File No. 33-47666
811-6664
As filed with the Securities and Exchange Commission on July 25, 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 2 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT -----
COMPANY ACT OF 1940 / X /
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Amendment No. 5 / X /
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FRANKLIN TEMPLETON JAPAN FUND
(FORMERLY FRANKLIN JAPAN FUND)
(Exact Name of Registrant as Specified in Charter)
700 CENTRAL AVENUE, P.O. BOX 33030, ST. PETERSBURG, FLORIDA 33701-8030
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (813) 823-8712
Thomas M. Mistele, Esq.
700 Central Avenue
St. Petersburg, FL 33701
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
X on (August 1, 1995) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Registrant has elected to register an indefinite number of shares of
beneficial interest, $0.01 par value per share, pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrant filed the Notice required by Rule
24f-2 with respect to its fiscal year ending March 31, 1995 on May 26, 1995.
<PAGE>
FRANKLIN TEMPLETON JAPAN FUND
CROSS-REFERENCE SHEET
ITEM NO. CAPTION
PART A
1 Cover Page
2 Expense Table
3 Not Applicable
4 General Description;
Investment Techniques
5 Management of the Fund
5A Not Applicable
6 General Information
7 How to Buy Shares of the
Fund
8 How to Sell Shares of the
Fund
9 Not Applicable
PART B
10 Cover Page
11 Table of Contents
12 General Information and
History
13 Investment Objectives and
Policies
14 Management of the Trust
15 Management of the Trust
16 Investment Management and
Other Services
17 Brokerage Allocation
<PAGE>
ITEM NO. CAPTION
18 Description of Shares;
Part A
19 Purchase, Redemption and
Pricing of Shares
20 Tax Status
21 Principal Underwriter
22 Performance Information
23 Financial Statements
<PAGE>
PROSPECTUS -- AUGUST 1, 1995
FRANKLIN TEMPLETON
JAPAN FUND
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INVESTMENT The investment objective of Franklin Templeton Japan Fund (the
OBJECTIVE "Fund") is long-term capital growth. The Fund seeks its
AND POLICIES objective by investing primarily in securities of companies
domiciled in Japan and traded in Japanese securities markets.
THE FUND MAY BORROW MONEY FOR INVESTMENT PURPOSES (I.E.,
"LEVERAGE" ITS PORTFOLIO), WHICH MAY INVOLVE GREATER RISK AND
ADDITIONAL COSTS TO THE FUND. IN ADDITION, THE FUND MAY INVEST
UP TO 15% OF ITS ASSETS IN ILLIQUID SECURITIES, INCLUDING UP TO
10% OF ITS ASSETS IN RESTRICTED SECURITIES, WHICH MAY INVOLVE
GREATER RISK AND INCREASED FUND EXPENSES. THERE ARE FURTHER
RISKS ASSOCIATED WITH THE FUND'S POLICY OF INVESTING PRIMARILY
IN JAPANESE SECURITIES. SEE "RISK FACTORS."
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PURCHASE OF Please complete and return the Shareholder Application. If you
SHARES need assistance in completing this form, please call our
Shareholder Services Department. The Fund's Shares may be
purchased at a price equal to their net asset value plus a
sales charge not exceeding 5.75% of the offering price. The
minimum initial investment is $100 ($25 minimum for subsequent
investments).
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PROSPECTUS This Prospectus sets forth concisely information about the Fund
INFORMATION that a prospective investor ought to know before investing.
Investors are advised to read and retain this Prospectus for
future reference. A Statement of Additional Information ("SAI")
dated August 1, 1995, has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated in its
entirety by reference in and made a part of this Prospectus.
The SAI is available without charge upon request to Franklin
Templeton Distributors, Inc., P.O. Box 33030, St. Petersburg,
Florida 33733-8030 or by calling the Fund Information
Department.
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FUND INFORMATION DEPARTMENT--1-800/DIAL BEN
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TEMPLETON "STAR" SERVICE (24 hours, seven days a week access to current prices,
shareholder account balances/values, last transaction and duplicate account
statements) -- 1-800-654-0123
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
EXPENSE TABLE........ 2
FINANCIAL HIGHLIGHTS. 3
GENERAL DESCRIPTION.. 4
Investment Objective
and Policies........ 4
INVESTMENT TECH-
NIQUES.............. 5
Temporary Invest-
ments............... 5
Borrowing............ 5
Loans of Portfolio
Securities.......... 6
Options on Securities
or Indices.......... 6
Forward Foreign
Currency Contracts
and Options on
Foreign Currencies.. 6
Futures Contracts.... 7
Repurchase Agree-
ments............... 7
Depositary Receipts.. 7
Illiquid and Re-
stricted Securities. 8
RISK FACTORS......... 8
Investment in Japa-
nese Issuers........ 8
Foreign Investments.. 9
Emerging Growth Com-
panies.............. 10
High-Risk Debt Secu-
rities.............. 10
Leverage............. 10
Futures Contracts and
Related Options..... 10
HOW TO BUY SHARES OF
THE FUND............ 11
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Offering Price....... 11
Net Asset Value Pur-
chases.............. 13
Description of Spe-
cial Net Asset Value
Purchases........... 14
Additional Dealer
Compensation........ 14
Purchasing Fund
Shares.............. 15
Automatic Investment
Plan................ 15
Institutional Ac-
counts.............. 15
Account Statements... 15
Templeton STAR Serv-
ice................. 15
Retirement Plans..... 16
Net Asset Value...... 16
EXCHANGE PRIVILEGE... 16
Transfers............ 17
Exchanges by Timing
Accounts............ 18
HOW TO SELL SHARES OF
THE FUND............ 18
Reinstatement Privi-
lege................ 20
Systematic Withdrawal
Plan................ 20
Redemptions by Tele-
phone............... 21
Contingent Deferred
Sales Charge........ 21
TELEPHONE TRANSAC-
TIONS............... 22
Verification Proce-
dures............... 22
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Restricted Accounts.. 23
General.............. 23
MANAGEMENT OF THE
FUND................ 23
Investment Manager... 23
Business Manager..... 24
Transfer Agent....... 24
Custodian............ 24
Plan of Distribution. 24
Brokerage Commis-
sions............... 25
GENERAL INFORMATION.. 25
Description of
Shares/Share Certif-
icates.............. 25
Meetings of Share-
holders............. 25
Dividends and Distri-
butions............. 25
Federal Tax Informa-
tion................ 26
Japan Taxes.......... 26
Inquiries............ 26
Performance Informa-
tion................ 26
Statements and Re-
ports............... 26
WITHHOLDING INFORMA-
TION................ 27
CORPORATE RESOLUTION. 28
AUTHORIZATION AGREE-
MENT................ 29
THE FRANKLIN TEMPLE-
TON GROUP........... 30
</TABLE>
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SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder will bear directly or indirectly
in connection with an investment in the Fund. The figures are estimates of the
Fund's expenses for the current fiscal year.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of Offering
Price)............................................................... 5.75%
Deferred Sales Charge................................................. None/1/
Exchange Fee (per transaction)........................................ $5.00/2/
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees....................................................... 0.75%
Rule 12b-1 Fees/3/.................................................... .35%
Other Expenses (audit, legal, business management, transfer agent and
custodian)........................................................... .90%
Total Fund Operating Expenses (after expense reimbursement)........... 2.00%
</TABLE>
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/1/ Investments of $1 million or more are not subject to a front-end sales
charge; however, a contingent deferred sales charge of 1% is generally
imposed on certain redemptions within a "contingency period" of 12 months of
the calendar month following such investments. See "How to Sell Shares of
the Fund--Contingent Deferred Sales Charge."
/2/ $5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.
/3/ Annual Rule 12b-1 fees may not exceed 0.35% of the Fund's average net
assets. Consistent with the National Association of Securities Dealers,
Inc.'s rules, it is possible that the combination of front-end sales charges
and Rule 12b-1 fees could cause long-term Shareholders to pay more than the
economic equivalent of the maximum front-end sales charges permitted under
those same rules.
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. The information in this table does not reflect the charge of up to
$15 per transaction if a Shareholder requests that redemption proceeds be sent
by express mail or wired to a commercial bank account. For a more detailed
discussion of these matters, investors should refer to the appropriate
sections of this Prospectus.
EXAMPLE
As required by SEC regulations, the following example illustrates the
expenses, including the maximum front-end sales charge and applicable
contingent deferred sales charge, that apply to a $1,000 investment in the
Fund over various time periods assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period.
<TABLE>
<CAPTION>
ONE YEAR THREE YEAR FIVE YEARS TEN YEARS
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<S> <C> <C> <C>
$77 $117 $159 $277
</TABLE>
For purposes of this example, it is assumed that a contingent deferred sales
charge will not apply.
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES, INCLUDING
FEES SET BY CONTRACT, SHOWN ABOVE, AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN
THOSE SHOWN. The operating expenses are borne by the Fund and only indirectly
by Shareholders as a result of their investment in the Fund. In addition,
federal securities regulations require the example to assume an annual return
of 5%, but the Fund's actual return may be more or less than 5%.
2
Effective April 15, 1995, the Fund's Investment Manager, Templeton
Investment Counsel, Inc., has voluntarily agreed to reduce its investment
management fee to the extent necessary to limit the total expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses) of the Fund
to an annual rate of 2.00% of the Fund's average daily net assets. If such fee
reduction is insufficient to so limit the Fund's total expenses, the Fund's
Business Manager, Templeton Global Investors, Inc., has voluntarily agreed to
reduce its fee and, to the extent necessary, assume other Fund expenses, so as
to so limit the Fund's total expenses. If this policy were not in effect, the
Fund's "Other Expenses" and "Total Fund Operating Expenses" would be 10.95%
and 12.05%, respectively, and you would pay the following expenses on a $1,000
investment, assuming 5% annual return and redemption at the end of each time
period: $167 for one year and $364 for three years. As long as this temporary
expense limitation continues, it may lower the Fund's expenses and increase
its total return. After December 31, 1995, this expense limitation may be
terminated or revised at any time, at which time the Fund's expenses may
increase and its total return may be reduced, depending on the total assets of
the Fund.
FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
McGladrey & Pullen, LLP, independent certified public accountants, whose
report thereon, which is incorporated by reference, appears in the Fund's 1995
Annual Report to Shareholders. This statement should be read in conjunction
with the other financial statements and notes thereto included in the Fund's
1995 Annual Report to Shareholders, which contains further information about
the Fund's performance, and which is available to Shareholders upon request
and without charge.
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
JULY 28, 1994
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 1995
----------------
<S> <C>
Net asset value, beginning of period $10.00
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Income from investment operations:
Net investment income .10
Net realized and unrealized loss (.12)
------
Total from investment operations (.02)
Distributions to Shareholders from net investment income (.05)
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Change in net asset value (.07)
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Net asset value, end of period $ 9.93
======
TOTAL RETURN* (0.19)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $1,444
Ratio of expenses to average net assets 12.05%**
Ratio of expenses, net of reimbursement, to average net
assets 1.25%**
Ratio of net investment income to average net assets 1.92%**
Portfolio turnover rate --
</TABLE>
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* Total Return does not reflect sales commissions. Not annualized.
** Annualized.
3
GENERAL DESCRIPTION
Franklin Templeton Japan Fund (the "Fund") was organized as a business trust
under the laws of Delaware on October 29, 1991, and is registered under the
Investment Company Act of 1940 (the "1940 Act") as a diversified, open-end
management investment company.
INVESTMENT OBJECTIVE AND POLICIES. The investment objective of the Fund is
long-term capital growth. The Fund seeks to achieve its objective through
investing its assets primarily in securities of companies domiciled in Japan
and traded in the Japanese securities markets. A company is considered
domiciled in Japan if it is organized under the laws of Japan, at least half
of its assets are located in Japan and it normally derives at least half of
its income from operations or sales in Japan or if its principal activities
are in Japan.
The Fund's investments will consist of common stocks, common stock
equivalents (convertible debt securities and warrants) preferred stocks and
debt securities issued by domestic and foreign corporations, domestic and
foreign governments and supranational organizations such as the World Bank,
the European Investment Bank and the Asian Development Bank, as well as the
investments discussed under "Investment Techniques."
Under normal circumstances at least 80% of the Fund's assets will be
invested in equity securities of Japanese issuers. "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") and Global Depositary
Receipts ("GDRs"). See "Investment Techniques -- Depositary Receipts."
Securities considered for purchase by the Fund may be listed or unlisted, and
may be issued by companies in various industries, with various levels of
market capitalization.
Consistent with the Fund's objective of seeking long-term capital growth,
the Fund may purchase debt, as well as equity securities, issued by private
and governmental issuers. Although the Fund would not anticipate that its debt
investments would achieve the same levels of growth as its equity investments,
nevertheless, such investments fluctuate in value based upon changes in such
factors as the general level of interest rates and credit quality, and may be
expected to offer attractive growth opportunities. 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 invest in debt securities (defined as bonds, notes, debentures,
commercial paper, time deposits, and bankers' acceptances) which are rated in
any rating category by Moody's Investors Service, Inc. ("Moody's") or Standard
& Poor's Corporation ("S&P") or which are unrated by any rating agency. Such
securities may include high risk, lower quality debt securities, commonly
referred to as "junk bonds." See "Risk Factors." As an operating policy, which
may be changed by the Board of Trustees, 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. The Fund may invest in yen-denominated bonds sold in Japan by non-
Japanese issuers ("Samurai Bonds") and may invest in dollar-denominated bonds
sold in the United States by non-U.S. issuers ("Yankee Bonds"). As compared
with bonds issued in their countries of domicile, such bond issues normally
carry a higher interest rate but are less actively traded. Samurai Bonds and
Yankee Bonds are subject to the risks associated with other debt instruments
and with securities of foreign issuers, as described below and in the SAI.
Debt securities are subject to certain market and credit risks. See
"Investment Objective and Policies -- Debt Securities" in the SAI for
descriptions of debt securities rated BBB by S&P and Baa by Moody's.
Government securities in which the Fund may invest consist of debt
securities issued by the U.S. Treasury which are direct obligations of the
U.S. Government, including bills (maturity of one year or less), notes
(maturities of one to 10 years) and bonds (generally maturities of greater
than 10 years), and debt securities issued or guaranteed by U.S. Government-
sponsored instrumentalities and federal agencies, including the Federal
National Mortgage Association ("FNMA"), Federal Home Loan Banks and the
Federal Housing Administration. Mortgage-backed U.S. Government securities,
such as FNMA certificates, are highly sensitive to prepayment and interest
rates. Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors. Generally, however,
prepayments on fixed rate mortgage loans will increase during a period of
falling interest rates and decrease
4
during a period of rising interest rates. Accordingly, to the extent of the
Fund's investment in mortgage-backed securities, amounts available for
reinvestment by the Fund are likely to be greater during a period of declining
interest rates and, as a result, are likely to be reinvested at lower interest
rates than during a period of rising interest rates. The Fund may also invest
in obligations issued or guaranteed by a foreign government or any of its
political subdivisions, authorities, agencies, or instrumentalities which are
rated in any category, as described above, or which are unrated by any rating
agency.
The objective of the Fund is a fundamental policy which cannot be changed
without Shareholder approval. The investment policies and practices described
herein are not fundamental policies of the Fund and may be changed at the
discretion of the Board of Trustees without Shareholder approval.
The Fund may also lend its portfolio securities and borrow money for
investment purposes (i.e., "leverage" its portfolio). In addition, the Fund
may enter into transactions in options on securities, securities indices and
foreign currencies, forward foreign currency contracts, and futures contracts
and related options. These are generally referred to as derivative
instruments, and involve special risk factors, which are described below. When
deemed appropriate by the Investment Manager, the Fund may invest cash
balances in repurchase agreements and other money market investments to
maintain liquidity in an amount to meet expenses or for day-to-day operating
purposes. These investment techniques are described below and under the
heading "Investment Objective and Policies" in the SAI.
When the Investment Manager believes that unusual 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 "Investment Techniques -- Temporary Investments."
The Fund invests for long-term growth of capital and does not emphasize
short-term trading profits. Accordingly, the Fund expects to have an annual
portfolio turnover rate not exceeding 50%. There can be no assurance that the
Fund's investment objective will be achieved.
INVESTMENT TECHNIQUES
The Fund is authorized to use the various 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 United States or any foreign country: debt
obligations issued or guaranteed by the U.S. Government or the governments of
foreign countries, their agencies or instrumentalities; short-term time
deposits with banks; repurchase agreements with banks and broker-dealers with
respect to U.S. Government obligations; and 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 the Investment Manager.
BORROWING. The Fund may borrow up to one-third of the value of its total
assets from banks to increase its holdings of portfolio securities. Under the
1940 Act, the Fund is required to maintain continuous asset coverage of 300%
with respect to such borrowings and to sell (within three days) sufficient
portfolio holdings to restore such coverage if it should decline to less than
300% due to market fluctuations or otherwise, even if such liquidations of the
Fund's holdings may be disadvantageous from an investment standpoint.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of portfolio securities on the Fund's net asset value,
and money borrowed will be subject to interest and other costs (which may
include commitment fees and/or the cost of maintaining minimum average
balances) which may or may not exceed the income received from the securities
purchased with borrowed funds.
5
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 for the purpose of offsetting operating expenses.
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. To increase its return or to hedge all or
a portion of its portfolio investments, the Fund may write (i.e., sell)
covered put and call options and purchase put and call options on securities
or securities indices that are traded on United States and foreign exchanges
or in the over-the-counter markets. An option on a security is a contract that
permits the purchaser of the option, in return for the premium paid, the right
to buy a specified security (in the case of a call option) or to sell a
specified security (in the case of a put option) from or to the writer of the
option at a designated price during the term of the option. An option on a
securities index permits the purchaser of the option, in return for the
premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of
the option. The Fund may write a call or put option only if the option is
"covered." This means that so long as the Fund is obligated as the writer of a
call option, it will own the underlying securities subject to the call, or
hold a call at the same or lower exercise price, for the same exercise period,
and on the same securities as the written call. A put is covered if the Fund
maintains liquid assets with a value equal to the exercise price in a
segregated account, or holds a put on the same underlying securities at an
equal or greater exercise price. The value of the underlying securities on
which options may be written at any one time will not exceed 15% of the total
assets of the Fund. The Fund will not purchase put or call options if the
aggregate premium paid for such options would exceed 5% of its total assets at
the time of purchase.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. The
Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to attempt to minimize the risk to the Fund from adverse changes
in the relationship between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. The Fund will 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 the Investment Manager 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 amount of
the former foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency. The second
investment practice is generally referred to as "cross-hedging." The Fund has
no specific limitation on the percentage of assets it may commit to forward
contracts, subject to its stated investment objective and policies, except
that the Fund will not enter into a forward contract if the amount of assets
set aside to cover forward contracts would impede portfolio management or the
Fund's ability to meet redemption requests. 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
6
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 purchased by the Fund are traded on U.S.
and foreign exchanges or over-the-counter.
FUTURES CONTRACTS. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock and bond index futures contracts, foreign
currency futures contracts and options on any of the foregoing. A financial
futures contract is an agreement between two parties to buy or sell a
specified debt security at a set price on a future date. An index futures
contract is an agreement to take or make delivery of an amount of cash based
on the difference between the value of the index at the beginning and at the
end of the contract period. A futures contract on a foreign currency is an
agreement to buy or sell a specified amount of a currency for a set price on a
future date.
When the Fund enters into a futures contract, it must make an initial
deposit, known as "initial margin," as a partial guarantee of its performance
under the contract. As the value of the security, index or currency
fluctuates, either party to the contract is required to make additional margin
payments, known as "variation margin," to cover any additional obligation it
may have under the contract. In addition, when the Fund enters into a futures
contract, it will segregate assets or "cover" its position in accordance with
the 1940 Act. See "Investment Objective and Policies -- Futures Contracts" in
the SAI. With respect to positions in futures and related options that do not
constitute "bona fide hedging" positions, the Fund will not enter into a
futures contract or related option contract if, immediately thereafter, the
aggregate initial margin deposits relating to such positions plus premiums
paid by it for open futures option positions, less the amount by which any
such options are "in-the-money," would exceed 5% of the Fund's total assets.
REPURCHASE AGREEMENTS. For temporary defensive purposes and for cash
management purposes, the Fund may, without limit, 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
and simultaneously agrees to resell the security back to the bank or broker-
dealer 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. The Fund may purchase sponsored or unsponsored American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global
Depositary Receipts ("GDRs") (collectively, "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 United
States. 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.
7
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest up to 15% of its
total assets in illiquid securities, for which there is a limited trading
market and for which a low trading volume of a particular security may result
in abrupt and erratic price movements. The Fund may be unable to dispose of
its holdings in illiquid securities at then-current market prices and may have
to dispose of such securities over extended periods of time. The Fund may also
invest in securities that are sold (i) in private placement transactions
between their issuers and their purchasers and that are neither listed on an
exchange nor traded over-the-counter, or (ii) in transactions between
qualified institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended. Such restricted securities are subject to contractual or
legal restrictions on subsequent transfer. As a result of the absence of a
public trading market, such restricted securities may in turn be less liquid
and more difficult to value than publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized from the sales could, due to illiquidity, be less than those
originally paid by the Fund or less than their fair value. In addition,
issuers whose securities are not publicly traded may not be subject to the
disclosure and other investor protection requirements that may be applicable
if their securities were publicly traded. If any privately placed or Rule 144A
securities held by the Fund are required to be registered under the securities
laws of one or more jurisdictions before being resold, the Fund may be
required to bear the expenses of registration. The Fund will limit its
investment in restricted securities other than Rule 144A securities to 10% of
its total assets, and will limit its investment in all restricted securities,
including Rule 144A securities, to 15% of its total assets. Restricted
securities, other than Rule 144A securities determined by the Board of
Trustees to be liquid, are considered to be illiquid and are subject to the
Fund's limitation on investment in illiquid securities.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund, nor
can there be any assurance that the Fund's investment objective will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Fund can decrease as well as increase, depending on a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions and market
factors. In addition to the factors which affect the value of individual
securities, a Shareholder may anticipate that the value of Fund Shares will
fluctuate with movements in the broader equity and bond markets. A decline in
the stock market of any country in which the Fund is invested may also be
reflected in declines in the price of the Shares of the Fund. History reflects
both decreases and increases in worldwide stock markets and currency
valuations, and these may reoccur unpredictably in the future. The value of
debt securities held by the Fund generally will vary inversely with changes in
prevailing interest rates. Additionally, investment decisions made by the
Investment Manager will not always be profitable or prove to have been
correct. The Fund is not intended as a complete investment program.
INVESTMENT IN JAPANESE ISSUERS. Like other stock markets, the Japanese stock
market can be volatile. For example, the Japanese stock market, as measured by
the Nikkei Stock Average, increased by over 500% during the ten-year period
ended December 31, 1989, reaching its high of 38,915.87 on December 18, 1989,
and it has declined by over 50% since that time, falling to 16,505.67 on June
13, 1995. This decline has had an adverse effect on the availability of credit
and on the value of the substantial stock holdings of Japanese companies, in
particular, Japanese banks, insurance companies and other financial
institutions. This in turn has contributed to the recent weakness in Japan's
economy. A continuance or recurrence of a Japanese stock market decline could
have an adverse impact throughout Japan's economy.
Japan has had problems with certain of its trading partners, particularly
the United States, to whom it sells significantly more than it buys in return.
Even the dramatic appreciation of the yen relative to the dollar -- from (Yen)
239 to approximately (Yen) 87 per dollar between September 1985 and July
1995 -- has not altered the trade imbalance with the United States. However,
Japan is taking steps to stimulate domestic demand through tax deductions,
increased spending on construction and redevelopment, and easing of the
discount rate. Efforts are underway, in particular, to open up Japanese
markets to more U.S. products. Internally, certain commentators have
8
pointed to Japan's rapidly aging population, an outdated retail and
distribution system, a rigid education system, and a decrease in the work
ethic among Japanese youth as potential sources of future economic
difficulties. Three substantial economic stimulus programs were put into place
in 1993 and in 1994 a personal income tax cut of considerable magnitude was
announced. Additionally, private companies are successfully making a global
diversification of their production facilities to cope with the yen
appreciation against the U.S. dollar.
The common stocks of many Japanese companies continue to trade at high
price-earnings ratios even after the recent market decline. Differences in
accounting methods make it difficult to compare the earnings of Japanese
companies with those of companies in other countries, especially the United
States. In general, however, reported net income in Japan is understated
relative to U.S. accounting standards and this is one reason why price-
earnings ratios of the stocks of Japanese companies have tended historically
to be higher than those for U.S. stocks. In addition, Japanese companies have
tended historically to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the United States.
FOREIGN INVESTMENTS. Up to 20% of the Fund's total assets may be invested in
securities of non-Japanese issuers, including issuers in underdeveloped
countries. Investors should consider carefully the substantial risks involved
in investing in securities issued by companies and governments of foreign
nations, including Japan, which are in addition to the usual risks inherent in
domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in 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. Some countries may withhold portions
of interest and dividends at the source. In addition, in many countries there
is less publicly available information about issuers than is available in
reports about companies in the United States. Foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards, and auditing practices and requirements may not be comparable to
those applicable to United States companies. Further, the Fund may encounter
difficulties or be unable to vote proxies, exercise shareholder rights, pursue
legal remedies, and obtain judgments in foreign courts.
Commission rates in foreign countries, which are sometimes fixed rather than
subject to negotiation as in the United States, are likely to be higher.
Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is
earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to subsequent declines
in value of the portfolio security or, if the Fund has entered into a contract
to sell the security, could result in possible liability to the purchaser. In
many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States. There is an increased risk, therefore, of uninsured
loss due to lost, stolen, or counterfeit stock certificates. In addition, the
foreign securities markets of 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 United States. As an open-end investment company,
the Fund is limited in the extent to which it may invest in illiquid
securities. The Tokyo Stock Exchange has a large volume of trading and the
Investment Manager believes that securities of companies traded in Japan are
generally as liquid as securities of comparable U.S. companies.
Prior governmental approval of foreign investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations.
9
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.
EMERGING GROWTH COMPANIES. The Fund has established no criteria regarding
the minimum market capitalization of the companies in which it may invest.
