, or regulation, that determination shall not
affect the validity or enforceability of any other provision of this Agreement.

d) Waivers

There shall be no waiver of any provision of this Agreement except a
written waiver signed by Bank and FTDI. No written waiver shall be deemed a
continuing waiver or a waiver of any other provision, unless the waiver
expresses such intention.

e) Sole Agreement

This Agreement is the entire agreement of Bank and FTDI and supersedes all
oral negotiations and prior writings.

f) Governing Law

This Agreement shall be construed in accordance with the laws of the State
of California, not including any provision which would require the general
application of the law of another jurisdiction, and shall be binding upon the
parties hereto when signed by FTDI and accepted by Bank, either by Bank's
signature in the space provided below or by Bank's first trade entered after
receipt of this Agreement.

g) Arbitration

Should any of Bank's concession accounts with FTDI have a debit balance,
FTDI may offset and recover the amount owed from any other account Bank has with
FTDI, without notice or demand to Bank. Either party may submit any dispute
under this Agreement to binding arbitration under the commercial arbitration
rules of the American Arbitration Association. Judgment upon any arbitration
award may be entered by any state or federal court having jurisdiction.

h) Amendments

FTDI may amend this Agreement at any time by depositing a written notice
of the amendment in the U.S. mail, first class postage pre-paid, addressed to
Bank's address given below. Bank's placement of any Transaction order or
acceptance of any payments after the effective date and receipt of notice of any
such amendment shall constitute Bank's acceptance of the amendment.

i) Term and Termination

This Agreement shall continue in effect until terminated. FTDI or Bank may
terminate this Agreement at any time by written notice to the other, but such
termination shall not affect the payment or repayment of Fees on Transactions
prior to the termination date. Termination also will not affect the indemnities
given under this Agreement.

j) Acceptance; Cumulative Effect

This Agreement is cumulative and supersedes any agreement previously in
effect. It shall be binding upon the parties hereto when signed by FTDI and
accepted by Bank. If Bank has a current agreement with FTDI, Bank's first trade
or acceptance of payments from FTDI after receipt of this Agreement, as it may
be amended pursuant to paragraph 6(h), above, shall constitute Bank's acceptance
of the terms of this Agreement. Otherwise, Bank's signature below shall
constitute Bank's acceptance of these terms.

FRANKLIN/TEMPLETON DISTRIBUTORS, INC.

By:

Greg Johnson, President

777 Mariners Island Blvd. San Mateo, CA 94404 Attention: Chief Legal Officer
(for legal notices only)

415/312-2000

700 Central Avenue St. Petersburg, Florida 33701-3628

813/823-8712

To the Bank or Trust Company: If you have not previously signed an agreement
with us for the sale of mutual fund shares to your customers, please complete
and sign this section and return the original to us.

BANK or TRUST COMPANY

(Firm's name)

By:

(Signature)

Name:

Title:Address:

Telephone:

CUSTODY AGREEMENT

THIS CUSTODY AGREEMENT ("Agreement") is made and entered into as
of August 20, 1991, by and between Franklin International Trust, a Delaware
business trust (the "Trust"), and Bank of America National Trust and Savings
Association, a banking association organized under the laws of the United
States (the "Custodian").

RECITALS

A. The Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act")
that invests and reinvests, on behalf of its various series, in Domestic
Securities and Foreign Securities.

B. The Custodian is, and has represented to the Trust that the
Custodian is, a "bank" as that term is defined in Section 2(a)(5) of the
Investment Company Act of 1940, as amended and is eligible to receive and
maintain custody of investment company assets pursuant to Section 17(f) and
Rule 17f-2 thereunder.

C. The Trust and the Custodian desire to provide for the
retention of the Custodian as a custodian of the assets of the Trust's two
current series, Franklin International Equity Fund, Franklin Pacific Growth
Fund, and such subsequent series as the parties hereto may determine from
time-to-time, on the terms and subject to the provisions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:

Section 1. DEFINITIONS

For purposes of this Agreement, the following terms shall have
the respective meanings specified below:

"Agreement" shall mean this Custody Agreement.

"Board of Trustees" shall mean the Board of Trustees of the Trust.

"Business Day" with respect to any Domestic Security means any
day, other than a Saturday or Sunday, that is not a day on which banking
institutions are authorized or required by law to be closed in The City of
New York and, with respect to Foreign Securities, a London Business Day.
"London Business Day" shall mean any day on which dealings and deposits in
U.S. dollars are transacted in the London interbank market.

"Custodian" shall mean Bank of America National Trust and Savings
Association.

"Domestic Securities" shall have the meaning provided in
Subsection 2.1 hereof.

"Executive Committee" shall mean the executive committee of the
Board of Trustees.

"Foreign Custodian" shall have the meaning provided in Section
4.1 hereof.

"Foreign Securities" shall have the meaning provided in Section
2.1 hereof.

"Foreign Securities Depository" shall have the meaning provided
in Section 4.1 hereof.

"Trust" shall mean the Franklin International Trust and any
separate series of the Trust hereinafter organized.

"Guidelines" shall have the meaning provided in Subsection 3.5(a)
hereof.

"Investment Company Act" shall mean the Investment Company Act of
1940, as amended.

"Securities" shall have the meaning provided in Section 2.1
hereof.

"Securities System" shall have the meaning provided in Section
3.1 hereof.

"Securities System Account" shall have the meaning provided in
Subsection 3.8(a) hereof.

"Shares" shall mean shares of beneficial interest of the Trust.

"Subcustodian" shall have the meaning provided in Subsection 3.7
hereof, but shall not include any Foreign Custodian.

"Transfer Agent" shall mean the duly appointed and acting
transfer agent for the Trust.

"Writing" shall mean a communication in writing, a communication
by telex, the Custodian's Global Custody Instruction SystemTM, facsimile
transmission, bankwire or other teleprocess or electronic instruction system
acceptable to the Custodian.

Section 2. APPOINTMENT OF CUSTODIAN; DELIVERY OF ASSETS

2.1 Appointment of Custodian. The Trust hereby appoints and
designates the Custodian as a custodian of the assets of the Trust including
cash, securities the Trust desires to be held within the United States
("Domestic Securities") and securities it desires to be held outside the
United States ("Foreign Securities"). Domestic Securities and Foreign
Securities are sometimes referred to herein, collectively, as "Securities."
The Custodian hereby accepts such appointment and designation and agrees that
it shall maintain custody of the assets of the Trust delivered to it
hereunder in the manner provided for herein.

2.2 Delivery of Assets. The Trust agrees to deliver to the
Custodian Securities and cash owned by the Trust, payments of income,
principal or capital distributions received by the Trust with respect to
Securities owned by the Trust from time to time, and the consideration
received by it for such Shares or other securities of the Trust as may be
issued and sold from time to time. The Custodian shall have no
responsibility whatsoever for any property or assets of the Trust held or
received by the Trust and not delivered to the Custodian pursuant to and in
accordance with the terms hereof. All Securities accepted by the Custodian
on behalf of the Trust under the terms of this Agreement shall be in "street
name" or other good delivery form as determined by the Custodian.

2.3 Subcustodians. Upon receipt of Proper Instructions and a
certified copy of a resolution of the Board of Trustees or of the Executive
Committee certified by the Secretary or an Assistant Secretary of the Trust,
the Custodian may from time to time appoint one or more Subcustodians or
Foreign Custodians to hold assets of the Trust in accordance with the
provisions of this Agreement.

2.4 No Duty to Manage. The Custodian, a Subcustodian or a
Foreign Custodian shall not have any duty or responsibility to manage or
recommend investments of the assets of the Trust held by them or to initiate
any purchase, sale or other investment transaction in the absence of Proper
Instructions or except as otherwise specifically provided herein.

Section 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS OF THE TRUST HELD
BY THE CUSTODIAN
3.1 Holding Securities. The Custodian shall hold and physically
segregate from any property owned by the Custodian, for the account of the
Trust, all non-cash property delivered by the Trust to the Custodian
hereunder other than Securities which, pursuant to Subsection 3.8 hereof, are
held through a registered clearing agency, a registered securities
depository, the Federal Reserve's book-entry securities system (referred to
herein, individually, as a "Securities System"), or held by a Subcustodian,
Foreign Custodian or in a Foreign Securities Depository.

3.2 Delivery of Securities. Except as otherwise provided in
Subsection 3.5 hereof, the Custodian, upon receipt of Proper Instructions,
shall release and deliver Securities owned by the Trust and held by the
Custodian in the following cases or as otherwise directed in Proper
Instructions:

(a) except as otherwise provided herein, upon sale of such
Securities for the account of the Trust and receipt by the
Custodian, a Subcustodian or a Foreign Custodian of payment
therefor;

(b) upon the receipt of payment by the Custodian, a
Subcustodian or a Foreign Custodian in connection with any
repurchase agreement related to such Securities entered into by
the Trust;

(c) in the case of a sale effected through a Securities
System, in accordance with the provisions of Subsection 3.8
hereof;

(d) to a tender agent or other authorized agent in
connection with (i) a tender or other similar offer for
Securities owned by the Trust, or (ii) a tender offer or
repurchase by the Trust of its own Shares;

(e) to the issuer thereof or its agent when such
Securities are called, redeemed, retired or otherwise become
payable; provided, that in any such case, the cash or other
consideration is to be delivered to the Custodian, a Subcustodian
or a Foreign Custodian;

(f) to the issuer thereof, or its agent, for transfer into
the name or nominee name of the Trust, the name or nominee name
of the Custodian, the name or nominee name of any Subcustodian or
Foreign Custodian; or for exchange for a different number of
bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in any
such case, the new Securities are to be delivered to the
Custodian, a Subcustodian or Foreign Custodian;

(g) to the broker selling the same for examination in
accordance with the "street delivery" custom;

(h) for exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, or reorganization of the
issuer of such Securities, or pursuant to a conversion of such
Securities; provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian or a
Subcustodian;

(i) in the case of warrants, rights or similar securities,
the surrender thereof in connection with the exercise of such
warrants, rights or similar Securities or the surrender of
interim receipts or temporary Securities for definitive
Securities; provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian, a
subcustodian or a Foreign Custodian;

(j) for delivery in connection with any loans of
Securities made by the Trust, but only against receipt by the
Custodian, a Subcustodian or a Foreign Custodian of adequate
collateral as determined by the Trust (and identified in Proper
Instructions communicated to the Custodian), which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be credited
to the account of the Custodian, a Subcustodian or a Foreign
Custodian in the Federal Reserve's book-entry securities system,
the Custodian will not be held liable or responsible for the
delivery of Securities owned by the Trust prior to the receipt of
such collateral;

(k) for delivery as security in connection with any
borrowings by the Trust requiring a pledge of assets by the
Trust, but only against receipt by the Custodian, a Subcustodian
or a Foreign Custodian of amounts borrowed;

(l) for delivery in accordance with the provisions of any
agreement among the Trust, the Custodian, a Subcustodian or a
Foreign Custodian and a broker-dealer relating to compliance with
the rules of registered clearing corporations and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Trust;

(m) for delivery in accordance with the provisions of any
agreement among the Trust, the Custodian, a Subcustodian or a
Foreign Custodian and a futures commission merchant, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any contract market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Trust;

(n) upon the receipt of instructions from the Transfer
Agent for delivery to the Transfer Agent or to the holders of
Shares in connection with distributions in kind in satisfaction
of requests by holders of Shares for repurchase or redemption; and

(o) for any other proper purpose, but only upon receipt of
Proper Instructions, and a certified copy of a resolution of the
Trustees or of the Executive Committee certified by the Secretary
or an Assistant Secretary of the Trust, specifying the securities
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom delivery of
such securities shall be made.

