PROSPECTUS
& APPLICATION
LOGO
TEMPLETON
DEVELOPING MARKETS
TRUST
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JANUARY 1, 1997
INVESTMENT STRATEGY
GLOBAL GROWTH
LOGO
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This prospectus describes the Advisor Class shares of Templeton
Developing Markets Trust (the "Fund"). It contains information you should
know before investing in the Fund. Please keep it for future reference.
THE FUND SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING IN SECURITIES
OF ISSUERS OF COUNTRIES HAVING DEVELOPING MARKETS. INVESTMENT IN SUCH
SECURITIES INVOLVES CERTAIN CONSIDERATIONS WHICH ARE NOT NORMALLY
INVOLVED IN INVESTMENT IN SECURITIES OF U.S. COMPANIES, AND AN
INVESTMENT IN THE FUND MAY BE CONSIDERED SPECULATIVE. THE FUND MAY
BORROW MONEY FOR INVESTMENT PURPOSES, WHICH MAY INVOLVE GREATER RISK AND
ADDITIONAL COSTS TO THE FUND. IN ADDITION, THE FUND MAY INVEST UP TO 10%
OF ITS ASSETS IN RESTRICTED SECURITIES, WHICH MAY INVOLVE GREATER RISK
AND INCREASED FUND EXPENSES. SEE "WHAT ARE THE FUND'S POTENTIAL RISKS?"
The Fund's SAI for the Advisor Class, dated January 1, 1997, as may be
amended from time to time, includes more information about the Fund's
procedures and policies. It has been filed with the SEC and is
incorporated by reference into this prospectus. For a free copy or a
larger print version of this prospectus, call 1-800/DIAL BEN or write
the Fund at the address shown.
Advisor Class shares are only available for purchase by certain persons,
including, among others, certain broker-dealers and qualified registered
investment advisors; participants in Franklin Templeton's 401(k) and
Franklin Templeton's Profit Sharing Plans; Franklin Templeton Fund
Allocator Series; and directors, trustees, officers and full time
employees (and their family members) of Franklin Templeton Group and the
Franklin Templeton Group of Funds. See "About Your Account."
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY OF THE U.S. GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TEMPLETON DEVELOPING
MARKETS TRUST
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This prospectus is not an offering of the securities herein
described in any state in which the offering is not authorized.
No sales representative, dealer, or other person is
authorized to give any information or make any representations
other than those contained in this prospectus. Further
information may be obtained from Distributors.
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When reading this prospectus, you will see
certain terms beginning with capital letters.
This means the term is explained
in our glossary section.
<PAGE>
<TABLE>
<S> <C> <C>
TEMPLETON TABLE OF CONTENTS
DEVELOPING ABOUT THE FUND
MARKETS TRUST Expense Summary ...................... 2
- ----------------------- How Does the Fund Invest Its
January 1, 1997 Assets? .............................. 3
What Are the Fund's Potential
Risks? ............................... 9
Who Manages the
Fund? ............................... 13
How Does the Fund Measure
Performance? ........................ 15
How Is the Fund
Organized? .......................... 15
How Taxation Affects You and the
Fund ................................ 16
ABOUT YOUR ACCOUNT
How Do I Buy
Shares? ............................. 18
May I Exchange Shares for Shares of
Another Fund? ....................... 19
How Do I Sell
Shares? ............................. 21
What Distributions Might I Receive
From the Fund? ...................... 23
Transaction Procedures and Special
Requirements ........................ 24
Services to Help You Manage Your
700 Central Avenue Account ............................ 28
St. Petersburg, Florida GLOSSARY
33701 Useful Terms and
1-800/DIAL BEN Definitions ........................ 32
</TABLE>
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Advisor Class shares of the Fund. Because the Advisor Class shares were not
offered to the public prior to January 1, 1997, the table is based on the
historical expenses of the Class I shares of the Fund for the fiscal year ended
December 31, 1995.* Your actual expenses may vary.
<TABLE>
<CAPTION>
ADVISOR
CLASS
<S> <C> <C> <C>
A. SHAREHOLDER TRANSACTION EXPENSES**
MAXIMUM SALES CHARGE IMPOSED ON PURCHASES NONE
B. ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.25%
Rule 12b-1 Fees NONE
Other Expenses (audit, legal, business
management,
transfer agent and custodian) 0.50%
----------
Total Fund Operating Expenses 1.75%
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C. EXAMPLE
</TABLE>
Assume the annual return for the Advisor Class shares is 5% and its
operating expenses are as described above. For each $1,000 investment, you
would pay the following projected expenses if you sold your shares after the
number of years shown.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
------------------------------------------------------
<S> <C> <C> <C>
$18 $55 $95 $206
</TABLE>
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Fund pays its operating expenses. The effects of these expenses are
reflected in its Net Asset Value or dividends and are not directly charged
to your account.
*Unlike Advisor Class shares, the Class I shares of the Fund have a front-end
sales charge and Rule 12b-1 fees.
**If your transaction is processed through your Securities Dealer you may be
charged a fee by your Securities Dealer for this service.
- Templeton Developing Markets Trust
2
<PAGE>
HOW DOES THE FUND INVEST ITS ASSETS?
The Fund's Investment Objective
The Fund's investment objective is long-term capital appreciation, which it
seeks to achieve by investing primarily in equity securities of issuers in
countries having developing markets. 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.
It is currently expected that under normal conditions at least 65% of the Fund's
total assets will be invested in developing market equity securities. The Fund
and TAML may, from time to time, use various methods of selecting securities for
the Fund's portfolio, and may also employ and rely on independent or affiliated
sources of information and ideas in connection with management of the Fund's
portfolio. TAML generally will provide three portfolio managers for the Fund,
and such portfolio management assignments may, from time to time, be changed or
improved.