While they may offer greater opportunities for capital appreciation than
larger, more established companies, investments in smaller, emerging growth
companies may involve greater risks and thus may be considered speculative.
For example, small companies may have limited product lines, markets or
financial and management resources. In addition, many small emerging growth
company stocks trade less frequently and in smaller volume, and may be subject
to more abrupt or erratic price movements, than stocks of large companies. The
securities of small emerging growth companies may also be more sensitive to
market changes than the securities of large companies.
HIGH-RISK DEBT SECURITIES. The Fund is authorized to invest in debt
securities rated in any category by S&P or Moody's and securities which are
unrated by any rating agency. See "Investment Objective and Policies -- Debt
Securities" in the SAI. As an operating policy, which may be changed by the
Board of Trustees 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 of Trustees 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
"Investment Objectives and Policies--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 referred to as "junk bonds," are
regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation and may be in default. Unrated debt securities are not
necessarily of lower quality than rated securities, but they may not be
attractive to as many buyers. Regardless of rating levels, all debt securities
considered for purchase (whether rated or unrated) will be carefully analyzed
by the Investment Manager to insure, to the extent possible, that the planned
investment is sound. The Fund may, from time to time, invest up to 5% of its
total assets in defaulted debt securities if, in the opinion of the Investment
Manager, the issuer may resume interest payments in the near future.
LEVERAGE. Leveraging by means of borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities on the Fund's net
asset value, and money borrowed will be subject to interest and other costs
(which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the income received from the
securities purchased with borrowed funds.
FUTURES CONTRACTS AND RELATED OPTIONS. Successful use of futures contracts
and related options is subject to special risk considerations. A liquid
secondary market for any futures or options contract may not be available when
a futures or options position is sought to be closed. In addition, there may
be an imperfect correlation between movements in the securities or foreign
currency on which the futures or options contract is based and movements in
the securities or currency in the Fund's portfolio. Successful use of futures
or options contracts is further dependent on the Investment Manager's ability
to correctly predict movements in the securities or foreign currency markets,
and no assurance can be given that its judgment will be correct. Successful
use of options on securities or securities indices is subject to similar risk
considerations. The Fund has the authority to purchase over-the-counter
options, which are generally less liquid than exchange traded options. 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.
10
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased at the Offering Price through any broker
which has a dealer agreement with Franklin Templeton Distributors, Inc.
("FTD"), the Principal Underwriter for Shares of the Fund, or directly from
FTD upon receipt by FTD of a completed Shareholder Application and check. The
minimum initial investment is $100, and subsequent investments must be $25 or
more. These minimums may be waived when the Shares are being purchased through
retirement plans providing for regular periodic investments, as described
below under "Retirement Plans."
OFFERING PRICE. Shares of the Fund are offered at their public Offering
Price, which is determined by adding the net asset value per Share plus a
front-end sales charge, next computed (i) after the Shareholder's securities
dealer receives the order which is promptly transmitted to the Fund, or
(ii) after receipt of an order by mail from the Shareholder directly in proper
form (which generally means a completed Shareholder Application accompanied by
a negotiable check).
The price to the public on purchases of the Fund's Shares made at one time
by a single purchaser, by an individual, his or her spouse and their children
under age 21, or by a single trust or fiduciary account other than an employee
benefit plan holding Shares of the Fund on or before February 1, 1995, is the
net asset value per Share plus a sales charge not exceeding 5.75% of the
Offering Price (equivalent to 6.10% of the net asset value), which is reduced
on larger sales as shown below:
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
-----------------------------------
AS A PERCENTAGE AS A PERCENTAGE PORTION OF TOTAL
OF OFFERING OF NET ASSET OFFERING PRICE
AMOUNT OF SALE AT PRICE OF THE VALUE OF THE RETAINED BY
OFFERING PRICE SHARES PURCHASED SHARES PURCHASED DEALERS/1/, /3/
- ----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Less than $50,000..................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000........ 4.50% 4.71% 3.75%
$100,000 but less than $250,000....... 3.50% 3.63% 2.80%
$250,000 but less than $500,000....... 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000..... 2.00% 2.04% 1.60%
$1,000,000 or more.................... none none (see below)/2/
</TABLE>
- -------
1 Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
2 The following commissions will be paid by FTD, from its own resources, to
securities dealers who initiate and are responsible for purchases of $1
million or more: 1% on sales of $1 million but less than $2 million, plus
0.80% on sales of $2 million but less than $3 million, plus 0.50% on sales
of $3 million but less than $50 million, plus 0.25% on sales of $50 million
but less than $100 million, plus 0.15% on sales of $100 million or more.
Dealer concession breakpoints are reset every 12 months for purposes of
additional purchases.
3 At the discretion of FTD, all sales charges may at times be reallowed to the
securities dealer. If 90% or more of the sales commission is reallowed, such
securities dealer may be deemed to be an underwriter as that term is defined
in the Securities Act of 1933.
No front-end sales charge applies on investments of $1 million or more, but
a contingent deferred sales charge of 1% is imposed on certain redemptions of
all or a portion of investments of $1 million or more within 12 months of the
calendar month following such investments ("contingency period"). See "How to
Sell Shares of the Fund--Contingent Deferred Sales Charge."
11
The size of a transaction which determines the applicable sales charge on
the purchase of Fund Shares is determined by adding the amount of the
Shareholder's current purchase plus the cost or current value (whichever is
higher) of a Shareholder's existing investment in one or more of the funds in
the Franklin Group of Funds (R) and the Templeton Family of Funds. Included
for these aggregation purposes are (i) the mutual funds in the Franklin Group
of Funds(R) except Franklin Valuemark Funds and Franklin Government Securities
Trust (the "Franklin Funds"); (ii) other investment products underwritten by
FTD or its affiliates (although certain investments may not have the same
schedule of sales charges and/or may not be subject to reduction); and (iii)
the U.S.-registered mutual funds in the Templeton Family of Funds except
Templeton Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund and
Templeton Variable Products Series Fund (the "Templeton Funds"). (Franklin
Funds and Templeton Funds are collectively referred to as the "Franklin
Templeton Funds.") Sales charge reductions based upon aggregate holdings of
(i), (ii) and (iii) above ("Franklin Templeton Investments") may be effective
only after notification to FTD that the investment qualifies for a discount.
Other Payments to Securities Dealers. FTD, or one of its affiliates, may
make payments, from its own resources, of up to 1% of the amount purchased to
securities dealers who initiate and are responsible for purchases made at net
asset value by certain designated retirement plans (as defined below)
(excluding IRA and IRA rollovers), certain non-designated plans (as defined
below), certain trust companies and trust departments of banks and certain
retirement plans of organizations with collective retirement plan assets of
$10 million or more. See definitions under "Description of Special Net Asset
Value Purchases" below, and as set forth in the SAI.
A sales charge of 4% of the Offering Price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan account which is a Shareholder in the Fund on or before
February 1, 1995. Of the 4% sales commission applicable to such purchases,
3.20% of the Offering Price will be retained by dealers.
Cumulative Quantity Discount. The schedule of reduced sales charges also may
be applied to qualifying sales on a cumulative basis. For this purpose, the
dollar amount of the sale is added to the higher of (i) the value (calculated
at the applicable Offering Price) or (ii) the purchase price, of Franklin
Templeton Investments. The cumulative quantity discount applies to Franklin
Templeton Investments owned at the time of purchase by the purchaser, his or
her spouse, and their children under age 21 and grandchildren under 21. In
addition, the aggregate investments of a trustee or other fiduciary account
(for an account under exclusive investment authority) may be considered in
determining whether a reduced sales charge is available, even though there may
be a number of beneficiaries of the account. For example, if the investor held
Shares valued at $40,000 (or, if valued at less than $40,000, had been
purchased for $40,000) and purchased an additional $20,000 of the Fund's
Shares, the sales charge for the $20,000 purchase would be at the rate of
4.50%. It is FTD's policy to give investors the best sales charge rate
possible; however, there can be no assurance that an investor will receive the
appropriate discount unless, at the time of placing the purchase order, the
investor or the dealer makes a request for the discount and gives FTD
sufficient information to determine whether the purchase will qualify for the
discount. On telephone orders from dealers for the purchase of Shares to be
registered in "street name," FTD will accept the dealer's instructions with
respect to the applicable sales charge rate to be applied. The cumulative
quantity discount may be amended or terminated at any time.
Letter of Intent. Investors may also reduce sales charges on all investments
by means of a Letter of Intent ("LOI") which expresses the investor's
intention to invest a certain amount within a 13-month period in Shares of the
Fund or any Franklin Templeton Fund. See the Shareholder Application. Except
for certain employee benefit plans, the minimum initial investment under an
LOI is 5% of the total LOI amount. Except for Shares purchased by certain
employee benefit plans, Shares purchased with the first 5% of such amount will
be held in escrow to secure payment of the higher sales charge applicable to
the Shares actually purchased if the full amount indicated is not purchased,
and such escrowed Shares will be involuntarily redeemed to pay the additional
sales charge, if necessary. A purchase not originally made pursuant to an LOI
may be included under a subsequent LOI executed within 90 days of the
purchase. Any redemptions made by Shareholders, other than by certain employee
benefit plans, during the 13-month period will be subtracted from the amount
of the purchases for purposes of determining whether the terms of the LOI have
been completed. For a further description of the LOI, see "Purchase,
Redemption and Pricing of Shares--Letter of Intent" in the SAI.
12
Group Purchases. An individual who is a member of a qualified group may also
purchase Shares of the Fund at the reduced sales charge applicable to the
group as a whole. The sales charge is based upon the aggregate dollar value of
Shares previously purchased and still owned by the group, plus the amount of
the current purchase. For example, if members of the group had previously
invested and still held $80,000 of Fund Shares and now were investing $25,000,
the sales charge would be 3.50%. Information concerning the current sales
charge applicable to a group may be obtained by contacting FTD.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares at a discount, and
(iii) satisfies uniform criteria which enable FTD to realize economies of
scale in its costs of distributing Shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or FTD and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to FTD, and must seek to arrange for payroll
deduction or other bulk transmission of investments to the Fund.
If an investor selects a payroll deduction plan, subsequent investments will
be automatic and will continue until such time as the investor notifies the
Fund and the investor's employer to discontinue further investments. Due to
the varying procedures to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and the time the money reaches the Fund. The investment in the Fund
will be made at the Offering Price per Share determined on the day that both
the check and payroll deduction data are received in required form by the
Fund.
NET ASSET VALUE PURCHASES. Shares may be purchased without the imposition of
either a front-end sales charge ("net asset value") or a contingent deferred
sales charge by (i) officers, trustees, directors, and full-time employees of
the Funds, any of the Franklin Templeton Funds, or of Franklin Resources, Inc.
and its subsidiaries (the "Franklin Templeton Group"), and their spouses and
family members, including any subsequent payments made by such parties after
cessation of employment; (ii) companies exchanging Shares with or selling
assets pursuant to a merger, acquisition or exchange offer; (iii) insurance
company separate accounts for pension plan contracts; (iv) accounts managed by
the Franklin Templeton Group; (v) shareholders of Templeton Institutional
Funds, Inc. reinvesting redemption proceeds from that fund under an employee
benefit plan qualified under Section 401 of the Internal Revenue Code of 1986,
as amended (the "Code"), in Shares of the Fund; (vi) certain unit investment
trusts and unit holders of such trusts reinvesting their distributions from
the trusts in the Fund; (vii) registered securities dealers and their
affiliates, for their investment account only; and (viii) registered personnel
and employees of securities dealers, and their spouses and family members, in
accordance with the internal policies and procedures of the employing
securities dealer.
Shares of the Fund may be purchased at net asset value with the proceeds
from (i) a redemption of Shares of the Fund or Class I shares of any other
Franklin Templeton Fund which were purchased with an initial sales charge or
assessed a contingent deferred sales charge on redemption, or (ii) a dividend
or distribution paid by any of the Franklin Templeton Funds, within 365 days
after the date of the redemption or dividend or distribution. See "How to Sell
Shares of the Fund--Reinstatement Privilege."
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by investors who have, within the past 60
days, redeemed an investment in a mutual fund which is not part of the
Franklin Templeton Funds and which was subject to a front-end sales charge or
a contingent deferred sales charge, and which has investment objectives
similar to those of the Fund.
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by broker-dealers who have entered into a
supplemental agreement with FTD, or by registered investment advisers
affiliated with such broker-dealers, on behalf of their clients who are
participating in a comprehensive fee program (also known as a wrap fee
program).
13
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by anyone who has taken a distribution from
an existing retirement plan already invested in the Franklin Templeton Funds
(including former participants of the Franklin Templeton Profit Sharing 401(k)
plan), to the extent of such distribution. In order to exercise this
privilege, a written order for the purchase of Shares of the Fund must be
received by Franklin Templeton Trust Company ("FTTC"), the Funds, or Franklin
Templeton Investor Services, Inc. (the "Transfer Agent") within 365 days after
the plan distribution.
Shares may also be purchased at net asset value and without the imposition
of a contingent deferred sales charge by any state, county or city, or any
instrumentality, department, authority or agency thereof which has determined
that the Fund is a legally permissible investment and which is prohibited by
applicable investment laws from paying a sales charge or commission in
connection with the purchase of shares of any registered management investment
company ("an eligible governmental authority"). SUCH INVESTORS SHOULD CONSULT
THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER AND TO WHAT EXTENT THE SHARES OF
THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM. Municipal investors
considering investment of proceeds of bond offerings into the Fund should
consult with expert counsel to determine the effect, if any, of various
payments made by the Fund or their investment manager on arbitrage rebate
calculations. If an investment by an eligible governmental authority at net
asset value is made through a securities dealer who has executed a dealer
agreement with FTD, FTD or one of its affiliates may make a payment, out of
its own resources, to such securities dealer in an amount not to exceed 0.25%
of the amount invested. Contact Franklin Templeton Institutional Services for
additional information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES. Shares may also be
purchased at net asset value and without the imposition of a contingent
deferred sales charge by certain designated retirement plans, including,
profit-sharing, pension, 401(k) and simplified employee pension plans
("designated plans"), subject to minimum requirements with respect to number
of employees or amount of purchase, which may be established by FTD.
Currently, those criteria require that the employer establishing the plan have
200 or more employees or that the amount invested or to be invested during the
subsequent 13-month period in the Fund or in any of the Franklin Templeton
Investments totals at least $1 million. Employee benefit plans not designated
above or qualified under Section 401 of the Code ("non-designated plans") may
be afforded the same privilege if they meet the above requirements as well as
the uniform criteria for qualified groups previously described under "Group
Purchases," which enable FTD to realize economies of scale in its sales
efforts and sales-related expenses.
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by trust companies and bank trust departments
for funds over which they exercise exclusive discretionary investment
authority and which are held in a fiduciary, agency, advisory, custodial or
similar capacity. Such purchases are subject to minimum requirements with
respect to amount of purchase, which may be established by FTD. Currently,
those criteria require that the amount invested or to be invested during the
subsequent 13-month period in the Fund or any of the Franklin Templeton
Investments must total at least $1 million. Orders for such accounts will be
accepted by mail accompanied by a check or by telephone or other means of
electronic data transfer directly from the bank or trust company, with payment
by federal funds received by the close of business on the next business day
following such order.
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by trustees or other fiduciaries purchasing
securities for certain retirement plans of organizations with collective
retirement plan assets of $10 million or more, without regard to where such
assets are currently invested.
Refer to the SAI for further information regarding net asset value purchases
of Shares.
ADDITIONAL DEALER COMPENSATION. FTD, or one of its affiliates, from its own
resources, may also provide additional compensation to securities dealers in
connection with sales of shares of the Franklin Templeton Funds. Compensation
may include financial assistance to securities dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising, sales campaigns and/or shareholder services and programs
regarding one or more of the Franklin Templeton Funds and other dealer-
14
sponsored programs or events. In some instances, this compensation may be made
available only to certain securities dealers whose representatives have sold
or are expected to sell significant amounts of shares of the Franklin
Templeton Funds. Compensation may include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited
registered representatives and members of their families to locations within
or outside of the United States for meetings or seminars of a business nature.
Securities dealers may not use sales of the Fund's Shares to qualify for this
compensation to the extent such may be prohibited by the laws of any state or
any self-regulatory agency, such as the National Association of Securities
Dealers, Inc. In addition, FTD or its affiliates may make ongoing payments to
brokerage firms, financial institutions (including banks) and others to
facilitate the administration and servicing of shareholder accounts. None of
the aforementioned additional compensation is paid for by the Fund or its
Shareholders.
Ongoing payments will be made to qualifying dealers at the annual rate of
0.25% of the average daily net asset value of Shares registered in the name of
that broker-dealer as nominee or held in a Shareholder account that designates
that broker-dealer as dealer of record. These payments are made in order to
promote selling efforts and to compensate dealers for providing certain
services, including processing purchase and redemption transactions,
establishing Shareholder accounts and providing certain information and
assistance with respect to the Fund. For purchases of Shares that are subject
to a contingent deferred sales charge, the dealer will receive ongoing
payments beginning in the thirteenth month after the date of the purchase.
PURCHASING FUND SHARES. As to telephone orders placed with FTD by dealers,
the dealer must receive the investor's order before the close of the New York
Stock Exchange ("NYSE") and transmit it to FTD by 5:00 p.m., New York time,
for the investor to receive that day's Offering Price. Payment for such orders
must be by check in U.S. currency and must be promptly submitted to FTD.
Orders mailed to FTD by dealers or individual investors are effected at the
net asset value of the Fund's Shares next computed after the purchase order
accompanied by payment has been received by FTD. Such payment must be by check
in U.S. currency drawn on a commercial bank in the U.S. and, if over $100,000,
may not be deemed to have been received until the proceeds have been collected
unless the check is certified or issued by such bank. Any subscription may be
rejected by FTD or by the Fund.
The Fund may impose a $10 charge against a Shareholder account in the event
that a check or draft submitted for the purchase of Fund Shares is returned
unpaid to the Fund.
Investors should promptly check the confirmation advice that is mailed after
each purchase (or redemption) order to insure that it has been accurately
reflected in the investor's account.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received at least 10 days prior to the collection date,
or by FTD upon written notice to the investor at least 30 days prior to the
collection date.
INSTITUTIONAL ACCOUNTS. Institutional investors will likely be required to
complete an institutional account application. There may be additional methods
of opening accounts, purchasing, redeeming or exchanging Shares of the Fund
available for institutional accounts. To obtain an institutional account
application or additional information regarding institutional accounts,
contact Franklin Templeton Institutional Services at 1-800-321-8563.
ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on
regular confirmation statements from the Transfer Agent.
TEMPLETON STAR SERVICE. From a touch-tone phone, Templeton and Franklin
shareholders may access an automated system (day or night) which offers the
following features:
15
By calling the Templeton STAR Service, shareholders may obtain current price
and yield information specific to a Templeton Fund, regardless of class, or
Franklin Class II shares; obtain account information; and request duplicate
confirmation or year-end statements and money fund checks, if applicable.
By calling the Franklin TeleFACTS system, shareholders may obtain current
price, yield or other performance information specific to a Franklin Fund;
process an exchange into an identically registered Franklin account; obtain
account information; and request duplicate confirmation or year-end
statements, money fund checks, if applicable, and deposit slips.
Share prices and account information specific to Templeton Class I or II
shares and Franklin Class II shares may also be accessed on TeleFACTS by
Franklin Class I and Class II shareholders.
The Templeton STAR Service is accessible by calling 1-800-654-0123. The
TeleFACTS system is accessible by calling 1-800-247-1753. The code for the
Fund, which will be needed to access system information, is 417. The system's
automated operator will prompt the caller with easy to follow step-by-step
instructions from the main menu. Other features may be added in the future.
RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which FTTC or its affiliate
acts as trustee or custodian: IRAs, Simplified Employee Pensions, 403(b)
plans, qualified plans for corporations, self-employed individuals and
partnerships, and 401(k) plans. A plan document must be adopted in order for a
retirement plan to be in existence. For further information about any of the
plans, agreements, applications and annual fees, contact Franklin Templeton
Distributors, Inc. To determine which retirement plan is appropriate, an
investor should contact his or her tax adviser.
NET ASSET VALUE. The net asset value per Share is determined as of the
scheduled closing time of the NYSE (generally 4:00 p.m., New York time) each
day the NYSE is open for trading, by dividing the value of the Fund's
securities plus any cash and other assets (including accrued interest and
dividends receivable) less all liabilities (including accrued expenses) by the
number of Shares outstanding, adjusted to the nearest whole cent. A security
listed or traded on a recognized stock exchange or NASDAQ is valued at its
last sale price on the principal exchange on which the security is traded. The
value of a foreign security is determined in its national currency as of the
close of trading on the foreign exchange on which it is traded, or as of the
scheduled closing time of the NYSE (generally 4:00 p.m., New York time), if
that is earlier, and that value is then converted into its U.S. dollar
equivalent at the foreign exchange rate in effect at noon, New York time, on
the day the value of the foreign security is determined. If no sale is
reported at that time, the mean between the current bid and asked price is
used. Occasionally, events which affect the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the NYSE, and will therefore not be reflected in the computation
of the Fund's net asset value. If events materially affecting the value of
such securities occur during such period, then these securities will be valued
at fair value as determined by the management and approved in good faith by
the Board of Trustees. All other securities for which over-the-counter market
quotations are readily available are valued at the mean between the current
bid and asked price. Securities for which market quotations are not readily
available and other assets are valued at fair value as determined by the
management and approved in good faith by the Board of Trustees.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares for Class I shares of other Franklin
Templeton Funds which are eligible for sale in the Shareholder's state of
residence and in conformity with such fund's stated eligibility requirements
and investment minimums. Shares may not be exchanged for Class II shares of
any Franklin Templeton Funds. A contingent deferred sales charge will not be
imposed on exchanges. If the exchanged Shares were subject to a contingent
deferred sales charge in the original fund purchased, and Shares are
subsequently redeemed within 12 months following the calendar month following
the original purchase date, a contingent deferred sales charge will be
imposed. See also "How to Sell Shares of the Funds--Contingent Deferred Sales
Charge."
16
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. Exchanges are made on
the basis of the net asset values of the shares involved, except as set forth
below. Exchanges of shares which were originally purchased without a sales
charge will be charged a sales charge in accordance with the terms of the
prospectus of the fund being purchased, unless the original investment on
which no sales charge was paid was transferred in from a fund on which the
investor paid a sales charge. Exchanges of shares from the Franklin Templeton
Money Funds are subject to applicable sales charges on the funds being
purchased, unless the Franklin Templeton Money Fund shares were acquired by an
exchange from a fund having a sales charge, or by reinvestment of dividends or
capital gain distributions. Exchanges of Shares of the Fund which were
purchased with a lower sales charge to a fund which has a higher sales charge
will be charged the difference, unless the shares were held in the original
fund for at least six months prior to executing the exchange. All exchanges
are permitted only after at least 15 days have elapsed from the date of the
purchase of the Shares to be exchanged.
A Shareholder may exchange Shares by writing to the Transfer Agent (see "How
to Sell Shares of the Fund"), by contacting his or her investment dealer or--
if the Shareholder Application indicates that the Shareholder has not declined
the option--by telephoning 1-800-632-2301. Telephone exchange instructions
must be received by FTD by the scheduled closing time of the NYSE (generally
4:00 p.m., New York time). Telephonic exchanges can involve only Shares in
non-certificated form. Shares held in certificate form are not eligible, but
may be returned and qualify for these services. All accounts involved in a
telephonic exchange must have the same registration and dividend option as the
account from which the Shares are being exchanged. The Trust and the Transfer
Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Please refer to "Telephone
Transactions--Verification Procedures." Forms for declining the telephone
exchange privilege and prospectuses of the other funds in the Franklin
Templeton Group may be obtained from FTD. Exchange redemptions and purchases
are processed simultaneously at the Share prices next determined after the
exchange order is received. (See "How to Buy Shares of the Fund--Offering
Price.") A gain or loss for tax purposes generally will be realized upon the
exchange, depending on the tax basis of the Shares redeemed.
This exchange privilege is available only in states where shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon 60 days' written notice. A Shareholder who wishes
to make an exchange should first obtain and review a current prospectus of the
fund into which he or she wishes to exchange. Broker-dealers who process
exchange orders on behalf of their customers may charge a fee for their
services. Such fee may be avoided by making requests for exchange directly to
the Transfer Agent.
If a substantial portion of the Fund's Shareholders should, within a short
period, elect to redeem their shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Fund to initially invest this money in short-term, interest-bearing money
market instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objectives exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
The contingency period of Shares will be tolled (or stopped) for the period
such Shares are exchanged into and held in a Class I Franklin or Templeton
money market fund. If an account has Shares subject to a contingent deferred
sales charge, Shares will be exchanged into the new account on a "first-in,
first-out" basis. See also "How to Sell Shares of the Funds--Contingent
Deferred Sales Charge."
TRANSFERS. Transfers between identically registered accounts in the same
fund and class are treated as non-monetary and non-taxable events, and are not
subject to a contingent deferred sales charge. The transferred Shares will
continue to age from the date of original purchase.
17
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ("Timing Accounts"), FTD will deduct an administrative service fee of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase Shares based upon certain predetermined market
indicators. In accordance with the terms of their respective prospectuses,
certain funds in the Franklin Templeton Group do not accept or may place
differing limitations than those described below on exchanges by Timing
Accounts.
The Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern who:
(i) makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund; (ii) makes more than two exchanges out of
the Fund per calendar quarter; or (iii) exchanges Shares equal in value to at
least $5 million, or more than 1% of the Fund's net assets. Accounts under
common ownership or control, including accounts administered so as to redeem
or purchase Shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
In addition, the Fund reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to the Fund and therefore may be refused.
Finally, as indicated above, the Fund and FTD reserve the right to refuse
any order for the purchase of Shares.