3.3 Registration of Securities. Securities held by the
Custodian, a Subcustodian or a Foreign Custodian (other than bearer
Securities) shall be registered in the name or nominee name of the Trust, in
the name or nominee name of the Custodian or in the name or nominee name of
any Subcustodian or Foreign Custodian. The Trust agrees to hold the
Custodian, any such nominee, Subcustodian or Foreign Custodian harmless from
any liability as a holder of record of such Securities.

3.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts for the Trust, subject only to draft or
order by the Custodian acting pursuant to the terms of this Agreement, and
shall hold in such account or accounts, subject to the provisions hereof, all
cash received by it hereunder from or for the account of the Trust, other
than cash maintained by the Trust in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act. Funds held by
the Custodian for the Trust may be deposited by it to its credit as Custodian
in the banking departments of the Custodian, a Subcustodian or a Foreign
Custodian. It is understood and agreed by the Custodian and the Trust that
the rate of interest, if any, payable on such funds (including foreign
currency deposits) that are deposited with the Custodian may not be a market
rate of interest and that the rate of interest payable by the Custodian to
the Trust shall be agreed upon by the Custodian and the Trust from time to
time. Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that capacity.

3.5 Collection of Income; Trade Settlement; Crediting of
Accounts. The Custodian shall collect income payable with respect to
Securities owned by the Trust, settle Securities trades for the account of
the Trust and credit and debit the Trust's account with the Custodian in
connection therewith as follows:

(a) Upon receipt of Proper Instructions, the Custodian
shall effect the purchase of a Security by charging the account
of the Trust on the contractual settlement date; provided,
however, that in the case of Foreign Securities, Proper
Instructions are provided to the Custodian by the Trust prior to
the contractual settlement date in accordance with, and within
the time period specified in the "Global Custody Guidelines for
the Franklin International Trust" (the "Guidelines") which may be
adopted for the use of this Trust, as may be amended by the
Custodian from time to time in its sole discretion. The
Custodian shall have no liability of any kind to any person,
including the Trust, if the Custodian effects payment on behalf
of the Trust as provided for herein or in Proper Instructions,
and the seller or selling broker fails to deliver the Securities
purchased.

(b) Upon receipt of Proper Instructions, the Custodian
shall effect the sale of a Security by delivering a certificate
or other indicia of ownership, and shall credit the account of
the Trust with the proceeds of such sale on the contractual
settlement date; provided, however, that in the case of Foreign
Securities, Proper Instructions are provided to the Custodian by
the Trust prior to the contractual settlement date in accordance
with, and within the time period specified in, the Guidelines.
The Custodian shall have no liability of any kind to any person,
including the Trust, if the Custodian delivers such a
certificate(s) or other indicia of ownership as provided for
herein or in Proper Instructions, and the purchaser or
purchasing broker fails to effect payment to the Trust within a
reasonable time period, as determined by the Custodian in its
sole discretion. In such event, the Custodian shall be entitled
to reimbursement of the amount so credited to the account of the
Trust in connection with such sale.

(c) The Trust is responsible for ensuring that the
Custodian receives timely and accurate Proper Instructions to
enable the Custodian to effect settlement of any purchase or
sale. If the Custodian does not receive such instructions within
the required time period, the Custodian shall have no liability
of any kind to any person, including the Trust, for failing to
effect settlement on the contractual settlement date. However,
the Custodian shall use its best reasonable efforts to effect
settlement as soon as possible after receipt of Proper
Instructions.

(d) The Custodian shall credit the account of the Trust
with interest income payable on interest bearing Securities on
payable date. Interest income on cash balances will be credited
monthly to the account of the Trust on the first Business Day (on
which the Custodian is open for business) following the end of
each month. Dividends and other amounts payable with respect to
Domestic Securities and Foreign Securities shall be credited to
the account of the Trust when received by the Custodian. The
Custodian shall not be required to commence suit or collection
proceedings or resort to any extraordinary means to collect such
income and other amounts payable with respect to Securities owned
by the Trust. The collection of income due the Trust on Domestic
Securities loaned pursuant to the provisions of Subsection 3.2(j)
shall be the responsibility of the Trust. The Custodian will
have no duty or responsibility in connection therewith, other
than to provide the Trust with such information or data as may be
necessary to assist the Trust in arranging for the timely
delivery to the Custodian of the income to which the Trust is
entitled. The Custodian shall have no liability to any person,
including the Trust, if the Custodian credits the account of the
Trust with such income or other amounts payable with respect to
Securities owned by the Trust (other than Securities loaned by
the Trust pursuant to Subsection 3.2(j) hereof) and the Custodian
subsequently is unable to collect such income or other amounts
from the payors thereof within a reasonable time period, as
determined by the Custodian in its sole discretion. In such
event, the Custodian shall be entitled to reimbursement of the
amount so credited to the account of the Trust.

3.6 Payment of Trust Monies. Upon receipt of Proper
Instructions the Custodian shall pay out monies of the Trust in the following
cases or as otherwise directed in Proper Instructions:

(a) upon the purchase of Securities, futures contracts or
options on futures contracts for the account of the Trust but
only, except as otherwise provided herein, (i) against the
delivery of such securities, or evidence of title to futures
contracts or options on futures contracts, to the Custodian or a
Subcustodian registered pursuant to Subsection 3.3 hereof or in
proper form for transfer; (ii) in the case of a purchase effected
through a Securities System, in accordance with the conditions
set forth in Subsection 3.8 hereof; or (iii) in the case of
repurchase agreements entered into between the Trust and the
Custodian, another bank or a broker-dealer (A) against delivery
of the Securities either in certificated form to the Custodian or
a Subcustodian or through an entry crediting the Custodian's
account at the appropriate Federal Reserve Bank with such
Securities or (B) against delivery of the confirmation
evidencing purchase by the Trust of Securities owned by the
Custodian or such broker-dealer or other bank along with written
evidence of the agreement by the Custodian or such broker-dealer
or other bank to repurchase such Securities from the Trust;

(b) in connection with conversion, exchange or surrender
of Securities owned by the Trust as set forth in Subsection 3.2
hereof;

(d) for the payment of any expense or liability incurred
by the Trust, including but not limited to the following payments
for the account of the Trust: custodian fees, interest, taxes,
management, accounting, transfer agent and legal fees and
operating expenses of the Trust whether or not such expenses are
to be in whole or part capitalized or treated as deferred
expenses; and

(e) for the payment of any dividends or distributions
declared by the Board of Trustees with respect to the Shares.

3.7 Appointment of Subcustodians. The Custodian may, upon
receipt of Proper Instructions, appoint another bank or trust company, which
is itself qualified under the Investment Company Act to act as a custodian (a
"Subcustodian"), as the agent of the Custodian to carry out such of the
duties of the Custodian hereunder as a Custodian may from time to time
direct; provided, however, that the appointment of any Subcustodian shall not
relieve the Custodian of its responsibilities or liabilities hereunder.

3.8 Deposit of Securities in Securities Systems. The Custodian
may deposit and/or maintain Domestic Securities owned by the Trust in a
Securities System in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and subject
to the following provisions:

(a) the Custodian may hold Domestic Securities of the
Trust in the Depository Trust Company or the Federal Reserve's
book entry system or, upon receipt of Proper Instructions, in
another Securities System provided that such securities are held
in an account of the Custodian in the Securities System
("Securities System Account") which shall not include any assets
of the Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;

(b) the records of the Custodian with respect to Domestic
Securities of the Trust which are maintained in a Securities
System shall identify by book-entry those Domestic Securities
belonging to the Trust;

(c) the Custodian shall pay for Domestic Securities
purchased for the account of the Trust upon (i) receipt of
advice from the Securities System that such securities have been
transferred to the Securities System Account, and (ii) the making
of an entry on the records of the Custodian to reflect such
payment and transfer for the account of the Trust. The Custodian
shall transfer Domestic Securities sold for the account of the
Trust upon (A) receipt of advice from the Securities System that
payment for such securities has been transferred to the
Securities System Account, and (B) the making of an entry on the
records of the Custodian to reflect such transfer and payment for
the account of the Trust. Copies of all advices from the
Securities System of transfers of Domestic Securities for the
account of the Trust shall be maintained for the Trust by the
Custodian and be provided to the Trust at its request. Upon
request, the Custodian shall furnish the Trust confirmation of
each transfer to or from the account of the Trust in the form of
a written advice or notice; and

(d) upon request, the Custodian shall provide the Trust
with any report obtained by the Custodian on the Securities
System's accounting system, internal accounting control and
procedures for safeguarding domestic securities deposited in the
Securities System.

3.9 Segregated Account. The Custodian shall upon receipt of
Proper Instructions establish and maintain a segregated account or accounts
for and on behalf of the Trust, into which account or accounts may be
transferred cash and/or Securities, including Securities maintained in an
account by the Custodian pursuant to Section 3.8 hereof, (i) in accordance
with the provisions of any agreement among the Trust, the Custodian and a
broker-dealer or futures commission merchant, relating to compliance with the
rules of registered clearing corporations and of any national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Trust,
(ii) for purposes of segregating cash or securities in connection with
options purchased, sold or written by the Trust or commodity futures
contracts or options thereon purchased or sold by the Trust and (iii) for
other proper corporate purposes, but only, in the case of this clause (iii),
upon receipt of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee certified
by the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be proper
corporate purposes.

3.10 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of the Trust held by it and in connection
with transfers of such securities.

3.11 Proxies. The Custodian shall, with respect to the
Securities held hereunder, promptly deliver to the Trust all proxies, all
proxy soliciting materials and all notices relating to such Securities. If
the Securities are registered otherwise than in the name of the Trust or a
nominee of the Trust, the Custodian shall use its best reasonable efforts,
consistent with applicable law, to cause all proxies to be promptly executed
by the registered holder of such Securities in accordance with Proper
Instructions.

3.12 Communications Relating to Trust Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written information
(including, without limitation, pendency of calls and maturities of
Securities and expirations of rights in connection therewith and notices of
exercise of put and call options written by the Trust and the maturity of
futures contracts purchased or sold by the Trust) received by the Custodian
from issuers of Securities being held for the Trust. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Trust all
written information received by the Custodian from issuers of the Securities
whose tender or exchange is sought and from the party (or its agents) making
the tender or exchange offer. If the Trust desires to take action with
respect to any tender offer, exchange offer or any other similar transaction,
the Trust shall notify the Custodian at least three Business Days prior to
the date of which the Custodian is to take such action.