The Fund considers countries having developing markets to be all countries that
are generally considered to be developing or emerging countries by the
International Bank for Reconstruction and Development (more commonly referred
to as the World Bank) or the International Finance Corporation, as well as
countries that are classified by the United Nations or otherwise regarded by
their authorities as developing. Currently, the countries not in this category
include Ireland, Spain, New Zealand, Australia, the United Kingdom, Italy, the
Netherlands, Belgium, Austria, France, Canada, Germany, Denmark, the U.S.,
Sweden, Finland, Norway, Japan, Iceland, Luxembourg and Switzerland. In
addition, as used in this prospectus, developing market equity securities means
(i) equity securities of companies the principal securities trading market for
which is a developing market country, as defined above, (ii) equity securities,
traded in any market, of companies that derive 50% or more of their total
revenue from either goods or services produced in developing market countries
or sales made in developing market countries or (iii) equity securities of
companies organized under the laws of, and with a principal office in, a
developing market country. "Equity securities," as used in this prospectus,
refers to common stock, preferred stock, warrants or rights to subscribe to or
purchase such securities and sponsored or unsponsored American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs"), and Global Depositary
Receipts ("GDRs") (collectively, "depositary receipts"). Determinations as to
eligibility will be made by TAML based on publicly available information and
inquiries made to the companies. (See "What Are the Fund's Potential Risks?"
for a discussion of the nature of information publicly available for non-U.S.
Templeton Developing Markets Trust -
3
<PAGE>
companies.) The Fund will at all times, except during defensive periods,
maintain investments in at least three countries having developing markets.
The Fund seeks to benefit from economic and other developments in developing
markets. The investment objective of the Fund reflects the belief that
investment opportunities may result from an evolving long-term international
trend favoring more market-oriented economies, a trend that may especially
benefit certain countries having developing markets. This trend may be
facilitated by local or international political, economic or financial
developments that could benefit the capital markets of such countries. Certain
such countries, which may be in the process of developing more market-oriented
economies, may experience relatively high rates of economic growth. Other
countries, although having relatively mature developing markets, may also be in
a position to benefit from local or international developments encouraging
greater market orientation and diminishing governmental intervention in
economic affairs.
For capital appreciation, the Fund may invest up to 35% of its total assets in
debt securities (defined as bonds, notes, debentures, commercial paper,
certificates of deposit, time deposits and bankers' acceptances and which may
include structured investments) which are rated at least C by Moody's or C by
S&P or unrated debt securities deemed to be of comparable quality by TAML. See
"What Are the Fund's Potential Risks?" As an operating policy, which may be
changed by the Board, the Fund will not invest more than 5% of its total assets
in debt securities rated lower than Baa by Moody's or BBB by S&P. Certain debt
securities can provide the potential for capital appreciation based on various
factors such as changes in interest rates, economic and market conditions,
improvement in an issuer's ability to repay principal and pay interest, and
ratings upgrades. Additionally, convertible bonds offer the potential for
capital appreciation through the conversion feature, which enables the holder
of the bond to benefit from increases in the market price of the securities
into which they are convertible.
The Fund may also lend its portfolio securities and borrow money for investment
purposes (i.e., "leverage" its portfolio). In addition, the Fund may enter into
transactions in options on securities, securities indices and foreign
currencies, forward foreign currency exchange contracts, and futures contracts
and related options. When deemed appropriate by TAML, the Fund may invest cash
balances in repurchase agreements and other money market investments to
maintain liquidity in an amount to meet expenses or for day-to-day operating
purposes. These investment techniques are described below and under the heading
"How Does the Fund Invest Its Assets?" in the SAI.
- Templeton Developing Markets Trust
4
<PAGE>
When TAML believes that market conditions warrant, the Fund may adopt a
temporary defensive position and may invest without limit in money market
securities denominated in U.S. dollars or in the currency of any foreign
country. See "Types of Securities in which the Fund May Invest - Temporary
Investments."
The Fund does not emphasize short-term trading profits and usually expects to
have an annual portfolio turnover rate not exceeding 50%.
Types of Securities in which the Fund May Invest
The Fund is authorized to use the various securities and investment techniques
described below. Although these strategies are regularly used by some investment
companies and other institutional investors in various markets, some of these
strategies cannot at the present time be used to a significant extent by the
Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
Temporary Investments. For temporary defensive purposes, the Fund may invest up
to 100% of its total assets in the following money market securities,
denominated in U.S. dollars or in the currency of any foreign country, issued by
entities organized in the U.S. or any foreign country: short-term (less than
twelve months to maturity) and medium-term (not greater than five years to
maturity) obligations issued or guaranteed by the U.S. government or the
governments of foreign countries, their agencies or instrumentalities; finance
company and corporate commercial paper, and other short-term corporate
obligations, in each case rated Prime-1 by Moody's or A or better by S&P or, if
unrated, of comparable quality as determined by TAML; obligations (including
certificates of deposit, time deposits and bankers' acceptances) of banks; and
repurchase agreements with banks and broker-dealers with respect to such
securities.
Borrowing. The Fund may borrow up to one-third of the value of its total assets
from banks to increase its holdings of portfolio securities. Under the 1940 Act,
the Fund is required to maintain continuous asset coverage of 300% with respect
to such borrowings and to sell (within three days) sufficient portfolio holdings
to restore such coverage if it should decline to less than 300% due to market
fluctuations or otherwise, even if such liquidations of the Fund's holdings may
be disadvantageous from an investment standpoint. Leveraging by means of
borrowing may exaggerate the effect of any increase or decrease in the value of
portfolio securities on the Fund's Net Asset Value, and money borrowed will be
subject to interest and other costs (which may include commitment fees and/or
the cost of maintaining minimum average balances), which may or may not
Templeton Developing Markets Trust -
5
<PAGE>
exceed the income or gains received from the securities purchased with borrowed
funds.
Loans of Portfolio Securities. The Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of its total
assets to generate income. Such loans must be secured by collateral (consisting
of any combination of cash, U.S. government securities or irrevocable letters
of credit) in an amount at least equal (on a daily marked-to-market basis) to
the current market value of the securities loaned. The Fund may terminate the
loans at any time and obtain the return of the securities loaned within five
business days. The Fund will continue to receive any interest or dividends paid
on the loaned securities and will continue to retain any voting rights with
respect to the securities. In the event that the borrower defaults on its
obligation to return borrowed securities, because of insolvency or otherwise,
the Fund could experience delays and costs in gaining access to the collateral
and could suffer a loss to the extent that the value of the collateral falls
below the market value of the borrowed securities.
