SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
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FRANKLIN TEMPLETON INTERNATIONAL TRUST
TEMPLETON PACIFIC GROWTH FUND
IMPORTANT SHAREHOLDER INFORMATION
These materials are for a special meeting of shareholders scheduled for March
12, 2001 at 4:00 p.m. Pacific time. They discuss the proposals to be voted on
at the meeting, and contain your proxy statement and proxy card. A proxy card
is, in essence, a ballot. When you vote your proxy, it tells us how you wish
to vote on important issues relating to your Fund. If you complete and sign
the proxy, we'll vote it exactly as you tell us. If you simply sign the
proxy, we'll vote it in accordance with the Board of Trustees'
recommendations on page 1 of the proxy statement.
We welcome your comments. If you have any questions, call Fund Information at
1-800/DIAL BEN(R) (1-800/342-5236). We urge you to spend a few minutes
reviewing the proposals in the proxy statement. Then, fill out the proxy card
and return it to us so that we know how you would like to vote. When
shareholders return their proxies promptly, the Fund may be able to save
money by not having to conduct additional mailings.
TELEPHONE AND INTERNET VOTING
For your convenience, you may be able to vote by telephone or through the
Internet, 24 hours a day. If your account is eligible, a control number and
separate instructions are enclosed.
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A LETTER FROM THE PRESIDENT
Dear Shareholders:
Enclosed for your consideration are a number of important matters relating to
your investment in Templeton Pacific Growth Fund (the "Fund") in connection
with a Special Meeting of Shareholders. The materials that we have included
describe proposals that will affect the future of your fund.
The Board of Trustees recommends that you cast your vote in favor of:
1. Approval of a new Subadvisory Agreement between Franklin Advisers,
Inc. and Templeton Asset Management LTD on behalf of the Fund;
2. Amending seven of the Fund's fundamental investment restrictions;
3. Eliminating four of the Fund's fundamental investment
restrictions;
PLEASE TAKE A MOMENT TO REVIEW THIS DOCUMENT, FILL OUT, SIGN AND RETURN THE
ENCLOSED PROXY CARD
To provide additional investment opportunities for the Fund, we have proposed
amending or eliminating certain of the Fund's fundamental investment
restrictions.
The proxy statement includes a question-and-answer format designed to provide
you with a simpler and more concise explanation of certain issues. Although
much of the information in the proxy statement is technical and required by
the various regulations that govern the Fund, we hope that this format will
be helpful to you.
Your vote is important to the Fund. On behalf of the Trustees, thank you in
advance for considering these issues and for promptly returning your proxy
card.
Sincerely,
Charles B. Johnson
President
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FRANKLIN TEMPLETON INTERNATIONAL TRUST - TEMPLETON PACIFIC GROWTH FUND
NOTICE OF SPECIAL SHAREHOLDERS' MEETING
TO BE HELD ON MARCH 12, 2001
A Special Shareholders' Meeting ("Meeting") of Templeton Pacific Growth Fund
(the "Fund") will be held at the Fund's office at 777 Mariners Island
Boulevard, San Mateo, California 94404, at 4:00 p.m. (Pacific time), on March
12, 2001.
During the Meeting, shareholders of the Fund will vote on the following
Proposals and Sub-Proposals:
1. Approval of a new Sub-advisory Agreement between Franklin
Advisers, Inc. and Templeton Asset Management LTD on behalf of the Fund;
2. To approve amendments to certain of the Fund's fundamental investment
restrictions (includes seven (7) Sub-Proposals).
(a) To amend the Fund's fundamental investment restriction regarding
borrowing;
(b) To amend the Fund's fundamental investment restriction regarding
underwriting;
(c) To amend the Fund's fundamental investment restriction regarding
lending;
(d) To amend the Fund's fundamental investment restrictions regarding
investments in real estate and commodities;
(e) To amend the Fund's fundamental investment restrictions regarding
short sales and issuing senior securities;
(f) To amend the Fund's fundamental investment restriction regarding
industry concentration; and
(g) To amend the Fund's fundamental investment restriction regarding
diversification of investments.
3. To approve the elimination of certain of the Fund's fundamental
investment restrictions.
4. To grant the proxyholders authority to vote upon any other business
that may properly come before the Meeting or any adjournment thereof.
The Board of Trustees has fixed December 15, 2000 as the record date for
determination of shareholders entitled to vote at the Meeting.
Please note that a separate vote is required for each Proposal or
Sub-Proposal.
By Order of the Board of Trustees,
Murray L. Simpson
Secretary
San Mateo, California
January 2, 2001
Please sign and return your proxy card in the self-addressed envelope
regardless of the number of shares you own.
TABLE OF CONTENTS
PAGE
PROXY STATEMENT
Information About Voting x
Proposal 1: To Approve Sub-advisory Agreement
x
Proposal 2: To Approve Amendments to Certain
of the Fund's Fundamental
Investment Restrictions (Includes Seven (7) Sub-Proposals) xx
2a: Borrowing xx
2b: Underwriting xx
2c: Lending xx
2d: Real Estate and Commodities xx
2e: Short Sales and Issuing Senior Securities xx
2f: Industry Concentration xx
2g: Diversification of Investments xx
Proposal 3: To Approve the Elimination of
Certain of the Fund's Fundamental Investment Restrictions xx
Proposal 4: Other Business xx
EXHIBITS
Exhibit A: Fundamental Investment
Restrictions
Proposed to be Amended or Eliminated A-1
TEMPLETON PACIFIC GROWTH FUND
PROXY STATEMENT
INFORMATION ABOUT VOTING
Who is asking for my vote?
The Board of Trustees of Franklin Templeton International Trust (Trust), on
behalf of its separate series Templeton Pacific Growth Fund (Fund), in
connection with the Special Meeting of the Shareholders of the Fund to be
held March 12, 2000 (the "Meeting"), have requested your vote on several
matters.
Who is eligible to vote?
Shareholders of record at the close of business on December 15, 2000 are
entitled to vote at the Meeting or any adjourned meeting. Each share of
record is entitled to one vote on each matter presented at the Meeting. The
Notice of Meeting, the proxy card, and the proxy statement were mailed to
shareholders of record on or about January 4, 2001.
On what issues am I being asked to vote?
You are being asked to vote on the following proposals:
1. To approve a new sub-advisory agreement between Franklin Advisers, Inc.
and Templeton Asset Management, Ltd. on behalf of the Fund;
2. To amend certain of the Fund's fundamental investment restrictions;
3. To eliminate certain of the Fund's fundamental investment restrictions;
4. To grant the proxyholders authority to vote upon any other business that
may properly come before the Meeting or any adjournment thereof.
How do the Trustees recommend that I vote?
The Trustees unanimously recommend that you vote:
1. FOR approval of the new sub-advisory agreement for the Fund
2. FOR the amendment of each of the Fund's fundamental investment
restrictions proposed to be amended;
3. FOR the elimination of the Fund's fundamental investment restrictions
proposed to be eliminated;
4. FOR the proxyholders to vote, in their discretion, on any other business
that may properly come before the Meeting or any adjournment thereof.
How do I ensure that my vote is accurately recorded?