HOW TO SELL SHARES OF THE FUND
Shares will be redeemed, without charge, on request of the Shareholder in
"Proper Order" to the Transfer Agent. "PROPER ORDER" MEANS THAT THE REQUEST TO
REDEEM MUST MEET ALL OF THE FOLLOWING REQUIREMENTS:
1. Except as provided below under "Redemptions by Telephone," it must be in
writing, signed by the Shareholder(s) exactly in the manner as the Shares are
registered, and must specify either the number of Shares, or the dollar amount
of Shares, to be redeemed and sent to Franklin Templeton Investor Services,
Inc., P.O. Box 33030, St. Petersburg, Florida 33733-8030;
2. The signature(s) of the redeeming Shareholder(s) must be guaranteed by an
"eligible guarantor," including (a) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (b) national securities
exchanges, registered securities associations and clearing agencies; (c)
securities broker-dealers which are members of a national securities exchange
or a clearing agency or which have minimum net capital of $100,000; or (d)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature medallion program. A notarized
signature will not be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature of each of the
redeeming Shareholders must be guaranteed. A signature guarantee is not
required for redemptions of $50,000 or less, requested by and payable to all
Shareholders of record, to be sent to the address of record for that account.
However, the Fund reserves the right to require signature guarantees on all
redemptions. A signature guarantee is required in connection with any written
request for transfer of Shares. Also, a signature guarantee is required if the
Fund or the Transfer Agent believes that a signature guarantee would protect
against potential claims based on the transfer instructions, including, for
example, when (i) the current address of one or more joint owners of an
account cannot be confirmed, (ii) multiple owners have a dispute or give
inconsistent instructions to the Fund, (iii) the Fund has been notified of an
adverse claim, (iv) the instructions received by the Fund are given by an
agent, not the actual registered owner, (v) the Fund determines that joint
owners who are married to each other are separated or may be the subject
18
of divorce proceedings, or (vi) the authority of a representative of a
corporation, partnership, association, or other entity has not been
established to the satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
. Corporation -- (i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
. Partnership -- (i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
. Trust -- (i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust
document listing the trustee(s) or a certificate of incumbency if the
trustee(s) are not listed on the account registration;
. Custodial (other than a retirement account) -- Signature guaranteed
letter of instruction from the custodian; and
. Accounts under court jurisdiction -- Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence; and
5. Redemption of Shares held in a retirement plan for which FTTC or its
affiliate acts as trustee or custodian must conform to the distribution
requirements of the plan and the Fund's redemption requirements above.
Distributions from such plans are subject to additional requirements under the
Code, and certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. For example, distributions from
retirement plans are subject to withholding requirements under the Code, and
the IRS Form W-4P (available from the Transfer Agent) may be required to be
submitted to the Transfer Agent with the distribution request, or the
distribution will be delayed. Franklin Templeton Investor Services, Inc. and
its affiliates assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws and will not be responsible
for any penalties assessed.
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Shareholder Services Department by
calling 1-800-632-2301 or 813-823-8712.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer
Agent. A gain or loss for tax purposes generally will be realized upon the
redemption, depending on the tax basis of the Shares redeemed. Payment of the
redemption price ordinarily will be made by check (or by wire at the sole
discretion of the Transfer Agent if wire transfer is requested, including name
and address of the bank and the Shareholder's account number to which payment
of the redemption proceeds is to be wired) within seven days after receipt of
the redemption request in Proper Order. However, if Shares have been purchased
by check, the Fund will make redemption proceeds available when a
Shareholder's check received for the Shares purchased has been cleared for
payment by the Shareholder's bank, which, depending upon the location of the
Shareholder's bank, could take up to 15 days or more. The check will be mailed
by first-class mail to the Shareholder's registered address (or as otherwise
directed). Remittance by wire (to a commercial bank account in the same
name(s) as the Shares are registered) or express mail, if requested, are
subject to a handling charge of up to $15, which will be deducted from the
redemption proceeds.
The Fund, through FTD, also repurchases Shares (whether in certificate or
book-entry form) through securities dealers. The Fund normally will accept
orders to repurchase such Shares by wire or telephone from dealers for their
customers at the net asset value next computed after the dealer has received
the certificate holder's request for repurchase, if the dealer received such
request before closing time of the NYSE on that day. Dealers have the
responsibility of submitting such repurchase requests by calling not later
than 5:00 p.m.,
19
New York time, on such day in order to obtain that day's applicable redemption
price. Repurchase of Shares is for the convenience of Shareholders and does
not involve a charge by the Fund; however, securities dealers may impose a
charge on the Shareholder for transmitting the notice of repurchase to the
Fund. The Fund reserves the right to reject any order for repurchase, which
right of rejection might adversely affect Shareholders seeking redemption
through the repurchase procedure. Ordinarily, payment will be made to the
securities dealer within seven days after receipt of a repurchase order and
Share certificate (if any) in "Proper Order" as set forth above. The Fund also
will accept, from member firms of the NYSE, orders to repurchase Shares for
which no certificates have been issued by wire or telephone without a
redemption request signed by the Shareholder, provided the member firm
indemnifies the Fund and FTD from any liability resulting from the absence of
the Shareholder's signature. Forms for such indemnity agreement can be
obtained from FTD.
The Fund may involuntarily redeem an investor's Shares if the net asset
value of such Shares is less than $100, except that involuntary redemptions
will not result from fluctuations in the value of an investor's Shares. In
addition, the Fund may involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
such other tax-related certifications as the Fund may require. A notice of
redemption, sent by first-class mail to the investor's address of record, will
fix a date not less than 30 days after the mailing date, and Shares will be
redeemed at net asset value at the close of business on that date, unless
sufficient additional Shares are purchased to bring the aggregate account
value up to $100 or more, or unless a certified taxpayer identification number
(or such other information as the Fund has requested) has been provided, as
the case may be. A check for the redemption proceeds will be mailed to the
investor at the address of record.
REINSTATEMENT PRIVILEGE. Shares of the Fund may be purchased at net asset
value with the proceeds from (i) a redemption of Shares of the Fund or Class I
shares of any other Franklin Templeton Fund which were purchased with an
initial sales charge or assessed a contingent deferred sales charge on
redemption, or (ii) a dividend or distribution paid by any of the Franklin
Templeton Funds, within 365 days after the date of the dividend or
distribution. However, if a Shareholder's original investment was in a Fund
with a lower sales charge, or no sales charge, the Shareholder must pay the
difference. An investor may reinvest an amount not exceeding the proceeds of
the redemption or the dividend or distribution. While credit will be given for
any contingent deferred sales charge paid on the Shares redeemed, a new
contingency period will begin. Matured Shares will be reinvested at net asset
value and will not be subject to a new contingent deferred sales charge.
Shares of the Fund redeemed in connection with an exchange into another fund
(see "Exchange Privilege") are not considered redeemed for this privilege. In
order to exercise this privilege, a written order for the purchase of Shares
of the Fund must be received by the Fund or the Fund's Transfer Agent within
365 days after the redemption or the payment date of the distribution. The 365
days, however, do not begin to run on redemption proceeds placed immediately
after redemption in a Franklin Bank Certificate of Deposit ("CD") until the CD
(including any rollover) matures. Reinvestment at net asset value may also be
handled by a securities dealer or other financial institution, who may charge
the Shareholder a fee for this service. The redemption is a taxable
transaction but reinvestment without a sales charge may affect the tax basis
of the Share reinvested, and the amount of gain or loss resulting from a
redemption may be affected by exercise of the reinstatement privilege if the
Shares redeemed were held for 90 days or less, or if a Shareholder reinvests
in the same fund within 30 days. Reinvestment will be at the next calculated
net asset value after receipt.
SYSTEMATIC WITHDRAWAL PLAN. A Shareholder may establish a Systematic
Withdrawal Plan ("Plan") and receive periodic payments from the account
provided that the net asset value of the Shares held by the Shareholder is at
least $5,000. There are no service charges for establishing or maintaining a
Plan. The minimum amount which the Shareholder may withdraw is $50 per
withdrawal transaction although this is merely the minimum amount allowed
under the Plan and should not be mistaken for a recommended amount. Retirement
plans subject to mandatory distribution requirements are not subject to the
$50 minimum. The Plan may be established on a monthly, quarterly, semiannual
or annual basis. If the Shareholder establishes a Plan, any capital gain
distributions and income dividends paid by the Fund to the Shareholder's
account must be reinvested for the Shareholder's account in additional Shares
at net asset value. Payments are then made from the liquidation of Shares at
net asset value on the day of the liquidation (which is generally on or about
20
the 25th of the month) to meet the specified withdrawals. Payments are
generally received three to five days after the date of liquidation. By
completing the "Special Payment Instructions for Distributions" section of the
Shareholder Application included with this Prospectus, a Shareholder may
direct the selected withdrawals to another of the Franklin Templeton Funds, to
another person, or directly to a checking account. Liquidation of Shares may
reduce or possibly exhaust the Shares in the Shareholder's account, to the
extent withdrawals exceed Shares earned through dividends and distributions,
particularly in the event of a market decline. If the withdrawal amount
exceeds the total Plan balance, the account will be closed and the remaining
balance will be sent to the Shareholder. As with other redemptions, a
liquidation to make a withdrawal payment is a sale for federal income tax
purposes. Because the amount withdrawn under the Plan may be more than the
Shareholder's actual yield or income, part of such a Plan payment may be a
return of the Shareholder's investment.
Maintaining a Plan concurrently with purchases of additional Shares of the
Fund would be disadvantageous because of the sales charge on the additional
purchases. Also, redemptions of Shares may be subject to a contingent deferred
sales charge if the Shares are redeemed within 12 months of the calendar month
of the original purchase date. The Shareholder should ordinarily not make
additional investments of less than $5,000 or three times the annual
withdrawals under the Plan during the time such a Plan is in effect.
With respect to Systematic Withdrawal Plans, the applicable contingent
deferred sales charge is waived for Share redemptions of up to 1% monthly of
an account's net asset value (12% annually, 6% semiannually, 3% quarterly).
For example, if an account maintained an annual balance of $1,000,000, only
$120,000 could be withdrawn through a once-yearly Systematic Withdrawal Plan
free of charge; any amount over that $120,000 would be assessed a 1% (or
applicable) contingent deferred sales charge.
A Plan may be terminated on written notice by the Shareholder or the Fund,
and it will terminate automatically if all Shares are liquidated or withdrawn
from the account, or upon the Fund's receipt of notification of the death or
incapacity of the Shareholder. Shareholders may change the amount (but not
below $50) and schedule of withdrawal payments or suspend one such payment by
giving written notice to the Transfer Agent at least seven business days prior
to the end of the month preceding a scheduled payment. Share certificates may
not be issued while a Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions--Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions--Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before the scheduled closing
time of the NYSE (generally 4:00 p.m., New York time), on any business day
will be processed that same day. The redemption check will be sent within
seven days, made payable to all the registered owners on the account, and will
be sent only to the address of record. Redemption requests by telephone will
not be accepted within 30 days following an address change by telephone. In
that case, a Shareholder should follow the other redemption procedures set
forth in this Prospectus. Institutional accounts which wish to execute
redemptions in excess of $50,000 must complete an Institutional Telephone
Privileges Agreement which is available from Franklin Templeton Institutional
Services by telephoning 1-800-321-8563.
CONTINGENT DEFERRED SALES CHARGE. In order to recover commissions paid to
securities dealers on qualified investments of $1 million or more, a
contingent deferred sales charge of 1% applies to redemptions of those
investments within the contingency period of 12 months following the calendar
month of their purchase, unless one of the exceptions described below applies.
The charge is 1% of the lesser of the net asset value of the Shares redeemed
(exclusive of reinvested dividends and capital gain distributions) or the net
asset value of such Shares at the time of purchase, and is retained by FTD.
The contingent deferred sales charge is waived in certain instances.
21
In determining if a contingent deferred sales charge applies, Shares not
subject to a contingent deferred sales charge are deemed to be redeemed first,
in the following order: (i) a calculated number of Shares representing amounts
attributable to capital appreciation of those Shares held less than the
contingency period of 12 months; (ii) Shares purchased with reinvested
dividends and capital gain distributions; and (iii) other Shares held longer
than the contingency period, and followed by any Shares held less than the
contingency period, on a "first in, first out" basis. For tax purposes, a
contingent deferred sales charge is treated as either a reduction in
redemption proceeds or an adjustment to the cost basis of the Shares redeemed.
The contingent deferred sales charge is waived, as applicable, for:
exchanges; any account fees; distributions to participants or beneficiaries in
FTTC individual retirement plan accounts due to death, disability or
attainment of age 59 1/2; tax-free returns of excess contributions from
employee benefit plans; distributions from employee benefit plans, including
those due to plan termination or plan transfer; redemptions through a
Systematic Withdrawal Plan of up to 1% monthly of an account's net asset value
(3% quarterly, 6% semiannually or 12% annually); redemptions initiated by the
Fund due to a Shareholder's account falling below the minimum specified
account size; and redemptions following the death of the Shareholder or the
beneficial owner.
All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month, and each subsequent month.
Requests for redemptions for a SPECIFIED DOLLAr amount, unless otherwise
specified, will result in additional Shares being redeemed to cover any
applicable contingent deferred sales charge, while requests for redemption of
a SPECIFIC NUMBER of Shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their investment representative of record, if
any, may be able to execute various transactions by calling Shareholder
Services at 1-800-632-2301.
All Shareholders will be able to: (i) effect a change in address, (ii)
change a dividend option (see "Restricted Accounts" below), (iii) transfer
Fund Shares in one account to another identically registered account in the
Fund, (iv) request the issuance of certificates (to be sent to the address of
record only) and (v) exchange Fund Shares by telephone as described in this
Prospectus. In addition, Shareholders who complete and file an Agreement as
described under "How to Sell Shares of the Fund--Redemption by Telephone" will
be able to redeem Shares of the Fund.
VERIFICATION PROCEDURES. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent
at the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So
long as the Fund and the Transfer Agent follow instructions communicated by
telephone which were reasonably believed to be genuine at the time of their
receipt, neither they nor their affiliates will be liable for any loss to the
Shareholder caused by an unauthorized transaction. The Fund and the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions in the event such reasonable procedures are not followed.
Shareholders are, of course, under no obligation to apply for or accept
telephone transaction privileges. In any instance where the Fund or the
Transfer Agent is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed and
neither the Fund, the Transfer Agent, nor their affiliates will be liable for
any losses which may occur because of a delay in implementing a transaction.
22
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on Franklin Templeton retirement accounts. To assure
compliance with all applicable regulations, special forms are required for any
distribution, redemption, or dividend payment. While the telephone exchange
privilege is extended to Franklin Templeton IRA and 403(b) retirement
accounts, certain restrictions may apply to other types of retirement plans.
Changes to dividend options must also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, retirement account Shareholders may call to
speak to a Retirement Plan Specialist at 1-800/527-2020 for Franklin accounts,
or 1-800/354-9191 (press "2" when prompted to do so) for Templeton accounts.
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be difficult to
execute because of heavy telephone volume. In such situations, Shareholders
may wish to contact their registered dealer for assistance, or to send written
instructions to the Fund as detailed elsewhere in this Prospectus.
Neither the Fund nor the Transfer Agent will be liable for any losses
resulting from the inability of a Shareholder to execute a telephone
transaction. The telephone transaction privilege may be modified or
discontinued by the Fund at any time upon 60 days' written notice to
Shareholders.
MANAGEMENT OF THE FUND
The Fund is managed by its Board of Trustees and all powers of the Fund are
exercised by or under authority of the Board. Information relating to the
Trustees and executive officers is set forth under the heading "Management of
the Fund" in the SAI.
INVESTMENT MANAGER. The Investment Manager of the Fund is Templeton
Investment Counsel, Inc., a Florida corporation with offices at Broward
Financial Centre, Fort Lauderdale, Florida 33394-3091. The Investment Manager
manages the investment and reinvestment of the Fund's assets. The Investment
Manager is an indirect wholly owned subsidiary of Franklin Resources, Inc.
("Franklin"). Through its subsidiaries, Franklin is engaged in various aspects
of the financial services industry. The Investment Manager and its affiliates
serve as advisers for a wide variety of public investment mutual funds and
private clients in many nations. The Templeton organization has been investing
globally over the past 52 years and provide investment management and advisory
services to a worldwide client base, including over 4 million mutual fund
shareholders, foundations, endowments, employee benefit plans and individuals.
The Investment Manager and its affiliates have approximately 3,200 employees
in the United States, Australia, Scotland, Germany, Hong Kong, Luxembourg,
Bahamas, Singapore, Canada and Russia.
The Investment Manager uses a disciplined, long-term approach to value-
oriented global and international investing. It has an extensive global
network of investment research sources. Securities are selected for the Fund's
portfolio on the basis of fundamental company-by-company analysis. Many
different selection methods are used for different funds and clients and these
methods are changed and improved by the Investment Manager's research on
superior selection methods.
The Investment Manager does not furnish any overhead items or facilities for
the Fund, although such expenses are paid by some investment advisers of other
investment companies. As compensation for its services, the Fund pays the
Investment Manager a monthly fee, equal on an annual basis to 0.75% of its
average daily net assets during the year. This fee is higher than advisory
fees paid by most other U.S. investment companies, primarily because investing
in securities of companies in foreign markets requires the Investment Manager
to invest additional time and incur added expense in developing specialized
resources, including research facilities. The Fund also pays its own operating
expenses, including: (1) the fees and expenses of the disinterested Trustees;
(2) interest expenses; (3) taxes and governmental fees; (4) brokerage
commissions and other expenses incurred in acquiring or disposing of portfolio
securities; (5) the expenses of registering and qualifying its Shares for sale
with the Securities and Exchange Commission ("SEC") and with various state
securities commissions; (6) expenses of its independent public accountants and
legal counsel; (7) insurance premiums; (8) fees
23
and expenses of the Custodian and Transfer Agent and any related services; (9)
expenses of obtaining quotations of portfolio securities and of pricing
Shares; (10) expenses of maintaining the Fund's legal existence and of
Shareholders' meetings; (11) expenses of preparation and distribution to
existing Shareholders of periodic reports, proxy materials and prospectuses;
(12) payments made pursuant to the Fund's Distribution Plan (see "Plan of
Distribution"); and (13) fees and expenses of membership in industry
organizations.
The lead portfolio manager for the Fund is William T. Howard, Jr., Vice
President of the Investment Manager. Mr. Howard holds a Bachelor of Arts
degree in international studies from Rhodes College and a Master of Business
Administration degree in finance from Emory University. Before joining the
Templeton organization in 1993, he was a portfolio manager and analyst with
Tennessee Consolidated Retirement System in Nashville, Tennessee, where he was
responsible for research and management of the international equity portfolio
and specialized in the Japanese equity market. Gary P. Motyl and Gary R.
Clemmons exercise secondary portfolio management responsibility with respect
to the Fund. Mr. Motyl, Senior Vice President of the Investment Manager, holds
a Bachelor of Science degree in finance from Lehigh University and a Master of
Business Administration degree in finance from Pace University. He has been a
security analyst and portfolio manager with the Investment Manager since 1981.
Prior to joining the Templeton organization, Mr. Motyl worked from 1974 to
1979 as a security analyst with Standard & Poor's Corporation. He then worked
as a research analyst and portfolio manager from 1979 to 1981 with Landmark
First Mortgage Bank where he had responsibility for equity research and
managed several pension and profit sharing plans. Mr. Clemmons, Vice President
of the Investment Manager, holds a Bachelor of Science degree in geology from
the University of Nevada and a Master of Business Administration degree in
finance from the University of Wisconsin. He joined the Investment Manager in
1993. Prior to that time he was a research analyst at Templeton Quantitative
Advisors, Inc. in New York, where he was also responsible for management of a
small capitalization fund. Further information concerning the Investment
Manager is included under the heading "Investment Management and Other
Services" in the SAI.
BUSINESS MANAGER. Templeton Global Investors, Inc. provides certain
administrative facilities and services for the Fund, including payment of
salaries of officers, preparation and maintenance of books and records,
preparation of tax returns and financial reports, monitoring compliance with
regulatory requirements and monitoring tax-deferred retirement plans. For its
services, the Fund pays the Business Manager a fee equivalent to 0.15% of the
average daily net assets of the Fund during the year, reduced to 0.135% of
such assets in excess of $200 million, to 0.10% of such assets in excess of
$700 million, and to 0.075% of such assets in excess of $1,200 million.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
PLAN OF DISTRIBUTION. A Plan of Distribution has been approved for the Fund
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Any portion of Rule
12b-1 fees remaining from the Plan after distribution to securities dealers of
up to the maximum amount permitted under the Plan may be used by the class to
reimburse FTD for routine ongoing promotion and distribution expenses incurred
with respect to the Fund. Such expenses may include, but are not limited to,
the printing of prospectuses and reports used for sales purposes, expenses, of
preparing and distributing sales literature and related expenses,
advertisements, and other distribution-related expenses, including a prorated
portion of FTD's overhead expenses attributable to the distribution of Fund
Shares, as well as any distribution or service fees paid to securities dealers
or their firms or others who have executed a servicing agreement with the
Fund, FTD or its affiliates.
The maximum amount which the Fund may pay to FTD or others under the Plan
for such distribution expenses is 0.35% per annum of average daily net assets,
payable on a quarterly basis. All expenses of distribution and marketing in
excess of 0.35% per annum will be borne by FTD, or others who have incurred
them, without reimbursement from the Fund. Under the Plan, costs and expenses
not reimbursed in any one given quarter (including costs and expenses not
reimbursed because they exceed the applicable limit of the Plan) may be
reimbursed in subsequent quarters or years, subject to applicable law. FTD has
informed the Fund that cost and expenses that may be reimbursable in future
quarters or years were $3,446 (.24% of its net assets) at March 31, 1995.
24
The Plan also covers any payments to or by the Fund, the Investment Manager,
FTD, or other parties on behalf of the Fund, the Investment Manager or FTD, to
the extent such payments are deemed to be for the financing of any activity
primarily intended to result in the sale of Shares issued by the Fund within
the context of Rule 12b-1. The payments under the Plan are included in the
maximum operating expenses which may be borne by the Fund. For more
information, including a discussion of the Board's policies with regard to the
amount of the Plan's fees, please see the SAI.
BROKERAGE COMMISSIONS. The Fund's brokerage policies are described under the
heading "Brokerage Allocation" in the SAI. The Fund's brokerage policies
provide that the receipt of research services from a broker and the sale of
Shares by a broker are factors which may be taken into account in allocating
securities transactions, so long as the prices and execution provided by the
broker equal the best available within the scope of the Fund's brokerage
policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The capitalization of the Fund
consists of an unlimited number of Shares of beneficial interest, par value
$0.01 per Share. The Board of Trustees is authorized, in its discretion, to
classify and allocate the unissued Shares of the Fund in an unlimited number
of separate series and may in the future divide existing series into two or
more classes. Each Share entitles the holder to one vote.
Shares for initial investment, as well as subsequent investments, including
the reinvestment of dividends and capital gain distributions, are generally
credited to an account in the name of an investor on the books of the Fund,
without the issuance of a share certificate. Maintaining shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss
or theft of a share certificate. No charge is made for the issuance of one
certificate for all or some of the shares purchased in a single order. A lost,
stolen or destroyed certificate cannot be replaced without obtaining a
sufficient indemnity bond. The cost of such a bond, which is generally borne
by the Shareholder, can be 2% or more of the value of the lost, stolen or
destroyed certificate. A certificate will be issued if requested by the
Shareholder or by the securities dealer.
MEETINGS OF SHAREHOLDERS. The Fund is not required to hold annual meetings
of Shareholders and may elect not to do so. The Fund will call a special
meeting of Shareholders for the purpose of considering the removal of a person
serving as Trustee if requested in writing to do so by the holders of not less
than 10% of the Fund's outstanding Shares. The Fund is required to assist
Shareholder communications in connection with the calling of Shareholder
meetings to consider removal of a Trustee or Trustees.
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay a dividend at least
annually representing substantially all of its net investment income and any
net realized capital gains. Unless otherwise requested, income dividends and
capital gain distributions paid by the Fund, other than on those Shares whose
owners keep them registered in the name of a broker-dealer, are automatically
reinvested on the payment date in whole or fractional Shares at net asset
value as of the ex-dividend date, unless a Shareholder makes a written or
telephonic request for payments in cash. Dividend and capital gain
distributions are eligible for reinvestment at net asset value in Shares of
the Fund or Class I shares of another of the Franklin Templeton Funds. The
processing date for the reinvestment of dividends may vary, from time to time,
and does not affect the amount of the Shares acquired. Income dividends and
capital gain distributions will be paid in cash on Shares during the time
their owners keep them registered in the name of a broker-dealer, unless the
broker-dealer has made arrangements with the Transfer Agent for reinvestment.
Prior to purchasing Shares of the Fund, the impact of dividends or capital
gains distributions which have been declared but not yet paid should be
carefully considered. Any dividend or capital gains distribution paid shortly
after a purchase by a Shareholder prior to the record date will have the
effect of reducing the per Share net asset value of the Shares by the amount
of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, generally will be
subject to tax.
Checks are forwarded by first-class mail to the address of record. The
proceeds of any such checks which are not accepted by the addressee and
returned to the Fund will be reinvested in the Shareholder's account in whole
or fractional Shares at the net asset value
25
next computed after the check has been received by the Transfer Agent.
Subsequent distributions automatically will be reinvested at net asset value
as of the ex-dividend date in additional whole or fractional Shares.
FEDERAL TAX INFORMATION. The Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. See the SAI for a summary of requirements that must be satisfied to so
qualify. A regulated investment company generally is not subject to Federal
income tax on income and gains distributed in a timely manner to its
shareholders. The Fund intends to distribute to Shareholders substantially all
of its net investment income and realized capital gains, which generally will
be taxable income or capital gains in their hands. Distributions declared in
October, November or December to Shareholders of record on a date in such
month and paid during the following January will be treated as having been
received by Shareholders on December 31 in the year such distributions were
declared. The Fund will inform 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. A more detailed description of tax
consequences to Shareholders is contained in the SAI under the heading "Tax
Status."
The Fund may be required to withhold Federal income tax at the rate of 31%
of all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholder's federal income tax liability.