Options on Securities or Indices. The Fund may write (i.e., sell) covered put
and call options and purchase put and call options on securities or securities
indices that are traded on U.S. and foreign exchanges or in the over-the-counter
markets. An option on a security is a contract that permits the purchaser of the
option, in return for the premium paid, the right to buy a specified security
(in the case of a call option) or to sell a specified security (in the case of
a put option) from or to the writer of the option at a designated price during
the term of the option. An option on a securities index permits the purchaser
of the option, in return for the premium paid, the right to receive from the
seller cash equal to the difference between the closing price of the index and
the exercise price of the option. The Fund may write a call or put option to
generate income, and will do so only if the option is "covered." This means
that so long as the Fund is obligated as the writer of a call option, it will
own the underlying securities subject to the call, or hold a call at the same
or lower exercise price, for the same exercise period, and on the same
securities as the written call. A put is covered if the Fund maintains liquid
assets with a value at least equal to the exercise price in a segregated
account, or holds a put on the same underlying securities at an equal or
greater exercise price. The value of the underlying securities on which options
may be written at any one time will not exceed 15% of the total assets of the
Fund. The Fund will not purchase put or call options if the aggregate premium
paid for such options would exceed 5% of its total assets at the time of
purchase.
- Templeton Developing Markets Trust
6
<PAGE>
Forward Foreign Currency Exchange Contracts and Options on Foreign Currencies.
The Fund will normally conduct its foreign currency exchange transactions either
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward contracts to purchase or sell
foreign currencies. The Fund will generally not enter into a forward contract
with a term of greater than one year. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date which
is individually negotiated and privately traded by currency traders and their
customers.
The Fund will generally enter into forward contracts only under two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock in"
the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed
to settle the transaction. Second, when TAML believes that the currency of a
particular foreign country may suffer or enjoy a substantial movement against
another currency, it may enter into a forward contract to sell or buy the
former foreign currency (or another currency which acts as a proxy for that
currency) approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency. This second investment
practice is generally referred to as "cross-hedging." The Fund will not enter
into forward contracts if, as a result, the Fund will have more than 20% of its
total assets committed to the consummation of such contracts. Although forward
contracts will be used primarily to protect the Fund from adverse currency
movements, they also involve the risk that anticipated currency movements will
not be accurately predicted.
The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency-denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or
Templeton Developing Markets Trust -
7
<PAGE>
purchased by the Fund are traded on U.S. and foreign exchanges or over-the-
counter.
Closed-End Investment Companies. Some countries, such as South Korea, Chile and
India, have authorized the formation of closed-end investment companies to
facilitate indirect foreign investment in their capital markets. In accordance
with the 1940 Act, the Fund may invest up to 10% of its total assets in
securities of closed-end investment companies. This restriction on investments
in securities of closed-end investment companies may limit opportunities for
the Fund to invest indirectly in certain developing markets. Shares of certain
closed-end investment companies may at times be acquired only at market prices
representing premiums to their Net Asset Values. If the Fund acquires shares of
closed-end investment companies, shareholders would bear both their
proportionate share of expenses of the Fund (including management and advisory
fees) and, indirectly, the expenses of such closed-end investment companies.
Futures Contracts. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock index futures contracts, foreign currency
futures contracts and options on any of the foregoing. A financial futures
contract is an agreement between two parties to buy or sell a specified debt
security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the difference
between the value of the index at the beginning and at the end of the contract
period. A futures contract on a foreign currency is an agreement to buy or sell
a specified amount of a currency for a set price on a future date.
When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
contract. In addition, when the Fund enters into a futures contract, it will
segregate assets or "cover" its position in accordance with the 1940 Act. See
"How Does the Fund Invest Its Assets? - Futures Contracts" in the SAI. The Fund
may not commit more than 5% of its total assets to initial margin deposits on
futures contracts and related options. The value of the underlying securities
on which futures contracts will be written at any one time will not exceed 25%
of the total assets of the Fund.
Repurchase Agreements. For temporary defensive purposes and for cash management
purposes, the Fund may enter into repurchase agreements with U.S. banks and
broker-dealers. Under a repurchase agreement the Fund acquires a security from
a U.S. bank or a registered broker-dealer who simultaneously agrees to
- Templeton Developing Markets Trust
8
<PAGE>
repurchase the security at a specified time and price. The repurchase price is
in excess of the purchase price by an amount which reflects an agreed-upon rate
of return, which is not tied to the coupon rate on the underlying security.
Under the 1940 Act, repurchase agreements are considered to be loans
collateralized by the underlying security and therefore will be fully
collateralized. However, if the seller should default on its obligation to
repurchase the underlying security, the Fund may experience delay or difficulty
in exercising its rights to realize upon the security and might incur a loss if
the value of the security declines, as well as incur disposition costs in
liquidating the security.
Depositary Receipts. ADRs are depositary receipts typically issued by a U.S.
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. EDRs and GDRs are typically issued by foreign banks or
trust companies, although they also may be issued by U.S. banks or trust
companies, and evidence ownership of underlying securities issued by either a
foreign or a U.S. corporation. Generally, depositary receipts in registered form
are designed for use in the U.S. securities market and depositary receipts in
bearer form are designed for use in securities markets outside the U.S.
Depositary receipts may not necessarily be denominated in the same currency as
the underlying securities into which they may be converted. Depositary receipts
may be issued pursuant to sponsored or unsponsored programs. In sponsored
programs, an issuer has made arrangements to have its securities traded in the
form of depositary receipts. In unsponsored programs, the issuer may not be
directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from an
issuer that has participated in the creation of a sponsored program.
Accordingly, there may be less information available regarding issuers of
securities underlying unsponsored programs and there may not be a correlation
between such information and the market value of the depositary receipts.
Depositary receipts also involve the risks of other investments in foreign
securities, as discussed below. For purposes of the Fund's investment policies,
the Fund's investments in depositary receipts will be deemed to be investments
in the underlying securities.
WHAT ARE THE FUND'S POTENTIAL RISKS?
You should understand that all investments involve risk and there can be no
guarantee against loss resulting from an investment in the Fund, nor can there
be any assurance that the Fund's investment objective will be attained. As with
any investment in securities, the value of, and income from, an investment in
the Fund can decrease as well as increase, depending on a variety of factors
which may affect the values and income generated by the Fund's portfolio
Templeton Developing Markets Trust -
9
<PAGE>
securities, including general economic conditions and market factors. In
addition to the factors which affect the value of individual securities, you
may anticipate that the value of the shares of the Fund will fluctuate with
movements in the broader equity and bond markets. A decline in the stock market
of any country in which the Fund is invested may also be reflected in declines
in the price of the shares of the Fund. Changes in currency valuations will
also affect the price of the shares of the Fund. History reflects both
decreases and increases in stock markets and currency valuations, and these may
occur unpredictably in the future. The value of debt securities held by the
Fund generally will vary inversely with changes in prevailing interest rates.