3.13 Reports by Custodian. The Custodian shall supply to the
Trust the daily, weekly and monthly reports described in the Guidelines as
well as any other reports which the Custodian and the Trust may agree upon
from time to time.

Section 4. CERTAIN DUTIES OF THE CUSTODIAN WITH RESPECT TO ASSETS OF THE
TRUST HELD OUTSIDE THE UNITED STATES

4.1 Custody outside the United States. The Trust authorizes the
Custodian to hold Foreign Securities and cash in custody accounts which have
been established by the Custodian with (i) its foreign branches, (ii) foreign
banking institutions, foreign branches of United States banks and
subsidiaries of United States banks or bank holding companies (each a
"Foreign Custodian") and (iii) Foreign Securities depositories or clearing
agencies (each a "Foreign Securities Depository"); provided, however, that
the Board of Trustees or the Executive Committee has approved in advance the
use of each such Foreign Custodian and Foreign Securities Depository and the
contract between the Custodian and each Foreign Custodian and that such
approval is set forth in Proper Instructions and a certified copy of a
resolution of the Board of Trustees or of the Executive Committee certified
by the Secretary or an Assistant Secretary of the Trust. Unless expressly
provided to the contrary in this Section 4, custody of Foreign Securities and
assets held outside the United States by the Custodian, a Foreign Custodian
or through a Foreign Securities Depository shall be governed by Section 3
hereof.

4.2 Assets to be Held. The Custodian shall limit the securities
and other assets maintained in the custody of its foreign branches, Foreign
Custodians and Foreign Securities Depositories to: (i) "foreign securities",
as defined in paragraph (c) (1) of Rule 17f-5 under the Investment Company
Act, and (ii) cash and cash equivalents in such amounts as the Custodian or
the Trust may determine to be reasonably necessary to effect the Trust's
Foreign Securities transactions.

4.3 Foreign Securities Depositories. Except as may otherwise be
agreed upon in writing by the Custodian and the Trust, assets of the Trust
shall be maintained in Foreign Securities Depositories only through
arrangements implemented by the Custodian or Foreign Custodians pursuant to
the terms hereof.

4.4 Segregation of Securities. The Custodian shall identify on
its books and records as belonging to the Trust, the Foreign Securities of
the Trust held by each Foreign Custodian.

4.5 Agreements with Foreign Custodians. Each agreement with a
Foreign Custodian shall provide generally that: (a) the Trust's assets will
not be subject to any right, charge, security interest, lien or claim of any
kind in favor of the Foreign Custodian or its creditors, except a claim of
payment for their safe custody or administration; (b) beneficial ownership
for the Trust's assets will be freely transferable without the payment of
money or value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to the Trust; (d) the
independent public accountants for the Trust, will be given access to the
records of the Foreign Custodian relating to the assets of the Trust or
confirmation of the contents of those records; (e) the disposition of assets
of the Trust held by the Foreign Custodian will be subject only to the
instructions of the Custodian or its agents; (f) the Foreign Custodian shall
indemnify and hold harmless the Custodian and the Trust from and against any
loss, damage, cost, expense, liability or claim arising out of or in
connection with the Foreign Custodian's performance of its obligations under
such agreement; (g) to the extent practicable, the Trust's assets will be
adequately insured in the event of loss; and (h) the Custodian will receive
periodic reports with respect to the safekeeping of the Trust's assets,
including notification of any transfer to or from the Trust's account.

4.6 Access of Independent Accountants of the Trust. Upon
request of the Trust, the Custodian will use its best reasonable efforts to
arrange for the independent accountants of the Trust to be afforded access to
the books and records of any Foreign Custodian insofar as such books and
records relate to the custody by any such Foreign Custodian of assets of the
Trust.

4.7 Transactions in Foreign Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall instruct the appropriate Foreign
Custodian to transfer, exchange or deliver Foreign Securities owned by the
Trust, but, except to the extent explicitly provided herein, only in any of
the cases specified in Subsection 3.2. Upon receipt of Proper Instructions,
the Custodian shall pay out or instruct the appropriate Foreign Custodian to
pay out monies of the Trust in any of the cases specified in Subsection 3.6.
Notwithstanding anything herein to the contrary, settlement and payment for
Foreign Securities received for the account of the Trust and delivery of
Foreign Securities maintained for the account of the Trust may be effected in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which
the transaction occurs, including, without limitation, delivering securities
to the purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer. Foreign
Securities maintained in the custody of a Foreign Custodian may be maintained
in the name of such entity or its nominee name to the same extent as set
forth in Section 3.3 of this Agreement and the Trust agrees to hold any
Foreign Custodian and its nominee harmless from any liability as a holder of
record of such securities.

4.8 Liability of Foreign Custodian. Each agreement between the
Custodian and a Foreign Custodian shall require the Foreign Custodian to
exercise reasonable care in the performance of its duties and to indemnify
and hold harmless the Custodian and the Trust from and against any loss,
damage, cost, expense, liability or claim arising out of or in connection
with the Foreign Custodian's performance of such obligations. At the
election of the Trust, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claims against a Foreign Custodian as a
consequence of any such loss, damage, cost, expense, liability or claim if
and to the extent that the Trust has not been made whole for any such loss,
damage, cost, expense, liability or claim.

4.9 Monitoring Responsibilities.

(a) The Custodian will promptly inform the Trust in the
event that the Custodian learns of a material adverse change in
the financial condition of a Foreign Custodian or is notified by
(i) a foreign banking institution employed as a Foreign Custodian
that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million or that its
shareholders' equity has declined below $200 million (in each
case computed in accordance with generally accepted United States
accounting principles) and denominated in U.S. dollars, or (ii) a
subsidiary of a United States bank or bank holding company acting
as a Foreign Custodian that there appears to be a substantial
likelihood that its shareholders' equity will decline below $100
million or that its shareholders' equity has declined below $100
million (in each case computed in accordance with generally
accepted United States accounting principles) and denominated in
U.S. dollars.

(b) The custodian will furnish such information as may be
reasonably necessary to assist the Trust's Board of Trustees in
its annual review and approval of the continuance of all
contracts or arrangements with Foreign Subcustodians.

Section 5. PROPER INSTRUCTIONS

As used in this Agreement, the term "Proper Instructions" means
instructions of the Trust received by the Custodian via telephone or in
Writing which the Custodian believes in good faith to have been given by
Authorized Persons (as defined below) or which are transmitted with proper
testing or authentication pursuant to terms and conditions which the
Custodian may specify. Any Proper Instructions delivered to the Custodian by
telephone shall promptly thereafter be confirmed in Writing by an Authorized
Person, but the Trust will hold the Custodian harmless for its failure to
send such confirmation in writing, the failure of such confirmation to
conform to the telephone instructions received or the Custodian's failure to
produce such confirmation at any subsequent time. Unless otherwise expressly
provided, all Proper Instructions shall continue in full force and effect
until cancelled or superseded. If the Custodian requires test arrangements,
authentication methods or other security devices to be used with respect to
Proper Instructions, any Proper Instructions given by the Trust thereafter
shall be given and processed in accordance with such terms and conditions for
the use of such arrangements, methods or devices as the Custodian may put
into effect and modify from time to time. The Trust shall safeguard any
testkeys, identification codes or other security devices which the Custodian
shall make available to it. The Custodian may electronically record any
Proper Instructions given by telephone, and any other telephone discussions,
with respect to its activities hereunder. As used in this Agreement, the
term "Authorized Persons" means such officers or such agents of the Trust as
have been designated by a resolution of the Board of trustees or of the
Executive Committee, a certified copy of which has been provided to the
Custodian, to act on behalf of the Trust under this Agreement. Each of such
persons shall continue to be an Authorized Person until such time as the
Custodian receives Proper Instructions that any such officer or agent is no
longer an Authorized Person.

Section 6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY

The Custodian may in its discretion, without express authority
from the Trust:

(a) make payments to itself or others for minor expenses
of handling Securities or other similar items relating to its
duties under this Agreement, provided that all such payments
shall be accounted for to the Trust;

(b) endorse for collection, in the name of the Trust,
checks, drafts and other negotiable instruments; and

(c) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the Securities and property of
the Trust except as otherwise provided in Proper Instructions.

Section 7. EVIDENCE OF AUTHORITY

The Custodian shall be protected in acting upon any instructions
(conveyed by telephone or in Writing), notice, request, consent, certificate
or other instrument or paper believed by it to be genuine and to have been
properly given or executed by or on behalf of the Trust. The Custodian may
receive and accept a certified copy of a resolution of the Board of Trustees
or Executive Committee as conclusive evidence (a) of the authority of any
person to act in accordance with such resolution or (b) of any determination
or of any action by the Board of Trustees or Executive Committee as described
in such resolution, and such resolution may be considered as in full force
and effect until receipt by the Custodian of written notice by an Authorized
Person to the contrary.

Section 8. DUTY OF CUSTODIAN TO SUPPLY INFORMATION

The Custodian shall cooperate with and supply necessary
information in its possession (to the extent permissible under applicable
law) to the entity or entities appointed by the Board of Trustees to keep the
books of account of the Trust and/or compute the net asset value per Share of
the outstanding Shares of the Trust.

Section 9. RECORDS

The Custodian shall create and maintain all records relating to
its activities under this Agreement which are required with respect to such
activities under Section 31 of the Investment Company Act and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Trust and
shall at all times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents of the Trust
and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Trust's request, supply the Trust with a tabulation
of Securities owned by the Trust and held by the Custodian and shall, when
requested to do so by the Trust and for such compensation as shall be agreed
upon between the Trust and the Custodian, include certificate numbers in such
tabulations.

Section 10. COMPENSATION OF CUSTODIAN

The Custodian shall be entitled to reasonable compensation for
its services and expenses as Custodian, as agreed upon from time to time
between the Trust and the Custodian.

Section 11. RESPONSIBILITY OF CUSTODIAN

The Custodian shall be responsible for the performance of only
such duties as are set forth herein or contained in Proper Instructions and
shall use reasonable care in carrying out such duties. The Custodian shall
be liable to the Trust for any loss which shall occur as the result of the
failure of a Foreign Custodian or a Foreign Securities Depository engaged by
such Foreign Custodian or the Custodian to exercise reasonable care with
respect to the safekeeping of securities and other assets of the Trust to the
same extent that the Custodian would be liable to the Trust if the Custodian
itself were holding such securities and other assets. In the event of any
loss to the Trust by reason of the failure of the Custodian, a Foreign
Custodian or a Foreign Securities Depository engaged by such Foreign
Custodian or the Custodian to utilize reasonable care, the Custodian shall be
liable to the Trust to the extent of the Trust's damages, to be determined
based on the market value of the property which is the subject of the loss at
the date of discovery of such loss and without reference to any special
conditions or circumstances. The Custodian shall be held to the exercise of
reasonable care in carrying out this Agreement. The Trust agrees to
indemnify and hold harmless the Custodian and its nominees from all taxes,
charges, expenses, assessments, claims and liabilities (including legal fees
and expenses) incurred by any of them in connection with the performance of
this Agreement, except such as may arise from any negligent action, negligent
failure to act or willful misconduct on the part of the indemnified entity or
any Foreign Custodian or Foreign Securities Depository. The Custodian shall
be entitled to rely, and may act, on advice of counsel (who may be counsel
for the Trust) on all matters and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian need not
maintain any insurance for the benefit of the Trust.