JAPAN TAXES. Pursuant to the tax convention between the United States and
Japan (the "Convention"), a Japanese withholding tax at the maximum rate of
15% is, with certain exceptions, imposed upon dividends paid by a Japanese
corporation to the Fund. Pursuant to the present terms of the Convention,
interest received by the Fund from sources within Japan is subject to a
Japanese withholding tax at a maximum rate of 10%. Capital gains of the Fund
arising from its investments as described herein are not taxable in Japan.
Generally, the Fund will be subject to the Japan securities transaction tax
on its sale of certain securities in Japan. The current rates of such tax
range from 0.03% to 0.30% depending upon the particular type of securities
involved. Transactions involving equity securities are currently taxed at the
highest rate.
INQUIRIES. Shareholders' inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., P.O. Box 33030, St.
Petersburg, Florida 33733-8030 -- telephone 1-800-632-2301 or 813-823-8712.
Transcripts of Shareholder accounts less than three years old are provided on
request without charge; requests for transcripts going back more than three
years from the date the request is received by the Transfer Agent are subject
to a fee of up to $15 per account.
PERFORMANCE INFORMATION. The Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over
a period of 1, 5 and 10 years (or up to the life of the Fund), will reflect
the deduction of the maximum initial sales charge and deduction of a
proportional share of Fund expenses (on an annual basis), and will assume that
all dividends and distributions are reinvested when paid. Total return may be
expressed in terms of the cumulative value of an investment in the Fund at the
end of a defined period of time. For a description of the methods used to
determine total return for the Fund, see the SAI.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on March 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semiannual
reports (containing unaudited financial statements) are sent to Shareholders
each year. To reduce the volume of mail Shareholders receive and reduce
expenses, only one copy of most Fund reports, such as the Fund's Annual and
semiannual report, may be mailed to a household. Additional copies may be
obtained, without charge, upon request to the Fund Information Department. The
Fund also sends to each Shareholder a confirmation statement after every
transaction that affects the Shareholder's account and a year-end historical
confirmation statement.
26
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service ("IRS").
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number ("SSN/TIN"), you must obtain Form SS-5 or Form SS-4 from
your local Social Security or IRS office and apply for one. If you have
checked the "Awaiting TIN" box and signed the certification, withholding will
apply to payments relating to your account unless you provide a certified TIN
within 60 days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- -----------------------------------------------------------------------------------
. Joint Actual owner of . Corporation, Corporation,
Individual account, or if Partnership, or other Partnership, or other
combined funds, the organization organization
first-named
individual
- -----------------------------------------------------------------------------------
. Unif. Minor . Broker nominee Broker nominee
Gift/Transfer
to Minor
- -----------------------------------------------------------------------------------
. Sole Owner of business
Proprietor
- -----------------------------------------------------------------------------------
. Legal Ward, Minor, or
Guardian Incompetent
- -----------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient"
box if you are an exempt recipient. Exempt recipients generally include:
A corporation A real estate investment trust
A financial institution A common trust fund operated by a bank
under section 584(a)
An organization exempt from tax An entity registered at all times
under section 501(a), or an under the Investment Company
individual retirement plan Act of 1940
A registered dealer in securities or
commodities registered in the U.S.
or a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith.
If you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
"Exempt Foreign Person" if you are not (1) a citizen or resident of the U.S.,
or (2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an "Exempt Foreign Person" is one who has been physically present
in the U.S. for less than 31 days during the current calendar year. An
individual who is physically present in the U.S. for at least 31 days during
the current calendar year will still be treated as an "Exempt Foreign Person,"
provided that the total number of days physically present in the current
calendar year and the two preceding calendar years does not equal or exceed
183 days (counting all of the days in the current calendar year, only one-
third of the days in the first preceding calendar year and only one-sixth of
the days in the second preceding calendar year). In addition, lawful permanent
residents or green card holders may not be treated as "Exempt Foreign
Persons." If you are an individual or an entity, you must not now be, or at
this time expect to be, engaged in a U.S. trade or business with respect to
which any gain derived from transactions effected by the Fund/Payer during the
calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that
(1) the taxpayer identification number you have given is correct, and (2) the
IRS has not notified you that you are subject to backup withholding because
you failed to report certain interest or dividend income. You may use Form W-
9, "Payer's Request for Taxpayer Identification Number and Certification," to
make these certifications. If an account is no longer active, you do not have
to notify a Fund/Payer or broker of your change in status unless you also have
another account with the same Fund/Payer that is still active. If you receive
interest from more than one Fund/Payer or have dealings with more than one
broker or barter exchange, file a certificate with each. If you have more than
one account with the same Fund/Payer, the Fund/Payer may require you to file a
separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated
as having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for
three calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
27
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that each Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to a Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly
elected_________________________ of ___________________________________________
TITLE CORPORATE NAME
a _________________________ organized under the laws of the State of __________
TYPE OF ORGANIZATION STATE
and that the following is a true and correct copy of a resolution adopted by
the Board of Directors at a meeting duly called and held on ___________________
DATE
RESOLVED, that the _________________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds (R) or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED, that any of the following _________ officers are authorized
NUMBER
to sign any share assignment on behalf of this Corporation or Association and
to take any other actions as may be necessary to sell or redeem its shares in
the Funds or to sign checks or drafts withdrawing funds from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary.)
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes ________________________________________________________
NAME AND TITLE
CORPORATE SEAL (if appropriate)
28
THE FRANKLIN TEMPLETON TELEPHONE REDEMPTION AUTHORIZATION AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
Shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Fund's Prospectus.
The telephone redemption privilege is available only to Shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges automatically available to Franklin
Templeton Fund shareholders, please sign and return this authorization to
Franklin Templeton Investor Services, Inc. ("Services"), transfer agent and
shareholder servicing agent for the Franklin Templeton Funds.
SHAREHOLDER AUTHORIZATION: I/We request the telephone redemption privilege
under the terms described below and in the prospectus for each investment
company in the Franklin Templeton Group of Funds (a "Franklin Templeton Fund"
or a "Fund"), now opened or opened at a later date, holding shares registered
as follows:
- ------------------------------------- ---------------------------------------
PRINT NAME(S) AS SHOWN IN YOUR ACCOUNT
REGISTRATION ("SHAREHOLDER")
- ------------------------------------- ---------------------------------------
ACCOUNT NUMBER(S)
I/We authorize each Fund and Services to honor and act upon telephone requests
given as provided in this agreement to redeem shares from any
Shareholder account:
- ------------------------------------- ---------------------------------------
SIGNATURE(S) AND DATE
- ------------------------------------- ---------------------------------------
PRINT NAME(S) (AND TITLE/CAPACITY, IF
APPLICABLE)
VERIFICATION PROCEDURES: I/We understand and agree that: (1) each Fund and
Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Services may be liable
for any losses due to unauthorized or fraudulent telephone instructions; (2)
the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the
time of the call for the purpose of establishing the caller's identification,
and the sending of confirmation statements to the address of record each time
a redemption is initiated by telephone; and (3) so long as the Fund and
Services follow the confirmation procedures in acting on instructions
communicated by telephone which were reasonably believed to be genuine at the
time of receipt, neither they, nor their parent or affiliates, will be liable
for any loss, damages or expenses caused by an unauthorized or fraudulent
redemption request.
JOINTLY OWNED/CO-TRUSTEE ACCOUNTS: Each of us signing this agreement as either
joint owners or co-trustees authorizes each Fund and Services to honor
telephone redemption requests given by ANY ONE of the signers, or our
investment representative of record, if any, ACTING ALONE.
APPOINTMENT OF ATTORNEY-IN-FACT: In order to issue telephone redemption
requests acting alone, each of us individually makes the following
appointment: I hereby appoint the other joint owner(s)/co-trustee(s) as my
agent(s) (attorney[s]-in-fact) with full power and authority to individually
act for me in any lawful way with respect to the issuance of instructions to a
Fund or Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it
is revoked by either written notice from any one of us delivered to a Fund or
Services by registered mail, return receipt requested or by a Fund or Services
upon receipt of any information that causes a Fund or Services to believe in
good faith that there is or that there may be a dispute among any of us with
respect to the Franklin Templeton Fund account(s) covered by this agreement.
Each of us agrees to notify the Fund or Services immediately upon the death of
any of the signers.
CORPORATE/PARTNERSHIP/TRUST/RETIREMENT ACCOUNTS: The Shareholder and each of
us signing this agreement on behalf of the Shareholder represent and warrant
to each Franklin Templeton Fund and Services that the Shareholder has the
authority to enter into this agreement and that each of us is duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Services may honor a telephone redemption request given by ANY
officer/partner/member/administrator/or agent of the Shareholder ACTING ALONE.
RESTRICTED ACCOUNTS: Telephone redemptions may not be accepted on Franklin
Templeton Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin Templeton Investor Services, Inc., Attn.: Telephone Redemptions
Dept., 700 Central Avenue, St. Petersburg, Florida 33701-3628.
29
The Franklin Templeton Group
Literature Request -- Call today for a free descriptive brochure and
prospectus on any of the funds listed below. The prospectus contains more
complete information, including fees, charges and expenses, and should be read
carefully before investing or sending money.
TEMPLETON FUNDS
American Trust
Americas Government Securities Fund
Developing Markets Trust
Foreign Fund
Global Infrastructure Fund
Global Opportunities Trust
Greater European Fund
Growth Fund
Growth and Income Fund
Income Fund
Japan Fund
Latin America Fund
Money Fund
Real Estate Securities Fund
Smaller Companies Growth Fund
World Fund
FRANKLIN FUNDS
SEEKING TAX-FREE INCOME
Federal Intermediate Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund***
Puerto Rico Tax-Free Income Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan***
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
FRANKLIN FUNDS
SEEKING CAPITAL GROWTH
California Growth Fund
DynaTech Fund
Equity Fund
Global Health Care Fund
Gold Fund
Growth Fund
International Equity Fund
Pacific Growth Fund
Real Estate Securities Fund
Small Cap Growth Fund
FRANKLIN FUNDS SEEKING
GROWTH AND INCOME
Balance Sheet Investment Fund
Convertible Securities Fund
Equity Income Fund
Global Utilities Fund
Income Fund
Premier Return Fund
Rising Dividends Fund
Strategic Income Fund
Utilities Fund
FRANKLIN FUNDS SEEKING
HIGH CURRENT INCOME
AGE High Income Fund
German Government Bond Fund
Global Government Income Fund
Investment Grade Income Fund
U.S. Government Securities Fund
FRANKLIN FUNDS SEEKING HIGH CURRENT
INCOME AND STABILITY OF PRINCIPAL
Adjustable Rate Securities Fund
Adjustable U.S. Government Securities Fund
Short-Intermediate U.S. Government Securities Fund
FRANKLIN FUNDS FOR NON-U.S. INVESTORS
Tax-Advantaged High Yield Securities Fund
Tax-Advantaged International Bond Fund
Tax-Advantaged U.S. Government Securities Fund
FRANKLIN TEMPLETON INTERNATIONAL
CURRENCY FUNDS
Global Currency Fund
Hard Currency Fund
High Income Currency Fund
FRANKLIN MONEY MARKET FUNDS
California Tax-Exempt Money Fund
Federal Money Fund
IFT U.S. Treasury Money Market Portfolio
Money Fund
New York Tax-Exempt
Money Fund
Tax-Exempt Money Fund
FRANKLIN FUND FOR CORPORATIONS
Corporate Qualified Dividend Fund
FRANKLIN TEMPLETON VARIABLE ANNUITIES
Franklin Valuemark
Franklin Templeton
Valuemark Income
Plus (an immediate
annuity)
Toll-free 1-800-DIAL BEN (1-800-342-5236)
* Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
*** Portfolio of insured municipal securities.
30
NOTES
-----
31
- --------------------------
FRANKLIN TEMPLETON
JAPAN FUND
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Shareholder Services
1-800-632-2301
Fund Information
1-800/DIAL BEN
Institutional Services
1-800-321-8563
This Prospectus is not
an offering of the
securities herein
described in any state
in which the offering
is not authorized. No
sales representative,
dealer, or other person
is authorized to give
any information or make
any representations
other than those
contained in this
Prospectus. Further
information may be
obtained from the
Principal Underwriter.
- --------------------------
[LOGO OF RECYCLED APPEARS HERE]
TL417 P 08/95
FRANKLIN
TEMPLETON
JAPAN
FUND
Prospectus
August 1, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
Mail to: FRANKLIN TEMPLETON DISTRIBUTORS, INC.
P.O. Box 33031 St. Petersburg, Florida 33733-8031 (800) 393-3001
Please do not use this form for any Retirement Plan for which Franklin Templeton
Trust Company serves as custodian or trustee, or for Templeton Money Fund,
Templeton Institutional Funds or Templeton Capital Accumulator Fund. Request
separate Applications and/or Prospectuses.
- --------------------------------------------------------------------------------
SHAREHOLDER APPLICATION OR REVISION
[_] Please check the box if this is a revision and see Section 8
- --------------------------------------------------------------------------------
Please check Class I or Class II, if applicable, next to your Fund selection.
Class I and Class II shares have different sales charges and operating expenses,
among other differences, as described in each Fund's prospectus.
Date __________________
<TABLE>
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C> <C>
[_] [_]$______ AMERICAN TRUST [_] [_]$______ GLOBAL OPPORTUNITIES TRUST
[_] ______ AMERICAS GOVERNMENT SECURITIES FUND [_] [_] ______ GREATER EUROPEAN FUND
[_] [_] ______ DEVELOPING MARKETS TRUST [_] [_] ______ GROWTH FUND
[_] [_] ______ FOREIGN FUND [_] [_] ______ GROWTH AND INCOME FUND
[_] [_] ______ GLOBAL INFRASTRUCTURE FUND [_] [_] ______ INCOME FUND
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C>
[_] $______ JAPAN FUND [_] [_] OTHER: $___________
[_] [_] ______ LATIN AMERICA FUND (Except for Class II Money Fund)
[_] [_] ______ REAL ESTATE SECURITIES FUND _______________________________
[_] [_] ______ SMALLER COMPANIES GROWTH FUND _______________________________
[_] [_] ______ WORLD FUND _______________________________
</TABLE>
- --------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION (PLEASE PRINT)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
__________________________________________________ ________-________-__________
First Name Middle Initial Last Name Social Security Number (SSN)
__________________________________________________ ________-________-__________
Joint Owner(s) (Joint ownership means "Joint Social Security Number (SSN)
Tenants With Rights of Survivorship" unless
otherwise specified) All owners must sign Section 4.
- --------------------------------------------------------------------------------
[_] GIFT/TRANSFER TO A MINOR
_______________________________ As Custodian For________________________________
Name of Custodian (one only) Minor's Name (one only)
_____________Uniform Gifts/Transfers to Minors Act________-________-____________
State of Residence Minor's Social Security Number
Please Note: Custodian's Signature, not Minor's, is required in Section 4.
- --------------------------------------------------------------------------------
[_] TRUST, CORPORATION, PARTNERSHIP, RETIREMENT PLAN, OR OTHER ENTITY
__________________________________________ ____________-_______________________
Name Taxpayer Identification Number (TIN)
__________________________________________ ____________________________________
Name of Beneficiary (if to be included in Date of Trust Document (must be
the Registration) completed for registration)
________________________________________________________________________________
Name of Each Trustee (if to be included in the Registration)
- --------------------------------------------------------------------------------
2 ADDRESS
- --------------------------------------------------------------------------------
___________________________________________ Daytime Phone (___)________________
Street Address Area Code
____________________________________-______ Evening Phone (___)________________
City State Zip Code Area Code
I am a Citizen of: [_] U.S. or [_]______________________________
Country of Residence
- --------------------------------------------------------------------------------
3 INITIAL INVESTMENT ($100 minimum initial investment)
- --------------------------------------------------------------------------------
Check(s) enclosed for $___________________ . (Payable to Franklin Templeton
Distributors, Inc. or the Fund(s)
indicated above.)
- --------------------------------------------------------------------------------
4 SIGNATURE AND TAX CERTIFICATIONS
(All registered owners must sign application)
- --------------------------------------------------------------------------------
See "Important Notice Regarding Taxpayer IRS Certifications" in back of
prospectus. The Fund reserves the right to refuse to open an account without
either a certified Taxpayer Identification Number ("TIN") or a certification of
foreign status. Failure to provide tax certifications in this section may result
in backup withholding on payments relating to your account and/or in your
inability to qualify for treaty withholding rates.
I am(We are) not subject to backup withholding because I(we) have not been
notified by the IRS that I am(we are) subject to backup withholding as a result
of a failure to report all interest or dividends or because the IRS has notified
me(us) that I am(we are) no longer subject to backup withholding. (If you are
currently subject to backup withholding as a result of a failure to report all
interest or dividends, please cross out the preceding statement.)
[_] The number shown above is my(our) correct TIN, or that of the Minor named in
Section 1.
[_] AWAITING TIN. I am(We are) waiting for a number to be issued to me(us).
I(We) understand that if I(we) do not provide a TIN to the Fund within 60
days, the Fund is required to commence 31% backup withholding until I(we)
provide a certified TIN.
[_] EXEMPT RECIPIENT. Individuals cannot be exempt. Check this box only after
reading the instructions to see whether you qualify as an exempt recipient.
(You should still provide a TIN.)
[_] EXEMPT FOREIGN PERSON. Check this box only if the following statement
applies: "I am(we are) neither a citizen nor a resident of the United
States. I(we) certify to the best of my(our) knowledge and belief, I(we)
qualify as an exempt foreign person and/or entity as described in the
instructions."
Permanent address for tax purposes:
________________________________________________________________________________
Street Address City State Country Postal Code
PLEASE NOTE: The IRS only allows one TIN to be listed on an account. On joint
accounts, it is preferred that the primary account owner (or person listed first
on the account) list his/her number as requested above.
CERTIFICATION - Under the penalties of perjury, I(we) certify that (1) the
information provided on this application is true, correct and complete, (2)
I(we) have read the prospectus(es) for the Fund(s) in which I am(we are)
investing and agree to the terms thereof, and (3) I am(we are) of legal age or
an emancipated minor. I (we) acknowledge that Shares of the Fund(s) are not
insured or guaranteed by any agency or institution and that an investment in the
Shares involves risks, including the possible loss of principal.
X X
- ---------------------------------------- ---------------------------------------
Signature Signature
X X
- ---------------------------------------- ---------------------------------------
- --------------------------------------------------------------------------------
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
- --------------------------------------------------------------------------------
-----------------------
We hereby submit this application for the purchase of Templeton Dealer Number
shares of the Fund indicated above in accordance with
the terms of our selling agreement with Franklin -----------------------
Templeton Distributors, Inc. ("FTD"), and with the
Prospectus for the Fund. We agree to notify FTD of any
purchases of Class I shares which may be eligible for
reduced or eliminated sales charges.
-----------------------------------------------------------------------------
WIRE ORDER ONLY: The attached check for $_______ should be applied against
Wire Order
Confirmation Number ___________ Dated___________ For__________ Shares
-----------------------------------------------------------------------------
Securities Dealer Name__________________________________________________________
Main Office Address________________ Main Office Telephone Number (___)__________
Branch Number________ Representative Number ________ Representative Name________
Branch Address_________________________ Branch Telephone Number (___)___________
Authorized Signature, Securities Dealer______________________ Title_____________
- --------------------------------------------------------------------------------
ACCEPTED: Franklin Templeton Distributors, Inc. By___________ Date______________
- --------------------------------------------------------------------------------
Please see reverse side for Shareholder Account Privileges:
[_] Distribution Options [_] Special Instructions for Distributions
[_] Systematic Withdrawal Plan [_] Automatic Investment Plan
[_] Telephone Exchange Service [_] Letter of Intent
[_] Cumulative Quantity Discount
This application must be preceded or accompanied by a prospectus for
the Fund(s) being purchased.
- --------------------------------------------------------------------------------
6 DISTRIBUTION OPTIONS (Check one)
- --------------------------------------------------------------------------------
Check one - if no box is checked, all dividends and capital gains will be
reinvested in additional shares of the Fund.
[_] Reinvest all dividends [_] Pay all dividends in cash
and capital gains. and reinvest capital gains.
[_] Pay capital gains in cash [_] Pay all dividends and
and reinvest dividends. capital gains in cash.
- --------------------------------------------------------------------------------
7 OPTIONAL SHAREHOLDER PRIVILEGES
- --------------------------------------------------------------------------------
A. SPECIAL PAYMENT INSTRUCTIONS FOR DISTRIBUTIONS (Check one box)
[_] Pay Distributions, as noted in Section 6, or [_] withdrawals, as noted in
section 7(B), to purchase shares of another Franklin or Templeton Fund.
Restrictions may apply to purchases of shares of a different class. See
the prospectus for details.
Fund Name______________________ Existing Account Number___________________
[_] Send my Distributions to the person, named below, instead of as registered
in Section 1.
Name___________________________ Street Address____________________________
City___________________________ State____________________Zip Code_________
- --------------------------------------------------------------------------------
B. SYSTEMATIC WITHDRAWAL PLAN
Please withdraw from my Franklin Templeton account $_____($50 minimum)
[_]Monthly [_]Quarterly [_]Semi-Annually or [_]Annually as set forth in the
Prospectus, starting in ______________(Month). The net asset value of the
shares held must be at least $5,000 at the time the plan is established.
Additional restrictions may apply to Class II or other shares subject to
contingent deferred sales charge, as described in the prospectus. Send the
proceeds to: [_]Address of Record OR [_]the Franklin Templeton Fund or person
specified in Section 7(A) - Special Payment Instructions for Distributions.
- --------------------------------------------------------------------------------
C. TELEPHONE TRANSACTIONS
TELEPHONE EXCHANGE PRIVILEGE: If the Fund does not receive specific
instructions from the shareholder, either in writing or by telephone, the
Telephone Exchange Privilege (see the prospectus) is automatically extended
to each account. The shareholder should understand, however, that the Fund
and Franklin Templeton Investor Services, Inc. ("FTI") or Franklin Templeton
Trust Company and their agents will not be liable for any loss, injury,
damage or expense as a result of acting upon instructions communicated by
telephone reasonably believed to be genuine. The shareholder agrees to hold
the Fund and its agents harmless from any loss, claims, or liability arising
from its or their compliance with such instructions. The shareholder
understands that this option is subject to the terms and conditions set forth
in the prospectus of the fund to be acquired.
[_]No, I do NOT wish to participate in the Telephone Exchange Privilege or
authorize the Fund or its agents, including FTI or Templeton Funds Trust
Company, to act upon instructions received by telephone to exchange shares
for shares of any other account(s) within the Franklin Templeton Group of
Funds.
Telephone Redemption Privilege: This is available to shareholders who
specifically request it and who complete the Franklin Templeton Telephone
Redemption Authorization Agreement in the back of the Fund's prospectus.
- --------------------------------------------------------------------------------
D. AUTOMATIC INVESTMENT PLAN
IMPORTANT: ATTACH AN UNSIGNED, VOIDED CHECK (FOR CHECKING ACCOUNTS) OR A
SAVINGS ACCOUNT DEPOSIT SLIP HERE, AND COMPLETE THE INFORMATION BELOW. I(We)
would like to establish an Automatic Investment Plan (the "Plan") as
described in the Prospectus. I(We) agree to reimburse FTI and/or FTD for any
expenses or losses that they may incur in connection with my(our) plan,
including any caused by my(our) bank's failure to act in accordance with
my(our) request. If my(our) bank makes any erroneous payment or fails to make
a payment after shares are purchased on my(our) behalf, any such purchase may
be cancelled and I(we) hereby authorize redemptions and/or deductions from
my(our) account for that purpose.
Debit my (circle one) savings, checking, other ________ account monthly for
$__________($25 minimum) on or about the [_]1st [_]5th [_]15th or [_]20th day
starting_______(month), to be invested in (name of
Fund)___________________Account Number (if known)_______
INSTRUCTIONS TO BANK - AUTOMATIC INVESTMENT PLAN AUTHORIZATION
To:__________________________________ ______________________________________
Name of Your Bank ABA Number
___________________________ _________________ ____________ ______________
Street Address City State Zip Code
I(We) authorize you to charge my(our) Checking/Savings Account and to make
payment to FTD, upon instructions from FTD. I(We) agree that in making payment
for such charges your rights shall be the same as if each were a charge made and
signed personally by me(us). This authority shall remain in effect until you
receive written notice from me(us) changing its terms or revoking it. Until you
actually receive such notice, I(we) agree that you shall be fully protected in
paying any charge under this authority. I(we) further agree that if any such
charge is not made, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever.
X_________________________________________________ ___________________________
Signature(s) EXACTLY as shown on your bank records Date
______________________________________ _______________________________________
Print Name(s) Account Number
______________________________ _________________ ____________ ______________
Your Street Address City State Zip Code
- --------------------------------------------------------------------------------
E. LETTER OF INTENT (LOI)
[_]I(We) agree to the terms of the LOI and provisions for reservations of
Class I shares and grant FTD the security interest set forth in the
Prospectus. Although I am(we are) not obligated to do so, it is my(our)
intention to invest over a 13 month period in Class I and/or Class II shares
of one or more Franklin or Templeton Funds (including all money market funds
in the Franklin Templeton Group) an aggregate amount at least equal to that
which is checked below. I understand that reduced sales charges will apply
only to purchases of Class I shares.
<TABLE>
<S> <C> <C> <C> <C>
[_]$50,000-99,999 (except for Income Fund [_]$100,000-249,999 [_]$250,000-499,999 [_]$500,000-999,999 [_]$1,000,0000 or more
and Americas Government Securities Fund)
</TABLE>
Purchases of Class I Shares under LOI of $1,000,000 or more are made at net
asset value and may be subject to a contingent deferred sales charge as
described in the prospectus.
Purchases made within the last 90 days will be included as part of your LOI.
Please write in your Account Number(s)____________ ____________ ____________
- --------------------------------------------------------------------------------
F. CUMULATIVE QUANTITY DISCOUNT -- APPLICABLE TO CLASS I SHARES ONLY
Class I shares may be purchased at the offering price applicable to the total
of (a) the dollar amount then being purchased plus (b) the amount equal to
the cost or current value (whichever is higher) of the combined holdings of
the purchaser, his or her spouse, and their children under age 21, of Class I
and Class II shares of funds in the Franklin Templeton Group as stated in the
prospectus. In order for this cumulative quantity discount to be made
available, the shareholder or his or her securities dealer must notify FTI or
FTD of the total holdings in the Franklin Templeton Group each time an order
is placed. I understand that reduced sales charges will apply only to
purchases of Class I shares.