Additionally, investment decisions made by TAML will not always be profitable
or prove to have been correct. The Fund is not intended as a complete
investment program.
The Fund has the right to purchase securities in any foreign country, developed
or developing. You should consider carefully the substantial risks involved in
investing in securities issued by companies and governments of foreign nations,
which are in addition to the usual risks inherent in domestic investments. These
risks are often heightened for investments in developing markets, including
certain Eastern European countries. See "What Are the Fund's Potential Risks?"
in the SAI. There is the possibility of expropriation, nationalization or
confiscatory taxation, taxation of income earned in foreign nations (including,
for example, withholding taxes on interest and dividends) or other taxes imposed
with respect to investments in foreign nations, foreign exchange controls (which
may include suspension of the ability to transfer currency from a given
country), foreign investment controls on daily stock market movements, default
in foreign government securities, political or social instability, or
diplomatic developments which could affect investment in securities of issuers
in foreign nations. In addition, in many countries there is less publicly
available information about issuers than is available in reports about
companies in the U.S. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to U.S. companies.
The Fund may encounter difficulties or be unable to vote proxies, exercise
shareholder rights, pursue legal remedies, and obtain judgments in foreign
courts. Also, some countries may withhold portions of income and dividends at
the source. These considerations generally are more of a concern in developing
countries, where the possibility of political instability (including
revolution) and dependence on foreign economic assistance may be greater than
in developed countries. Investments in companies domiciled in developing
countries therefore may be subject to potentially higher risks than investments
in developed countries.
- Templeton Developing Markets Trust
10
<PAGE>
Brokerage commissions, custodial services, and other costs relating to
investment in developing markets are generally more expensive than in the U.S.
Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is
earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to subsequent declines
in value of the portfolio security or, if the Fund has entered into a contract
to sell the security, could result in possible liability to the purchaser.
Prior governmental approval of non-domestic investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations. Repatriation of
investment income, capital and proceeds of sales by foreign investors may
require governmental registration and/or approval in some developing countries.
The Fund could be adversely affected by delays in or a refusal to grant any
required governmental registration or approval for such repatriation.
Further, the economies of developing countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade.
In many developing markets, there is less government supervision and regulation
of business and industry practices, stock exchanges, brokers and listed
companies than in the U.S. There is an increased risk, therefore, of uninsured
loss due to lost, stolen, or counterfeit stock certificates. In addition, the
foreign securities markets of many of the countries in which the Fund may
invest may also be smaller, less liquid, and subject to greater price
volatility than those in the U.S. The Fund may invest in Eastern European
countries, which involves special risks that are described under "What Are the
Fund's Potential Risks?" in the SAI.
Templeton Developing Markets Trust -
11
<PAGE>
As a non-fundamental policy, the Fund will limit its investments in Russian
securities to 5% of its total assets. Russian securities involve additional
significant risks, including political and social uncertainty (for example,
regional conflicts and risk of war), currency exchange rate volatility,
pervasiveness of corruption and crime in the Russian economic system, delays in
settling portfolio transactions and risk of loss arising out of Russia's system
of share registration and custody. For more information on these risks and
other risks associated with Russian securities, please see "What Are the Fund's
Potential Risks?" in the SAI.
The Fund usually effects currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign exchange market. However, some
price spread on currency exchange transactions (to cover service charges) will
be incurred when the Fund converts assets from one currency to another.
The Fund is authorized to invest in medium quality or high-risk, lower quality
debt securities that are rated between BBB and as low as C by S&P, and between
Baa and as low as C by Moody's or, if unrated, are of equivalent investment
quality as determined by TAML. As an operating policy, which may be changed by
the Board without shareholder approval, the Fund will not invest more than 5%
of its total assets in debt securities rated lower than BBB by S&P or Baa by
Moody's. The Board may consider a change in this operating policy if, in its
judgment, economic conditions change such that a higher level of investment in
high-risk, lower quality debt securities would be consistent with the interests
of the Fund and its shareholders. See "How Does the Fund Invest Its
Assets? - Debt Securities" in the SAI for descriptions of debt securities rated
BBB by S&P and Baa by Moody's. High-risk, lower quality debt securities,
commonly known as junk bonds, are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation and may be in default.
Unrated debt securities are not necessarily of lower quality than rated
securities but they may not be attractive to as many buyers. Regardless of
rating levels, all debt securities considered for purchase (whether rated or
unrated) will be carefully analyzed by TAML to insure, to the extent possible,
that the planned investment is sound. The Fund may, from time to time, purchase
defaulted debt securities if, in the opinion of TAML, the issuer may resume
interest payments in the near future. As a fundamental policy, the Fund will
not invest more than 10% of its total assets (at the time of purchase) in
defaulted debt securities, which may be illiquid.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of portfolio securities on the Fund's Net Asset Value, and
money borrowed will be subject to interest and other costs (which may include
- Templeton Developing Markets Trust
12
<PAGE>
commitment fees and/or the cost of maintaining minimum average balances) which
may or may not exceed the income or gains received from the securities
purchased with borrowed funds.
Successful use of futures contracts and related options is subject to special
risk considerations. A liquid secondary market for any futures or options
contract may not be available when a futures or options position is sought to
be closed. In addition, there may be an imperfect correlation between movements
in the securities or foreign currency on which the futures or options contract
is based and movements in the securities or currency in the Fund's portfolio.
Successful use of futures or options contracts is further dependent on TAML's
ability to correctly predict movements in the securities or foreign currency
markets and no assurance can be given that its judgment will be correct.
Successful use of options on securities or securities indices is subject to
similar risk considerations. In addition, by writing covered call options, the
Fund gives up the opportunity, while the option is in effect, to profit from
any price increase in the underlying security above the option exercise price.
There are further risk factors, including possible losses through the holding of
securities in domestic and foreign custodian banks and depositories, described
elsewhere in the prospectus and in the SAI.
WHO MANAGES THE FUND?
The Board. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations. The
Board also monitors the Fund to ensure that no material conflicts exist among
the classes of shares. While none is expected, the Board will act appropriately
to resolve any material conflict that may arise.
Investment Manager. TAML manages the Fund's assets and makes the Fund's
investment decisions. TAML also performs similar services for other funds. It is
wholly owned by Resources, a publicly owned company engaged in the financial
services industry through its subsidiaries. Charles B. Johnson and Rupert H.