You may attend the Meeting and vote in person or you may complete and return
the enclosed proxy card. If you are eligible to vote by telephone or through
the Internet, a control number and separate instructions are enclosed.
Proxy cards that are properly signed, dated and received at or prior to the
Meeting will be voted as specified. If you specify a vote for any of the
Proposals 1 through 4, your proxy will be voted as you indicate. If you
simply sign and date the proxy card, but do not specify a vote for any of the
Proposals 1 through 4, your shares will be voted as follows: IN FAVOR of the
new sub-advisory agreement for the Fund (Proposal 1, IN FAVOR of amending
certain of the Fund's fundamental investment restrictions (Sub-Proposals
2a-2g), IN FAVOR of eliminating certain of the Fund's fundamental investment
restrictions, (Proposal 3 and/or IN FAVOR of granting the proxyholders named
in the proxy card the authority to vote in their discretion as to any other
matters that may properly come before the Meeting or any adjournment
(Proposal 4).
May I revoke my proxy?
You may revoke your proxy at any time before it is voted by: (1) delivering a
written revocation to the Secretary of the Fund, (2) forwarding to the Fund a
later-dated proxy card that is received by the Fund at or prior to the
Meeting, or (3) attending the Meeting and voting in person.
THE PROPOSALS
PROPOSAL 1: TO APPROVE A NEW SUB-ADVISORY AGREEMENT
WHY IS A NEW SUB-ADVISORY AGREEMENT PROPOSED?
The Fund is currently managed by Franklin Advisers, Inc. ("Advisers")
and until October 31, 2000 was sub-advised by Templeton Investment Counsel,
Inc. ("TICI"). TICI has investment operations in Fort Lauderdale, Florida.
As a result of certain personnel changes at TICI, management recommended to
the Trust's Board that Templeton Asset Management, Ltd. ("TAML") become the
sub-adviser to the Fund effective November 1, 2000. TAML has investment
operations in Hong Kong and, like TICI, is a corporate affiliate of
Advisers. TAML was recommended because the primary portfolio manager
selected to manage the Fund had determined to accept a position with TAML in
Hong Kong, and leave his position with TICI.
WHAT DID THE BOARD CONSIDER IN APPROVING THE AGREEMENT WITH TAML?
In accordance with regulations under the 1940 Act, the Trust's Board of
Trustees approved an interim contract with TAML (the "Agreement"), which
became effective on November 1, 2000, on the same terms as the previous
contract with TICI. Assuming that shareholders approve the sub-advisory
agreement with TAML, the interim contract will become the permanent
sub-advisory agreement.
In approving the Agreement, the Board considered that TAML and TICI are
both part of the Franklin Templeton organization and, therefore, the Board
was comfortable with the investment process, corporate structure and quality
of services to be provided. The Board also was informed of the investment
experience and background of the proposed portfolio managers. Finally, the
Board also considered the investment expertise of TAML particularly with
respect to Pacific-rim based companies.
ARE THE TERMS OF THE AGREEMENT WITH TAML THE SAME AS THOSE OF THE FORMER
SUB-ADVISORY AGREEMENT WITH TICI?
Yes, the terms of the Agreement, including fees to be paid to TAML, are
identical to those of the former agreement with TICI. Under the Agreement,
subject to the overall policies, control, direction and review of the Trust's
Board of Trustees, and subject to the instructions and supervision of
Advisers, TAML provides 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. TAML also
places all purchase and sale orders on behalf of the Fund. The Agreement
specifically provides that orders regarding U.S. domiciled securities and
money market instruments may also be placed on behalf of the Fund by Advisers.
The Agreement provides that in performing its services, TAML will adhere
to the Fund's investment objectives, policies and restrictions as contained
in the Prospectus and Statement of Additional Information, in the Trust's
Declaration of Trust, any investment guidelines established by Advisers and
the provisions of the 1940 Act and the rules and regulations of the U.S.
Securities and Exchange Commission and the Internal Revenue Code. TAML is
obligated to supply the Trust's Board quarterly with a report of its
activities under the Agreement.
In performing the services described, TAML must use its best efforts to
obtain for the Fund the most favorable price and execution available.
However, subject to appropriate Board policies and procedures, TAML may, to
the extent authorized by law and 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.
The Agreement is effective as of November 1, 2000 and continues in
effect for two years. It is renewable annually thereafter for successive
periods not to exceed one year (i) by a vote of the Trust's Board of Trustees
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 the Agreement or interested persons thereof, cast in person at
a meeting called for the purpose of voting on such approval. The Agreement
may be terminated at any time, without payment of any penalty by the Trust's
Board of Trustees, upon sixty (60) days' written notice to Advisers and TAML,
and by Advisers or TAML upon sixty (60) days' written notice to the other
party. The Agreement terminates automatically in the event of any transfer
or assignment of the Agreement, as defined in the 1940 Act, and in the event
of any act or event that terminates the investment management agreement
between Advisers and the Fund.
WHAT INFORMATION SHOULD A SHAREHOLDER KNOW ABOUT TAML?
TAML is a corporation organized under the laws of and based in
Singapore. Its Hong Kong branch, through which investment management advice
and assistance is provided to the Fund, has offices at Two Exchange Square,
Hong Kong. TAML is an indirect wholly owned subsidiary of Franklin
Resources, Inc. ("Resources"), 777 Mariners Island Boulevard, San Mateo,
California 94404. Resources is also the corporate parent of Advisers.
TAML is registered as an investment adviser under the Investment
Advisers Act of 1940. [ info required by Item 22 (c) (10) regarding
Templeton Developing Markets Securities Fund and other investment companies
advised by TAML]
TAML's directors and managing directors are shown below. Martin L.
Flanagan is Vice President and Chief Financial Officer of the Trust and
Charles E. Johnson is Vice President of the Trust. None of the other
directors or managing directors of TAML holds positions with the Trust.
NAME, POSITION WITH TAML AND ADDRESS AND PRINCIPAL OCCUPATION
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VIJAY CHANDUR ADVANI, DIRECTOR
7 Temasek Blvd., Suntec Tower One, #38-03, Singapore 038987
MARTIN L. FLANAGAN, DIRECTOR
777 Mariners Island Blvd., San Mateo, CA 94404-1585
Director of TAML. He joined Templeton in 1983. Mr. Flanagan also serves as
an officer and/or director or trustee of 52 of the investment companies in
Franklin Templeton Investment. Chairman and Director of Franklin Templeton
Services, Inc. Executive Vice President, Chief Financial Officer and
Director of Templeton Worldwide, Inc. He is a Director and Executive Vice
President of TGAL.
MARK G. HOLOWESKO, DIRECTOR
P. O. Box N-7759, Lyford Cay, Nassau, Bahamas
Director of TAML. He joined Templeton in 1985. Serves also as Director,
President and Head of Investment of TGAL. He serves as a Director and
officer of various Franklin Templeton affiliates and investment companies.
CHARLES E. JOHNSON, DIRECTOR
777 Mariners Island Blvd., San Mateo, CA 94404-1585
President, Member - Office of the President and Director of Franklin
Resources, Inc., President and Director of Templeton Worldwide, Inc.
Chairman of the Board and President of Franklin Investment Advisory Services,
Inc.