[_]I(We) own shares of more than one Fund in the Franklin Templeton Group and
qualify for the Cumulative Quantity Discount described above and in the
Prospectus.
My(Our) other Account Number(s) are ___________ ___________ _______________
- --------------------------------------------------------------------------------
8 ACCOUNT REVISION (If Applicable)
- --------------------------------------------------------------------------------
If you are using this application to revise your Account Registration, or wish
to have Distributions sent to an address other than the address on your existing
Account's Registration, a Signature Guarantee is required. Signatures of all
registered owners must be guaranteed by an "eligible guarantor" as defined in
the "How to Sell Shares of the Fund" section in the Fund's Prospectus. A Notary
Public is not an acceptable guarantor.
X________________________________________ ____________________________________
Signature(s) of Registered Account Owners Account Number(s)
X________________________________________ ____________________________________
X________________________________________
X________________________________________ ____________________________________
Signature Guarantee Stamp
NOTE: For any change in registration, please send us any outstanding
Certificates by Registered Mail.
- --------------------------------------------------------------------------------
TLGOF APP 07/95
<PAGE>
FRANKLIN TEMPLETON JAPAN FUND
THIS STATEMENT OF ADDITIONAL INFORMATION DATED AUGUST 1, 1995
, IS NOT A PROSPECTUS. IT SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS OF FRANKLIN TEMPLETON JAPAN
FUND DATED AUGUST 1, 1995 ,
WHICH MAY BE OBTAINED WITHOUT CHARGE UPON REQUEST
TO THE PRINCIPAL UNDERWRITER, FRANKLIN TEMPLETON DISTRIBUTORS, INC.,
700 CENTRAL AVENUE, P.O. BOX 33030
ST. PETERSBURG, FLORIDA 33733-8030
TOLL FREE TELEPHONE: 800/DIAL BEN
TABLE OF CONTENTS
General Information and History...................... 1
Investment Objective and Policies 1
-Investment Policies............................... 1
-Repurchase Agreements............................. 1
-Debt Securities................................... 2
-Convertible Securities............................ 4
-Futures Contracts................................. 4
-Options on Securities, Indices
and Futures...................................... 5
-Foreign Currency Hedging
Transactions......................................... 8
-Investment Restrictions........................... 9
-Additional Restrictions...........................11
-Risk Factors......................................12
-Trading Policies..................................18
-Personal Securities
Transactions.........................................18
Management of the Fund...............................19
Trustee Compensation ................................25
Principal Shareholders...............................26
Investment Management and Other
Services...........................................26
-Investment Management Agreement................... 26
-Management Fees .................................... 27
-The Investment Manager.............................. 28
-Business Manager.................................... 28
-Custodian and Transfer Agent........................ 29
-Legal Counsel....................................... 30
-Independent Accountants............................. 30
-Reports to Shareholders............................. 30
Brokerage Allocation................................... 30
Purchase, Redemption and Pricing of
Shares............................................... 34
-Ownership and Authority Disputes.......................35
-Tax-Deferred Retirement Plans..........................35
-Letter of Intent.................................... 37
-Special Net Asset Value
Purchases......................................... 38
Tax Status............................................. 39
Principal Underwriter.................................. 46
Description of Shares.................................. 48
Performance Information................................ 48
Financial Statements . . . . . . . .
. . . . . . ........................................... 51
GENERAL INFORMATION AND HISTORY
Franklin Templeton Japan Fund (the "Fund") was organized as a Delaware
business trust on October 29, 1991, and is registered under the Investment
Company Act of 1940 (the "1940 Act") as an open-end management investment
company.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT POLICIES. The investment objective and policies
of the Fund are described in the Fund's Prospectus under the
heading "General Description -- Investment Objective and
Policies."
REPURCHASE AGREEMENTS. Repurchase agreements are contracts under which
the buyer of a security simultaneously commits to resell the security to the
seller at an agreed-upon price and date. Under a repurchase agreement, the
seller is required to maintain the value of the securities subject to the
repurchase agreement at not less than their repurchase price. The investment
manager of the Fund (Templeton Investment Counsel, Inc. ("TICI" or "Investment
Manager") will monitor the value of such securities daily to determine that the
value equals or exceeds the repurchase price. Repurchase agreements may involve
risks in the event of default or insolvency of the seller, including possible
delays or restrictions upon the Fund's ability to dispose of the underlying
securities. The Fund will enter into repurchase agreements only with parties who
meet creditworthiness standards approved by the Board of Trustees, I.E., banks
or broker-dealers which have been determined by the Fund's Investment Manager to
present no serious risk of becoming involved in bankruptcy proceedings within
the time frame contemplated by the repurchase transaction.
DEBT SECURITIES. The Fund may invest in debt securities that are rated
in any rating category by Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's") or that are unrated by any rating agency. As
an operating policy, which may be changed by the Board of Trustees without
Shareholder approval, the Fund will invest no more than 5% of its assets in debt
securities rated lower than Baa by Moody's or BBB by S&P. The market value of
debt securities generally varies in response to changes in interest rates and
the financial condition of each issuer. During periods of declining interest
rates, the value of debt securities generally increases. Conversely, during
periods of rising interest rates, the value of such securities generally
declines. These changes in market value will be reflected in the Fund's net
asset value.
Bonds which are rated Baa by Moody's are considered as medium grade
obligations, I.E., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. Bonds
which are rated C by Moody's are the lowest rated class of bonds, and issues so
rated can be regarded as having
<PAGE>
extremely poor prospects of ever attaining any real investment
standing.
Bonds rated BBB by S&P are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category than in higher rated categories. Bonds rated D by S&P
are the lowest rated class of bonds, and generally are in payment default. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Although they may offer higher yields than do higher rated securities,
high risk, low rated debt securities (commonly referred to as "junk bonds") and
unrated debt securities generally involve greater volatility of price and risk
of principal and income, including the possibility of default by, or bankruptcy
of, the issuers of the securities. In addition, the markets in which low rated
and unrated debt securities are traded are more limited than those in which
higher rated securities are traded. The existence of limited markets for
particular securities may diminish the Fund's ability to sell the securities at
fair value either to meet redemption requests or to respond to a specific
economic event such as a deterioration in the creditworthiness of the issuer.
Reduced secondary market liquidity for certain low rated or unrated debt
securities may also make it more difficult for the Fund to obtain accurate
market quotations for the purposes of valuing the Fund's portfolio. Market
quotations are generally available on many low rated or unrated securities only
from a limited number of dealers and may not necessarily represent firm bids of
such dealers or prices for actual sales.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Fund to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such creditworthiness analysis than
would be the case if the Fund were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to
<PAGE>
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interest rates, for example, could
cause a decline in low rated debt securities prices because the advent of a
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of low
rated debt securities defaults, the Fund may incur additional expenses seeking
recovery.
The Fund may invest in yen-dominated bonds sold in Japan by
non-Japanese issuers ("Samurai bonds") and in dollar-denominated bonds sold in
the United States by non-U.S. issuers ("Yankee bonds"). As compared with bonds
issued in their countries of domicile, such bond issues normally carry a higher
interest rate but are less actively traded. The Fund will invest in Samurai or
Yankee bond issues only after taking into account consideration of quality and
liquidity, as well as yield. These bonds would be issued by governments which
are members of the Organization for Economic Cooperation and Development or have
AAA ratings.
The Fund may accrue and report interest income on high yield bonds,
such as zero coupon bonds or pay-in-kind securities, even though it receives no
cash interest until the security's maturity or payment date. In order to qualify
for beneficial tax treatment afforded regulated investment companies, and
generally to be relieved of federal tax liabilities, the Fund must distribute
substantially all of its net income and gains to Shareholders (see "Tax Status")
generally on an annual basis. The Fund may have to dispose of portfolio
securities under disadvantageous circumstances to generate cash or leverage
itself by borrowing cash in order to satisfy the distribution requirement.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities,
including convertible debt and convertible preferred stock. Convertible
securities are fixed-income securities which may be converted at a stated price
within a specific amount of time into a specified number of shares of common
stock. These securities are usually senior to common stock in a corporation's
capital structure, but usually are subordinated to non-convertible debt
securities. In general, the value of a convertible security is the higher of its
investment value (its value as a fixed-income security) and its conversion value
(the value of the underlying shares of common stock if the security is
converted). The investment value of a convertible security generally increases
when interest rates decline and generally
<PAGE>
decreases when interest rates rise. The conversion value of a convertible
security is influenced by the value of the underlying common stock.
FUTURES CONTRACTS. The Fund may purchase and sell financial futures
contracts. Although some financial futures contracts call for making or taking
delivery of the underlying securities, in most cases these obligations are
closed out before the settlement date. The closing of a contractual obligation
is accomplished by purchasing or selling an identical offsetting futures
contract. Other financial futures contracts by their terms call for cash
settlements.
The Fund may also buy and sell index futures contracts with respect to
any stock or bond index traded on a recognized stock exchange or board of trade.
An index futures contract is a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the contract is made. The
index futures contract specifies that no delivery of the actual securities
making up the index will take place. Instead, settlement in cash must occur upon
the termination of the contract, with the settlement being the difference
between the contract price and the actual level of the index at the expiration
of the contract.
At the time the Fund purchases a futures contract, an amount of cash,
U.S. Government securities, or other highly liquid debt securities equal to the
market value of the contract will be deposited in a segregated account with the
Fund's custodian. When writing a futures contract, the Fund will maintain with
its custodian liquid assets that, when added to the amounts deposited with a
futures commission merchant or broker as margin, are equal to the market value
of the instruments underlying the contract. Alternatively, the Fund may "cover"
its position by owning the instruments underlying the contract or, in the case
of an index futures contract, owning a portfolio with a volatility substantially
similar to that of the index on which the futures contract is based, or holding
a call option permitting the Fund to purchase the same futures contract at a
price no higher than the price of the contract written by the Fund (or at a
higher price if the difference is maintained in liquid assets with the Fund's
custodian).
OPTIONS ON SECURITIES, INDICES AND FUTURES. The Fund may write covered
put and call options and purchase put and call options on securities, securities
indices and futures contracts that are traded on United States and foreign
exchanges and in the over-the-counter markets.
An option on a security or a futures contract is a contract that gives
the purchaser of the option, in return for the premium
<PAGE>
paid, the right to buy a specified security or futures contract (in the case of
a call option) or to sell a specified security or futures contract (in the case
of a put option) from or to the writer of the option at a designated price
during the term of the option. An option on a securities index gives the
purchaser of the option, in return for the premium paid, the right to receive
from the seller cash equal to the difference between the closing price of the
index and the exercise price of the option.
The Fund may write a call or put option only if the option is
"covered." A call option on a security or futures contract written by the Fund
is "covered" if the Fund owns the underlying security or futures contract
covered by the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option on a security
or futures contract is also covered if the Fund holds a call on the same
security or futures contract and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written or (b) is greater than the exercise price
of the call written if the difference is maintained by the Fund in cash or high
grade U.S. Government securities in a segregated account with its custodian. A
put option on a security or futures contract written by the Fund is "covered" if
the Fund maintains cash or fixed-income securities with a value equal to the
exercise price in a segregated account with its custodian, or else holds a put
on the same security or futures contract and in the same principal amount as the
put written where the exercise price of the put held is equal to or greater than
the exercise price of the put written.
The Fund will cover call options on securities indices that it writes
by owning securities whose price changes, in the opinion of the Fund's
Investment Manager, are expected to be similar to those of the index, or in such
other manner as may be in accordance with the rules of the exchange on which the
option is traded and applicable laws and regulations. Nevertheless, where the
Fund covers a call option on a securities index through ownership of securities,
such securities may not match the composition of the index. In that event, the
Fund will not be fully covered and could be subject to risk of loss in the event
of adverse changes in the value of the index. The Fund will cover put options on
securities indices that it writes by segregating assets equal to the option's
exercise price, or in such other manner as may be in accordance with the rules
of the exchange on which the option is traded and applicable laws and
regulations.
<PAGE>
The Fund will receive a premium from writing a put or call option,
which increases its gross income in the event the option expires unexercised or
is closed out at a profit. If the value of a security, index or futures contract
on which the Fund has written a call option falls or remains the same, the Fund
will realize a profit in the form of the premium received (less transaction
costs) that could offset all or a portion of any decline in the value of the
portfolio securities being hedged. If the value of the underlying security,
index or futures contract rises, however, the Fund will realize a loss in its
call option position, which will reduce the benefit of any unrealized
appreciation in its investments. By writing a put option, the Fund assumes the
risk of a decline in the underlying security, index or futures contract. To the
extent that the price changes of the portfolio securities being hedged correlate
with changes in the value of the underlying security, index or futures contract,
writing covered put options will increase the Fund's losses in the event of a
market decline, although such losses will be offset in part by the premium
received for writing the option.
The Fund may also purchase put options to hedge its investments against
a decline in value. By purchasing a put option, the Fund will seek to offset a
decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not increase, its
loss will be limited to the premium paid for the option plus related transaction
costs. The success of this strategy will depend, in part, on the accuracy of the
correlation between the changes in value of the underlying security, index or
futures contract and the changes in value of the Fund's security holdings being
hedged.
The Fund may purchase call options on individual securities or futures
contracts to hedge against an increase in the price of securities or futures
contracts that it anticipates purchasing in the future. Similarly, the Fund may
purchase call options on a securities index to attempt to reduce the risk of
missing a broad market advance, or an advance in an industry or market segment,
at a time when the Fund holds uninvested cash or short-term debt securities
awaiting investment. When purchasing call options, the Fund will bear the risk
of losing all or a portion of the premium paid if the value of the underlying
security, index or futures contract does not rise.
There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. Trading could be interrupted, for
example, because of supply and demand imbalances arising from a lack of either
buyers or sellers, or the options exchange could suspend trading after the price
has
<PAGE>
risen or fallen more than the maximum specified by the exchange. Although the
Fund may be able to offset to some extent any adverse effects of being unable to
liquidate an option position, it may experience losses in some cases as a result
of such inability. The value of over-the-counter options purchased by the Fund,
as well as the cover for options written by the Fund, are considered not readily
marketable and are subject to the Fund's limitation on investments in securities
that are not readily marketable. See "Investment Objective and Policies
- --Investment Restrictions."
FOREIGN CURRENCY HEDGING TRANSACTIONS. In order to hedge against
foreign currency exchange rate risks, the Fund may enter into forward foreign
currency exchange contracts and foreign currency futures contracts, as well as
purchase put or call options on foreign currencies, as described below. The Fund
may also conduct its foreign currency exchange transactions on a spot (I.E.,
cash) basis at the spot rate prevailing in the foreign currency exchange market.
The Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund from adverse
changes in the relationship between the U.S. dollar and foreign currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. The Fund may enter into a
forward contract, for example, when it enters into a contract for the purchase
or sale of a security denominated in a foreign currency in order to "lock in"
the U.S. dollar price of the security. In addition, for example, when the Fund
believes that a foreign currency may suffer or enjoy a substantial movement
against another currency, it may enter into a forward contract to sell an amount
of the former foreign currency approximating the value of some or all of its
portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." Because in
connection with the Fund's forward foreign currency transactions, an amount of
its assets equal to the amount of the purchase will be held aside or segregated
to be used to pay for the commitment, the Fund will always have cash, cash
equivalents or high quality debt securities available in an amount sufficient to
cover any commitments under these contracts or to limit any potential risk. The
segregated account will be marked-to-market on a daily basis. While these
contracts are not presently regulated by the Commodity Futures Trading
Commission ("CFTC"), the CFTC may in the future assert authority to regulate
forward contracts. In such event, the Fund's ability to utilize forward
contracts in the manner set forth above may be restricted. Forward contracts may
limit potential gain from a positive change in the relationship between the U.S.
dollar and foreign
<PAGE>
currencies. Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not engaged in such contracts.
The Fund may purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the dollar value of
foreign portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge up to the amount of the premium received, and the Fund could be required
to purchase or sell foreign currencies at disadvantageous exchange rates,
thereby incurring losses. The purchase of an option on foreign currency may
constitute an effective hedge against fluctuation in exchange rates, although,
in the event of rate movements adverse to its position, the Fund may forfeit the
entire amount of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by the Fund will be traded on U.S. and
foreign exchanges or over-the-counter.
The Fund may enter into exchange-traded contracts for the purchase or
sale for future delivery of foreign currencies ("foreign currency futures").
This investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of
the Fund's portfolio securities or adversely affect the prices of securities
that the Fund intends to purchase at a later date. The successful use of foreign
currency futures will usually depend on the ability of the Fund's Investment
Manager to forecast currency exchange rate movements correctly. Should exchange
rates move in an unexpected manner, the Fund may not achieve the anticipated
benefits of foreign currency futures or may realize losses.
INVESTMENT RESTRICTIONS. The Fund has imposed upon itself certain
investment restrictions which, together with its investment objective, are
fundamental policies except as otherwise indicated. No changes in the Fund's
investment objective or these investment restrictions can be made without the
approval of the Shareholders of the Fund. For this purpose, the provisions of
the 1940 Act require the affirmative vote of the lesser of either (1) 67% or
more of the Fund's Shares present at a Shareholders' meeting at which more than
50% of the outstanding Shares are present or represented by proxy or (2) more
than 50% of the outstanding Shares of the Fund.
In accordance with these restrictions, the Fund will not:
1. Invest in real estate or mortgages on real estate
(although the Fund may invest in marketable securities
<PAGE>
secured by real estate or interests therein); invest in other
open-end investment companies (except in connection with a
merger, consolidation, acquisition or reorganization); invest
in interests (other than publicly issued debentures or equity
stock interests) in oil, gas or other mineral exploration or
development programs; or purchase or sell commodity contracts
(except futures contracts as described in the Fund's
Prospectus).
2. Purchase any security (other than obligations of the U.S.
Government, its agencies or instrumentalities) if, as a
result, as to 75% of the Fund's total assets (a) more than 5%
of the Fund's total assets would then be invested in
securities of any single issuer, or (b) the Fund would then
own more than 10% of the voting securities of any single
issuer.
3. Act as an underwriter; issue senior securities except as set
forth in investment restriction 6 below; or purchase on margin
or sell short, except that the Fund may make margin payments
in connection with futures, options and currency transactions.
4. Loan money, except that the Fund may (a) purchase a portion of
an issue of publicly distributed bonds, debentures, notes and
other evidences of indebtedness, (b) enter into repurchase
agreements and (c) lend its portfolio securities.
5. Borrow money, except that the Fund may borrow money from banks
in an amount not exceeding 33-1/3% of the value of its total
assets (including the amount borrowed).
6. Mortgage, pledge or hypothecate its assets (except as may be
necessary in connection with permitted borrowings); provided,
however, this does not prohibit escrow, collateral or margin
arrangements in connection with its use of options, futures
contracts and options on future contracts.
7. Invest more than 25% of its total assets in a single industry.
For purposes of this restriction, (a) a foreign government is
considered to be an industry, and (b) all supra-national
entities, in the aggregate, are considered to be an industry.
8. Participate on a joint or a joint and several basis in
any trading account in securities. (See "Investment
Objective and Policies -- Trading Policies" as to
<PAGE>
transactions in the same securities for the Fund and/or other
mutual funds and clients with the same or affiliated
advisers.)
If the Fund receives from an issuer of securities held by the Fund
subscription rights to purchase securities of that issuer, and if the Fund
exercises such subscription rights at a time when the Fund's portfolio holdings
of securities of that issuer would otherwise exceed the limits set forth in
Investment Restrictions 2 or 7 above, it will not constitute a violation if,
prior to receipt of securities upon exercise of such rights, and after
announcement of such rights, the Fund has sold at least as many securities of
the same class and value as it would receive on exercise of such rights.
ADDITIONAL RESTRICTIONS. The Fund has adopted the following additional
restrictions which are not fundamental and which may be changed without
Shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy. Under these restrictions, the Fund may not:
1. Purchase or retain securities of any company in which Trustees
or officers of the Fund or of the Fund's Investment Manager,
individually owning more than 1/2 of 1% of the securities of
such company, in the aggregate own more than 5% of the
securities of such company.
2. Invest more than 5% of the value of its total assets in
securities of issuers which have been in continuous operation
less than three years.
3. Invest more than 5% of its net assets in warrants whether or
not listed on the New York or American Stock Exchanges, and
more than 2% of its net assets in warrants that are not listed
on those exchanges. Warrants acquired in units or attached to
securities are not included in this restriction.
4. Purchase or sell real estate limited partnership
interests.
5. Purchase or sell interests in oil, gas and mineral
leases (other than securities of companies that invest
in or sponsor such programs).
6. Invest in any company for the purpose of exercising
control or management.
7. Purchase more than 10% of a company's outstanding
voting securities.
<PAGE>
8. Invest more than 15% of the Fund's total assets in
securities that are not readily marketable (including
repurchase agreements maturing in more than seven days
and over-the-counter options purchased by the Fund),
including no more than 10% of its total assets in
restricted securities. Rule 144A securities are not
subject to the 10% limitation on restricted securities,
although the Fund will limit its investment in all
restricted securities, including 144A securities, to
15% of its total assets.
9. Invest more than 5% of the value of its total assets in
securities of issuers domiciled in Eastern Europe and in
non-European members of the Commonwealth of Independent
States.
Whenever any investment restriction states a maximum percentage of the
Fund's assets which may be invested in any security or other property, it is
intended that such maximum percentage limitation be determined immediately after
and as a result of the Fund's acquisition of such security or property. Assets
are calculated as described in the Fund's Prospectus under the heading "How to
Buy Shares of the Fund."
RISK FACTORS. The Fund's concentration of its investments in Japan
means the Fund will be more dependent on the investment considerations discussed
below and may be more volatile than a fund which is broadly diversified
geographically. Additional factors relating to Japan include the following.
In the past, Japan has experienced earthquakes and tidal waves of
varying degrees of severity, and the risks of such phenomena, and damage
resulting therefrom, continue to exist. Japan also has one of the world's
highest population densities. Approximately 45% of the total population of Japan
is concentrated in the metropolitan areas of Tokyo, Osaka and Nagoya.
Since the end of World War II, Japan has experienced significant
economic development and among the free industrial nations of the world is
second only to the United States in terms of gross national product ("GNP").
During the years of high economic growth in the 1960's and early 1970's, the
expansion was based on the development of heavy industries such as steel and
shipbuilding. In the 1970's Japan moved into assembly industries which employ
high levels of technology and consume relatively low quantities of resources,
and since then has become a major producer of electrical and electronic products
and automobiles. Since the mid-1980's Japan has become a major creditor nation,
with extensive trade surpluses. With the exception of periods associated with
the oil crises of 1974 and 1978, Japan has
<PAGE>
generally experienced very low levels of inflation. There is, of
course, no guarantee these favorable trends will continue.
The Government of Japan has called for a transformation of the economy
away from its high dependency on export-led growth towards greater stimulation
of the domestic economy. In addition, there has been a move toward more economic
liberalization and discounting in the consumer sector. These shifts have already
begun to take place and may cause disruption in the Japanese economy.
Japan's economy is a market economy in which industry and commerce are
predominantly privately owned and operated. However, the Government is involved
in establishing and meeting objectives for developing the economy and improving
the standard of living of the Japanese people.
Japan has historically depended on oil for most of its energy
requirements. Almost all of its oil is imported, with the majority imported from
the Middle East. In the past, oil prices have had a major impact on the domestic
economy, but more recently Japan has worked to reduce its dependence on oil by
encouraging energy conservation and use of alternative fuels. In addition, a
restructuring of industry, with emphasis shifting from basic industries to
processing and assembly-type industries, has contributed to the reduction of oil
consumption. However, there is no guarantee this favorable trend will continue.
Overseas trade is important to Japan's economy. Japan has few natural
resources and must export to pay for its imports of these basic requirements.
Japan's principal export markets are the United States, Canada, the United
Kingdom, Germany, Australia, Korea, Taiwan, Hong Kong and the People's Republic
of China. The principal sources of its imports are the United States, South East
Asia and the Middle East. Because of the concentration of Japanese exports in
highly visible products such as automobiles, machine tools and semiconductors
and the large trade surpluses ensuing therefrom, Japan has had difficult
relations with its trading partners, particularly the United States, where the
trade imbalance is the greatest. It is possible trade sanctions or other
protectionist measures could impact Japan adversely in both the short- and
long-term.
Although under normal circumstances at least 80% of the Fund's assets
will be invested in equity securities of Japanese issuers, the Fund has the
right to purchase securities in any foreign country, developed or developing.
Investors should consider carefully the substantial risks involved in securities
of companies and governments of foreign nations, including Japan, which are in
addition to the usual risks inherent in domestic investments.
<PAGE>
There may be less publicly available information about foreign
companies comparable to the reports and ratings published about companies in the
United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to United States
companies. Foreign markets have substantially less volume than the New York
Stock Exchange ("NYSE") and securities of some foreign companies are less liquid
and more volatile than securities of comparable United States companies. The
Tokyo Stock Exchange has a large volume of trading and the Investment Manager
believes that securities of companies traded in Japan are generally as liquid as
securities of comparable U.S. companies. Commission rates in foreign countries,
which are generally fixed rather than subject to negotiation as in the United
States, are likely to be higher. In many foreign countries there is less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the United States.
Investments in companies domiciled in developing countries may be
subject to potentially higher risks than investments in developed countries.
These risks include (i) less social, political and economic stability; (ii) the
small current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict the
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property; (vi) the absence,
until recently in certain Eastern European countries, of a capital market
structure or market-oriented economy; and (vii) the possibility that recent
favorable economic developments in Eastern Europe may be slowed or reversed by
unanticipated political or social events in such countries.
Investments in Eastern European countries may involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there can be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, the Fund could lose a substantial
portion of any investments it has made in the affected countries. Further, no
accounting standards exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into U.S. dollars, the
conversion rates may be artificial to the actual market values and may be
adverse to Fund Shareholders.