Johnson, Jr. are the principal shareholders of Resources. Together, TAML and its
affiliates manage over $172 billion in assets. The Templeton organization has
been investing globally since 1940. TAML and its affiliates have offices in
Argentina, Australia, Bahamas, Canada, France, Germany, Hong Kong, India,
Italy, Luxembourg, Poland, Russia, Scotland, Singapore, South Africa, U.S., and
Vietnam. Please see "Investment Management and Other Services" and
"Miscellaneous Information" in the SAI for information on securities
transactions and a summary of the Fund's Code of Ethics.
Templeton Developing Markets Trust -
13
<PAGE>
Portfolio Management. The lead portfolio manager for the Fund since its
inception is Dr. J. Mark Mobius. Dr. Mobius is managing director of TAML. He
holds a BA in fine arts from Boston University, an MA in mass communications
from Boston University, and a PhD in economics from the Massachusetts Institute
of Technology. Prior to joining the Templeton organization in 1987, Dr. Mobius
was president of the International Investment Trust Company Limited (investment
manager of Taiwan, R.O.C. Fund) (1986-1987) and a director of Vickers da Costa,
Hong Kong (an international securities firm) (1983-1986). Dr. Mobius began
working in Vickers da Costa's Hong Kong office in 1980 and moved to Taiwan in
1983 to open the firm's office there and to direct operations in India,
Indonesia, Thailand, the Philippines, and Korea. Before joining Vickers da
Costa, Dr. Mobius operated his own consulting firm in Hong Kong from 1970 until
1980.
Allan Lam and Tom Wu exercise secondary portfolio management responsibilities
for the Fund. Mr. Lam holds a BA in accounting from Rutgers University. Prior
to joining the Templeton organization in 1987, he worked as an auditor with two
international accounting firms in Hong Kong: Deloitte Haskins & Sells CPA and
KPMG Peat Marwick CPA. Mr. Wu is a director of TAML. He holds a BS in economics
from the University of Hong Kong and an MBA in finance from the University of
Oregon. Prior to joining the Templeton organization in 1987, Mr. Wu worked as
an investment analyst, specializing in Hong Kong companies, with Vickers da
Costa. Further information concerning TAML is included under the heading
"Investment Management and Other Services" in the SAI.
Management Fees. For the fiscal year ended December 31, 1995, the Fund paid
1.25% of its average daily net assets in management fees.
Portfolio Transactions. TAML tries to obtain the best execution on all
transactions. If TAML believes more than one broker or dealer can provide the
best execution, consistent with internal policies it may consider research and
related services and the sale of Fund shares, as well as shares of other funds
in the Franklin Templeton Group of Funds, when selecting a broker or dealer.
Please see "How Does the Fund Buy Securities for Its Portfolio?" in the SAI for
more information.
Administrative Services. FT Services (and, prior to October 1, 1996, Templeton
Global Investors, Inc.) provides certain administrative services and facilities
for the Fund. For the fiscal year ended December 31, 1995, administrative fees
were 0.10% of the Fund's average daily net assets. Please see "Investment
Management and Other Services" in the SAI for more information.
- Templeton Developing Markets Trust
14
<PAGE>
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, each class of the Fund advertises its performance. The more
commonly used measures of performance are total return, current yield and
current distribution rate. Performance figures are usually calculated using the
maximum sales charge, if applicable. Certain performance figures may not
include any sales charge or 12b-1 fees.
Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested. Current yield for each
class shows the income per share earned by that class. The current distribution
rate shows the dividends or distributions paid to shareholders of a class. This
rate is usually computed by annualizing the dividends paid per share during a
certain period and dividing that amount by the current Offering Price of the
class. Unlike current yield, the current distribution rate may include income
distributions from sources other than dividends and interest received by the
Fund.
The investment results of each class will vary. Performance figures are always
based on past performance and do not guarantee future results. For a more
detailed description of how the Fund calculates its performance figures, please
see "How Does the Fund Measure Performance?" in the SAI.
HOW IS THE FUND ORGANIZED?
The Fund is a diversified, open-end management investment company, commonly
called a mutual fund. It was organized as a Massachusetts business trust on
August 9, 1991, and is registered with the SEC under the 1940 Act.
The Fund offers three classes of shares: Templeton Developing Markets Trust -
Class I, Templeton Developing Markets Trust - Class II and Templeton Developing
Markets Trust - Advisor Class. The Fund began offering Advisor Class shares on
January 1, 1997. Class I, Class II and Advisor Class shares differ as to sales
charges, expenses and services. Different fees and expenses will affect
performance. In the future, additional classes of shares may be offered. A
further description of Class I and Class II is set forth below.
Each class will vote separately on matters (1) affecting only that class, (2)
expressly required to be voted on separately by state law, or (3) required to
be voted on separately by the 1940 Act. Shares of each class represent
proportionate interests in the assets of the Fund and have the same voting and
other rights and preferences as the other classes of the Fund for matters that
affect the Fund as a whole.
Templeton Developing Markets Trust -
15
<PAGE>
Class I and Class II. Class I and Class II shares of the Fund are described in a
separate prospectus relating only to those classes. You may buy Class I and
Class II shares through your investment representative or directly by contacting
the Fund. If you would like a prospectus relating to the Fund's Class I and
Class II shares, contact your investment representative or Distributors.
Class I and Class II shares of the Fund have sales charges and Rule 12b-1
charges that may affect performance. Class I shares have a front-end sales
charge of 5.75% (6.10% of the net amount invested) which is reduced on certain
transactions of $50,000 or more. Class I shares are subject to Rule 12b-1
expenses up to a maximum of 0.35% per year of Class I's average daily net
assets. Class II shares have a front-end sales charge of 1.00% (1.01% of the net
amount invested), and are subject to Rule 12b-1 expenses up to a maximum of
1.00% per year of Class II's average daily net assets. Shares of Class I may be
subject to, and shares of Class II are generally subject to, a Contingent
Deferred Sales Charge upon redemption.
The Fund has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the members of the Board. If
this happens, holders of the remaining shares voting will not be able to elect
anyone to the Board.
The Fund does not intend to hold annual shareholder meetings. It may hold a
special meeting, however, for matters requiring shareholder approval under the
1940 Act. The Fund will call a special meeting of shareholders for the purpose
of considering the removal of a Board member if requested in writing to do so
by shareholders holding at least 10% of the outstanding shares. The 1940 Act
requires that we help you communicate with other shareholders in connection
with removing members of the Board.