All collections of funds or other property paid or distributed in
respect of Securities held by the Custodian, agent, Subcustodian or Foreign
Custodian hereunder shall be made at the risk of the Trust. The Custodian
shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Custodian, agent, Subcustodian or by a Foreign
Custodian of any payment, redemption or other transaction regarding
securities in respect of which the Custodian has agreed to take action as
provided in Section 3 hereof. The Custodian shall not be liable for any
action taken in good faith upon Proper Instructions or upon any certified
copy of any resolution of the Board of Trustees and may rely on the
genuineness of any such documents which it may in good faith believe to be
validly executed. The Custodian shall not be liable for any loss resulting
from, or caused by, the direction of the Trust to maintain custody of any
Securities or cash in a foreign country including, but not limited to, losses
resulting from nationalization, expropriation, currency restrictions, civil
disturbance, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation or other similar occurrences or events beyond
the control of the Custodian. Finally, the Custodian shall not be liable for
any taxes, including interest and penalties with respect thereto, that may be
levied or assessed upon or in respect of any assets of the Trust held by the
Custodian.

Section 12. LIMITED LIABILITY OF THE TRUST

The Custodian acknowledges that it has received notice of and
accepts the limitations of the Trust's liability as set forth in its
Agreement and Declaration of Trust. The Custodian agrees that the Trust's
obligation hereunder shall be limited to the assets of the Trust, and that
the Custodian shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trustee, officer, employee, or agent
of the Trust.

Section 13. EFFECTIVE PERIOD; TERMINATION

This Agreement shall become effective as of the date of its
execution and shall continue in full force and effect until terminated as
hereinafter provided. This Agreement may be terminated by the Trust or the
Custodian by 60 days notice in Writing to the other provided that any
termination by the Trust shall be authorized by a resolution of the Board of
Trustees, a certified copy of which shall accompany such notice of
termination, and provided further, that such resolution shall specify the
names of the persons to whom the Custodian shall deliver the assets of the
Trust held by it. If notice of termination is given by the Custodian, the
Trust shall, within 60 days following the giving of such notice, deliver to
the Custodian a certified copy of a resolution of the Board of Trustees
specifying the names of the persons to whom the Custodian shall deliver
assets of the Trust held by it. In either case the Custodian will deliver
such assets to the persons so specified, after deducting therefrom any
amounts which the Custodian determines to be owed to it hereunder (including
all costs and expenses of delivery or transfer of Trust assets to the persons
so specified). If within 60 days following the giving of a notice of
termination by the Custodian, the Custodian does not receive from the Trust a
certified copy of a resolution of the Board of Trustees specifying the names
of the persons to whom the Custodian shall deliver the assets of the Trust
held by it, the Custodian, at its election, may deliver such assets to a bank
or trust company doing business in the State of California to be held and
disposed of pursuant to the provisions of this Agreement or may continue to
hold such assets until a certified copy of one or more resolutions as
aforesaid is delivered to the Custodian. The obligations of the parties
hereto regarding the use of reasonable care, indemnities and payment of fees
and expenses shall survive the termination of this Agreement.

Section 14. MISCELLANEOUS

14.1 Relationship. Nothing contained in this Agreement shall (i)
create any fiduciary, joint venture or partnership relationship between the
Custodian and the Trust or (ii) be construed as or constitute a prohibition
against the provision by the Custodian or any of its affiliates to the Trust
of investment banking, securities dealing or brokerages services or any other
banking or financial services.

14.2 Further Assurances. Each party hereto shall furnish to the
other party hereto such instruments and other documents as such other party
may reasonably request for the purpose of carrying out or evidencing the
transactions contemplated by this Agreement.

14.3 Attorneys' Fees. If any lawsuit or other action or
proceeding relating to this Agreement is brought by a party hereto against
the other party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (including allocated
costs and disbursements of in-house counsel), in addition to any other relief
to which the prevailing party may be entitled.

14.4 Notices. Except as otherwise specified herein, each notice
or other communication hereunder shall be in Writing and shall be delivered
to the intended recipient at the following address (or at such other address
as the intended recipient shall have specified in a written notice given to
the other parties hereto):

if to the Trust :

Franklin International Trust
c/o Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Trust Manager

if to the Custodian:

Bank of America NT&SA
International Securities Services
25 Cannon Street
London EC4P HN
England
Attention: Manager

14.5 Headings. The underlined headings contained herein are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the interpretation
hereof.

14.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and both of which,
when taken together, shall constitute one agreement.

14.7 Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflict of laws).

14.8 Force Majeure. Subject to the provisions of Section 11
hereof regarding the Custodian's general standard of care, no failure, delay
or default in performance of any obligation hereunder shall constitute an
event of default or a breach of this agreement, or give rise to any liability
whatsoever on the part of one party hereto to the other, to the extent that
such failure to perform, delay or default arises out of a cause beyond the
control and without negligence of the party otherwise chargeable with
failure, delay or default; including, but not limited to: action or inaction
of governmental, civil or military authority; fire; strike; lockout or other
labor dispute; flood; war; riot; theft; earthquake; natural disaster;
breakdown of public or common carrier communications facilities; computer
malfunction; or act, negligence or default of the other party. This
paragraph shall in no way limit the right of either party to this Agreement
to make any claim against third parties for any damages suffered due to such
causes.

14.9 Successors and Assigns. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns, if any.

14.10 Waiver. No failure on the part of any person to exercise
any power, right, privilege or remedy hereunder, and no delay on the part of
any person in the exercise of any power, right, privilege or remedy
hereunder, shall operate as a waiver thereof; and no single or partial
exercise of any such power, right, privilege or remedy shall preclude any
other or further exercise thereof or of any other power, right, privilege or
remedy.

14.11 Amendments. This Agreement may not be amended, modified,
altered or supplemented other than by means of an agreement or instrument
executed on behalf of each of the parties hereto.

14.12 Severability. In the event that any provision of this
Agreement, or the application of any such provision to any person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to persons or circumstances other than those as
to which it is determined to be invalid, unlawful, void or unenforceable,
shall not be impaired or otherwise affected and shall continue to be valid
and enforceable to the fullest extent permitted by law.

14.13 Parties in Interest. None of the provisions of this
Agreement is intended to provide any rights or remedies to any person other
than the Trust and the Custodian and their respective successors and assigns,
if any.

14.14 Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto and supersedes all prior agreements and
understandings between the parties hereto relating to the subject matter
hereof.

14.15 Variations of Pronouns. Whenever required by the context
hereof, the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; and the
neuter gender shall include the masculine and feminine genders.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.

"Custodian": BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION

/s/ John B. Housen
By: John B. Housen

Its Vice President

"Trust" FRANKLIN INTERNATIONAL TRUST

/s/ Charles B. Johnson
By: Charles B. Johnson

Its President

(Franklin logo)

FRANKLIN
RESOURCES, INC.
777 Mariners Island Blvd.
San Mateo, CA 94404
415/312-5818
FAX 415/312-3528

Martin L. Flanagan CPA, CFA
Senior Vice President
Chief Financial Officer

April 12, 1995

Mr. Stephen H. Kilbuck
Vice President Corporate Banking
Bank of America, NT & SA
555 California Street, 41st Floor
San Francisco, CA 94104

Dear Steve:

Various Franklin Funds/Portfolios (the "Funds") and Bank of America,
National Trust and Savings Association ("Bank") are parties to custody
agreements (the "Agreements") as well as separate cash management and deposit
services arrangements.

By this Letter Agreement, each of the Funds and Bank desire to establish
the cash compensation to be paid by each Fund for services rendered to it by
Bank.

Effective April 1, 1995, commencing with the first statement prepared
thereafter each Fund will pay to Bank a monthly fee in cash equal to an annual
rate of 87.5/100 ths. (.875) basis points of the net asset value of each such
Funds domestic portfolios held in custody by Bank and nine and three-tenths
(9.3) basis points of the net asset value of each such Funds international
portfolios held in custody by Bank or held by foreign sub-custodians calculated
as of the last business day of the month. For purposes of calculating the
monthly fee, 000007291 will be used as the monthly factor for the domestic
portfolio and .0000775 will be used as the monthly factor for the international
portfolio. The obligation of each Fund is separate from the obligation of any
other Fund.

The purpose of this Letter of Agreement is to provide for a fair level of
compensation to Bank for its service. The fee is based on the assumption that
each Fund will continue to use services of a type and volume comparable to the
services currently used. The parties agree that any party may initiate
discussions concerning revisions to the terms of this Letter Agreement at any
time it believes the level of compensation to be inappropriate. The parties
further agree that any party may, upon at least sixty (60) days' written notice,
terminate this Letter Agreement with respect to that party. Upon its
termination, if the parties have not agreed to a substitute fee arrangement, any
party may also terminate all or some of the service provided by Bank upon
additional sixty (60) days' written notice.

On an ongoing basis, Bank will continue to prepare the monthly corporate
account analysis statements on behalf of each Fund, which estimates all revenues
and expenses for the parties' relationship. From time to time, Bank and any
Fund(s) may renegotiate the estimated "prices" used in the account analysis
process. The account analysis statement will provide a basis for any
negotiations between the parties on the appropriateness of the fee agreement as
embodied in this Letter Agreement. However, no payment of any kind shall be due
on account of any shortfall on the account analysis statement.