<PAGE>
Investing in Russian companies involves a high degree of risk and
special considerations not typically associated with investing in the United
States securities markets, and should be considered highly speculative. Such
risks include: (1) delays in settling portfolio transactions and risk of loss
arising out of Russia's system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgment; (3) pervasiveness of corruption and crime in the
Russian economic system; (4) currency exchange rate volatility and the lack of
available currency hedging instruments; (5) higher rates of inflation (including
the risk of social unrest associated with periods of hyper-inflation); (6)
controls on foreign investment and local practices disfavoring foreign investors
and limitations on repatriation of invested capital, profits and dividends, and
on the Fund's ability to exchange local currencies for U.S. dollars; (7) the
risk that the government of Russia or other executive or legislative bodies may
decide not to continue to support the economic reform programs implemented since
the dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the dissolution of the Soviet Union; (8) the
financial condition of Russian companies, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (9)
dependency on exports and the corresponding importance of international trade;
(10) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (11) possible
difficulty in identifying a purchaser of securities held by the Fund due to the
underdeveloped nature of the securities markets.
There is little historical data on Russian securities markets because
they are relatively new and a substantial proportion of securities transactions
in Russia are privately negotiated outside of stock exchanges. Because of the
recent formation of the securities markets as well as the underdeveloped state
of the banking and telecommunications systems, settlement, clearing and
registration of securities transactions are subject to significant risks.
Ownership of shares (except where shares are held through depositories that meet
the requirements of the 1940 Act) is defined according to entries in the
company's share register and normally evidenced by extracts from the register or
by formal share certificates. However, there is no central registration system
for shareholders and these services are carried out by the companies themselves
or by registrars located throughout Russia. These registrars are not necessarily
subject to effective state supervision and it is possible for the Fund to lose
its registration through fraud, negligence or even mere
<PAGE>
oversight. While the Fund will endeavor to ensure that its interest continues to
be appropriately recorded either itself or through a custodian or other agent
inspecting the share register and by obtaining extracts of share registers
through regular confirmations, these extracts have no legal enforceability and
it is possible that subsequent illegal amendment or other fraudulent act may
deprive the Fund of its ownership rights or improperly dilute its interests. In
addition, while applicable Russian regulations impose liability on registrars
for losses resulting from their errors, it may be difficult for the Fund to
enforce any rights it may have against the registrar or issuer of the securities
in the event of loss of share registration. Furthermore, although a Russian
public enterprise with more than 1,000 shareholders is required by law to
contract out the maintenance of its shareholder register to an independent
entity that meets certain criteria, in practice this regulation has not always
been strictly enforced. Because of this lack of independence, management of a
company may be able to exert considerable influence over who can purchase and
sell the company's shares by illegally instructing the registrar to refuse to
record transactions in the share register. This practice may prevent the Fund
from investing in the securities of certain Russian companies deemed suitable by
the Investment Manager. Further, this also could cause a delay in the sale of
Russian company securities by the Fund if a potential purchaser is deemed
unsuitable, which may expose the Fund to potential loss on the investment.
The Fund endeavors to buy and sell foreign currencies on as favorable a
basis as practicable. Some price spread on currency exchange (to cover service
charges) may be incurred, particularly when the Fund changes investments from
one country to another or when proceeds of the sale of Shares in U.S. dollars
are used for the purchase of securities in foreign countries. Also, some
countries may adopt policies which would prevent the Fund from transferring cash
out of the country or withhold portions of interest and dividends at the source.
There is the possibility of expropriation, nationalization or confiscatory
taxation, withholding and other foreign taxes on income or other amounts,
foreign exchange controls (which may include suspension of the ability to
transfer currency from a given country), default in foreign government
securities, political or social instability, or diplomatic developments which
could affect investments in securities of issuers in foreign nations.
The Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments. Through the flexible policy of the Fund, the
Investment Manager endeavors to avoid unfavorable consequences and to take
advantage of
<PAGE>
favorable developments in particular nations where from time to time it places
the Fund's investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
The Trustees consider at least annually the likelihood of the
imposition by any foreign government of exchange control restrictions which
would affect the liquidity of the Fund's assets maintained with custodians in
foreign countries, as well as the degree of risk from political acts of foreign
governments to which such assets may be exposed. The Trustees also consider the
degree of risk involved through the holding of portfolio securities in domestic
and foreign securities depositories (see "Investment Management and Other
Services -- Custodian and Transfer Agent"). However, in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Fund's Investment
Manager, any losses resulting from the holding of portfolio securities in
foreign countries and/or with securities depositories will be at the risk of the
Shareholders. No assurance can be given that the Trustees' appraisal of the
risks will always be correct or that such exchange control restrictions or
political acts of foreign governments will not occur.
The Fund's ability to reduce or eliminate its futures and related
options positions will depend upon the liquidity of the secondary markets for
such futures and options. The Fund intends to purchase or sell futures and
related options only on exchanges or boards of trade where there appears to be
an active secondary market, but there is no assurance that a liquid secondary
market will exist for any particular contract or at any particular time. Use of
futures and options for hedging may involve risks because of imperfect
correlations between movements in the prices of the futures or options and
movements in the prices of the securities being hedged. Successful use of
futures and related options by the Fund for hedging purposes also depends upon
the Investment Manager's ability to predict correctly movements in the direction
of the market, as to which no assurance can be given.
Additional risks may be involved with the Fund's special investment
techniques, including loans of portfolio securities and borrowing for investment
purposes. These risks are described under the heading "Investment Techniques" in
the Prospectus.
<PAGE>
TRADING POLICIES. The Investment Manager and its affiliated companies
serve as investment advisers to other investment companies and private clients.
Accordingly, the respective portfolios of these funds and clients may contain
many or some of the same securities. When any two or more of these funds or
clients are engaged simultaneously in the purchase or sale of the same security,
the transactions are placed for execution in a manner designed to be equitable
to each party. The larger size of the transaction may affect the price of the
security and/or the quantity which may be bought or sold for each party. If the
transaction is large enough, brokerage commissions in certain countries may be
negotiated below those otherwise chargeable.
Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other remuneration in
connection therewith, may be effected between any of these funds, or between
funds and private clients, under procedures adopted pursuant to Rule 17a-7 under
the 1940 Act.
PERSONAL SECURITIES TRANSACTIONS. Access persons of the Franklin
Templeton Group, as defined in SEC Rule 17(j) under the 1940 Act, who are
employees of Franklin Resources, Inc. or their subsidiaries, are permitted to
engage in personal securities transactions subject to the following general
restrictions and procedures: (1) the trade must receive advance clearance from a
Compliance Officer and must be completed within 24 hours after this clearance;
(2) copies of all brokerage confirmations must be sent to the Compliance Officer
and within 10 days after the end of each calendar quarter, a report of all
securities transactions must be provided to the Compliance Officer; (3) in
addition to items (1) and (2), access persons involved in preparing and making
investment decisions must file annual reports of their securities holdings each
January and also inform the Compliance Officer (or other designated personnel)
if they own a security that is being considered for a fund or other client
transactions or if they are recommending a security in which they have an
ownership interest for purchases or sale by a fund or other client.
MANAGEMENT OF THE FUND
The name, address, principal occupation during the past five years and
other information with respect to each of the Trustees and Principal Executive
Officers of the Fund are as follows:
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
HARRIS J. ASHTON
Metro Center
1 Station Place
Stamford, Connecticut
Trustee
Chairman of the Board,
president, and chief executive
officer of General Host
Corporation (nursery and craft
centers); and a director of
RBC Holdings (U.S.A.) Inc. (a
bank holding company) and Bar-
S Foods. Age 63.
NICHOLAS F. BRADY*
The Bullitt House
102 East Dover Street
Easton, Maryland
Trustee
Chairman of Templeton Emerging Markets Investment Trust PLC; chairman of
Templeton Latin America Investment Trust PLC; chairman of Darby Overseas
Investments, Ltd. (an investment firm) (1994- present); director of the Amerada
Hess Corporation, Capital Cities/ABC, Inc., Christiana Companies, and the H.J.
Heinz Company; Secretary of the United States Department of the Treasury
(1988-January 1993); and chairman of the board of Dillion, Read & Co. Inc.
(investment banking) prior thereto. Age 65.
F. BRUCE CLARKE
19 Vista View Blvd.
Thornhill, Ontario
Trustee
Retired; formerly, credit
adviser, National Bank of
Canada, Toronto. Age 85.
HASSO-G VON DIERGARDT-NAGLO
R.R. 3
Stouffville, Ontario
Trustee
Farmer; and president of
Clairhaven Investments, Ltd.
and other private investment
companies. Age 79.
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
MARTIN L. FLANAGAN*
777 Mariners Island Blvd.
San Mateo, California
Trustee and Vice President Senior vice president, treasurer and chief
financial officer of Franklin Resources, Inc.; director and executive vice
president of Templeton Investment Counsel, Inc.; director, president and chief
executive officer of Templeton Global Investors, Inc.; president or vice
president of various Templeton Funds; director or trustee of six Templeton
Funds; accountant, Arthur Andersen & Company (1982-1983); and a member of the
International Society of Financial Analysts and the American Institute of
Certified Public Accountants.
Age 35.
S. JOSEPH FORTUNATO
200 Campus Drive
Florham Park, New Jersey
Trustee Member of the law firm of Pitney, Hardin, Kipp & Szuch; and a director
of General Host Corporation. Age 63.
JOHN Wm. GALBRAITH
360 Central Avenue
Suite 1300
St. Petersburg, Florida
Trustee
President of Galbraith
Properties, Inc. (personal
investment company); director
of Gulfwest Banks, Inc. (bank
holding company) (1995-
present) and Mercantile Bank
(1991-present); vice chairman
of Templeton, Galbraith &
Hansberger Ltd. (1986-1992);
and chairman of Templeton
Funds Management, Inc. (1974-
1991). Age 73.
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
ANDREW H. HINES, JR.
150 2nd Avenue N.
St. Petersburg, Florida
Trustee Consultant for the Triangle Consulting Group; chairman of the board
and chief executive officer of Florida Progress Corporation (1982-February 1990)
and director of various of its subsidiaries; chairman and director of Precise
Power Corporation; executive-in-residence of Eckerd College (1991-present); and
a director of Checkers Drive-In Restaurants, Inc. Age 72.
CHARLES B. JOHNSON*
777 Mariners Island Blvd.
San Mateo, California
Chairman of the Board and
Vice President
President, chief executive officer, and director of Franklin Resources, Inc.;
chairman of the board and director of Franklin Advisers, Inc. and Franklin
Templeton Distributors, Inc.; director of Franklin Administrative Services,
Inc., General Host Corporation, and Templeton Global Investors, Inc.; and
officer and director, trustee or managing general partner, as the case may be,
of most other subsidiaries of Franklin and of 55 of the investment companies in
the Franklin Templeton Group. Age 62.
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
CHARLES E. JOHNSON*
777 Mariners Island Blvd.
San Mateo, California
Trustee and President Senior vice president and director of Franklin
Resources, Inc.; senior vice president of Franklin Templeton Distributors, Inc.;
president and director of Franklin Institutional Service Corporation and
Templeton Worldwide, Inc.; chairman of the board of Templeton Investment
Counsel, Inc.; vice president and/or director, as the case may be, for some of
the subsidiaries of Franklin Resources, Inc.; and an officer and/or director or
trustee, as the case may be, of 24 of the investment companies in the Franklin
Templeton Group. Age 39.
BETTY P. KRAHMER
2201 Kentmere Parkway
Wilmington, Delaware
Trustee
Director or trustee of various civic associations; formerly, economic analyst,
U.S.
Government. Age 65.
GORDON S. MACKLIN
8212 Burning Tree Road
Bethesda, Maryland
Trustee
Chairman of White River
Corporation (information
services); director of Fund
America Enterprises Holdings,
Inc., Lockheed Martin
Corporation, MCI Communications Corporation, Fusion Systems Corporation,
Infovest Corporation, and Medimmune, Inc.; formerly, chairman of Hambrecht and
Quist Group; director of H&Q Healthcare Investors; and president of the National
Association of Securities Dealers, Inc. Age 67.
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH FUND DURING PAST FIVE YEARS
FRED R. MILLSAPS
2665 N.E. 37th Drive
Fort Lauderdale, Florida
Trustee
Manager of personal
investments (1978-present); chairman and chief executive officer of Landmark
Banking Corporation (1969-1978); financial vice president of Florida Power and
Light (1965- 1969); vice president of The Federal Reserve Bank of Atlanta
(1958-1965); and a director of various other business and nonprofit
organizations. Age 66.
MARK G. HOLOWESKO
Lyford Cay
Nassau, Bahamas
Vice President President and director of Templeton, Galbraith & Hansberger
Ltd.; director of global equity research for Templeton Worldwide, Inc.;
president or vice president of the Templeton Funds; formerly, investment
administrator with Roy West Trust Corporation (Bahamas) Limited (1984-1985).
Age 35.
WILLIAM HOWARD
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President Vice president of Templeton Investment Counsel, Inc.; formerly,
portfolio manager and analyst, Tennessee Consolidated Retirement System
(1986-1993). Age 37.
JOHN R. KAY
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President Vice president of the Templeton Funds; vice president and
treasurer of Templeton Global Investors,
Inc. and Templeton Worldwide,
Inc.; assistant vice president
of Franklin Templeton
Distributors, Inc.; formerly,
vice president and controller
of the Keystone Group, Inc.
Age 55.
<PAGE>
JAMES R. BAIO
500 East Broward Blvd.
Fort Lauderdale, Florida
Treasurer Certified public accountant; treasurer of the Templeton Funds;
senior vice president of Templeton Worldwide, Inc., Templeton Global Investors,
Inc., and Templeton Funds Trust Company; formerly, senior tax manager of Ernst &
Young (certified public accountants) (1977-1989). Age 40.
THOMAS M. MISTELE
700 Central Avenue
St. Petersburg, Florida
Secretary Senior vice president of Templeton Global Investors, Inc.; vice
president of Franklin Templeton Distributors, Inc.; secretary of the Templeton
Funds; formerly, attorney, Dechert Price & Rhoads (1985-1988) and Freehill,
Hollingdale & Page (1988); and judicial clerk, U.S. District Court (Eastern
District of Virginia) (1984- 1985). Age 42.
JACK L. COLLINS
700 Central Avenue
St. Petersburg, Florida
Assistant Treasurer Assistant treasurer of the Templeton Funds; assistant vice
president of Franklin Templeton Investor Services, Inc.; formerly, partner,
Grant Thornton, independent public accountants. Age 66.
JEFFREY L. STEELE
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
Partner, Dechert Price &
Rhoads. Age 49.
- --------------------------
* These are Trustees who are "interested persons" of the Fund
as that term is defined in the 1940 Act. Mr. Brady and
Franklin Resources, Inc. are limited partners of Darby
Overseas Partners, L.P. ("Darby Overseas"). Mr. Brady
established Darby Overseas in February, 1994, and is
Chairman and a shareholder of the corporate general partner
of Darby Overseas. In addition, Darby Overseas and
<PAGE>
Templeton, Galbraith & Hansberger, Ltd. are limited partners
of Darby Emerging Markets Fund, L.P.
There are no family relationships between any of the Trustees, except
that Mr. Charles B. Johnson is the father of Mr.
Charles E. Johnson.
TRUSTEE COMPENSATION
All of the Fund's Officers and Trustees also hold positions with other
investment companies in the Franklin Templeton Group. No compensation is paid by
the Fund to any officer or Trustee who is an officer, trustee or employee of the
Investment Manager or its affiliates. Each Templeton Fund pays its independent
directors and trustees and Mr. Brady an annual retainer and/or fees for
attendance at Board and Committee meetings, the amount of which is based on the
level of assets in each fund. Accordingly, the Fund currently pays the
independent Trustees and Mr. Brady an annual retainer of $100. The independent
Trustees and Mr. Brady are reimbursed for any expenses incurred in attending
meetings, paid pro rata by each Franklin Templeton Fund in which they serve. No
pension or retirement benefits are accrued as part of Fund expenses.
The following table shows the total compensation paid to the Trustees
by the Fund and by all investment companies in the Franklin Templeton Group:
<TABLE>
<CAPTION>
Number of Total Compensation
Name Aggregate Franklin Templeton from all Funds in
of Compensation Fund Boards on which Franklin Templeton
TRUSTEE FROM THE TRUST* TRUSTEE SERVES GROUP**
<S> <C> <C> <C>
Harris J. Ashton $550 54 $319,925
Nicholas F. Brady 500 23 86,124
F. Bruce Clarke 550 19 95,275
Hasso-G von Diergardt-Naglo 550 19 75,275
S. Joseph Fortunato 550 56 336,065
John Wm. Galbraith 0 22 0
Andrew H. Hines, Jr. 550 23 106,125
Betty P. Krahmer 550 23 75,275
Gordon S. Macklin 550 51 303,685
<PAGE>
Fred R. Millsaps 550 23 106,125
</TABLE>
- ---------------
* For the fiscal year ended March 31, 1995.
** For the calendar year ended December 31, 1994.
PRINCIPAL SHAREHOLDERS
As of June 30, 1995, there were176,023 Shares of the Fund outstanding,
of which no Shares were owned beneficially by any of the Trustees or Officers of
the Fund. As of June 30 , 1995, to the knowledge of management, no person owned
beneficially or of record 5% or more of the outstanding Shares of the Fund,
except Templeton Global Investors, Inc., 500 East Broward Blvd., Suite 2100,
Fort Lauderdale, Florida 33394 owned 50,410 Shares (28% of the outstanding
Shares), Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive East, 3rd
Floor, Jacksonville, Florida 32246 owned of record 68,101 Shares (38% of the
outstanding Shares), and Prudential Securities, FBO Larry Levin, 1509 Dolington
Road, Yardley, Pennsylvania 19067 owned 13,090 Shares (7% of the outstanding
Shares).
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT MANAGEMENT AGREEMENT. The Investment Manager of the Fund is
Templeton Investment Counsel, Inc., a Florida corporation with offices located
at Broward Financial Centre, Fort Lauderdale, Florida 33394-3091. The Investment
Management Agreement, dated July 28, 1994, was approved by Templeton Global
Investors, Inc., as sole Shareholder of the Fund, on June 30, 1994, and was last
approved by the Board of Trustees, including a majority of the Trustees who were
not parties to the Agreement or interested persons of any such party, at a
meeting on May 25, 1995 and will run through July 31, 1996. The Investment
Management Agreement will continue from year to year thereafter, subject to
approval annually by the Board of Trustees or by vote of a majority of the
outstanding Shares of the Fund (as defined in the 1940 Act) and also, in either
event, with the approval of a majority of those Trustees who are not parties to
the Agreement or interested persons of any such party in person at a meeting
called for the purpose of voting on such approval.
The Investment Management Agreement requires the Fund's Investment
Manager to manage the investment and reinvestment of the Fund's assets. The
Investment Manager is not required to furnish any personnel, overhead items or
facilities for the Fund, including daily pricing or trading desk facilities,
although such expenses are paid by investment advisers of some other investment
companies.
The Investment Management Agreement provides that the Fund's Investment
Manager will select brokers and dealers for execution of the Fund's portfolio
transactions consistent with the Fund's
<PAGE>
brokerage policies (see "Brokerage Allocation"). Although the services provided
by broker-dealers in accordance with the brokerage policies incidentally may
help reduce the expenses of or otherwise benefit the Investment Manager and
other investment advisory clients of the Investment Manager and of its
affiliates, as well as the Fund, the value of such services is indeterminable
and the Investment Manager's fee is not reduced by any offset arrangement by
reason thereof.
When the Investment Manager of the Fund determines to buy or sell the
same security for the Fund that the Investment Manager or one or more of its
affiliates has selected for one or more of its other clients or for clients of
its affiliates, the orders for all such securities transactions are placed for
execution by methods determined by the Investment Manager, with approval by the
Board of Trustees, to be impartial and fair, in order to seek good results for
all parties. See "Investment Objective and Policies -- Trading Policies."
Records of securities transactions of persons who know when orders are placed by
the Fund are available for inspection at least four times annually by the
Compliance Officer of the Fund so that the non-interested Trustees (as defined
in the 1940 Act) can be satisfied that the procedures are generally fair and
equitable to all parties.
The Investment Management Agreement provides that the Fund's Investment
Manager shall have no liability to the Fund, or any Shareholder of the Fund for
any error of judgment, mistake of law, or any loss arising out of any investment
or other act or omission in the performance by the Investment Manager of its
duties under the Agreement, except liability resulting from willful misfeasance,
bad faith or gross negligence on the Investment Manager's part or reckless
disregard of its duties under the Agreement. The Investment Management Agreement
will terminate automatically in the event of its assignment, and may be
terminated by the Fund any time without payment of any penalty on 60 days'
written notice, with the approval of a majority of the Trustees in office at the
time or by vote of a majority of the outstanding voting securities of the Fund
(as defined in the 1940 Act).
MANAGEMENT FEES. For its services, the Fund pays the Investment Manager
a monthly fee equal on an annual basis to 0.75% of its average daily net assets.
During the period July 28, 1994 (commencement of operations) through March 31,
1995, the Investment Manager received from the Fund fees of $4,738.
The Investment Manager will comply with any applicable state
regulations which may require it to make reimbursements to the Fund in the event
that the Fund's aggregate operating expenses, including the advisory fee, but
generally excluding interest, taxes, brokerage commissions and extraordinary
expenses, are in excess of specific applicable limitations. The strictest rule
currently applicable to the Fund is 2.5% of the first $30,000,000
<PAGE>
of net assets, 2% of the next $70,000,000 of net assets and 1.5%
of the remainder.
THE INVESTMENT MANAGER. The Investment Manager is an
indirect wholly owned subsidiary of Franklin Resources, Inc.
("Franklin"), a publicly traded company whose shares are listed
on the NYSE. Charles B. Johnson (a Trustee and officer of the
Fund), Rupert H. Johnson, Jr. and R. Martin Wiskemann are
principal shareholders of Franklin and own, respectively,
approximately 20%, 16% and 9.2% of its outstanding shares.
Messrs. Charles B. Johnson and Rupert H. Johnson, Jr. are
brothers.
BUSINESS MANAGER. Templeton Global Investors, Inc. performs
certain administrative functions as Business Manager for the
Fund, including:
o providing office space, telephone, office equipment and
supplies for the Fund;
o paying compensation of the Fund's officers for services
rendered as such;
o authorizing expenditures and approving bills for
payment on behalf of the Fund;
o supervising preparation of annual and semiannual reports to
Shareholders, notices of dividends, capital gain distributions
and tax credits, and attending to correspondence and other
special communications with individual Shareholders;
o daily pricing of the Fund's investment portfolio and preparing
and supervising publication of daily quotations of the bid and
asked prices of the Fund's Shares, earnings reports and other
financial data;
o monitoring relationships with organizations serving the
Fund, including the custodian and printers;
o providing trading desk facilities for the Fund;
o supervising compliance by the Fund with recordkeeping
requirements under the 1940 Act and regulations thereunder,
with state regulatory requirements, maintaining books and
records for the Fund (other than those maintained by the
custodian and transfer agent), and preparing and filing tax
reports other than the Fund's income tax returns;
<PAGE>
o monitoring the qualifications of tax-deferred
retirement plans providing for investment in Shares of
the Fund; and
o providing executive, clerical and secretarial help
needed to carry out these responsibilities.
For its services, the Business Manager receives a monthly fee equal on
an annual basis to 0.15% of the first $200,000,000 of the Fund's average daily
net assets, reduced to 0.135% annually of the Fund's net assets in excess of
$200,000,000, further reduced to 0.1% annually of such net assets in excess of
$700,000,000, and further reduced to 0.075% annually of such net assets in
excess of $1,200,000,000. Since the Business Manager's fee covers services often
provided by investment advisers to other funds, the Fund's combined expenses for
advisory and administrative services together may be higher than those of some
other investment companies. During the period July 28, 1994 through March 31,
1995, the Fund paid business management fees of $941.
The Business Manager is relieved of liability to the Fund for any act
or omission in the course of its performance under the Business Management
Agreement, in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties and obligations under the Agreement. The
Business Management Agreement may be terminated by the Fund at any time on 60
days' written notice without payment of penalty, provided that such termination
by the Fund shall be directed or approved by vote of a majority of the Trustees
of the Fund in office at the time or by vote of a majority of the outstanding
voting securities of the Fund, and shall terminate automatically and immediately
in the event of its assignment.
Templeton Global Investors, Inc. is a wholly owned
subsidiary of Franklin.
CUSTODIAN AND TRANSFER AGENT. The Chase Manhattan Bank, N.A. serves as
Custodian of the Fund's assets, which are maintained at the Custodian's
principal office, MetroTech Center, Brooklyn, New York 11245, and at the offices
of its branches and agencies throughout the world. The Custodian has entered
into agreements with foreign sub-custodians approved by the Trustees pursuant to
Rule 17f-5 under the 1940 Act. The Custodian, its branches and sub-custodians
generally domestically, and frequently abroad, do not actually hold certificates
for the securities in their custody, but instead have book records with domestic
and foreign securities depositories, which in turn have book records with the
transfer agents of the issuers of the securities. Compensation for the services
of the Custodian is based on a schedule of charges agreed on from time to time.
<PAGE>
Franklin Templeton Investor Services, Inc. serves as the Fund's
Transfer Agent. Services performed by the Transfer Agent include processing
purchase, transfer and redemption orders; making dividend payments, capital gain
distributions and reinvestments; and handling routine communications with
Shareholders. The Transfer Agent receives from the Fund an annual fee of $13.74
per Shareholder account plus out-of-pocket expenses. These fees are adjusted
each year to reflect changes in the Department of Labor Consumer Price Index.
LEGAL COUNSEL. Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, D.C. 20005, is legal counsel for the Fund with regard
to matters of U.S. law.
INDEPENDENT ACCOUNTANTS. The firm of McGladrey & Pullen, LLP, 555 Fifth
Avenue, New York, New York 10017, serves as independent accountants for the
Fund. Its audit services comprise examination of the Fund's financial statements
and review of the Fund's filings with the Securities and Exchange Commission
("SEC") and the Internal Revenue Service ("IRS").
REPORTS TO SHAREHOLDERS. The Fund's fiscal year ends on March 31.