DENNIS CHONG BOON LIM, DIRECTOR
7 Temasek Blvd., Suntec Tower One, #38-03, Singapore -38987
Senior Executive Vice President and Portfolio Manager of TAML.
GREGORY E. MCGOWAN, DIRECTOR
500 East Broward Blvd., Fort Lauderdale, FL 33394-3091
He serves also as an Executive Vice President and Secretary of TAGL and
Director and Executive Vice President of TICI. Executive Vice President -
International Development, Chief International General Counsel and Director
of Templeton Worldwide, Inc.
J. MARK MOBIUS, MANAGING DIRECTOR
Two Exchange Square, 39th Floor, Suite 3905-08, Hong Kong
He is also Director and Executive Vice President of TAGL and an officer or
director of various Templeton investment companies.
WAI KWOK WU, DIRECTOR
7 Temasek Blvd., Suntec Tower One, #38-03, Singapore 038987
OTHER INFORMATION ABOUT THE FUND'S ADVISORY ARRANGEMENTS?
The Fund is managed by Advisers pursuant to a contract dated September
20, 1991, which was approved by the sole initial shareholder of the Fund on
September 10, 1991 and was most recently continued by the Trust" Board of
Trustees on April 18, 2000 (the "Advisers Agreement"). Until October 31,
2000, the Fund was sub-advised pursuant to a contract between the Adviser and
TICI, dated January 1, 1993. That contract was approved by the shareholders
of the Fund on April 26, 1993, was last continued by the Trust's Board of
Trustees on April 18, 2000. The Agreement was approved by the Trust's Board
of Trustees on September 26, 2000 at a meeting called for the purpose of
voting on the agreement. From December 31, 1992 until October 31, 2000
Advisers received portfolio advice and management assistance from TICI.
Under the Advisers Agreement, the Fund pays a total fee for investment
management equal to an amount based on the value of the Fund's average daily
net assets, as follows: 1.00% up to and including $100 million; 0.90% over
$100 million up to and including $250 million; 0.80% over $250 million up to
and including $500 million; and 0.75% over $500 million. Under the TICI
Agreement, TICI received from Advisers a fee equal to an amount based on the
value of the Fund's average daily net assets, as follows: 0.50% up to and
including $100 million; 0.40% over $100 million up to and including $250
million; 0.30% over $250 million up to and including $500 million; and 0.25%
over $500 million. TAML receives and will receive the same amount under the
Agreement.
For the Fund's last fiscal year ended October 31,2000, Advisers received
a total fee of $629,459 from the Fund. Of that amount Advisers paid TICI a
total of $314,729. During the same period, the Fund paid the following
amounts to Franklin Templeton Distributors, Inc. as Rule 12b-1 distribution
fees, to Franklin Templeton Services, Inc. for administration fess, and to
Franklin Templeton Investor Services, Inc. for transfer agency fees:
$198,222, $94,263 and $__________, respectively.
The Board of Trustees, including a majority of the Trustees who are not
interested persons, unanimously recommends approval of the Agreement. If
shareholders of the Fund fail
to approve the continuation of the Agreement, Advisers and the Board of
Trustees will determine what action should be taken to provide for the
continued management of the Fund.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE PROPOSAL 1
INTRODUCTION TO PROPOSALS 2 AND 3.
Why is the Fund amending or eliminating certain of its fundamental investment
restrictions?
The Fund is subject to certain investment restrictions, which govern the
Fund's investment activities. Under the Investment Company Act of 1940, as
amended, (the "1940 Act"), certain investment restrictions are required to be
"fundamental" which means that they can only be changed by a shareholder
vote. An investment company may designate additional restrictions that are
fundamental, and it may also adopt "non-fundamental" restrictions, which may
be changed by the Directors without shareholder approval.
After the Fund was reorganized as a Delaware business trust in 1991, certain
legal and regulatory requirements applicable to mutual funds changed. For
example, certain restrictions imposed by state laws and regulations were
preempted by the National Securities Markets Improvement Act of 1996
("NSMIA") and therefore are no longer applicable to funds. The Fund currently
is subject to fundamental investment restrictions that are either more
restrictive than required under current law, or which are no longer required
at all. Accordingly, the Trustees recommend that the Fund's shareholders
approve the amendment or elimination of certain of the Fund's current
fundamental investment restrictions.
By reducing the total number of investment restrictions that can be changed
only by a shareholder vote, the Trustees believe that the Fund will be able
to minimize the costs and delays associated with holding future shareholder
meetings to revise fundamental policies that become outdated or
inappropriate. The Trustees also believe that the sub-adviser's ability to
manage the Fund's assets in a changing investment environment will be
enhanced, and that investment management opportunity will be increased by
these changes.
The proposed restrictions satisfy current federal regulatory requirements,
and are written to provide flexibility to respond to future legal,
regulatory, market or technical changes. The proposed changes will not affect
the Fund's investment objective. Although the proposed changes in fundamental
investment restrictions will provide the Fund with greater flexibility to
respond to future investment opportunities, the Board does not anticipate
that the changes, individually or in the aggregate, will result in a material
change in the level of investment risk associated with investment in the Fund
nor will the changes materially affect the manner in which the Fund is
managed.
The Fund's existing investment restrictions, together with the recommended
changes to the restrictions, are detailed in Exhibit A, which is entitled,
"Fundamental Investment Restrictions Proposed to be Amended or Eliminated."
Shareholders are requested to vote on each Sub-Proposal in Proposal 2
separately.
PROPOSAL 2: TO APPROVE AMENDMENTS TO CERTAIN OF THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS (this Proposal involves separate
votes on Sub-Proposals 2a - 2g)
Sub-Proposal 2a: To amend the Fund's fundamental investment restriction
regarding borrowing.
The 1940 Act requires investment companies to impose certain limitations on
borrowing activities. The limitations on borrowing are generally designed to
protect shareholders and their investment by restricting a fund's ability to
subject its assets to the claims of creditors who might have a claim to the
fund's assets that would take precedence over the claims of shareholders. A
fund's borrowing restriction must be fundamental.
Under the 1940 Act, a fund may borrow from banks up to one-third of its total
assets (including the amount borrowed). A fund may borrow up to 5% of its
total assets for temporary purposes from any person. Funds typically borrow
money to meet redemption requests in order to avoid forced, unplanned sales
of portfolio securities. This technique allows a fund greater flexibility to
buy and sell portfolio securities for investment or tax considerations,
rather than for cash flow considerations.
What effect will amending the current borrowing restriction have on the Fund?
As described in the Fund's current investment restriction number 2, the Fund
is presently limited to borrowing up to 10% of assets, rather than the 331/3%
allowed under current law. The proposed revision would increase this
borrowing limit to the legally permissible limit of 331/3%. The proposed
restriction would also clarify that the Fund may borrow: (1) from banks to
the extent permitted by the 1940 Act or any exemptions therefrom, and (2)
from any person in a private transaction not intended for public distribution
for temporary or emergency purposes, but (3) in any event all borrowings must
not exceed 331/3% of total assets. The Fund's current restriction also states
that the Fund may not borrow for investment purposes in excess of 5% of the
value of the Fund's assets. The 1940 Act limits on borrowing historically
were interpreted to prohibit mutual funds from making additional investments
in securities while borrowings exceeded 5% of total assets. However, such a
5% limit is not required under the 1940 Act and originated from informal
regulatory positions. Accordingly, under the proposed restriction, the Fund
would be permitted to make additional investments, even if borrowings exceed
5% of total assets. The Fund, however, has no current intention of changing
the way it operates to take advantage of the increased flexibility associated
with removing this restriction on its ability to make additional investments
while borrowings exceed 5%.