HOW TAXATION AFFECTS YOU AND THE FUND
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
The Fund intends to elect to be treated and to qualify each year as a regulated
investment company under Subchapter M of the Code. A regulated investment
company generally is not subject to Federal income tax on income and gains
distributed in a timely manner to its shareholders. The Fund intends to
distribute to shareholders substantially all of its net investment income and
net realized capital gains, which generally will be taxable income or capital
gains in
- Templeton Developing Markets Trust
16
<PAGE>
their hands. Distributions declared in October, November or December to
shareholders of record on a date in such month and paid during the following
January will be treated as having been received by shareholders on December 31
in the year such distributions were declared. The Fund will inform shareholders
each year of the amount and nature of such income or gains. Sales or other
dispositions of Fund shares generally will give rise to taxable gain or loss.
Templeton Developing Markets Trust -
17
<PAGE>
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
Opening Your Account
Advisor Class shares are offered only to investors satisfying one of the
following criteria:
(a) Broker-dealers, qualified registered investment advisors or certified
financial planners, who have entered into a supplemental agreement with
Distributors for clients participating in comprehensive fee programs;
(b) Qualified registered investment advisors or registered certified financial
planners who have clients invested in Mutual Series on October 31, 1996;
(c) Qualified registered investment advisors or registered certified financial
planners who did not have clients invested in Mutual Series on October 31,
1996 may buy through a broker-dealer or service agent who has entered into
an agreement with Distributors;
(d) Effective on or about February 1, 1997, participants in Franklin Templeton's
401(k) and Franklin Templeton's Profit Sharing Plans;
(e) Directors, trustees, officers and full-time employees (and members of their
immediate family) of Franklin Templeton Group and Franklin Templeton Group
of Funds who invest $100 or more;
(f) Accounts managed by the Franklin Templeton Group; and
(g) Class I shareholders of the Fund who qualify under one of the above
categories, may have their existing Class I shares invested into the Fund's
Advisor Class by sending written instructions indicating that they wish to
do so, by June 30, 1997. Instructions should be addressed to Investor
Services. Generally, for federal income tax purposes, there will be no
recognition of gain or loss associated with such a transaction. You may
wish to consult with your tax advisor to determine whether there are any
state income tax consequences to such a transaction.
(h) Each series of Franklin Templeton Fund Allocator Series that invests $1,000
or more.
The minimum for subsequent investments in Advisor Class shares is $25 for most
purchases of Advisor Class shares of the Fund and for purchases by directors,
trustees, officers and full-time employees (and members of their
- Templeton Developing Markets Trust
18
<PAGE>
immediate family) of Franklin Templeton Group and Franklin Templeton Funds; and
$1,000 for each series of Franklin Templeton Fund Allocator Series.
Purchase Price of Fund Shares
Advisor Class shares are purchased at Net Asset Value without a sales charge.
Securities Dealers may receive compensation up to 0.25% of the amount invested
from Distributors or an affiliated company.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction for taxable investors.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund and its rules and
requirements for exchanges. For example, some Franklin Templeton Funds do not
accept exchanges and others may have different investment minimums. Some
Franklin Templeton Funds do not offer Advisor Class shares.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- -----------------------------------------------------------------------
<S> <C>
BY MAIL 1. Send us written instructions signed by all
account owners
2. Include any outstanding share certificates
for the shares you're exchanging
- -----------------------------------------------------------------------
BY PHONE Call Shareholder Services
(If you do not want the ability to exchange by
phone to apply to your account, please let us
know.)
- -----------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- -----------------------------------------------------------------------
</TABLE>
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
How We Process Your Exchange
If you are exchanging your Advisor Class shares of the Fund you may:
- - exchange into any of our money funds except Franklin Templeton Money Fund II.
Templeton Developing Markets Trust -
19
<PAGE>
- - exchange into the other Advisor Class shares of the Franklin Templeton Funds
(excluding Templeton Foreign Fund and Templeton Growth Fund, Inc., except as
described below), Class Z of Mutual Series and Templeton Institutional Funds,
Inc., if you meet the investment requirements of the fund to be acquired.
- - exchange into the Advisor Class shares of Templeton Foreign Fund and
Templeton Growth Fund, Inc. only if you fall into one of the following
categories: (i) you are a broker-dealer or a qualified registered investment
advisor who has entered into a special agreement with Distributors for your
clients who are participating in comprehensive fee programs; (ii) you are a
qualified registered investment advisor or registered certified financial
planner who has clients invested in Mutual Series on October 31, 1996; (iii)
you are a qualified registered investment advisor or registered certified
financial planner who did not have clients invested in Mutual Series on
October 31, 1996 and are buying through a broker-dealer or service agent who
has entered into an agreement with Distributors; (iv) you are a director,
trustee, officer or full-time employee (or a family member) of the Franklin
Templeton Group or the Franklin Templeton Funds; (v) you are a participant in
Franklin Templeton's 401(k) Plan or Franklin Templeton's Profit Sharing Plan;
(vi) the exchanging shareholder is an account managed by the Franklin
Templeton Group; or (vii) the exchanging shareholder is a series of the
Franklin Templeton Fund Allocator Series.
- - if the fund you are exchanging into does not offer Advisor Class shares, you
may exchange into the Class I shares of the fund at Net Asset Value.
Please be aware that the following restrictions may apply to exchanges:
- - The accounts must be identically registered. You may exchange shares from a
Fund account requiring two or more signatures into an identically registered
money fund account requiring only one signature for all transactions. Please
notify us in writing if you do not want this option to be available on your
account(s). Additional procedures may apply. Please see "Transaction
Procedures and Special Requirements."
- - Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact our Retirement Plans Department for information on exchanges
within these plans.
- - The fund you are exchanging into must be eligible for sale in your state.
- Templeton Developing Markets Trust
20
<PAGE>
- - We may modify or discontinue our exchange policy upon 60 days' written notice.
- - Currently, the Fund does not allow investments by Market Timers.
Because excessive trading can hurt Fund performance and shareholders, we may
refuse any exchange purchase if (i) we believe the Fund would be harmed or
unable to invest effectively, or (ii) the Fund receives or anticipates
simultaneous orders that may significantly affect the Fund.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ----------------------------------------------------------------------
<S> <C>
BY MAIL 1. Send us written instructions signed by all
account owners
2. Include any outstanding share certificates
for the shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts
may need to send additional documents.
Accounts under court jurisdiction may have
additional requirements.