Shareholders are provided at least semiannually with reports showing the Fund's
portfolio and other information, including an annual report with financial
statements audited by the independent accountants. Shareholders who would like
to receive an interim quarterly report may phone Fund Information at 1-800-DIAL
BEN.
BROKERAGE ALLOCATION
The Investment Management Agreement provides that the Investment
Manager is responsible for selecting members of securities exchanges, brokers
and dealers (such members, brokers and dealers being hereinafter referred to as
"brokers") for the execution of the Fund's portfolio transactions and, when
applicable, the negotiation of commissions in connection therewith. All
decisions and placements are made in accordance with the following principles:
1. Purchase and sale orders are usually placed with
brokers who are selected by the Fund's Investment
Manager as able to achieve "best execution" of such
orders. "Best execution" means prompt and reliable
execution at the most favorable securities price,
taking into account the other provisions hereinafter
set forth. The determination of what may constitute
best execution and price in the execution of a
securities transaction by a broker involves a number of
considerations, including, without limitation, the
overall direct net economic result to the Fund
(involving both price paid or received and any
commissions and other costs paid), the efficiency with
which the transaction is effected, the ability to
<PAGE>
effect the transaction at all where a large block is involved,
availability of the broker to stand ready to execute possibly
difficult transactions in the future, and the financial
strength and stability of the broker. Such considerations are
judgmental and are weighed by the Investment Manager in
determining the overall reasonableness of brokerage
commissions.
2. In selecting brokers for portfolio transactions, the
Investment Manager takes into account its past experience as
to brokers qualified to achieve "best execution," including
brokers who specialize in any foreign securities held by the
Fund.
3. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services are
defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "1934 Act"), for the Fund and/or other
accounts, if any, for which the Investment Manager
exercises investment discretion (as defined in Section
3(a)(35) of the 1934 Act) and, as to transactions to
which fixed minimum commission rates are not
applicable, to cause the Fund to pay a commission for
effecting a securities transaction in excess of the
amount another broker would have charged for effecting
that transaction, if the Investment Manager in making
the selection in question determines in good faith that
such amount of commission is reasonable in relation to
the value of the brokerage and research services
provided by such broker, viewed in terms of either that
particular transaction or the Investment Manager's
overall responsibilities with respect to the Fund and
the other accounts, if any, as to which it exercises
investment discretion. In reaching such determination,
the Investment Manager is not required to place or
attempt to place a specific dollar value on the
research or execution services of a broker or on the
portion of any commission reflecting either of said
services. In demonstrating that such determinations
were made in good faith, the Investment Manager shall
be prepared to show that all commissions were allocated
and paid for purposes contemplated by the Fund's
brokerage policy; that the research services provide
lawful and appropriate assistance to the Investment
Manager in the performance of its investment decision-
making responsibilities; and that the commissions paid
were within a reasonable range. The determination that
commissions were within a reasonable range shall be
based on any available information as to the level of
commissions known to be charged by other brokers on
comparable transactions, but there shall be taken into
account the Fund's policies that (i) obtaining a low
commission is deemed secondary to obtaining a favorable
<PAGE>
securities price, since it is recognized that usually it is
more beneficial to the Fund to obtain a favorable price than
to pay the lowest commission; and (ii) the quality,
comprehensiveness and frequency of research studies which are
provided for the Investment Manager are useful to the
Investment Manager in performing its advisory services under
the Investment Management Agreement with the Fund. Research
services provided by brokers to the Investment Manager are
considered to be in addition to, and not in lieu of, services
required to be performed by the Investment Manager under its
Investment Management Agreement with the Fund. Research
furnished by brokers through whom the Fund effects securities
transactions may be used by the Investment Manager for any of
its accounts, and not all such research may be used by the
Investment Manager for the Fund. When execution of portfolio
transactions is allocated to brokers trading on exchanges with
fixed brokerage commission rates, account may be taken of
various services provided by the broker, including quotations
outside the United States for daily pricing of foreign
securities held in the Fund's portfolio.
4. Purchases and sales of portfolio securities within the United
States other than on a securities exchange are executed with
primary market makers acting as principal, except where, in
the judgment of the Investment Manager, better prices and
execution may be obtained on a commission basis or from other
sources.
5. Sales of the Fund's Shares (which shall be deemed to
include also shares of other companies registered under
the 1940 Act which have either the same investment
adviser or an investment adviser affiliated with the
Investment Manager) made by a broker are one factor
among others to be taken into account in deciding to
allocate portfolio transactions (including agency
transactions, principal transactions, purchases in
underwritings or tenders in response to tender offers)
for the account of the Fund to that broker; provided
that the broker shall furnish "best execution," as
defined in paragraph 1 above, and that such allocation
shall be within the scope of the Fund's other policies
as stated above; and provided further, that in every
allocation made to a broker in which the sale of Shares
is taken into account there shall be no increase in the
amount of the commissions or other compensation paid to
such broker beyond a reasonable commission or other
compensation determined, as set forth in paragraph 3
above, on the basis of best execution alone or best
execution plus research services, without taking
account of or placing any value upon such sale of
Shares.
<PAGE>
Brokerage commissions for transactions in securities listed on the
Tokyo Stock Exchange and other Japanese securities exchanges are fixed and are
calculated based on the following table.
The following percentage points shall be applied to the purchase and
sales proceeds of each trade in stocks, warrants and subscription rights.* Other
fixed rates apply to transactions in bonds (convertible and non-convertible) and
bonds with warrants.
AMOUNT OF PURCHASE/ COST AS A PERCENTAGE OF
SALES PROCEEDS TRADE PROCEEDS
One million yen or less 1.150%
Over(Y) 1 million -(Y) 5 million 0.900% +(Y) 2,500
Over(Y) 5 million -(Y)10 million 0.700% +(Y)12,500
Over(Y)10 million -(Y)30 million 0.575% +(Y)25,000
Over(Y)30 million -(Y)50 million 0.375% +(Y)85,000
Over(Y)50 million -(Y)100 million 0.225% +(Y)160,000
Over(Y)100 million -(Y)300 million 0.200% +(Y)185,000
Over(Y)300 million -(Y)500 million 0.125% +(Y)410,000
Over(Y)500 million -(Y) 1 billion 0.100% +(Y)535,000
Over(Y) 1 billion Stocks: negotiable
(minimum (Y)1,535,000)
Others: 0.075% + (Y)785,000
* Minimum amount of brokerage commission required is 2,500 yen
for every trade.
Under the current regulations of the Tokyo Stock Exchange and the
Japanese Ministry of Finance, member and non-member firms of Japanese exchanges
are required to charge full commissions to all customers other than banks and
certain financial institutions, but members and licensed non-member firms may
confirm transactions to banks and financial institution affiliates located
outside Japan with institutional discounts on brokerage commissions. The Fund
shall avail itself of institutional discounts, if the transactions are executed
through such banks and financial institutions. Currently, the Fund is entitled
to receive such discount and the amount of brokerage commission is 80% of the
full commission. There can be no assurance that the Fund will continue to
realize the benefit of discounts from fixed commissions.
Insofar as known to management, no Trustee or officer of the Fund, nor
the Investment Manager or Principal Underwriter or any person affiliated with
either of them, has any material direct or indirect interest in any broker
employed by or on behalf of the Fund. Franklin Templeton Distributors, Inc., the
Fund's Principal Underwriter, is a registered broker-dealer, but it does not
intend to execute any purchase or sale transactions for the Fund's portfolio or
to participate in any commissions on any such transactions. During the period
July 28, 1994 (commencement of
<PAGE>
operations) through March 31, 1995, the Fund paid brokerage commissions of
$6,000. All portfolio transactions are allocated to broker-dealers only when
their prices and execution, in the judgment of the Investment Manager, are equal
to the best available within the scope of the Fund's policies. There is no fixed
method used in determining which broker-dealers receive which order or how many
orders.
PURCHASE, REDEMPTION AND PRICING OF SHARES
The Fund's Prospectus describes the manner in which the
Fund's Shares may be purchased and redeemed. See "How to Buy
Shares of the Fund" and "How to Sell Shares of the Fund."
Net asset value per Share is determined as of the scheduled closing of
the NYSE (generally 4:00 p.m., New York time), every Monday through Friday
(exclusive of national business holidays). The Fund's offices will be closed,
and net asset value will not be calculated, on those days on which the NYSE is
closed, which currently are: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close of
business in New York on each day on which the NYSE is open. Trading of European
or Far Eastern securities generally, or in a particular country or countries,
may not take place on every New York business day. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and on which the Fund's net asset value is not calculated. The Fund calculates
net asset value per Share, and therefore effects sales, redemptions and
repurchases of its Shares, as of the close of the NYSE once on each day on which
that Exchange is open. Such calculation does not take place contemporaneously
with the determination of the prices of many of the portfolio securities used in
such calculation and if events occur which materially affect the value of those
foreign securities, they will be valued at fair market value as determined by
the management and approved in good faith by the Board of Trustees.
The Board of Trustees may establish procedures under which the Fund may
suspend the determination of net asset value for the whole or any part of any
period during which (1) the NYSE is closed other than for customary weekend and
holiday closings, (2) trading on the NYSE is restricted, (3) an emergency exists
as a result of which disposal of securities owned by the Fund is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (4) for such other period as the SEC may by
order permit for the protection of the holders of the Fund's Shares.
<PAGE>
OWNERSHIP AND AUTHORITY DISPUTES. In the event of disputes involving
multiple claims of ownership or authority to control a Shareholder's account,
the Fund has the right (but has no obligation) to: (1) freeze the account and
require the written agreement of all persons deemed by the Fund to have a
potential property interest in the account, prior to executing instructions
regarding the account; or (2) interplead disputed funds or accounts with a court
of competent jurisdiction. Moreover, the Fund may surrender ownership of all or
a portion of an account to the IRS in response to a Notice of Levy.
In addition to the special purchase plans described in the Prospectus,
the following special purchase plans also are available.
TAX-DEFERRED RETIREMENT PLANS. The Fund offers its
Shareholders the opportunity to participate in the following
types of retirement plans:
o For individuals whether or not covered by other
qualified plans;
o For simplified employee pensions;
o For employees of tax-exempt organizations; and
o For corporations, self-employed individuals and
partnerships.
Capital gains and income received by the foregoing plans generally are
exempt from taxation until distribution from the plans. Investors considering
participation in any such plan should review specific tax laws relating thereto
and should consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan. Additional information,
including the fees and charges with respect to all of these plans, is available
upon request to the Principal Underwriter. No distribution under a retirement
plan will be made until Franklin Templeton Funds Trust Company ("FTTC") receives
the participant's election on IRS Form W-4P (available on request from FTTC),
and such other documentation as it deems necessary, as to whether or not U.S.
income tax is to be withheld from such distribution.
INDIVIDUAL RETIREMENT ACCOUNT (IRA). All individuals (whether or not
covered by qualified private or governmental retirement plans) may purchase
Shares of the Fund pursuant to an IRA. However, contributions to an IRA by an
individual who is covered by a qualified private or governmental plan may not be
tax-deductible depending on the individual's income. Custodial services for IRAs
are available through FTTC. Disclosure statements summarizing certain aspects of
IRAs are furnished to all persons investing in such accounts, in accordance with
IRS regulations.
<PAGE>
SIMPLIFIED EMPLOYEE PENSIONS (SEP-IRA). For employers who wish to
establish a simplified form of employee retirement program investing in Shares
of the Fund, there are available Simplified Employee Pensions invested in IRA
Plans. Details and materials relating to these plans will be furnished upon
request to the Principal Underwriter.
RETIREMENT PLAN FOR EMPLOYEES OF TAX-EXEMPT ORGANIZATIONS (403(B)).
Employees of public school systems and certain types of charitable organizations
may enter into a deferred compensation arrangement for the purchase of Shares of
the Fund without being taxed currently on the investment. Contributions which
are made by the employer through salary reduction are excludable from the gross
income of the employee. Such deferred compensation plans, which are intended to
qualify under Section 403(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), are available through the Principal Underwriter.
Custodial services are provided by FTTC.
QUALIFIED PLAN FOR CORPORATIONS, SELF-EMPLOYED INDIVIDUALS AND
PARTNERSHIPS. For employers who wish to purchase Shares of the Fund in
conjunction with employee retirement plans, there is a prototype master plan
which has been approved by the IRS. A "Section 401(k) plan" is also available.
FTTC furnishes custodial services for these plans. For further details,
including custodian fees and plan administration services, see the master plan
and related material which is available from the Principal Underwriter.
LETTER OF INTENT. Purchasers who intend to invest $50,000 or more in
Shares of the Fund or Class I Shares of any other fund in the Franklin Group of
Funds and the Templeton Family of Funds, except Templeton Capital Accumulator
Fund, Inc., Templeton Variable Annuity Fund, Templeton Variable Products Series
Fund, Franklin Valuemark Funds and Franklin Government Securities Trust (the
"Franklin Templeton Funds"), within 13 months (whether in one lump sum or in
installments, the first of which may not be less than 5% of the total intended
amount and each subsequent installment not less than $25 unless the investor is
a qualifying employee benefit plan (the "Benefit Plan"), including automatic
investment and payroll deduction plans), and to beneficially hold the total
amount of such Shares fully paid for and outstanding simultaneously for at least
one full business day before the expiration of that period, should execute a
Letter of Intent ("LOI") on the form provided in the Shareholder Application in
the Fund's Prospectus. Payment for not less than 5% of the total intended amount
must accompany the executed LOI unless the investor is a Benefit Plan. Except
for purchases of Shares by a Benefit Plan, those Shares purchased with the first
5% of the intended amount stated in the LOI will be held as "Escrowed Shares"
for as long as the LOI remains unfulfilled. Although the Escrowed Shares are
registered in the investor's name, his full ownership of them is conditional
upon fulfillment of the LOI. No Escrowed Shares can be redeemed by the investor
for any purpose
<PAGE>
until the LOI is fulfilled or terminated. If the LOI is terminated for any
reason other than fulfillment, the Transfer Agent will redeem that portion of
the Escrowed Shares required and apply the proceeds to pay any adjustment that
may be appropriate to the sales commission on all Shares (including the Escrowed
Shares) already purchased under the LOI and apply any unused balance to the
investor's account. The LOI is not a binding obligation to purchase any amount
of Shares, but its execution will result in the purchaser paying a lower sales
charge at the appropriate quantity purchase level. A purchase not originally
made pursuant to an LOI may be included under a subsequent LOI executed within
90 days of such purchase. In this case, an adjustment will be made at the end of
13 months from the effective date of the LOI at the net asset value per Share
then in effect, unless the investor makes an earlier written request to the
Principal Underwriter upon fulfilling the purchase of Shares under the LOI. In
addition, the aggregate value of any Shares purchased prior to the 90-day period
referred to above may be applied to purchases under a current LOI in fulfilling
the total intended purchases under the LOI. However, no adjustment of sales
charges previously paid on purchases prior to the 90-day period will be made.
If an LOI is executed on behalf of a benefit plan (such plans are
described under "How to Buy Shares of the Fund -- Net Asset Value Purchases" in
the Prospectus), the level and any reduction in sales charge for these employee
benefit plans will be based on actual plan participation and the projected
investments in the Franklin Templeton Funds under the LOI. Benefit Plans are not
subject to the requirement to reserve 5% of the total intended purchase, or to
any penalty as a result of the early termination of a plan, nor are Benefit
Plans entitled to receive retroactive adjustments in price for investments made
before executing LOIs.
SPECIAL NET ASSET VALUE PURCHASES. As discussed in the Prospectus under
"How to Buy Shares of the Fund -- ^ Net Asset Value Purchases," certain
categories of investors may purchase Shares of the Fund at net asset value
(without a front-end or contingent deferred sales charge). Franklin Templeton
Distributors, Inc. ("FTD") or one of its affiliates may make payments, out of
its own resources, to securities dealers who initiate and are responsible for
such purchases, as indicated below. FTD may make these payments in the form of
contingent advance payments, which may require reimbursement from the securities
dealers with respect to certain redemptions made within 12 months of the
calendar month following purchase, as well as other conditions, all of which may
be imposed by an agreement between FTD, or its affiliates, and the securities
dealer.
The following amounts will be paid by FTD or one of its affiliates, out
of its own resources, to securities dealers who initiate and are responsible for
(i) purchases of most equity and
<PAGE>
fixed-income Franklin Templeton Funds made at net asset value by certain
designated retirement plans (excluding IRA and IRA rollovers): 1.00% on sales of
$1 million but less than $2 million, plus 0.80% on sales of $2 million but less
than $3 million, plus 0.50% on sales of $3 million but less than $50 million,
plus 0.25% on sales of $50 million but less than $100 million, plus 0.15% on
sales of $100 million or more; and (ii) purchases of most fixed-income Franklin
Templeton Funds made at net asset value by non-designated retirement plans:
0.75% on sales of $1 million but less than $2 million, plus 0.60% on sales of $2
million but less than $3 million, plus 0.50% on sales of $3 million but less
than $50 million, plus 0.25% on sales of $50 million but less than $100 million,
plus 0.15% on sales of $100 million or more. These payment breakpoints are reset
every 12 months for purposes of additional purchases. With respect to purchases
made at net asset value by certain trust companies and trust departments of
banks and certain retirement plans of organizations with collective retirement
plan assets of $10 million or more, FTD, or one of its affiliates, out of its
own resources, may pay up to 1% of the amount invested.
Under agreements with certain banks in Taiwan, Republic of China, the
Fund's Shares are available to such banks' discretionary trust funds at net
asset value. The banks may charge service fees to their customers who
participate in the discretionary trusts. Pursuant to agreements, a portion of
such service fees may be paid to FTD, or an affiliate of FTD to help defray
expenses of maintaining a service office in Taiwan, including expenses related
to local literature fulfillment and communication facilities.
TAX STATUS
The following discussion summarizes certain U.S. Federal tax
considerations incident to an investment in the Fund.
The Fund intends to qualify as a regulated investment company under the
Code. To so qualify, the Fund must, among other things: (a) derive at least 90%
of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities and gains from the sale or other disposition of foreign currencies,
or other income (including gains from options, futures contracts and forward
contracts) derived with respect to the Fund's business of investing in stocks,
securities or currencies; (b) derive less than 30% of its gross income from the
sale or other disposition of the following assets held for less than three
months: (i) stock and securities, (ii) options, futures and forward contracts
(other than options, futures and forward contracts on foreign currencies), and
(iii) foreign currencies (and options, futures and forward contracts on foreign
currencies) which are not directly related to the Fund's principal business of
investing in stocks and securities (or options and futures with respect to stock
or securities); (c)
<PAGE>
diversify its holdings so that, at the end of each quarter, (i) at least 50% of
the value of the Fund's total assets is represented by cash and cash items, U.S.
Government securities, securities of other regulated investment companies, and
other securities, with such other securities limited in respect of any one
issuer to an amount not greater in value than 5% of the Fund's total assets and
to not more than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of the Fund's total assets is invested in
the securities (other than U.S. Government securities or securities of other
regulated investment companies) of any one issuer or of any two or more issuers
that the Fund controls and that are determined to be engaged in the same
business or similar or related businesses; and (d) distribute at least 90% of
its investment company taxable income (which includes, among other items,
dividends, interest and net short-term capital gains in excess of net long-term
capital losses) each taxable year.
The Treasury Department is authorized to issue regulations providing
that foreign currency gains that are not directly related to the Fund's
principal business of investing in stock or securities (or options and futures
with respect to stock or securities) will be excluded from the income which
qualifies for purposes of the 90% gross income requirement described above. To
date, however, no regulations have been issued.
The status of the Fund as a regulated investment company does not
involve government supervision of management or of its investment practices or
policies. As a regulated investment company, the Fund generally will be relieved
of liability for U.S. Federal income tax on that portion of its net investment
income and net realized capital gains which it distributes to its Shareholders.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement also are subject to a nondeductible 4% excise tax. To
prevent application of the excise tax, the Fund intends to make distributions in
accordance with the calendar year distribution requirement.
Dividends of net investment income and net short-term capital gains are
taxable to Shareholders as ordinary income. Distributions of net capital gains
(the excess of net long-term capital gains over net short-term capital losses)
designated by the Fund as capital gain dividends are taxable to Shareholders as
long-term capital gains, regardless of the length of time the Fund's Shares have
been held by a Shareholder. Generally dividends and distributions are taxable to
Shareholders, whether received in cash or reinvested in Shares of the Fund. Any
distributions that are not from the Fund's investment company taxable income or
net capital gain may be characterized as a return of capital to Shareholders or,
in some cases, as capital gain. Shareholders will be notified annually as to the
Federal tax status of dividends and distributions they receive and any tax
withheld thereon.
<PAGE>
Distributions by the Fund reduce the net asset value of the Fund's
Shares. Should a distribution reduce the net asset value below a Shareholder's
cost basis, the distribution nevertheless would be taxable to the Shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implication of
buying Shares just prior to a distribution by the Fund. The price of Shares
purchased at that time includes the amount of the forthcoming distribution, but
the distribution will generally be taxable to them.
Certain of the debt securities acquired by the Fund may be treated as
debt securities that were originally issued at a discount. Original issue
discount can generally be defined as the difference between the price at which a
security was issued and its stated redemption price at maturity. Although no
cash income is actually received by the Fund, original issue discount that
accrues on a debt security in a given year generally is treated for Federal
income tax purposes as interest and, therefore, such income would be subject to
the distribution requirements of the Code.
Some of the debt securities may be purchased by the Fund at a discount
which exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for Federal income tax purposes.
The gain realized on the disposition of any taxable debt security having market
discount generally will be treated as ordinary income to the extent it does not
exceed the accrued market discount on such debt security. Generally, market
discount accrues on a daily basis for each day the debt security is held by the
Fund at a constant rate over the time remaining to the debt security's maturity
or, at the election of the Fund, at a constant yield to maturity which takes
into account the semiannual compounding of interest.
The Fund may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. Under the PFIC rules, an "excess distribution" received
with respect to PFIC stock is treated as having been realized ratably over the
period during which the Fund held the PFIC stock. The Fund itself will be
subject to tax on the portion, if any, of the excess distribution that is
allocated to the Fund's holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in such
prior taxable years) even though the Fund distributes the corresponding income
to Shareholders. Excess distributions include any gain from the sale of PFIC
stock as well as certain distributions from a PFIC. All excess distributions are
taxable as ordinary income.
<PAGE>
The Fund may be able to elect alternative tax treatment with respect
to PFIC stock. Under an election that currently may be available, the Fund
generally would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether any distributions
are received from the PFIC. If this election is made, the special rules,
discussed above, relating to the taxation of excess distributions, would not
apply. In addition, another election may be available that would involve marking
to market the Fund's PFIC shares at the end of each taxable year (and on certain
other dates prescribed in the Code), with the result that unrealized gains are
treated as though they were realized. If this election were made, tax at the
Fund level under the PFIC rules would generally be eliminated, but the Fund
could, in limited circumstances, incur nondeductible interest charges. The
Fund's intention to qualify annually as a regulated investment company may limit
its elections with respect to PFIC shares.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject the Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to Shareholders, and which will be taxed to Shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC stock.
Income received by the Fund from sources within foreign countries may
be subject to withholding and other income or similar taxes imposed by such
countries. If more than 50% of the value of the Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, the Fund
will be eligible and intends to elect to "pass through" to the Fund's
Shareholders the amount of foreign taxes paid by the Fund. Pursuant to this
election, a Shareholder will be required to include in gross income (in addition
to taxable dividends actually received) his pro rata share of the foreign taxes
paid by the Fund, and will be entitled either to deduct (as an itemized
deduction) his pro rata share of foreign income and similar taxes in computing
his taxable income or to use it as a foreign tax credit against his U.S. Federal
income tax liability, subject to limitations. No deduction for foreign taxes may
be claimed by a Shareholder who does not itemize deductions, but such a
Shareholder may be eligible to claim the foreign tax credit (see below). Each
Shareholder will be notified within 60 days after the close of the Fund's
taxable year whether the foreign taxes paid by the Fund will "pass through" for
that year.
Generally, a credit for foreign taxes is subject to the
limitation that it may not exceed the Shareholder's U.S. tax
attributable to his foreign source taxable income. For this
purpose, if the pass-through election is made, the source of the
Fund's income flows through to its Shareholders. With respect to
<PAGE>
the Fund, gains from the sale of securities will be treated as derived from U.S.
sources and certain currency fluctuation gains, including fluctuation gains from
foreign-currency denominated debt securities, receivables and payables, will be
treated as ordinary income derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income (as
defined for purposes of the foreign tax credit), including the foreign source
passive income passed through by the Fund. Shareholders may be unable to claim a
credit for the full amount of their proportionate share of the foreign taxes
paid by the Fund. Foreign taxes may not be deducted in computing alternative
minimum taxable income and the foreign tax credit can be used to offset only 90%
of the alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If the Fund is not eligible
to make the election to "pass through" to its Shareholders its foreign taxes,
the foreign income taxes it pays generally will reduce investment company
taxable income and the distributions by the Fund will be treated as United
States source income.
Certain options, futures and foreign currency forward contracts in
which the Fund may invest are "section 1256 contracts." Gains or losses on
section 1256 contracts generally are considered 60% long-term and 40% short-term
capital gains or losses ("60/40"); however, foreign currency gains or losses (as
discussed below) arising from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts held by the Fund at the
end of each taxable year (and on certain other dates as prescribed under the
Code) are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized.
Generally, the hedging transactions undertaken by the Fund may result
in "straddles" for U.S. Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund. In addition,
losses realized by the Fund on positions that are part of the straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which the losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the tax consequences to the Fund of hedging transactions are
not entirely clear. The hedging transactions may increase the amount of
short-term capital gain realized by the Fund which is taxed as ordinary income
when distributed to Shareholders.
The Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the Fund makes any of the elections, the
amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the
<PAGE>
elections may operate to accelerate the recognition of gains or losses from the
affected straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to Shareholders and which will be taxed to Shareholders as ordinary
income or long-term capital gain may be increased or decreased as compared to a
fund that did not engage in such hedging transactions.
Requirements relating to the Fund's tax status as a regulated
investment company may limit the extent to which the Fund will be able to engage
in transactions in options, futures and foreign currency forward contracts.