The proposed restriction also permits the Fund to borrow cash from investment
companies in Franklin Templeton Investments. The SEC recently granted an
exemptive order to the Fund, together with other funds in Franklin Templeton
Investments, permitting the Fund to borrow money from other Franklin and
Templeton funds. The proposed borrowing restriction would permit the Fund,
under certain circumstances and in accordance with the exemptive order, to
borrow money from other Franklin and Templeton funds at rates which are no
less favorable than those which the Fund would receive if it borrowed from
banks or other lenders.
Since the proposed borrowing restriction would provide the Fund with greater
borrowing flexibility, the Fund may be subject to additional costs, as well
as the risks inherent to borrowing, such as reduced total return.
Sub-Proposal 2b: To amend the Fund's fundamental investment restriction
regarding underwriting.
Under the 1940 Act, the Fund's policy concerning underwriting is required to
be fundamental. Under the federal securities laws, a person or company
generally is considered an underwriter if it participates in the public
distribution of securities of other issuers, usually by purchasing the
securities from the issuer with the intention of re-selling the securities to
the public. From time to time, a mutual fund may purchase a security for
investment purposes which it later sells or redistributes to institutional
investors or others under circumstances where the Fund could possibly be
considered to be an underwriter under the technical definition of underwriter
contained in the securities laws. For example, funds often purchase
securities in private securities transactions where a resale could raise a
question relating to whether or not the fund is technically acting as an
underwriter. However, recent SEC interpretations clarify that re-sales of
privately placed securities by institutional investors do not make the
institutional investor an underwriter in these circumstances. The proposed
restriction encompasses these SEC positions.
What effect will amending the current underwriting restriction have on the
Fund?
The proposed restriction is similar to the current investment restriction
number 5. However, the proposed underwriting restriction clarifies that the
Fund may sell its own shares without being deemed an underwriter. Under the
1940 Act, a mutual fund will not be considered an underwriter if it sells its
own shares pursuant to a written distribution plan that complies with Rule
12b-1 of the 1940 Act.
The proposed restriction also specifically permits the Fund to resell
restricted securities in those instances where there may be a question as to
whether the Fund is technically acting as an underwriter. It is not
anticipated that adoption of the proposed restriction would involve any
additional risk, as the proposed restriction would not affect the way the
Fund is currently managed.
Sub-Proposal 2c: To amend the Fund's fundamental investment restriction
regarding lending.
Under the 1940 Act, a fund's policy regarding lending must be fundamental.
Certain investment techniques could, under certain circumstances, be
considered to be loans. For example, if the Fund invests in debt securities,
such investments might be considered to be a loan from the Fund to the issuer
of the debt securities. In order to ensure that the Fund may invest in
certain debt securities or repurchase agreements, which also could
technically be characterized as the making of loans, the Fund's current
fundamental restriction specifically carves out such policies from its
prohibitions.
What effect will amending the current lending restriction have on the Fund?
The proposed restriction is similar to the Fund's current restriction number
2, but would provide the Fund with somewhat greater lending flexibility.
Although the proposed restriction retains the carve-outs in the existing
restriction, it also would permit the Fund to invest in loan participations
and direct corporate loans that recently have become more common as
investments for investment companies. The proposed restriction also would
provide the Fund with additional flexibility to make loans to investment
companies. Franklin Templeton Investments, including the Fund, recently
received an exemptive order from the SEC that permits the Fund to lend cash
to other Franklin and Templeton funds. The proposed restriction permits the
Fund, under certain conditions, to lend cash to other Franklin or Templeton
funds at rates higher than those which the Fund would receive if the Fund
loaned cash to banks through short-term lendings such as repurchase
agreements. The Board anticipates that this additional flexibility to lend
cash to other Franklin Templeton investment companies would enhance the
Fund's ability to respond to changes in market, industry or regulatory
conditions.
It is not anticipated that adoption of the proposed restriction would involve
any additional risk, as the proposed restriction would not affect the way the
Fund is currently managed.
Sub-Proposal 2d: To amend the Fund's fundamental investment restrictions
regarding investments in real estate and commodities.
Under the 1940 Act, a fund's restrictions regarding investments in real
estate and commodities must be fundamental. The Fund's real estate and
commodities restrictions are currently contained in two separate investment
restrictions. The proposed restriction would combine these two restrictions
into one, as well as clarify the types of financial commodities and other
instruments in which the Fund may invest.
What effect will amending the real estate and commodities restrictions have
on the Fund?
Real Estate: The proposed real estate restriction is substantially the same
as the real estate limitation contained in the Fund's current restriction
number 11. Accordingly, the Fund will continue to be prohibited from directly
investing in real estate, but will be permitted to purchase or sell
securities of real estate investment trusts.
The Fund's current restriction relating to real estate is combined with a
restriction relating to investments in other investment companies in
investment restriction number 11. The adoption of this Sub-Proposal would
result in the separation of the Fund's real estate restriction from the
Fund's fundamental investment restriction relating to investments in other
investment companies and its combining with the Fund's restriction relating
to commodities. The restriction on investing in other investment companies is
proposed to be eliminated (see Proposal 3).
Commodities: Generally, commodities are considered to be physical commodities
such as wheat, cotton, rice and corn. However, futures contracts, including
financial futures contracts such as those related to currencies, stock
indices or interest rates, are also considered to be commodities. Funds
typically invest in such contracts and options on contracts for hedging or
other investment purposes.
The proposed commodities restriction clarifies that the Fund has the
flexibility to invest in financial futures contracts and related options. The
proposed restriction would permit investment in financial futures instruments
for either investment or hedging purposes. Although the Fund has for many
years had the ability to invest in options on securities and options on
futures, it has not done so. The Fund does not intend to begin investing in
financial futures contracts and related options. Therefore, it is not
anticipated that the proposed restriction would involve any additional risk.
Using financial futures instruments can involve substantial risks, and will
be utilized only if the investment manager believes such risks are advisable.
The Fund's current restriction number 8 relating to commodities is combined
with a restriction relating to the maintenance of margin accounts. The
adoption of this Sub-Proposal would result in the separation of the Fund's
commodities restriction from the Fund's fundamental investment restriction
relating to investments in margin accounts and its combining with the Fund's
real estate restriction. The restriction on investing in margin accounts is
proposed to be eliminated (see Proposal 3).
Sub-Proposal 2e: To amend the Fund's investment restriction regarding short
sales and issuing senior securities.
Under the 1940 Act, the Fund must have an investment policy describing its
ability to issue senior securities. A "senior security" is an obligation of a
fund, with respect to its earnings or assets that takes precedence over the
claims of the fund's shareholders with respect to the same earnings or
assets. The 1940 Act generally prohibits an open-end fund from issuing senior
securities in order to limit the use of leverage. In general, a fund uses
leverage when it borrows money to enter into securities transactions, or
acquires an asset without being required to make payment until a later time.