Sincerely,

Authorized Officer for Each Trust/Franklin
Fund Portfolio (List Attached)

By /s/ Martin L. Flanagan
Martin L. Flanagan
Executive Financial Officer

ACCEPTED AND AGREED TO BY:

BANK OF AMERICA, NT & SA

By /s/ Stephen H. Kilbuck

Title: Vice President

FRANKLIN GROUP OF FUNDS

FUND # FUND INIT NAME OF FUND

022 FUT FRANKLIN UNIVERSAL TRUST - (closed-end)
033 FPMT FRANKLIN PRINCIPAL MATURITY TRUST - (closed-end)
024 FMIT FRANKLIN MULTI-INCOME TRUST - (closed-end)
101 FGF FRANKLIN GOLD FUND
102 FPRF FRANKLIN PREMIER RETURN FUND
(Franklin Option Fund until April 30, 1991)
103 FEF FRANKLIN EQUITY FUND
105 AGE AGE HIGH INCOME FUND, INC.
FCF FRANKLIN CUSTODIAN FUNDS, INC.
106 GROWTH SERIES
107 UTILITIES SERIES
108 DYNATECH SERIES
109 INCOME SERIES
110 U.S. GOVERNMENT SECURITIES SERIES
111* FMF FRANKLIN MONEY FUND (MMP feeder as of 8/1/94)
112 FCTFIF FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
113* FFMF FRANKLIN FEDERAL MONEY FUND (USGSMMP feeder as of 8/1/94)
114 FTEMF FRANKLIN TAX-EXEMPT MONEY FUND
115 FNYTFIF FRANKLIN NEW YORK TAX-FREE INCOME FUND, INC.
116 FFTFIF FRANKLIN FEDERAL TAX-FREE INCOME FUND
FTFT FRANKLIN TAX-FREE TRUST
118 FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND
119 FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND
120 FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND
121 FRANKLIN INSURED TAX-FREE INCOME FUND
122 FRANKLIN OHIO INSURED TAX-FREE INCOME FUND
123 FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
126 FRANKLIN ARIZONA TAX-FREE INCOME FUND
127 FRANKLIN COLORADO TAX-FREE INCOME FUND
128 FRANKLIN GEORGIA TAX-FREE INCOME FUND
129 FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
130 FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
160 FRANKLIN MISSOURI TAX-FREE INCOME FUND
161 FRANKLIN OREGON TAX-FREE INCOME FUND
162 FRANKLIN TEXAS TAX-FREE INCOME FUND
163 FRANKLIN VIRGINIA TAX-FREE INCOME FUND
164 FRANKLIN ALABAMA TAX-FREE INCOME FUND
165 FRANKLIN FLORIDA TAX-FREE INCOME FUND
166 FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
167 FRANKLIN INDIANA TAX-FREE INCOME FUND
168 FRANKLIN LOUISIANA TAX-FREE INCOME FUND
169 FRANKLIN MARYLAND TAX-FREE INCOME FUND
170 FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
171 FRANKLIN NEW JERSEY TAX-FREE INCOME FUND
172 FRANKLIN KENTUCKY TAX-FREE INCOME FUND
174 FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND
177 FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND
178 FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND
FCTFT FRANKLIN CALIFORNIA TAX-FREE TRUST
124 FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
125 FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
152 FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME
FUND
FNYTFT FRANKLIN NEW YORK TAX-FREE TRUST
(Franklin New York-Tax Exempt Money Fund until 1/91)
131 FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND
153 FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND
181 FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND
FIST FRANKLIN INVESTORS SECURITIES TRUST
135 FRANKLIN GLOBAL GOVERNMENT INCOME FUND
(formerly Franklin Global Opportunity Income Fund)
136 FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT
SECURITIES FUND
137 FRANKLIN CONVERTIBLE SECURITIES FUND
138* FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND
(formerly Franklin Adjustable Rate Mortgage Fund)
(USGARMP feeder)
139 FRANKLIN EQUITY INCOME FUND
(Franklin Special Equity Income Fund until 8/17/93)
151* FRANKLIN ADJUSTABLE RATE SECURITIES FUND
(ARSP retail feeder)
IFT INSTITUTIONAL FIDUCIARY TRUST
140* MONEY MARKET PORTFOLIO (MMP feeder)
141* FRANKLIN LATE DAY MONEY MARKET PORTFOLIO
(Franklin Government Investors Money Market
Portfolio until 6/15/93)
142* FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET
PORTFOLIO (USGSMMP feeder)
143* FRANKLIN U.S. TREASURY MONEY MARKET PORTFOLIO
144* FRANKLIN INSTITUTIONAL ADJUSTABLE U.S. GOVERNMENT
SECURITIES FUND (USGARMP feeder)
145* FRANKLIN INSTITUTIONAL ADJUSTABLE RATE SECURITIES FUND
(ARSP feeder)
146* FRANKLIN U.S. GOVERNMENT AGENCY MONEY MARKET FUND
147* AEA CASH MANAGEMENT FUND (MMP feeder)
(formerly Franklin Star MOney Market Portfolio)
149* FRANKLIN CASH RESERVES FUND (MMP feeder)
150 FBSIF FRANKLIN BALANCE SHEET INVESTMENT FUND
154 FTAIBF FRANKLIN TAX-ADVANTAGED INTERNATIONAL BOND FUND
155 FTAUSGSF FRANKLIN TAX-ADVANTAGED U.S. GOVERNMENT SECURITIES FUND
156 FTAHYSF FRANKLIN TAX-ADVANTAGED HIGH YIELD SECURITIES FUND
FMT FRANKLIN MANAGED TRUST
117 FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
(Franklin Corporate Cash Portfolio until 5/31/91)
158 FRANKLIN RISING DIVIDENDS FUND
159 FRANKLIN INVESTMENT GRADE INCOME FUND
- ---- FRANKLIN INSTITUTIONAL RISING DIVIDENDS FUND (PT feeder)
(not yet filed)
157 FSMP FRANKLIN STRATEGIC MORTGAGE PORTFOLIO (effective 2/1/93)
FMST FRANKLIN MUNICIPAL SECURITIES TRUST
173 FRANKLIN HAWAII MUNICIPAL BOND FUND
175 FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND
176 FRANKLIN WASHINGTON MUNICIPAL BOND FUND
220 FRANKLIN TENNESSEE MUNICIPAL BOND FUND
221 FRANKLIN ARKANSAS MUNICIPAL BOND FUND
FSS FRANKLIN STRATEGIC SERIES (changed from Cal 250)
194 FRANKLIN STRATEGIC INCOME FUND
195 FRANKLIN MIDCAP GROWTH FUND (filed - not yet being sold)
196 FRANKLIN INSTITUTIONAL MIDCAP GROWTH FUND
(formerly FISCO MidCap Growth Fund)
197 FRANKLIN GLOBAL UTILITIES FUND
198 FRANKLIN SMALL CAP GROWTH FUND
199 FRANKLIN GLOBAL HEALTH CARE FUND
ARSP ADJUSTABLE RATE SECURITIES PORTFOLIOS (THE PARENT)
182 U.S. GOVERNMENT ADJUSTABLE RATE MORTGAGE PORTFOLIO
(master fund)
183 ADJUSTABLE RATE SECURITIES PORTFOLIO (filed under 1940
Act Only) (master fund)
MMP THE MONEY MARKET PORTFOLIOS (master fund parent)
(filed under 1940 Act only)
184* THE MONEY MARKET PORTFOLIO (master fund)
186* THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
(master fund)
187 MGP MIDCAP GROWTH PORTFOLIO (master fund) (1940 Act filing only
- not yet being sold)
PT THE PORTFOLIOS TRUST (master fund parent) (1940 Act filing
only - not yet being sold)
188 THE RISING DIVIDENDS PORTFOLIO (master fund)
FIT FRANKLIN INTERNATIONAL TRUST
190 FRANKLIN PACIFIC GROWTH FUND
191 FRANKLIN INTERNATIONAL EQUITY FUND
FREST FRANKLIN REAL ESTATE SECURITIES TRUST
192 FRANKLIN REAL ESTATE SECURITIES FUND
FTGT FRANKLIN TEMPLETON GLOBAL TRUST (formerly Huntington Funds)
210* FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND
211* FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
212* FRANKLIN TEMPLETON HARD CURRENCY FUND
213* FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND
FVF FRANKLIN VALUEMARK FUNDS (ALLIANZ)
821 MONEY MARKET FUND
822 EQUITY GROWTH FUND
823 PRECIOUS METALS FUND
824 REAL ESTATE SECURITIES FUND
825 UTILITY EQUITY FUND
826 HIGH INCOME FUND
827 GLOBAL INCOME FUND
828 INVESTMENT GRADE INTERMEDIATE BOND FUND
829 INCOME SECURITIES FUND
830 U.S. GOVERNMENT SECURITIES FUND
831 ZERO COUPON FUND - 1995
832 ZERO COUPON FUND - 2000
833 ZERO COUPON FUND - 2005
834 ZERO COUPON FUND - 2010
835 ADJUSTABLE U.S. GOVERNMENT FUND
836 RISING DIVIDENDS FUND
837 TEMPLETON PACIFIC GROWTH FUND (Pacific Growth Fund
until 10/15/93)
838 TEMPLETON INTERNATIONAL EQUITY FUND (International
Equity Fund until 10/15/93)
839 TEMPLETON DEVELOPING MARKETS EQUITY FUND
840 TEMPLETON GLOBAL GROWTH FUND
841 TEMPLETON WORLDWIDE ASSET ALLOCATION FUND
(not yet effective)
891 FGST FRANKLIN GOVERNMENT SECURITIES TRUST (AETNA)
193 FRANKLIN STABLE VALUE FUND
511 FRANKLIN TEMPLETON MONEY FUND II (expected effective
date: 05/01/95)

This GLOBAL CUSTODY AGREEMENT is effective as of July 28, 1995 and is between
THE CHASE MANHATTAN BANK, n.a. (the "Bank") and FRANKLIN INVESTORS SECURITIES
TRUST, (the "Customer") on behalf of its Franklin Global Government Income Fund
series, and any additional series of Customer which may be added by amendment to
this Custody Agreement in the future.

1. CUSTOMER ACCOUNTS.

The Bank agrees to establish and maintain the following accounts
("Accounts"):

(a) A custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined in
Section 3) for the account of the Customer ("Securities"); and

(b) A deposit account in the name of the Customer ("Deposit Account") for
any and all cash in any currency received by the Bank or its Subcustodian for
the account of the Customer, which cash shall not be subject to withdrawal by
draft or check.

The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) ("Instructions") concerning the Accounts. The Bank may deliver
securities of the same class in place of those deposited in the Custody Account.

Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.

2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.

Unless Instructions specifically require another location acceptable to
the Bank:

(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired: and

(b) Cash will be credited to an account in a country or other jurisdiction
in which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.

Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.

If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians or their securities
depositories, such arrangement must be authorized by a written agreement, signed
by the Bank and the Customer.

3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.

The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodian
agreements ("Subcustodians). The Customer authorizes the Bank to hold Assets in
the Accounts in accounts which the Bank has established with one or more of its
branches or Subcustodians. The Bank and Subcustodians are authorized to hold any
of the Securities in their account with any securities depository in which they
participate.

The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.

The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:

(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in
Rule 17f-5 under the Investment Company Act (the "Act"):

(b) "eligible foreign custodian" shall mean (i) a banking institution or
trust company incorporated or organized under the laws of a country other than
the United States that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof), (iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is incorporated
or organized under the laws of a country other than the United States which has
such other qualifications as shall be specified in Instructions and approved by
the Bank, or (iv) any other entity that shall have been so qualified by
exemptive rule or other appropriate action of the SEC: and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country or (ii) a
transnational system for the central handling of securities or equivalent
book-entries.