- ----------------------------------------------------------------------
</TABLE>
Templeton Developing Markets Trust -
21
<PAGE>
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ----------------------------------------------------------------------
<S> <C>
BY PHONE Call Shareholder Services
(Only available if you have completed and sent to us the telephone
redemption agreement included with this prospectus)
Telephone requests will be accepted:
- If the request is $50,000 or less.
Institutional accounts may exceed $50,000 by
completing a separate agreement. Call
Institutional Services to receive a copy.
- If there are no share certificates issued
for the shares you want to sell or you have
already returned them to the Fund.
- Unless you are selling shares in a Trust
Company retirement plan account.
- Unless the address on your account was
changed by phone within the last 30 days.
Beginning on or about May 1, 1997,
you will automatically be able to redeem shares
by telephone without completing a telephone
redemption agreement. Please notify us if you
do not want this option to be available on
your account. If you later decide you would
like this option, send us written instructions
signed by all account owners.
- ----------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ----------------------------------------------------------------------
</TABLE>
We will send your redemption check within seven days after we receive your
request in proper form. If you sell your shares by phone, the check may only be
made payable to all registered owners on the account and sent to the address of
record. We are not able to receive or pay out cash in the form of currency.
If you sell shares you just purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
- Templeton Developing Markets Trust
22
<PAGE>
Trust Company Retirement Plan Accounts
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call our Retirement Plans Department.
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
Dividends and capital gains are calculated and distributed the same way for each
class of the Fund. The amount of any income dividends per share will differ,
however, generally due to the difference in the applicable Rule 12b-1 fees of
any class. Advisor Class shares are not subject to Rule 12b-1 fees.
The Fund intends to pay a dividend at least annually representing substantially
all of its net investment income and any net realized capital gains.
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution.
Distribution Options
You may receive your distributions from the Fund in any of these ways:
1. Buy additional shares of the Fund - You may buy additional shares of the same
class of the Fund by reinvesting capital gain distributions, dividend
distributions, or both. This is a convenient way to accumulate additional
shares and maintain or increase your earnings base.
2. Buy shares of other Franklin Templeton Funds - You may direct your
distributions to buy Advisor Class shares or Class I shares of another Franklin
Templeton Fund. Many shareholders find this a convenient way to diversify their
investments.
3. Receive distributions in cash - You may receive capital gains distributions,
dividend distributions, or both in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee.
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE THE SHAREHOLDER APPLICATION
INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT REPRESENTATIVE WHICH
Templeton Developing Markets Trust -
23
<PAGE>
OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL AUTOMATICALLY
REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE ADVISOR CLASS SHARES OF
THE FUND. For Trust Company retirement plans, special forms are required to
receive distributions in cash. You may change your distribution option at any
time by notifying us by mail or phone. Please allow at least seven days prior to
the record date for us to process the new option.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
How and When Shares are Priced
The Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share as of the scheduled close of the NYSE, generally 4:00
p.m. Eastern time. You can find the prior day's closing Net Asset Value and
Offering Price of the Fund in many newspapers.
The Net Asset Value of all outstanding shares of each class is calculated on a
pro rata basis. It is based on each class' proportionate participation in the
Fund, determined by the value of the shares of each class. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. The Fund's assets are
valued as described under "How Are Fund Shares Valued?" in the SAI.
The Price We Use When You Buy or Sell Shares
You buy shares of the Advisor Class at the Net Asset Value per share. We
calculate it to two decimal places using standard rounding criteria. You also
sell shares at Net Asset Value.
We will use the Net Asset Value next calculated after we receive your
transaction request in proper form. If you buy or sell shares through your
Securities Dealer, however, we will use the Net Asset Value next calculated
after your Securities Dealer receives your request, which is promptly
transmitted to the Fund. Your redemption proceeds will not earn interest
between the time we receive the order from your dealer and the time we receive
any required documents.
Proper Form
An order to buy shares is in proper form when we receive your signed
shareholder application and check. Written requests to sell or exchange shares
are in proper form when we receive written instructions signed by all registered
owners, with a signature guarantee if necessary. We must also receive any
outstanding share certificates for those shares.
- Templeton Developing Markets Trust
24
<PAGE>
Written Instructions
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
- - Your name,
- - The Fund's name,
- - The class of shares,
- - A description of the request,
- - For exchanges, the name of the fund you're exchanging into,
- - Your account number,
- - The dollar amount or number of shares, and
- - A telephone number where we may reach you during the day, or in the evening
if preferred.
Signature Guarantees
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature and may be
obtained from certain banks, brokers or other eligible guarantors. YOU SHOULD
VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR PRIOR TO SIGNING. A
NOTARIZED SIGNATURE IS NOT SUFFICIENT.
Share Certificates
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate
is lost,
Templeton Developing Markets Trust -
25
<PAGE>
stolen or destroyed, you may have to pay an insurance premium of up to 2% of
the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form. In this case, you should send the certificate and assignment
form in separate envelopes.
Telephone Transactions
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We will also record calls. We will not be
liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or not
implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.
Trust Company Retirement Plan Accounts. You may not sell shares or change
distribution options on Trust Company retirement plans by phone. While you may
exchange shares of Trust Company IRA and 403(b) retirement accounts by phone,
certain restrictions may be imposed on other retirement plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call our Retirement Plans Department.
Account Registrations and Required Documents
When you open an account, you need to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
Joint Ownership. If you open an account with two or more owners, we register
the account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or
more owners, all owners must sign instructions to process transactions and
changes to the account. Even if the law in your state says otherwise, you will
not
- Templeton Developing Markets Trust
26
<PAGE>
be able to change owners on the account unless all owners agree in writing. If
you would like another person or owner to sign for you, please send us a
current power of attorney.
Gifts and Transfers to Minors. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
Trusts. If you register your account as a trust, you should have a valid written
trust document to avoid future disputes or possible court action over who owns
the account.
Required Documents. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
<TABLE>
<CAPTION>
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- -----------------------------------------------------------------------
<S> <C>
CORPORATION Corporate Resolution
- -----------------------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement that
identify the general partners,
2. A certification for a partnership agreement
- -----------------------------------------------------------------------
TRUST 1. The pages from the trust document that
identify the trustees, or
2. A certification for trust
- -----------------------------------------------------------------------
</TABLE>
Street or Nominee Accounts. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both
dealers must have an agreement with Distributors or we will not process the
transfer. Contact your Securities Dealer to initiate the transfer. We will
process the transfer after we receive authorization in proper form from your
delivering Securities Dealer. Accounts may be transferred electronically
through the NSCC. For accounts registered in street or nominee name, we may
take instructions directly from the Securities Dealer or your nominee.