SEC staff interpretations allow a fund to engage in a number of types of
transactions that might otherwise be considered to create "senior securities"
or "leverage", provided certain conditions are met. For example, some
transactions that may create senior security concerns include short sales,
certain options and futures transactions, reverse repurchase agreements and
securities transactions that obligate the fund to pay money at a future date
(such as when-issued, forward commitment or delayed delivery transactions).
According to regulatory interpretations, when engaging in such transactions,
a fund must mark on its or its custodian bank's books, or set aside in a
segregated account with its custodian bank, cash or liquid securities to meet
the SEC staff's collateralization requirements. This procedure limits a
fund's ability to engage in these types of transactions and thereby limits a
fund's exposure to risk associated with these transactions.
What effect will amending the restrictions regarding short sales and issuing
senior securities have on the Fund?
The proposed restriction would amend the Fund's current investment
restriction number 9 and would permit the Fund to engage in short sales as
permitted under the 1940 Act, and any exemptions available under the 1940
Act. The proposed restriction also would permit the Fund to engage in
permissible types of leveraging transactions. Essentially, the proposed
restriction clarifies the Fund's ability to engage in those investment
transactions (such as repurchase transactions) which, while appearing to
raise senior security concerns, have been interpreted as not constituting the
issuance of senior securities under the federal securities laws.
The Board does not anticipate that any additional risk to the Fund will occur
as a result of amending the current restriction because the Fund has no
present intention of changing its current investment policies or engaging in
transactions that may be interpreted as issuing senior securities.
Sub-Proposal 2f: To amend the Fund's fundamental investment restriction
regarding industry concentration.
Under the 1940 Act, a fund's policy of concentrating its investments in
securities of companies in the same industry must be fundamental. Under the
federal securities laws, a mutual fund "concentrates" its investments if it
invests more than 25% of its "net" assets (exclusive of certain items such as
cash, U.S. government securities, securities of other investment companies,
and tax-exempt securities) in a particular industry or group of industries. A
fund is not permitted to concentrate its investments in a particular industry
unless it so states.
What effect will amending the current restriction regarding industry
concentration have on the Fund?
The proposed restriction would amend the Fund's current restriction by
clarifying the concentration policy's application to the Fund's "net" assets.
Further, the new restriction provides the Fund with additional flexibility
because it exempts from the 25% limitation securities issued or guaranteed by
the U.S. government or any of its agencies or instrumentalities, or the
securities of other investment companies as permitted by the 1940 Act. Such
investment flexibility will help the Fund respond to future legal,
regulatory, market or technical changes. However, adoption of the proposed
restriction is not expected to change materially the way in which the Fund is
currently managed as the Fund does not intend to begin concentrating in U.S.
government securities or in shares of other investment companies.
Sub-Proposal 2g: To amend the Fund's fundamental investment restriction
regarding diversification of investments.
The 1940 Act prohibits a "diversified" investment company, like the Fund,
from purchasing securities of any one issuer if, at the time of purchase, as
to 75% of the fund's total assets, more than 5% of the fund's total assets
would be invested in securities of that issuer, or the fund would own or hold
more than 10% of the outstanding voting securities of that issuer, except
that up to 25% of the fund's total assets may be invested without regard to
these limitations. Under the 1940 Act, these 5% and 10% limitations do not
apply to securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities, or to the securities of other investment companies.
What effect will amending the current investment diversification restriction
have on the Fund?
The Fund's current diversification restriction applies the 5% and 10%
limitations as to 100% of the Fund's total assets, rather than the lower
statutorily imposed 75% limit. Further, although the 1940 Act excludes the
securities of other investment companies as well as those of the U.S.
government and its agencies and instrumentalities, the current restriction
does not include such a carve-out for the securities of other investment
companies and the U.S. government securities carve-out is general and does
not encompass all aspects of the 1940 Act diversification provision.
The proposed restriction excludes from the 5% and 10% limitations the
purchase by the Fund of the securities of other investment companies. With
this exclusion, the Fund would be able to invest cash held at the end of the
day in money market funds or other short-term investments without regard to
the 5% and 10% investment limitations. The Fund, together with the other
funds in Franklin Templeton Investments, obtained an exemptive order from the
SEC (the "Cash Sweep Order") that permits the Franklin and Templeton funds to
invest their uninvested cash in one or more Franklin or Templeton money
market funds. Amending the Fund's current restriction number 1 would enable
the Fund to take advantage of the investment opportunities presented by the
Cash Sweep Order, since the Cash Sweep Order contemplates relief from the
1940 Act restrictions relating to the permissible percentage investments in
other investment companies.
Amending the Fund's diversification policy would make it consistent with the
definition of a diversified investment company under the 1940 Act with
respect to the securities of other investment companies and U.S. government
securities, and would provide the Fund with greater investment flexibility.
The proposed investment restriction also clarifies that the 5% and 10%
limitations do not apply to 25% of the Fund's total assets. However, it is
not currently anticipated that adoption of the proposed restriction would
materially change the way the Fund is managed.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE SUB-PROPOSALS 2a-2g
PROPOSAL 3: TO APPROVE THE ELIMINATION OF CERTAIN OF THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS
Which six (6) fundamental investment restrictions are the Board recommending
that the Fund eliminate?
Some of the Fund's fundamental investment restrictions were originally
drafted to comply with state laws and regulations, which, due to NSMIA, are
no longer in accordance with SEC staff positions since such positions have
either changed or are no longer relevant to the Fund. Since NSMIA eliminated
the states' ability to substantively regulate investment companies, the Fund
is no longer legally required to include current restrictions 6, 7, 10 and
12, and certain parts of restrictions 8 and 11, among its fundamental
investment restrictions. Advisers has recommended, and the Board has
determined, that all of these current fundamental investment restrictions be
eliminated.
The exact wording of these six restrictions, (referred to in this Proposal 3
as the "Restrictions") has been included in Exhibit A, which is entitled,
"Fundamental Investment Restrictions Proposed to be Amended or Eliminated."
Illiquid Securities:
The Fund's current fundamental investment restriction number 6, limits the
Fund's ability to acquire any kind of illiquid security. This restriction was
originally drafted to address the SEC's then current requirement relating to
illiquid security investments by a fund. As currently drafted, however, it is
more restrictive than the SEC position which permits funds to invest up to
15% of their assets in illiquid or restricted securities. Elimination of this
fundamental restriction would permit the Fund to take advantage of the
current SEC position. Although the Fund's policy relating to illiquid
securities would not be fundamental, the Fund would still be subject to the
SEC rules and regulations in this area.
Eliminating this restriction will not have any impact on the day to day
management of the Fund because the Fund has no present intention to invest a
significant portion of its assets in illiquid securities.
Control or Management:
The Fund's current fundamental investment restriction number 7 limits the
Fund's ability to invest for purposes of exercising control or management.
This restriction was enacted in response to various state securities laws and
is no longer required under NSMIA. Typically, if a fund acquires a large
percentage of the securities of a single issuer, it may be deemed to have
invested in such issuer for the purposes of exercising control or management.