The Customer represents that its Board of Trustees has approved each of
the Subcustodians listed in Schedule A of this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, and further
represents that its Board has determined that the use of each Subcustodian and
the terms of each subcustody agreement are consistent with the best interests of
the Customer's fund(s) and its (their) shareholders. The Bank will supply the
Customer with any amendment to Schedule A for approval. The Customer has
supplied or will supply the Bank with certified copies of its Board of Trustees
resolution(s) with respect to the foregoing prior to placing Assets with any
Subcustodian so approved.

4. USE OF SUBCUSTODIAN.

(a) The Bank will identify Assets on its books as belonging to the
Customer.

(b) A Subcustodian will hold Assets together with assets belonging to
other customers of the Bank in accounts identified on such Subcustodian's books
as special custody accounts for the exclusive benefit of customers of the Bank.

(c) Any Assets in the Accounts held by a Subcustodian will be subject only
to the Instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the Instructions of such Subcustodian.

(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.

5. DEPOSIT ACCOUNT TRANSACTIONS.

(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.

(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by the Bank on similar
loans.

(c) If the Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If the Customer does not promptly return
any amount upon such notification, the Bank shall be entitled, upon oral or
written notification to the Customer to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or its Subcustodian
shall have no duty or obligation to institute legal proceedings, file a claim or
a proof of claim in any insolvency proceeding or take any other action with
respect to the collection of such amount, but may act for the Customer upon
Instructions after consultation with the Customer.

6. CUSTODY ACCOUNT TRANSACTIONS.

(a) Securities will be transferred, exchanged or delivered by the Bank or
its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to the Bank.

(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transaction will be credited
or debited to the Accounts on the date cash or Securities are actually received
by the Bank and reconciled to the Accounts.

(i) The Bank may reverse credits or debits made to the Accounts in
its discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction.

(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the credits and debits
of the particular transaction at any time.

7. ACTIONS OF THE BANK.

The Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank will
perform the following functions.

(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.

(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.

(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.

(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.

The Bank will send the Customer an advice or notification of any transfers
of Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty days of receipt, the Customer shall be deemed to have
approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.

All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment, redemption
or other transaction regarding Securities in the Custody Account in respect of
which the Bank has agreed to take any action under this Agreement.

8. CORPORATE ACCOUNTS; PROXIES.

Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase plans
and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions"), the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.

When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the Bank will endeavor to obtain Instructions from the
Customer or its Authorized Person, as defined in Section 10, but if Instructions
are not received in time for the Bank to take timely action, or actual notice of
such Corporate Action was received too late to seek Instructions, the Bank is
authorized to sell such rights entitlement or fractional interest and to credit
the Deposit Account with the proceeds or take any other action it deems, in good
faith, to be appropriate in which case it shall be held harmless for any such
action.

The Bank will deliver proxies to the Customer or its designed agent
pursuant to special arrangements which may have been agreed to in writing. Such
proxies shall be executed in the appropriate nominee name relating to Securities
in the Custody Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted, and where bearer
Securities are involved, proxies will be delivered in accordance with
Instructions.

9. NOMINEES.

Securities which are ordinarily held in registered form may be registered in
a nominee name of the Bank, Subcustodian or securities depository, as the case
may be. The Bank may, without notice to the Customer, cause any such Securities
to cease to be registered in the name of any such nominee and to be registered
in the name of the Customer. In the event that any Securities registered in a
nominee name are called for partial redemption by the issuer, the Bank may allot
the called portion to the respective beneficial holders of such class of
security in any manner the Bank deems to be fair and equitable. The Customer
agrees to hold the Bank, Subcustodians, and their respective nominees harmless
from any liability arising directly or indirectly from their status as a mere
record holder of Securities in the Custody Account.

10. AUTHORIZED PERSONS.

As used in this Agreement the term "Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer under
this Agreement. Such persons shall continue to be Authorized Persons until such
time as the Bank receives Instructions from the Customer or its designated agent
that any such employee or agent is no longer an Authorized Person.

11. INSTRUCTIONS.

The term "Instructions" means Instructions of any Authorized Person received
by the Bank, via telephone, telex, TWX, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded.

Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold the
Bank harmless for the failure of an Authorized Person to send such confirmation
in writing, the failure of such confirmation to conform to the telephone
Instructions received or the Bank's failure to produce such confirmation at any
subsequent time. Either Party may electronically record any Instructions given
by telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.

Account transactions made pursuant to Sections 5 and 6 of this Agreement
may be made only for the purposes listed below. Instructions must specify the
purpose for which any transaction is to be made and the Customer shall be solely
responsible to assure that Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be set forth in its
prospectus.

(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.

(b) When Securities are called, redeemed or retired, or otherwise become
payable.

(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.

(d) Upon conversion of Securities pursuant to their terms into other
securities.

(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.

(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.

(g) In connection with any borrowings by the Customer requiring a pledge
of Securities, but only against receipt of amounts borrowed.

(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.

(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed.

(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Bank, its Subcustodian or the
Customer's transfer agent.

(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of the National
Association of Securities Dealers, Inc, relating to compliance with the rules of
The Options Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the Customer.

(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive the Securities previously deposited from
brokers. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return.

(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions.

(n) For other proper purposes as may be specified in Instructions issued
by an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment or
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper purpose under the instruments governing the Customer.

(o) Upon the termination of this Agreement as set forth in Section 14(i).

12. STANDARD OF CARE; LIABILITIES.

(a) The Bank shall be responsible for the performance of only such duties
as are set forth in this Agreement or expressly contained in Instructions which
are consistent with the provisions of this Agreement.

(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Assets. The Bank shall
be liable to the Customer for any loss which shall occur as the result of the
failure of a Subcustodian to exercise reasonable care with respect to the
safekeeping of such Assets to the same extent that the Bank would be liable to
the Customer if the Bank were holding such Assets in New York. In the event of
any loss to the Customer by reason of the failure of the Bank or its
Subcustodian to utilize reasonable care, the Bank shall be liable to the
Customer only to the extent of the Customers direct damages, to be determined
based on the market value of the property which is the subject of the loss at
the date of discovery of such loss and without reference to any special
conditions or circumstances.

(ii) The Bank will not be responsible of any act, omission, default
or for the solvency of any broker or agent which it or a Subcustodian appoints
unless such appointment was made negligently or in bad faith.

(iii) The Bank shall be indemnified by and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise within the scope of this Agreement if such act or
omission was in good faith without negligence. In performing its obligations
under this Agreement, the Bank may rely on the genuineness of any document which
it believes in good faith to have been validly executed.

(iv) The Customer agrees to pay for and hold the Bank harmless from
any liability or loss resulting from the imposition or assessment of any taxes
or other governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.

(v) The Bank shall be entitled to rely and may act upon the advice
of counsel (who may be counsel for the Customer) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.

(vi) The Bank need not maintain any insurance for the benefit of the
Customer.

(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of investing or 2)
investing or holding Assets in a particular country including, but not limited
to, losses resulting from nationalization, expropriation or other governmental
actions; regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market conditions which prevent
the orderly execution of securities transactions or affect the value of Assets.

(viii) Neither party shall be liable to the other for any loss due
to forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God.

b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:

(i) Question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;

(ii) supervise or make recommendations with respect to investments or the
retention of Securities;

(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other than as
provided in Section 5(c) of this Agreement;

iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker. agent or other party to which
Securities are delivered or payments are made pursuant to this Agreement; or

v) review or reconcile trade confirmations received from brokers.
The Customer or its Authorized Persons issuing Instructions shall bear any
responsibility to review such confirmations against Instructions issued to and
statements issued by the Bank.

(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer
have a material interest in the issue of Securities, or earn profits from any of
the activities listed herein.

(d) the Bank hereby warrants to the Customer that in its opinion, after
due inquiry, the established procedures to be followed by each of its branches,
each branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding the Customer's Securities
pursuant to this Agreement afford protection for such Securities at least equal
to that afforded by the Bank's established procedures with respect to similar
securities held by the Bank and its securities depositories in New York.

13. FEES AND EXPENSES.

The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to
legal fees. The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing to the Bank under any provision of
this Agreement.

14. MISCELLANEOUS.

(a) Foreign Exchange Transactions. To facilitate the administration of the
Customers trading and investment activity, the Bank is authorized to enter into
spot or forward foreign exchange contracts with the Customer or an Authorized
Person for the Customer and may also provide foreign exchange through its
subsidiaries, affiliates or Subcustodians. Instructions, including standing
Instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of the Bank,
its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement, shall apply to such transaction.

(b) Certification of Residency, etc. The Customer certifies that it is a
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.

(c) Access to Records. The Bank shall allow the Customers independent
public accountants reasonable access to the records of the Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customers books and records. Upon
reasonable request from the Customer, the Bank shall furnish the Customer such
reports (or portions thereof) of the Bank's system of internal accounting
controls applicable to the Bank's duties under this Agreement. The Bank shall
endeavor to obtain and furnish the Customer with such similar reports as it may
reasonably request with respect to each Subcustodian and securities depository
holding the Customer's assets.

(d) Governing Law; Successors and Assigns. This Agreement shall be governed
by the laws of the State of New York and shall not be assignable by either
party, but shall bind the successors in interest of the Customer and the Bank.

(e) Entire Agreement; Applicable Riders. Customer represents that the Assets
deposited in the Accounts are (check one):

____ employee benefit plan or other assets subject to the Employee
Retirement Income Security Act of 1974; as amended ("ERlSA");

X mutual fund assets subject to Securities and Exchange Commission
("SEC") rules and regulations; or

____ neither of the above.

This Agreement consists exclusively of this document together with Schedule
A and the following rider(s) [check applicable rider(s)]:

_____ ERISA

X MUTUAL FUND

_____ SPECIAL TERMS AND CONDITIONS

There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.

(f) Severability. In the event that one or more provisions of this Agreement
are held invalid, illegal or unenforceable in any respect on the basis of any
particular circumstances or in any jurisdiction, the validity, legality and
enforceability of any such provision and the remaining provisions, under other
circumstances or in other jurisdictions will not in any way be affected or
impaired.

(g) Waiver. Except as otherwise provided in this Agreement, no failure or
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.

(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be given to the other party in writing;

Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center, 18th Floor
Brooklyn, NY 11245

Attention: Global Securities Services

Customer: FRANKLIN INTERNATIONAL TRUST
777 Mariners Island Blvd.
San Mateo, California 94404

Attention: D. Loo-Tam
Fund Accounting

with a copy to:
Templeton Group of Funds
Broward Financial Center
500 East Broward, Suite 2100
Ft. Lauderdale, Florida 33394-3091

Attention: Jim Baio
Fund Accounting

(i) Termination. This Agreement may be terminated by the Customer or the
Bank by giving sixty days written notice to the other, provided that such notice
to the Bank shall specify the names of the persons to whom the Bank shall
deliver the Assets in the Accounts. If notice of termination is given by the
Bank, the Customer shall, within sixty days following receipt of the notice,
deliver to the Bank Instructions specifying the names of the persons to whom the
Bank shall deliver the Assets. In either case the Bank will deliver the Assets
to the persons so specified, after deducting any amounts which the Bank
determines in good faith to be owed to it under Section 13. If within sixty days
following receipt of a notice of termination by the Bank, the Bank does not
receive Instructions from the Customer specifying the names of the persons to
whom the Bank shall deliver the Assets, the Bank, at its election, and
consistent with the requirements of the Investment Company Act of 1940, may
deliver the Assets to a bank or trust company doing business in the State of New
York to be held and disposed of pursuant to the provisions of this Agreement, or
to Authorized Persons, or may continue to hold the Assets until Instructions are
provided to the Bank.