Electronic Instructions. If there is a Securities Dealer or other
representative of record on your account, we are authorized to use and execute
electronic instructions received directly from your dealer or representative
without further inquiry. Electronic instructions may be processed through the
services of the NSCC, which currently include the NSCC's "Networking,"
"Fund/SERV," and "ACATS" systems, or through Franklin/Templeton's PCTrades
II(TM) System.
Templeton Developing Markets Trust -
27
<PAGE>
Tax Identification Number
For tax reasons, we must have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
Keeping Your Account Open
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is $50 or less, except for investors
under categories (d), (f) and (h) under "Opening Your Account." We will only do
this if the value of your account falls below this minimum because you
voluntarily sold your shares and your account has been inactive (except for the
reinvestment of distributions) for at least six months. Before we close your
account, we will notify you and give you 30 days to increase the value of your
account to the required minimum amount of at least $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
Automatic Investment Plan
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the account application included with this
prospectus or contact your investment representative. The market value of the
Fund's shares may fluctuate and a systematic investment plan such as this will
not assure a profit or protect against a loss. You may discontinue the program
at any time by notifying Investor Services by mail or phone.
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Systematic Withdrawal Plan
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum
payment amount for each withdrawal must be at least $50. For retirement plans
subject to mandatory distribution requirements, the $50 minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account. You will generally receive your payment by the
end of the month in which a payment is scheduled. When you sell your shares
under a systematic withdrawal plan, it is a taxable transaction.
You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us in
writing at least seven business days before the end of the month preceding a
scheduled payment. Please see "How Do I Buy, Sell and Exchange Shares? -
Systematic Withdrawal Plan" in the SAI for more information.
Statements and Reports to Shareholders
We will send you the following statements and reports on a regular basis:
- - Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
- - Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports or an interim quarterly
report.
Brokers and Dealers and Plan Administrators
You may buy and sell Fund shares through registered broker-dealers. The Fund
does not impose a sales or service charge but your broker-dealer may charge you
a transaction fee. Transaction fees and services may vary among broker-dealers,
and your broker-dealer may impose higher initial or subsequent investment
Templeton Developing Markets Trust -
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requirements than those established by the Fund. Services provided by broker-
dealers may include allowing you to establish a margin account and borrow on
the value of the Fund's shares in that account. If your broker-dealer receives
your order before pricing on a given day, the broker-dealer is required to
forward the order to the Fund before pricing closes on that day. A broker-
dealer's failure to timely forward an order may give rise to a claim by the
investor against the broker.
Third party plan administrators of tax-qualified retirement plans and other
entities may provide sub-transfer agent services to the Fund. In such cases, the
Fund may pay the third party an annual sub-transfer agency fee that is not
greater than the Fund otherwise would have paid for such services.
Institutional Accounts
Institutional investors will likely be required to complete an institutional
account application. There may be additional methods of opening accounts and
purchasing, redeeming or exchanging shares of the Fund available for
institutional accounts. To obtain an institutional application or additional
information regarding institutional accounts, contact Franklin Templeton
Institutional Services at 1-800/321-8563 Monday through Friday, from 9:00 a.m.
to 5:00 p.m. Eastern time.
Availability of These Services
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
What If I Have Questions About My Account?
If you have any questions about your account, you may write to Investor
Services, P.O. Box 33030, St. Petersburg, FL 33733-8030. The Fund and
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Distributors are also located at this address. You may also contact us by phone
at one of the numbers listed below.
<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN
TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
- ------------------------------------------------------------------------
<S> <C> <C>
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
(1-800/342-5236) 9:30 a.m. to 5:30 p.m. (Saturday)
Retirement Plans 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
Templeton Developing Markets Trust -
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GLOSSARY
USEFUL TERMS AND DEFINITIONS
1940 Act - Investment Company Act of 1940, as amended.
AMEX - American Stock Exchange, Inc.
Board - The Board of Trustees of the Fund.
CD - Certificate of deposit.
Class I, Class II and Advisor Class - The Fund offers three classes of shares,
designated "Class I," "Class II," and "Advisor Class." The three classes have
proportionate interests in the Fund's portfolio. Class I and Class II differ,
however, primarily in their sales charge structures and Rule 12b-1 plans.
Advisor Class shares are purchased without a sales charge and do not have a
Rule 12b-1 plan.
Code - Internal Revenue Code of 1986, as amended.
Contingency Period - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the
contingency period is 18 months. Regardless of when during the month you
purchased shares, they will age one month on the last day of that month and
each following month.
Contingent Deferred Sales Charge (CDSC) - A sales charge of 1% that may apply
if you sell your shares within the Contingency Period.
Distributors - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
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 Group of Funds - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds.
FT Services - Franklin Templeton Services, Inc., the Fund's administrator.
Investor Services - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing agent and transfer agent.
IRS - Internal Revenue Service.
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Market Timer(s) - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.
Moody's - Moody's Investors Service, Inc.
Mutual Series - Franklin Mutual Series Fund Inc., a member of the Franklin
Group of Funds, formerly the Mutual Series Fund Inc. Each series of Mutual
Series began offering three classes of shares on November 1, 1996, Class I,
Class II and Class Z. All shares sold before that time are designated Class Z
shares.
NASD - National Association of Securities Dealers, Inc.
Net Asset Value (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by
the number of shares outstanding.
NSCC - National Securities Clearing Corporation.
NYSE - New York Stock Exchange, Inc.
Offering Price - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge, if applicable. The
maximum front-end sales charge is 5.75% for Class I and 1% for Class II. The
Advisor Class has no front-end sales charge.
Resources - Franklin Resources, Inc.
SAI - Statement of Additional Information.
S&P - Standard & Poor's Corporation.
SEC - U.S. Securities and Exchange Commission.
Securities Dealer - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
TAML - Templeton Asset Management Ltd. - Hong Kong Branch, the Fund's
investment manager, is located at Two Exchange Square, Hong Kong.
Templeton Developing Markets Trust -
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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. Trust Company is an affiliate
of Distributors and both are wholly-owned subsidiaries of Resources.
U.S. - United States.
We/Our/Us - Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly-owned
subsidiaries of Resources.
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