This restriction was intended to ensure that a mutual fund would not be
engaged in the business of managing another company.
Eliminating the restriction will not have any impact on the day to day
management of the Fund because the Fund has no present intention to invest in
an issuer for the purposes of exercising control or management.
Margin Accounts:
The Fund's current fundamental investment restriction number 8, in part,
limits the Fund's ability to purchase securities on margin. This restriction
was originally included in the Fund's list of investment limitations in
response to the various state law requirements to which mutual funds were
subject. As discussed earlier in the introduction, under NSMIA the Fund is no
longer required to retain a fundamental policy regarding these types of
investment activities.
As a general matter, elimination of this fundamental restriction relating to
purchasing securities on margin should not have an impact on the day to day
management of the Fund, since the 1940 Act prohibitions on these types of
transactions would continue to apply to the Fund. The Fund's ability to
purchase securities on margin raises senior security issues and is
specifically prohibited under the 1940 Act. Elimination of the restriction,
therefore, would not affect the Fund's inability to purchase on margin.
Finally, the Fund has not previously, nor does it currently intend to engage
in these investment activities.
Three Years of Company Operation:
The Fund's current fundamental investment restriction number 10 limits the
Fund's ability to invest in companies which have a record of less than three
years continuous operation. Under NSMIA, this limitation is not required to
be a fundamental investment restriction. Elimination of this fundamental
investment restriction would permit the Fund to invest in a relatively new
company, if it otherwise met the Fund's investment criteria. Securities of
unseasoned companies present greater risks than securities of more
established companies. Elimination of this restriction may, therefore,
increase the risks to the Fund.
Investment in Other Investment Companies:
The Fund's current fundamental investment restriction number 11,in part,
limits the Fund's ability to invest in the securities of other open-end
investment companies, except where there is no commission other than ordinary
brokerage commission paid, or in connection with a merger, consolidation,
acquisition or reorganization. This restriction, which is inconsistent with
the 1940 Act provisions in this regard, was originally included in the Fund's
fundamental investment restrictions in response to various state law
requirements. Under NSMIA, however, the Fund is no longer legally required to
retain such a policy as a fundamental restriction.
Upon elimination of this restriction, the Fund would remain subject to the
1940 Act restrictions (or any exemption from such restrictions) on a fund's
ability to invest in other open-end funds. The 1940 Act restrictions state
that a fund may not purchase more than 3% of another fund's total outstanding
voting stock, commit more than 5% of its assets to the purchase of another
fund's securities, or have more than 10% of its total assets invested in
securities of all other funds.
The current restriction also permits investments by the Fund in shares of a
money market fund, subject to certain conditions. Although eliminating the
present restriction would continue to permit the Fund to invest cash held at
the end of the day in money market funds, it would not subject the Fund to
the limiting conditions on investing in money market funds contained in the
current restriction. Amending the Fund's current restriction would permit the
Fund to take advantage of the investment opportunities presented by the Cash
Sweep Order, (as described in Sub-Proposal 2g), since the Cash Sweep Order
contemplates relief from the 1940 Act restrictions relating to the
permissible percentage investments in other investment companies in certain
limited circumstances.
Elimination of this restriction should not have an impact on the day to day
management of the Fund as the Fund does not intend to begin pursuing its
investment objective through the purchase of other open-end investment
company securities except with respect to cash investments in accordance with
the Cash Sweep Order.
Management Ownership of Securities:
The Fund's current restriction fundamental investment number 12 limits the
Fund's ability to invest in securities issued by companies whose securities
are owned in certain amounts by Directors and officers of the Fund, or its
investment manager, Advisers. This policy originated many years ago with a
now obsolete state securities law. As a general matter, elimination of this
fundamental restriction should not have an impact on the day to day
management of the Fund, as the 1940 Act conflict of interest restrictions
would still apply to the Fund.
Why is the Board recommending that the Restrictions be eliminated, and what
effect will their elimination have on the Fund?
The Board has determined that eliminating the Restrictions is consistent with
the federal securities laws. By reducing the total number of investment
restrictions that can be changed only by a shareholder vote, the Board
believes that the Fund will be able to minimize the costs and delays
associated with holding future shareholder meetings to revise fundamental
policies that become outdated or inappropriate. The Board believes that
eliminating the Restrictions is in the best interest of the Fund's
shareholders as it will provide the Fund with increased flexibility to pursue
its investment goals.
What are the risks, if any, in eliminating the Restrictions?
The Board does not anticipate that eliminating the Restrictions will result
in any additional risk to the Fund. Although the Fund's current Restrictions,
as drafted, are no longer legally required, the Fund's ability to invest in
these six areas will continue to be subject to the limitations of the 1940
Act, and any exemptive orders granted under the 1940 Act. Further, the Fund
has no current intention to change its present investment practices as a
result of eliminating these Restrictions except to the limited extent
described above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU APPROVE PROPOSAL 3
PROPOSAL 4: OTHER BUSINESS
The Trustees do not intend to bring any matters before the Meeting other than
Proposals 1 through 3 and are not aware of any other matters to be brought
before the Meeting by others. If any other matters do properly come before
the Meeting, the persons named in the enclosed proxy card will use their best
judgment in voting on such matters.
INFORMATION ABOUT THE FUND
The Investment Manager. Franklin Advisers, Inc. ("Advisers"), 777 Mariners
Island Blvd., San Mateo, California 94404 serves as the Fund's investment
manager. Advisers is wholly owned by Resources.
The Fund Administrator. Under an agreement with Advisers, Franklin Templeton
Services, Inc. ("FT Services"), whose principal address is also 777 Mariners
Island Blvd., San Mateo, CA 94404, provides certain administrative services
and facilities for the Fund. FT Services is a wholly owned subsidiary of
Resources and is an affiliate of Advisers and the Fund's principal
underwriter.
The Underwriter. The underwriter for the Fund is Franklin Templeton
Distributors, Inc., 777 Mariners Island Blvd., San Mateo, California 94404.
The Transfer Agent. The transfer agent, registrar and dividend disbursement
agent for the Fund is Franklin/Templeton Investor Services, Inc., 777
Mariners Island Blvd., San Mateo, California 94404.
The Custodian. Bank of New York, Mutual Funds Division, 90 Washington Street,
New York, NY 10286, acts as custodian of the Fund's securities and other
assets.
Reports to Shareholders and Financial Statements. The Fund's last audited
financial statements and annual report, for the fiscal year ended June 30,
1999, and its semi-annual report dated December 31, 1999, are available free
of charge. To obtain a copy, please call 1-800/DIAL BEN(R) or forward a written
request to Franklin/Templeton Investor Services, Inc., P.O. Box 997151,
Sacramento, CA 95899-9983.