FRANKLIN INTERNATIONAL TRUST

By /s/ Harmon E. Burns

Vice President
Title

THE CHASE MANHATTAN BANK, N.A.

By /s/ illegible

Vice President
Title

Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank. N.A. and

FRANKLIN INVESTORS SECURITIES TRUST
effective as of______________

Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940, as the same may be amended from
time to time.

Except to the extent that the Bank has specifically agreed to comply with
a condition of a rule, regulation or interpretation promulgated by or under the
authority of the Securities and Exchange Commission or the Exemptive Order
applicable to accounts of this nature issued to the Bank (Investment Company Act
of 1940, Release No. 12053, November 20, 1981), as amended, or unless the Bank
has otherwise specifically agreed, the Customer shall be solely responsible to
assure that the maintenance of Assets under this Agreement complies with such
rules, regulations, interpretations or exemptive order promulgated by or under
the authority of the Securities and Exchange Commission.

SCHEDULE A

FOREIGN SUBCUSTODIANS
THE CHASE MANHATTAN BANK, N.A. GLOBAL NETWORK
JULY 28, 1995

COUNTRY SUBCUSTODIAN

Argentina The Chase Manhattan Bank, N.A.

Australia The Chase Manhattan Bank Australia Limited

Austria Creditanstalt-Bankverein

Bangladesh Standard Chatered Bank

Belgium Generale Bank

Botswana Barclays Bank of Botswana Limited

Brazil Banco Chase Manhattan, S.A.

Canada Royal Bank of Canada and The Canada Trust
Company

Chile The Chase Manhattan Bank, N.A.

China The Hongkong and Shanghai Banking Corp.
Shenzhen and Shanghai

Colombia Cititrust Colombia S.A. Sociedad Fiduciaria

Czech Republic Ceskislovenska Obchodni Banka, A.S.

Denmark Den Danske Bank

Egypt National Bank of Egypt

Finland Kansallis-Osake-Pankki

France Banque Paribas; SICOVAM (Depository)

Germany Chase Bank, A.G.
Deutscher Kassenverein A.G. (Depository)

Ghana Barclays Bank of Ghana Ltd.

Greece Barclays Bank PLC, Athen

Hong Kong The Chase Manhattan Bank, N.A.

Hungary Citibank Budapest Rt.

India The Hongkong and Shanghai Banking Corp. and
Deutsche Bank, A.G., Bombay

Indonesia The Hongkong and Shanghai Banking Corp.

Ireland Bank of Ireland

Israel Bank Leumi Le-Israel B.M.

Italy The Chase Manhattan Bank, N.A.

Japan The Chase Manhattan Bank, N.A.

Jordan Arab Bank, PLC

Korea The Hongkong and Shanghai Banking Corp.

Lexemburg CEDEL S.A. (Depository)

Malaysia The Chase Manhattan Bank, N.A.

Mauritius The Hongkong and Shanghai Banking Corp.

Mexico The Chase Manhattan Bank, N.A. and Banco Nacional de
Mexico

Moroco Banque Commerciale du Maroc

The Netherlands ABN-AMRO Bank N.V.

New Zealand National Nominees Limited

Norway Den norske Bank

Pakistan Citibank, N.A. and
Deutsche Bank, A.G., Karachi

Peru Citibank, N.A.

Philippines The HongKong and Shanghai Banking Corp.

Poland Bank Handlowy W. Warzawie, S.A.

Portugal Banco Espirito Santo E Commercial De Lisboa

Singapore The Chase Manhattan Bank, N.A.

South Africa Standard Bank of South Africa Limited

Spain The Chase Manhattan Bank, N.A. and Banque Bruxelles
Lambert

Sri Lanka The Hongkong and Shanghai Banking Corp. Ltd.

Sweden Skandinaviska Enskilda Banken

Switzerland Union Bank of Switzerland

Taiwan The Chase Manhattan Bank, N.A.

Thailand The Chase Manhattan Bank, N.A.

Turkey The Chase Manhattan Bank, N.A.

United Kingdom The Chase Manhattan Bank, N.A.
Takas ve Saklama A.S. (Tvs) Depository

Uruguay The First National Bank of Boston

Venezuela Citibank, N.A.

Zimbabwe Barclays Bank PLC

Stradley Ronon Stevens & Young
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098

Direct Dial: (215) 564-8024

December 27, 1995

Franklin International Trust
777 Mariners Island Blvd.
San Mateo, California 94404

Re: Franklin International Trust

Gentlemen:

We have examined the Declaration of Trust and Bylaws of Franklin
International Trust ("Fund"), a Delaware Business Trust, and the various
pertinent records, documents and proceedings we deem material. We have also
examined the Notification of Registration and the Registration Statements
filed under the Investment Company Act of 1940 ("Investment Company Act") and
the Securities Act of 1933 ("Securities Act"), all as amended to date, as
well as other items we deem material to this opinion.

You have indicated that, pursuant to Section 24(e)(l) of the
Investment Company Act, the Fund intends to file Post-Effective Amendment No.
6 to its registration statement under the Securities Act to register 571,483
additional shares of beneficial interest for sale pursuant to its currently
effective registration statement under the Securities Act.

Based upon the foregoing information and examination, it is our
opinion that the Fund is a valid and subsisting business trust organized
under the laws of the State of Delaware and that the proposed registration of
the 571,483 shares of beneficial interest is proper and such shares of
beneficial interest, when issued will be legally outstanding, fully-paid and
non-assessable shares of beneficial interest, and the holders of such shares
of beneficial interest will have all the rights provided for with respect to
such holding by the Declaration of Trust and the laws of the State of
Delaware.

We hereby consent to the use of this opinion as an exhibit to
Post-Effective Amendment No. 6 to be filed by the Fund, covering the
registration of the said shares under the Securities Act and the applications
and registration statements, and amendments thereto, filed in accordance with
the securities laws of the several states in which shares of the Fund are
offered, and we further consent to reference in the Prospectus and Statement
of Additional Information of the Fund to the fact that this opinion
concerning the legality of the issue has been rendered by us.

Very truly yours,

STRADLEY, RONON, STEVENS & YOUNG

BY:/s/ Mark H. Plafker
Mark H. Plafker

MHP/nlk

149937.1

CONSENT OF INDEPENDENT AUDITORS

To the Board of Trustees of FRANKLIN INTERNATIONAL TRUST

We consent to the incorporation by reference in Post-Effective Amendment No. 6
to the Registration Statement of Franklin International Trust, on Form N-1A
(File No. 33-41240 of our report dated November 30, 1995 on our audit of the
financial statements and financial highlights of Franklin International Trust,
which report is included in the Annual Report to Shareholders for the year ended
October 31, 1995, which is incorporated by reference in the Registration
Statement.

/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.

San Francisco, California
December 27, 1995

Franklin International Trust
777 Mariners Island Boulevard
San Mateo, CA 94404

Ladies and Gentlemen:

This Subscription Agreement relates to Franklin International Trust
(the "Trust") and its authorized Series, Franklin Pacific Growth Fund (the
"Pacific Fund") and Franklin International Equity Fund (the "International
Fund").

The undersigned hereby subscribes to purchase 100,000 shares of
beneficial interest in the Pacific Fund, at $10 per share (5,000 shares of
which shall be designated "Special Shares" for the purposes of Paragraph 5
below), for an initial investment of $1,000,00 in the Pacific Fund. The
undersigned further subscribes to purchase 100,000 shares of beneficial
interest in the International Fund at $10 per share (5,000 of which shall be
designated "Special Shares" for the purposes of Paragraph 5 below), for an
initial investment of $1,000,000 in the International Fund. The shares of
beneficial interest of each Fund subscribed to herein are collectively
referred to as the "Shares".

With respect to the Shares, the undersigned hereby represents that:

1. There is no present reason to anticipate any change in
circumstances or any other occasion or event which would cause the
undersigned to sell or redeem the Shares shortly after the purchase thereof.

2. There are no agreements or arrangements between the undersigned and
the Trust, or any of its officers, trustees, employees or the investment
manager or adviser of the Trust, or any affiliated persons thereof with
respect to the resale, future distribution or redemption of the Shares.

3. The sale of the Shares will only be made by redemption to a Fund
and not by a transfer to any third party without the consent of the Trust.

4. The undersigned is aware that in issuing and selling these Shares,
each Fund and the Trust is relying upon the aforementioned representations.

5. The undersigned is fully aware that the organization expenses of
the Trust, including the costs and expenses of registration of the Trust's
shares of beneficial interest, are being charged to the operation of the
Funds over a period of five years, and that in the event the undersigned
redeems any portion of the Special Shares prior to the end of said
amortization period, the undersigned will reimburse the applicable Fund for
the pro rata share of the unamortized organization expenses (by a reduction
of the redemption proceeds) in the same proportion as the number of special
shares being redeemed bears to the total number of remaining Special Shares
by the undersigned hereunder.

FRANKLIN RESOURCES, INC.

Dated: September 10, 1991 By: /s/ Rupert H. Johnson, Jr.
Rupert H. Johnson, Jr.
Title: Executive Vice President

FRANKLIN INTERNATIONAL TRUST

Preamble to Amended and Restated Distribution Plan

The following Amended and Restated Distribution Plan (the "Plan") has
been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Act") by Franklin International Trust (the "Trust") for the use of two
series entitled Franklin International Equity Fund and Franklin Pacific
Growth Fund (may be collectively or separately hereinafter referred to as the
"Funds" or a "Fund"). The Plan has been approved by a majority vote of the
Board of Trustees of the Trust (the "Board of Trustees"), including a
majority of the trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan
(the "non-interested trustees"), cast in person at a meeting called for the
purpose of voting on such Plan.

In reviewing the Plan, the Board of Trustees considered the schedule
and nature of payments and terms of the Management Agreement between the
Trust, on behalf of the Funds, and Franklin Advisers, Inc. (the "Manager")
and the terms of the Underwriting Agreement between the Trust and
Franklin/Templeton Distributors, Inc. ("Distributors"). The Board of
Trustees concluded that the compensation of the Manager, under the Management
Agreement was fair and not excessive; however, the Board of Trustees also
recognized that uncertainty may exist from time to time with respect to
whether payments to be made by the Funds to the Manager or to Distributors or
others or by the Manager or Distributors to others may be deemed to
constitute distribution expenses. Accordingly, the Board of Trustees
determined that the Plan should provide for such payments and that adoption
of the Plan would be prudent and in the best interests of each of the Funds
and its shareholders. Such approval included a determination that, in the
exercise of their reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plan will benefit
each of the Funds and its shareholders.