Principal Shareholders. As of December 15, 2000, the Fund had xxxxxx shares
outstanding of Class A, xxxxxx shares outstanding of Class B, xxxxxx shares
outstanding of Class C, and xxxxxx shares outstanding of Advisor Class and
total net assets of $xxxxxxx. From time to time, the number of shares held
in "street name" accounts of various securities dealers for the benefit of
their clients may exceed 5% of the total shares outstanding. To the knowledge
of the Fund's management, as of December 15 there were no other entities
holding beneficially or of record more than 5% of a class of the Fund's
outstanding shares, except as shown for Advisor Class in the following table:
Percentage
Name and Address Share Class (%)
-------------------------------------------------------------------------------
[FTTC Trust Services FBO
P.O. Box 5086
San Mateo, CA 94402-0086]
In addition, to the knowledge of the Fund's management, as of December 15,
2000, the officers and Board members, as a group, owned of record and
beneficially xx.xx% of the Fund's Advisor Class shares and less than 1% of
the outstanding shares of the other classes of the Fund.
FURTHER INFORMATION ABOUT VOTING AND THE MEETING
Solicitation of Proxies. The cost of soliciting these proxies will be borne
50% by the Fund and 50% by Adviser. The Fund reimburses brokerage firms and
others for their expenses in forwarding proxy material to the beneficial
owners and soliciting them to execute proxies. The Fund has engaged
Shareholder Communications Corporation to solicit proxies from brokers,
banks, other institutional holders and individual shareholders for an
approximate fee, including out-of-pocket expenses, ranging between
$xxx,xxxand $xxx,xxx. The Fund expects that the solicitation will be
primarily by mail, but also may include telephone, personal interviews or
other means. The Fund does not reimburse Trustees and officers of the Fund,
or regular employees and agents of Advisers involved in the solicitation of
proxies. [The Fund intends to pay all costs associated with the solicitation
and the Meeting.]
In addition to solicitations by mail, some of the Executive Officers and
employees of the Fund, Advisers and its affiliates, without extra
compensation, may conduct additional solicitations by telephone, personal
interviews and other means.
Voting by Broker-Dealers. The Fund expects that, before the Meeting,
broker-dealer firms holding shares of the Fund in "street name" for their
customers will request voting instructions from their customers and
beneficial owners. If these instructions are not received by the date
specified in the broker-dealer firms' proxy solicitation materials, the Fund
understands that NYSE Rules permit the broker-dealers to vote on the items to
be considered at the Meeting on behalf of their customers and beneficial
owners. Certain broker-dealers may exercise discretion over shares held in
their name for which no instructions are received by voting those shares in
the same proportion as they vote shares for which they received instructions.
Quorum. A majority of the Fund's shares entitled to vote, present in person
or represented by proxy, constitutes a quorum at the Meeting. The shares over
which broker-dealers have discretionary voting power, the shares that
represent "broker non-votes" (i.e., shares held by brokers or nominees as to
which: (i) instructions have not been received from the beneficial owners or
persons entitled to vote; and (ii) the broker or nominee does not have
discretionary voting power on a particular matter), and the shares whose
proxies reflect an abstention on any item are all counted as shares present
and entitled to vote for purposes of determining whether the required quorum
of shares exists.
[Required Vote. Provided that a quorum is present, Proposal 1, the approval
of a new sub-advisory agreement, requires the affirmative vote of the lesser
of (1) the majority of the outstanding shares of the Fund, or (2) 67% or more
of the Fund's shares represented at the Meeting if more than 50% of the
outstanding shares of the Fund are present or represented by proxy (Majority
Shareholder Vote). Sub-Proposals 2a-2g, amendments to fundamental investment
restrictions, and Proposal 3, elimination of certain fundamental investment
restrictions, also approval by Majority Shareholder Vote. Proposal 4, the
transaction of any other business, requires the affirmative vote of a
majority of the Fund's outstanding shares. Abstentions and broker non-votes
will be treated as votes not cast and, therefore, will not be counted for
purposes of obtaining approval of each Proposal.
Other Matters and Discretion of Persons Named in the Proxy. The Fund is not
required, and does not intend, to hold regular annual meetings of
shareholders. Shareholders wishing to submit proposals for consideration for
inclusion in a proxy statement for the next meeting of shareholders should
send their written proposals to the Fund's offices, 777 Mariners Island
Blvd., San Mateo, CA 94404, so they are received within a reasonable time
before any such meeting. No business other than the matters described above
is expected to come before the Meeting. Should any other matter requiring a
vote of shareholders arise, including any question as to an adjournment or
postponement of the Meeting, the persons named on the enclosed proxy card
will vote on such matters according to their best judgment in the interests
of the Fund.
By order of the Board of Directors,
Murray L Simpson
Secretary
Dated: January 2, 2001
San Mateo, California
<TABLE>
<CAPTION>
EXHIBIT A
FUNDAMENTAL INVESTMENT RESTRICTIONS PROPOSED
TO BE AMENDED OR ELIMINATED
----------------- ---------------- ------------------------------------ ---------------------------------------------------
PROPOSAL CURRENT FUNDAMENTAL PROPOSED FUNDAMENTAL
OR RESTRICTION RESTRICTION
SUB-PROPOSAL RESTRICTION The Fund may not: The Fund may not:
----------------- ---------------- ------------------------------------ ---------------------------------------------------
<S> <C> <C> <C>
2a Borrowing 3. Borrow money, except for Borrow money, except that the Fund may borrow
temporary or emergency (but not money from banks or affiliated investment
investment) purposes from banks companies to the extent permitted by the 1940
and only in an amount up to 10% of Act, or any exemptions therefrom which may be
the value of the assets. While granted by the SEC, or from any person in a
borrowing exceed 5% of fund's private transaction not intended for public
assets, it will not make any distribution, for temporary or emergency purposes
additional investments.. and then in an amount not exceeding 33 1/3% of
the value of the Fund's total assets (including
the amount borrowed).
----------------- ---------------- ------------------------------------ ---------------------------------------------------
2b Underwriting 5. Underwrite securities of Act as an underwriter except to the extent the
other issuers, except insofar as Fund may be an underwriter when disposing of
fund may be technically deemed an securities it owns or when selling its own shares
underwriter under the federal
securities laws in connection with
the disposition of portfolio.
----------------- ---------------- ------------------------------------ ---------------------------------------------------
2c Lending 2. Make loans to other persons, Make loans to other persons except (a) through
except by the purchase of bonds, the lending of its portfolio securities, (b)
debentures, or similar obligations through the purchase of debt securities, loan
which are publicly distributed or participations and/or engaging in direct
of a character usually acquired by corporate loans in accordance with its investment
institutional investors or through goal and policies, and (c) to the extent the
loans of the fund's portfolio entry into a repurchase agreement is deemed to be
securities, or to the extent the a loan. The Fund may also make loans to
entry into a repurchase agreement affiliated investment companies to the extent
may be deemed a loan. permitted by the 1940 Act or any exemptions
therefrom that may be granted by the SEC.
----------------- ---------------- ------------------------------------ ---------------------------------------------------
2d Commodities 8. Maintain a margin account Purchase or sell real estate and commodities,
with a securities dealer, except except that the Fund may buy or sell securities
that either fund may obtain such of real estate investment trusts, may purchase or
short-term credits as may be sell currencies, may enter into futures contracts
necessary for the clearance of on securities, currencies, indices or any other
purchases and sales of securities financial instruments, and may purchase and sell
nor invest in commodities or options on such futures contracts.
commodities contracts or interests
(other than publicly-traded equity
securities) or leases with respect
with any oil, gas or other mineral
exploration or development
programs, except that either fund
my enter into contracts or hedging
purposes and make margin deposits
in connection therewith.
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 of
pursuant to any exemptions
therefrom, including any
exemptions permitting either fund
to invest in shares of one or more
money market funds managed by the
manager or its affiliates, or
except that securities of another
investment company may be acquired
pursuant to a plan of
reorganization, merger,
consolidation or acquisition.
----------------- ---------------- ------------------------------------ ---------------------------------------------------
2e Short Sales 2. Make loans to other persons, Issue securities senior to the Fund's presently
and Senior except by the purchase of bonds, authorized shares of beneficial interest, except
Securities debentures or similar obligations that this restriction shall not be deemed to
which are publicly distributed or prohibit the Fund from (a) making any permitted
of a character usually acquired by borrowings, loans, mortgages or pledges, (b)
institutional investors or through entering into options, futures contracts, forward
loans of either fund's portfolio contracts or repurchase transactions, or (c)
securities, or to the extent the making short sales of securities to the extent
entry into a repurchase agreement permitted by the 1940 Acts and any rule or order
may be deemed a loan. thereunder, or SEC staff interpretations thereof.
9. Effect short sales, unless at
the time the fund owns securities
equivalent in kind and amount to
those sold.
----------------- ---------------- ------------------------------------ ---------------------------------------------------
2f Industry 4. Invest more than 25% of the Concentrate (invest more that 25% of its total
Concentration fund's assets (at the time of the assets) in securities of issuers in a particular
most recent investment) in any industry (other than securities issued or
single industry. guaranteed by the U.S. government or any of its
agencies or instrumentalities or securities of
other investment companies).
----------------- ---------------- ------------------------------------ ---------------------------------------------------
2g Diversification 1. Purchase the securities of Buy the securities of any one issuer (other than
of Investments any one issuer (other than the U.S. government or any of its agencies or
obligations of the U.S.) if instrumentalities or securities of other
immediately thereafter and as a investment companies) if immediately after such
result of the purchase, the fund investment (a) more that 5% of the value of the
would (a) have invested more than Fund's total assets would be invested in such
5% of the value of the total issuer or (b) more than 10% of the outstanding
assets in the securities of the voting securities of such issuer would be owned
issuer, or (b) hold more than 10% by the Fund, except that up to 25% of the value
of any or all classes of the of such Fund's total assets may be invested
securities of any one issuer. without regard to such 5% and 10% limitations.
----------------- ---------------- ------------------------------------ ---------------------------------------------------
3 Illiquid 6. Purchase illiquid securities, None
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 assets
would be invested in such illiquid
securities.
----------------- ---------------- ------------------------------------ ---------------------------------------------------
Control or 7. Invest in securities for the None
Management purpose of exercising management
or control of the issuer.
----------------- ---------------- ------------------------------------ ---------------------------------------------------
Margin Account 8. Maintain a margin account None
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.
----------------- ---------------- ------------------------------------ ---------------------------------------------------
Continuous 10. Invest more than 5% of total None
Operation assets in companies which have a
record of less than three years
continuous operation, including
the operations of any predecessor
companies.
----------------- ---------------- ------------------------------------ ---------------------------------------------------
Investment 11. Invest directly in real estate None
Companies 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 of
pursuant to any exemptions
therefrom, including any
exemptions permitting either fund
to invest in shares of one or more
money market funds managed by the
manager or its affiliates, or
except that securities of another
investment company may be acquired
pursuant to a plan of
reorganization, merger,
consolidation or acquisition.
----------------- ---------------- ------------------------------------ ---------------------------------------------------
Ownership by 12. Purchase or retain in either None
Management fund's portfolio any security if
any officer, trustee or
securityholder 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.
----------------- ---------------- ------------------------------------ ---------------------------------------------------
</TABLE>
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before mailing.
PROXY PROXY
SPECIAL SHAREHOLDERS' MEETING OF
TEMPLETON PACIFIC GROWTH FUND
MARCH 12, 2001
The undersigned hereby revokes all previous proxies for his or her shares and
appoints Rupert H. Johnson, Jr., Harmon E. Burns, Murray L. Simpson, Barbara
J. Green, and David P. Goss, and each of them, proxies of the undersigned
with full power of substitution to vote all shares of Franklin Equity Fund
(the "Fund") that the undersigned is entitled to vote at the Fund's Meeting
to be held at 777 Mariners Island Boulevard, San Mateo, CA 94404 at 4:00
p.m. Pacific time on March 12, 2001, including any adjournments thereof, upon
such business as may properly be brought before the Meeting.
IMPORTANT: PLEASE SEND IN YOUR PROXY TODAY.
YOU ARE URGED TO DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY. THIS WILL
SAVE THE EXPENSE OF FOLLOW-UP LETTERS TO SHAREHOLDERS WHO HAVE NOT RESPONDED.
VOTE VIA THE INTERNET: WWW.FRANKLINTEMPLETON.COM
VOTE VIA THE TELEPHONE: 1-800/597-7836
CONTROL NUMBER:
Note: Please sign exactly as your name
appears on the proxy. If signing for
estates, trusts or corporations, your title
or capacity should be stated. If shares are
held jointly, each holder must sign.
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Signature
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Signature
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Date 10817 FEF
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
REQUIRED IF MAILED IN THE U.S.
(Please see reverse side)
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
Please detach at perforation before mailing.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF FRANKLIN
TEMPLETON INTERNATIONAL TRUST, ON BEHALF OF THE TEMPLETON PACIFIC GROWTH
FUND (THE "FUND"). IT WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS
MADE, THIS PROXY SHALL BE VOTED IN FAVOR OF PROPOSALS 1 , 2 (INCLUDING ALL
SUB-PROPOSALS), 3, AND 4. IF ANY OTHER MATTERS ABOUT WHICH THE PROXYHOLDERS
WERE NOT AWARE PRIOR TO THE TIME OF THE SOLICITATION PROPERLY COME BEFORE THE
MEETING, AUTHORIZATION IS GIVEN TO THE PROXYHOLDERS TO VOTE IN ACCORDANCE
WITH THE VIEWS OF MANAGEMENT ON SUCH MATTERS. MANAGEMENT IS NOT AWARE OF ANY
SUCH MATTERS.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
PROPOSALS 1 - 4.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
1. To approve a new subadvisory agreement [] [] []
2. To approve amendments to certain of the Fund's fundamental investment
restrictions (includes seven (7) Sub-Proposals). [] [] []
3.a. Borrowing [] [] []
3.b. Underwriting [] [] []
3.c. Lending [] [] []
3.d. Real estate and commodities [] [] []
3.e. Short sales and issuing senior securities [] [] []
3.f. Industry concentration [] [] []
3.g. Diversification [] [] []
3. To approve the elimination of certain of the Fund's fundamental
investment restrictions. [] [] []
4. To grant the proxyholders the authority to vote upon any other business
that may properly come before the Meeting or any adjournments thereof. [] [] []
</TABLE>
IMPORTANT: PLEASE SIGN AND MAIL IN YOUR PROXY...TODAY