AMENDED AND RESTATED DISTRIBUTION PLAN

1. The Funds shall reimburse Distributors or others for all expenses
incurred by Distributors or others in the promotion and distribution of the
shares of the Funds, including, but not limited to, the printing of
prospectuses and reports used for sales purposes, expenses of preparation and
distribution of sales literature and related expenses, advertisements, and
other distribution-related expenses, including a prorated portion of
Distributors' overhead expenses attributable to the distribution of Fund
shares, as well as any distribution or service fees paid to securities
dealers or their firms or others who have executed a servicing agreement with
the Fund, Distributors or its affiliates, which form of agreement has been
approved from time to time by the trustees, including the non-interested
trustees.

2. The maximum amount which may be reimbursed by the Funds to Distributors
or others pursuant to Paragraph 1 herein shall be 0.25% per annum of the
average daily net assets of each of the Funds. Said reimbursement shall be
made quarterly by each of the Funds to Distributors or others.

3. In addition to the payments which the Funds are authorized to make
pursuant to paragraphs 1 and 2 hereof, to the extent that the Funds, the
Manager, Distributors or other parties on behalf of a Fund, the Manager or
Distributors make payments that are deemed to be payments for the financing
of any activity primarily intended to result in the sale of shares issued by
a Fund within the context of Rule 12b-1 under the Act, then such payments
shall be deemed to have been made pursuant to the Plan.

In no event shall the aggregate asset-based sales charges, which
include payments specified in paragraphs 1 and 2, plus any other payments
deemed to be made pursuant to the Plan under this paragraph, exceed the
amount permitted to be paid pursuant to the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., Article III, Section 26(d).

4. Distributors shall furnish to the Board of Trustees, for their review,
on a quarterly basis, a written report of the monies reimbursed to it and to
others under the Plan, and shall furnish the Board of Trustees with such
other information as the Board of Trustees may reasonably request in
connection with the payments made under the Plan in order to enable the Board
of Trustees to make an informed determination of whether the Plan should be
continued.

5. The Plan shall continue in effect for a period of more than one year
only so long as such continuance is specifically approved at least annually
by a vote of the Board of Trustees, including the non-interested trustees,
cast in person at a meeting called for the purpose of voting on the Plan.

6. The Plan, and any agreements entered into pursuant to this Plan, may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of a Fund with respect to such Fund only, or by
vote of a majority of the non-interested trustees, on not more than sixty
(60) days' written notice, or by Distributors on not more than sixty (60)
days' written notice and shall terminate automatically in the event of any
act that constitutes an assignment of the Management Agreement between the
Trust and the Manager or the Underwriting Agreement between the Trust and
Distributors.

7. The Plan, and any agreements entered into pursuant to this Plan, may not
be amended to increase materially the amount to be spent by a Fund for
distribution pursuant to Paragraph 2 hereof without approval as to the
relevant Fund, by a majority of the Fund's outstanding voting securities.

8. All material amendments to the Plan, or any agreements entered into
pursuant to this Plan, shall be approved by a vote of the non-interested
trustees, cast in person at a meeting called for the purpose of voting on any
such amendment.

9. So long as the Plan is in effect, the selection and nomination of the
Trust's non-interested trustees shall be committed to the discretion of such
non-interested trustees.

10. This Plan shall take effect on the 1st day of July, 1993.

This Plan and the terms and provisions thereof are hereby accepted and
agreed to by the Trust, on behalf of the Funds, and Distributors as evidenced
by their execution hereof.

FRANKLIN INTERNATIONAL TRUST

/s/ Charles B. Johnson
By: Charles B. Johnson

FRANKLIN/TEMPLETON DISTRIBUTORS, INC.

/s/ Rupert H. Johnson, Jr.
By: Rupert H. Johnson, Jr.

Fund Name:
Period Ending: 12/31/94 12/31/94

MAX OFF NAV
1 Yr T.Return: -6.58% -2.41%
5 Yr T.Return: 61.27% 68.47%
10 Yr T.Return: NA NA
From Inception: 85.09% 93.24%
Inception Date: 05/04/87 05/04/87

SEC STANDARD TOTAL RETURN

AS OF: 12/31/94

MAX OFFER NAV

ONE YEAR -6.58% -2.41%

P= 1000.00 1000.00
T= -0.0658 -0.0241
n= 1 1
ERV= 934.20 975.90

FIVE YEAR 10.03% 11.00%

P= 1000.00 1000.00
T= 0.1003 0.1100
n= 5 5
ERV= 1612.71 1685.06

TEN YEAR 0.00% 0.00%

P= 1000.00 1000.00
T= 0.0000 0.0000
n= 10 10
ERV= 1000.00 1000.00

FROM INCEPTION 05/04/87 8.36% 8.97%

P= 1000.00 1000.00
T= 0.0836 0.0897
n= 7.6685 7.6685
ERV= 1850.94 1932.36

AGGREGATE TOTAL RETURN

1 YEAR -6.58% -2.41%
5 YEAR 61.27% 68.47%
10 YEAR NA NA
FROM INCEPTION 85.09% 93.24%

30-DAY SEC YIELD 10.15%
30-DAY SEC YIELD W/O NA
WAIVER
FISCAL YEAR-END 9.52%
DISTRIBUTION RATE (ON MAX
OFFERING)
FISCAL YEAR-END 9.93%
DISTRIBUTION RATE (ON
NAV)

FUND #

For the year ended 12/31/94

SEC - YIELD CALCULATION

a = interest/dividends earned 751,960

b = expenses accrued 58,736

c = avg # of shares o/s 10,026,685

d = maximum offering price 8.344

a - b 6
SEC Yield= 2[(---------------------------------- + 1) -1]
cd

751,960 - 58,736 6
= 2[(----------------------------------- + 1) -1]
10,026,685 * 8.344

693,224 6
= 2[(------------------------- + 1) -1]
83,662,660

6
= 2[( 1.00828594265330 ) -1]

= 2( 1.05075695727946 - 1)

= 0.1015139146

= 10.15%

POWER OF ATTORNEY

The undersigned officers and trustees of Franklin International Trust (the
"Registrant") hereby appoint MARK H. PLAFKER, HARMON E. BURNS, DEBORAH R.
GATZEK, KAREN L. SKIDMORE AND LARRY L. GREENE (with full power to each of
them to act alone) his attorney-in-fact and agent, in all capacities, to
execute, and to file any of the documents referred to below relating to
Post-Effective Amendments to the Registrant's registration statement on Form
N-1A under the Investment Company Act of 1940, as amended, and under the
Securities Act of 1933 covering the sale of shares by the Registrant under
prospectuses becoming effective after this date, including any amendment or
amendments increasing or decreasing the amount of securities for which
registration is being sought, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority.
Each of the undersigned grants to each of said attorneys, full authority to
do every act necessary to be done in order to effectuate the same as fully,
to all intents and purposes as he could do if personally present, thereby
ratifying all that said attorneys-in-fact and agents, may lawfully do or
cause to be done by virtue hereof.

The undersigned officers and trustees hereby execute this Power of
Attorney as of this 18th day of July 1995.

/s/ Rupert H. Johnson, Jr. /s/ Charles B. Johnson
Rupert H. Johnson, Jr., Charles B. Johnson,
Principal Executive Officer Trustee
and Trustee

/s/ Frank H. Abbott, III /s/ Harris J. Ashton
Frank H. Abbott, III, Harris J. Ashton,
Trustee Trustee

/s/ Harmon E. Burns /s/ S. Joseph Fortunato
Harmon E. Burns, S. Joseph Fortunato,
Trustee Trustee

/s/ David W. Garbellano /s/ Frank W. T. LaHaye
David W. Garbellano, Frank W. T. LaHaye,
Trustee Trustee

/s/ Gordon S. Macklin /s/ Diomedes Loo-Tam
Gordon S. Macklin, Diomedes Loo-Tam,
Trustee Principal Accounting Officer

/s/ Martin L. Flanagan
Martin L. Flanagan,
Principal Financial Officer

CERTIFICATE OF SECRETARY

I, Larry L. Greene, certify that I am Assistant Secretary of Franklin
International Trust (the "Trust").

As Assistant Secretary of the Trust, I further certify that the
following resolution was adopted by a majority of the Trustees of the Trust
present at a meeting held at 777 Mariners Island Boulevard, San Mateo,
California on July 18, 1995.

RESOLVED, that a Power of Attorney, substantially in the form of
the Power of Attorney presented to this Board, appointing Harmon
E. Burns, Deborah R. Gatzek, Karen L. Skidmore, Larry L. Greene
and Mark H. Plafker as attorneys-in-fact for the purpose of
filing documents with the Securities and Exchange Commission, be
executed by each Trustee and designated officer.

I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.

Dated: July 18, 1995 /s/ Larry L. Greene
Larry L. Greene
Assistant Secretary

<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FRANKLIN INTERNATIONAL TRUST OCTOBER 31, 1995 ANNUAL REPORT AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000876441
<NAME> FRANKLIN PACIFIC GROWTH FUND
<SERIES>
<NUMBER> 1
<NAME> FRANKLIN INTERNATIONAL TRUST
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 51517415
<INVESTMENTS-AT-VALUE> 46354001
<RECEIVABLES> 4173773
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 46977
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<PAYABLE-FOR-SECURITIES> 68246
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<SHARES-COMMON-PRIOR> 3781707
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<OVERDISTRIBUTION-GAINS> 0
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<NET-CHANGE-FROM-OPS> (3047437)
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<DISTRIBUTIONS-OF-INCOME> (584289)
<DISTRIBUTIONS-OF-GAINS> (1040435)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4017142
<NUMBER-OF-SHARES-REDEEMED> (4341319)
<SHARES-REINVESTED> 102552
<NET-CHANGE-IN-ASSETS> (7993925)
<ACCUMULATED-NII-PRIOR> 231385
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<PER-SHARE-NAV-BEGIN> 15.400
<PER-SHARE-NII> .150
<PER-SHARE-GAIN-APPREC> (1.013)
<PER-SHARE-DIVIDEND> (.156)
<PER-SHARE-DISTRIBUTIONS> (.271)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.110
<EXPENSE-RATIO> 1.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FRANKLIN INTERNATIONAL TRUST OCTOBER 31, 1995 ANNUAL REPORT AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<NAME> FRANKLIN INTERNATIONAL EQUITY FUND
<SERIES>
<NUMBER> 2
<NAME> FRANKLIN INTERNATIONAL TRUST

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 50128946
<INVESTMENTS-AT-VALUE> 45357065
<RECEIVABLES> 5770309
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 94342
<TOTAL-ASSETS> 51221716
<PAYABLE-FOR-SECURITIES> 57944
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<SHARES-COMMON-PRIOR> 4182052
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<NUMBER-OF-SHARES-REDEEMED> (2284213)
<SHARES-REINVESTED> 221229
<NET-CHANGE-IN-ASSETS> (690666)
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</TABLE>