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time the Fund accrues income or
other receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time the Fund actually collects such receivables or
pays such liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain financial contracts and options, gains or losses
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as "section 988" gains and losses, may increase or decrease the amount of
the Fund's net investment income to be distributed to its Shareholders as
ordinary income. For example, fluctuations in exchange rates may increase the
amount of income that the Fund must distribute in order to qualify for treatment
as a regulated investment company and to prevent application of an excise tax on
undistributed income. Alternatively, fluctuations in exchange rates may decrease
or eliminate income available for distribution. If section 988 losses exceed
other net investment income during a taxable year, the Fund would not be able to
make ordinary dividend distributions, or distributions made before the losses
were realized would be recharacterized as return of capital to Shareholders for
Federal income tax purposes, rather than as an ordinary dividend, reducing each
Shareholder's basis in his Fund Shares, or as a capital gain.
Upon the sale or exchange of his Shares, a Shareholder will realize a
taxable gain or loss depending upon his basis in the Shares. Such gain or loss
will be treated as capital gain or loss if the Shares are capital assets in the
Shareholder's hands, and generally will be long-term if the Shareholder's
holding period for the Shares is more than one year and generally otherwise will
be short-term. Any loss realized on a sale or exchange will be disallowed to the
extent that the Shares disposed of are replaced (including replacement through
the
<PAGE>
reinvesting of dividends and capital gain distributions in the Fund) within a
period of 61 days beginning 30 days before and ending 30 days after the
disposition of the Shares. In such a case, the basis of the Shares acquired will
be adjusted to reflect the disallowed loss. Any loss realized by a Shareholder
on the sale of the Fund's Shares held by the Shareholder for six months or less
will be treated for Federal income tax purposes as a long-term capital loss to
the extent of any distributions of long-term capital gains received by the
Shareholder with respect to such Shares.
In some cases, Shareholders will not be permitted to take sales charges
into account for purposes of determining the amount of gain or loss realized on
the disposition of their Shares. This prohibition generally applies where (1)
the Shareholder incurs a sales charge in acquiring the stock of a regulated
investment company, (2) the stock is disposed of before the 91st day after the
date on which it was acquired, and (3) the Shareholder subsequently acquires
shares of the same or another regulated investment company and the otherwise
applicable sales charge is reduced or eliminated under a "reinvestment right"
received upon the initial purchase of shares of stock. In that case, the gain or
loss recognized will be determined by excluding from the tax basis of the Shares
exchanged all or a portion of the sales charge incurred in acquiring those
Shares. This exclusion applies to the extent that the otherwise applicable sales
charge with respect to the newly acquired Shares is reduced as a result of
having incurred a sales charge initially. Sales charges affected by this rule
are treated as if they were incurred with respect to the stock acquired under
the reinvestment right. This provision may be applied to successive acquisitions
of stock.
The Fund generally will be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividends paid, capital gain
distributions, and redemption proceeds to Shareholders if (1) the Shareholder
fails to furnish the Fund with the Shareholder's correct taxpayer identification
number or social security number and to make such certifications as the Fund may
require, (2) the IRS notifies the Shareholder or the Fund that the Shareholder
has failed to report properly certain interest and dividend income to the IRS
and to respond to notices to that effect, or (3) when required to do so, the
Shareholder fails to certify that he is not subject to backup withholding. Any
amounts withheld may be credited against the Shareholder's Federal income tax
liability.
Ordinary dividends and taxable capital gain distributions declared in
October, November, or December with a record date in such month and paid during
the following January will be treated as having been paid by the Fund and
received by Shareholders on December 31 of the calendar year in which declared,
rather than the calendar year in which the dividends are actually received.
<PAGE>
Distributions also may be subject to state, local and foreign taxes.
U.S. tax rules applicable to foreign investors may differ significantly from
those outlined above. This discussion does not purport to deal with all of the
tax consequences applicable to Shareholders. Shareholders are advised to consult
their own tax advisers for details with respect to the particular tax
consequences to them of an investment in the Fund.
PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc. ("FTD" or the
"Principal Underwriter"), P.O. Box 33030, St. Petersburg, Florida
33733-8030, toll free telephone (800) 237-0738, is the Principal
Underwriter of the Fund's Shares. FTD is a wholly owned
subsidiary of Franklin.
The Fund, pursuant to Rule 12b-1 under the 1940 Act, has adopted a
Distribution Plan (the "Plan"). Under the Plan, the Fund may reimburse the
Principal Underwriter or others quarterly (subject to a limit of 0.35% per annum
of the Fund's average daily net assets) for costs and expenses incurred by FTD
or others in connection with any activity which is primarily intended to result
in the sale of the Fund's Shares. Payments to FTD or others could be for various
types of activities, including (1) payments to broker-dealers who provide
certain services of value to the Fund's Shareholders (sometimes referred to as a
"trail fee"); (2) reimbursement of expenses relating to selling and servicing
efforts or of organizing and conducting sales seminars; (3) payments to
employees or agents of the Principal Underwriter who engage in or support
distribution of Shares; (4) payments of the costs of preparing, printing and
distributing prospectuses and reports to prospective investors and of printing
and advertising expenses; (5) payment of dealer commissions and wholesaler
compensation in connection with sales of the Fund's Shares exceeding $1 million
(on which the Fund imposes no initial sales charge) and interest or carrying
charges in connection therewith; and (6) such other similar services as the
Fund's Board of Trustees determines to be reasonably calculated to result in the
sale of Shares. Under the Plan, the costs and expenses not reimbursed in any one
given quarter (including costs and expenses not reimbursed because they exceed
0.35% of the Fund's average daily net assets) may be reimbursed in subsequent
quarters or years.
During the fiscal year ended March 31, 1995, FTD incurred costs and
expenses (including advanced commissions) of $5,649 in connection with
distribution of the Fund's Shares. Unreimbursed expenses, which amounted to
$3,446 as of March 31, 1995, may be reimbursed by the Fund during the fiscal
year ending March 31, 1996 or in subsequent years. In the event that the Plan is
terminated, the Trust will not be liable to FTD for any unreimbursed expenses
that have been carried forward from previous months or years. During the fiscal
year ended March 31,
<PAGE>
1995, FTD spent, with respect to the Fund, the following amounts: compensation
to dealers, $665, sales promotion, $ -0-, sales materials, $ -0-, printing,
$4,867, advertising, $ -0-; and wholesaler commissions, $117.
The Distribution Agreement provides that the Principal Underwriter will
use its best efforts to maintain a broad and continuous distribution of the
Fund's Shares among bona fide investors and may sign selling agreements with
responsible dealers, as well as sell to individual investors. The Shares are
sold only at the Offering Price in effect at the time of sale, and the Fund
receives not less than the full net asset value of the Shares sold. The discount
between the Offering Price and the net asset value of the Fund's Shares may be
retained by the Principal Underwriter or it may reallow all or any part of such
discount to dealers. During the fiscal year ended March 31, 1995, FTD retained
such discount of $5,220 or approximately 15.32% of the gross commissions on
sales of Shares of the Fund.
The Distribution Agreement provides that the Fund shall pay the costs
and expenses incident to registering and qualifying its Shares for sale under
the Securities Act of 1933 and under the applicable blue sky laws of the
jurisdictions in which the Principal Underwriter desires to distribute such
Shares, and for preparing, printing and distributing prospectuses and reports to
Shareholders. The Principal Underwriter pays the cost of
printing additional copies of the prospectus and reports to Shareholders used
for selling purposes. (The Fund pays the costs of preparation, set-up and
initial supply of its prospectus for existing Shareholders.)
The Distribution Agreement is subject to renewal from year to year in
accordance with the provisions of the 1940 Act and terminates automatically in
the event of its assignment. The Distribution Agreement may be terminated
without penalty by either party upon 60 days' written notice to the other,
provided termination by the Fund shall be approved by the Board of Trustees or a
majority (as defined in the 1940 Act) of the Shareholders. The Principal
Underwriter is relieved of liability for any act or omission in the course of
its performance of the Distribution Agreement, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations.
FTD is the principal underwriter for the other Templeton Funds.
DESCRIPTION OF SHARES
<PAGE>
The Trust Instrument provides that the holders of not less than
two-thirds of the outstanding Shares of the Fund may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding Shares of the
Fund.
The Shares have non-cumulative voting rights so that the holders of a
plurality of the Shares voting for the election of Trustees at a meeting at
which 50% of the outstanding Shares are present can elect all the Trustees and
in such event, the holders of the remaining Shares voting for the election of
Trustees will not be able to elect any person or persons to the Board of
Trustees.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return for the Fund will be expressed in terms of the
average annual compounded rate of return for periods in excess of one year or
the total return for periods less than one year of a hypothetical investment in
the Fund over periods of one, five, or ten years (up to the life of the Fund)
calculated pursuant to the following formula: P(1 + T)n = ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual total return for
periods of one year or more or the total return for periods of less than one
year, n = the number of years, and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). All total
return figures reflect the deduction of the maximum initial sales charge and
deduction of a proportional share of Fund expenses on an annual basis, and
assume that all dividends and distributions are reinvested when paid. The total
return for the period from July 28, 1994 (commencement of operations) through
March 31, 1995, on an annualized basis, was -5.93 %.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) unmanaged indices so that investors may compare
the Fund's results with those of a group of unmanaged securities widely regarded
by investors as representative of the securities market in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in the Fund. Unmanaged indices may
assume the reinvestment of dividends but
<PAGE>
generally do not reflect deductions for administrative and
management costs and expenses.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objective and policies, characteristics and
quality of the portfolio and the market conditions during the given time period,
and should not be considered as a representation of what may be achieved in the
future.
From time to time, the Fund and the Investment Manager may also refer
to the following information:
(1) The Investment Manager's and its affiliates' market share of
international equities managed in mutual funds prepared or published by
Strategic Insight or a similar statistical organization.
(2) The performance of U.S. equity and debt markets relative to
foreign markets prepared or published by Morgan Stanley
Capital International or a similar financial organization.
(3) The capitalization of U.S. and foreign stock markets as
prepared or published by the International Finance
Corporation, Morgan Stanley Capital International or a similar
financial organization.
(4) The geographic distribution of the Fund's portfolio.
(5) The GNP and populations, including age characteristics, literacy rates,
foreign investment improvements due to a liberalization of securities
laws and a reduction of foreign exchange controls, and improving
communication technology, of various countries as published by various
statistical organizations.
(6) To assist investors in understanding the different returns
and risk characteristics of various investments, the Fund
may show historical returns of various investments and
published indices (E.G., Ibbotson Associates, Inc. Charts
and Morgan Stanley EAFE - Index).
(7) The major industries located in various jurisdictions as
published by the Morgan Stanley Index.
(8) Rankings by DALBAR Surveys, Inc. with respect to mutual fund
shareholder services.
(9) Allegorical stories illustrating the importance of
persistent long-term investing.
<PAGE>
(10) The Fund's portfolio turnover rate and its ranking relative
to industry standards as published by Lipper Analytical
Services, Inc. or Morningstar, Inc.
(11) A description of the Templeton organization's investment management
philosophy and approach, including its worldwide search for undervalued
or "bargain" securities and its diversification by industry, nation and
type of stocks or other securities.
(12) Quotations from the Templeton organization's founder, Sir John
Templeton,* advocating the virtues of diversification and long-term
investing, including the following:
o "Never follow the crowd. Superior performance is
possible only if you invest differently from the
crowd."
o "Diversify by company, by industry and by country."
o "Always maintain a long-term perspective."
o "Invest for maximum total real return."
o "Invest - don't trade or speculate."
o "Remain flexible and open-minded about types of
investment."
o "Buy low."
o "When buying stocks, search for bargains among quality
stocks."
o "Buy value, not market trends or the economic outlook."
o "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."
o "Do your homework or hire wise experts to help you."
o "Aggressively monitor your investments."
o "Don't panic."
o "Learn from your mistakes."
o "Outperforming the market is a difficult task."
- -------
** Sir John Templeton sold the Templeton organization to
Franklin Resources, Inc. in October, 1992 and resigned from the
Fund's Board on April 16, 1995. He is no longer involved with
the investment management process.
<PAGE>
o "An investor who has all the answers doesn't even
understand all the questions."
o "There's no free lunch."
o "And now the last principle: Do not be fearful or
negative too often."
In addition, the Fund and the Investment Manager may also refer to the
number of Shareholders in the Fund or the aggregate number of shareholders of
the Franklin Templeton Funds or the dollar amount of fund and private account
assets under management in advertising materials.
FINANCIAL STATEMENTS
The financial statements contained in the Fund's Annual Report to
Shareholders dated March 31, 1995 are incorporated herein by reference.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS: Incorporated by reference
from the Registrant's Annual Report for the period
July 28, 1994 (commencement of operations) through
March 31, 1995:
Independent Auditor's Report
Investment Portfolio as of March 31, 1995
Statement of Assets and Liabilities as of March
31, 1995
Statement of Operations for the period July 28,
1994 (commencement of operations) to March 31,
1995
Statement of Changes in Net Assets
Notes to Financial Statements
(b) EXHIBITS:
(1) Amended and Restated Trust Instrument
(2) By-laws
(3) Not applicable
(4) Not applicable
(5) Form of Investment Management Agreement
(6) Form of Distribution Agreement
(7) Not applicable
(8) Form of Custody Agreement
(9)(A) Form of Business Management Agreement
<PAGE>
(B) Form of Transfer Agent Agreement
(C) Form of Sub-Transfer Agent Services
Agreement
(D) Form of Shareholder Sub-Accounting Services
Agreement
<PAGE>
(10) Opinion and consent of counsel*
(11) Consent of independent public accountants
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15) Form of Distribution Plan
(16) Schedule showing computation of performance
quotations provided in response to Item 22
(unaudited)
(17) Power of Attorney**
(18) Assistant Secretary's Certificate pursuant
to Rule 483(b)
(27) Financial Data Schedule
- ------------------------
* Incorporated by reference to Registrant's Notice Pursuant to
Rule 24f-2 filed May 26, 1995.
** Incorporated by reference to Pre-Effective Amendment No. 2
to the Registration Statement, filed April 15, 1994.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
None.
ITEM 26. NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest, par value $0.01 per
share: shareholders as of June 30, 1995.
ITEM 27. INDEMNIFICATION
Reference is made to Article III, Section 7 and Article VII,
Section 2 of the Registrant's Agreement and Declaration of
Trust and Article VI of the By-Laws, which are filed herewith.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Agreement and Declaration of Trust or
otherwise, the Registrant
<PAGE>
is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Act and, therefore, is unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by trustees, officers or controlling
persons of the Registrant in connection with the successful
defense of any act, suit or proceeding) is asserted by such
trustees, officers or controlling persons in connection with
the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issues.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT
ADVISER AND ITS OFFICERS AND DIRECTORS
The business and other connections of Templeton
Investment Counsel, Inc. are described in Parts A and
B.
For information relating to the investment adviser's officers
and directors, reference is made to Form ADV filed under the
Investment Advisers Act of 1940 by Templeton Investment
Counsel, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Franklin Templeton Distributors, Inc.,
("Distributors") also acts as principal
underwriter of shares of Franklin Gold Fund,
Franklin Premier Return Fund, Franklin Equity
Fund, AGE High Income Fund, Inc., Franklin
Custodian Funds, Inc., Franklin Money Fund,
Franklin Templeton Money Fund, Franklin California
Tax-Free Income Fund, Inc., Franklin Federal Money
Fund, Franklin Tax-Exempt Money Fund, Franklin New
York Tax-Free Income Fund, Inc., Franklin Federal
Tax-Free Income Fund, Franklin Tax-Free Trust,
Franklin California Tax-Free Trust, Franklin New
York Tax-Free Trust, Franklin Investors Securities
Trust, Institutional Fiduciary Trust, Franklin
Balance Sheet Investment Fund, Franklin Tax-
Advantaged International Bond Fund, Franklin Tax-
Advantaged U.S. Government Securities Fund,
Franklin Tax-Advantaged High Yield Securities
Fund, Franklin Municipal Securities Trust,
Franklin Managed Trust, Franklin Strategic Series,
Franklin International Trust, Franklin Real Estate
Securities Trust, Franklin Templeton Global Trust,
<PAGE>
Templeton American Trust, Inc., Templeton Capital
Accumulator Fund, Inc., Templeton Developing Markets
Trust, Templeton Funds, Inc., Templeton Global
Investment Trust, Templeton Global Opportunities
Trust, Templeton Growth Fund, Inc., Templeton Income
Trust, Templeton Institutional Fund, Inc., Templeton
Real Estate Securities Fund, Templeton Smaller
Companies Growth Fund, Inc., Templeton Variable
Products Series Fund.
(b) The directors and officers of FTD, located at 700
Central Avenue, St. Petersburg, Florida 33701, are
as follows:
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
NAME WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C>
Charles B. Johnson Chairman of the Board Director and Vice
and Director President
Gregory E. Johnson President None
Rupert H. Johnson, Jr. Executive Vice President None
and Director
Harmon E. Burns Executive Vice President None
and Director
Edward V. McVey Senior Vice President None
Kenneth V. Domingues Senior Vice President None
Martin L. Flanagan Senior Vice President Vice President
and Treasurer
William J. Lippman Senior Vice President None
Richard C. Stoker Senior Vice President None
Charles E. Johnson Senior Vice President None
Deborah R. Gatzek Senior Vice President and None
Assistant Secretary
James K. Blinn Vice President None
Richard O. Conboy Vice President None
James A. Escobedo Vice President None
Loretta Fry Vice President None
<PAGE>
Robert N. Geppner Vice President None
Mike Hackett Vice President None
Peter Jones Vice President None
Philip J. Kearns Vice President None
Ken Leder Vice President None
Jack Lemein Vice President None
John R. McGee Vice President None
Thomas M. Mistele Vice President Secretary
Harry G. Mumford Vice President None
Vivian J. Palmieri Vice President None
Kent P. Strazza Vice President None
Susan K. Tallarico Vice President None
Leslie M. Kratter Secretary None
John R. Kay Assistant Vice President Vice President
Phillip A. Scatena Assistant Treasurer None
Karen De Bellis Assistant Treasurer None
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and rules promul-gated
thereunder are in the possession of Templeton Global
Investors, Inc., 500 East Broward Blvd., Fort
Lauderdale, Florida 33394.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
<PAGE>
(c) Registrant undertakes to call a meeting of
Shareholders for the purpose of voting upon the
question of removal of a Trustee or Trustees when
requested to do so by the holders of at least 10%
of the Registrant's outstanding shares of
beneficial interest and in connection with such
meeting to comply with the shareholder
communications provisions of Section 16(c) of the
Investment Company Act of 1940.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant certifies that it
meets all the requirements for effectiveness of the Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Petersburg, FL on the
25th day of July, 1995.
FRANKLIN TEMPLETON JAPAN FUND
By:
Charles E. Johnson*
President
*By: /S/ THOMAS M. MISTELE
Thomas M. Mistele
attorney-in-fact**
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
President and Trustee July 25, 1995
Charles E. Johnson* (Principal Executive
Officer)
Treasurer July 25, 1995
James R. Baio* (Principal Financial
and Accounting Officer)
Trustee July 25, 1995
John Wm. Galbraith
Trustee July 25, 1995
Martin L. Flanagan*
Trustee July 25, 1995
Hasso-G von Diergardt-Naglo*
Trustee July 25, 1995
F. Bruce Clarke*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Trustee July 25, 1995
Betty P. Krahmer*
Trustee July 25, 1995
Fred R. Millsaps*
Trustee July 25, 1995
Andrew H. Hines, Jr.*
Trustee July 25, 1995
Harris J. Ashton*
Trustee July 25, 1995
S. Joseph Fortunato*
Trustee July 25, 1995
Gordon S. Macklin*
Trustee July 25, 1995
Nicholas F. Brady*
</TABLE>
*By: /s/ THOMAS M. MISTELE
Thomas M. Mistele
attorney-in-fact**
- ----------------------
** Powers of attorney filed with Pre-Effective Amendment No. 2 on April 15,
1994.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS FILED WITH
POST-EFFECTIVE AMENDMENT NO. 2 TO THE
REGISTRATION STATEMENT ON FORM N-1A
FRANKLIN TEMPLETON JAPAN FUND
EXHIBIT INDEX
EXHIBIT NUMBER NAME OF EXHIBIT
( 1) Amended and Restated Trust Instrument
( 2) Bylaws
( 5) Investment Management Agreement
<PAGE>
( 6) Form of Distributions Agreement
( 8) Form of Custody Agreement
( 9)(A) Form of Business Management Agreement
(B) Form of Transfer Agent Agreement
(C) Form of Sub-Transfer Agent Services
Agreement
(D) Form of Shareholders Sub-Accounting
Services Agreement
(11) Consent of Independent Public
Accountants
(15) Form of Distribution Plan
(16) Schedule showing computation of
performance quotations provided in
response to Item 22 (unaudited)
(18) Assistant Secretary's Certificate
pursuant to Rule 483 (b)
(27) Financial Data Schedule
FRANKLIN TEMPLETON JAPAN FUND
TRUST INSTRUMENT
DATED OCTOBER 18, 1991
AMENDED AND RESTATED
OCTOBER 22, 1994
<PAGE>
FRANKLIN TEMPLETON JAPAN FUND
TABLE OF CONTENTS
Page
ARTICLE I NAME AND DEFINITIONS
Section 1.01 Name 1
Section 1.02 Definitions 1
ARTICLE II BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest 2
Section 2.02 Issuance of Shares 3
Section 2.03 Register of Shares
and Share Certificates 3
Section 2.04 Transfer of Shares 4
Section 2.05 Treasury Shares 4
Section 2.06 Establishment of Series 4
Section 2.07 Investment in the Trust 5
Section 2.08 Assets and Liabilities
of Series 5
Section 2.09 No Preemptive Rights 6
Section 2.10 No Personal
Liability of Shareholders 6
Section 2.11 Assent to Trust Instrument. 7
ARTICLE III THE TRUSTEES
Section 3.01 Management of the Trust 7
Section 3.02 Initial Trustees 8
Section 3.03 Term of Office 8
Section 3.04 Vacancies and Appointments 8
Section 3.05 Temporary Absence 9
Section 3.06 Number of Trustees 9
Section 3.07 Effect of Ending of
a Trustee's Service 9
Section 3.08 Ownership of
Assets of the Trust 9
ARTICLE IV POWERS OF THE TRUSTEES
Section 4.01 Powers 9
Section 4.02 Issuance and
Repurchase of Shares 13
Section 4.03 Trustees and
Officers as Shareholders 13
Section 4.04 Action by the Trustees 14
Section 4.05 Chairman of the Trustees 14
Section 4.06 Principal Transactions 14
ARTICLE V EXPENSES OF THE TRUST 14
<PAGE>
ARTICLE VI INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
Section 6.01 Investment Adviser 15
Section 6.02 Principal Underwriter 16
Section 6.03 Administrator 16
Section 6.04 Transfer Agent 16
Section 6.05 Parties to Contract 17
Section 6.06 Provisions and Amendments 17
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers 17
Section 7.02 Meetings 18
Section 7.03 Quorum and Required Vote 18
ARTICLE VIII CUSTODIAN
Section 8.01 Appointment and Duties 19
Section 8.02 Central Certificate System 19
ARTICLE IX DISTRIBUTIONS AND REDEMPTIONS
Section 9.01 Distributions 20
Section 9.02 Redemptions 20
Section 9.03 Determination of
Net Asset Value 21
and Valuation of Portfolio Assets
Section 9.04 Suspension of the Right
of Redemption 22
ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.01 Limitation of Liability 22
Section 10.02 Indemnification 22
Section 10.03 Shareholders 24
ARTICLE XI MISCELLANEOUS
Section 11.01 Trust Not a Partnership 24
Section 11.02 Trustee's Good Faith Action, 25
Expert Advice, No Bond or Surety
Section 11.03 Establishment of Record Dates 25
Section 11.04 Termination of Trust 25
Section 11.05 Reorganization 27
Section 11.06 Filing of Copies,
References, Headings 27
Section 11.07 Applicable Law 28
Section 11.08 Amendments 29
Section 11.09 Fiscal Year 29
Section 11.10 Name Reservation 29
Section 11.11 Provisions in Conflict
with Law 29
<PAGE>
FRANKLIN TEMPLETON JAPAN FUND
October 18, 1991
AMENDED AND RESTATED
October 22, 1994
TRUST INSTRUMENT, made and entered into by the Trustees
named hereunder;
WHEREAS, the Trustees desire to establish a business trust
for the investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property
contributed to the trust hereunder shall be held and managed in trust under this
Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.01 NAME. The name of the trust created hereby is
"Franklin Templeton Japan Fund."
SECTION 1.02 DEFINITIONS. Wherever used herein, unless
otherwise required by the context or specifically provided:
(a) "Bylaws" means the Bylaws of the Trust as adopted by
the Trustees, as amended from time to time.
(b) "Commission" has the meaning given it in the 1940 Act. "Affiliated
Person," "Assignment," "Interested Person" and "Principal Underwriter" shall
have the respective meanings given them in the 1940 Act, as modified by or
interpreted by any applicable order or orders of the Commission or any rules or
regulations adopted by or interpretive releases of the Commission thereunder.
"Majority Shareholder Vote" shall have the same meaning as the term "vote of a
majority of the outstanding voting securities" is given in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the Commission
or any rules or regulations adopted by or interpretive releases of the
Commission thereunder.
(c) "Delaware Act" refers to Chapter 38 of Title 12 of the Delaware
Code entitled "Treatment of Delaware Business Trusts," as amended from time to
time.
(d) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 9.03 hereof.
- 1 -
<PAGE>
(e) "Outstanding Shares" means those Shares shown from time to time in
the books of the Trust or its transfer agent as then issued and outstanding, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the treasury of the Trust.
(f) "Principal Underwriter" means a party, other than the
Trust, to a contract described in Section 6.02 hereof.
(g) "Series" means a series of Shares of the Trust
established in accordance with the provisions of Article II,
Section 2.06 hereof.
(h) "Shareholder" means a record owner of Outstanding
Shares of the Trust.
(i) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or class thereof shall be divided and may include fractions of Shares as
well as whole Shares.
(j) The "Trust" means Franklin Templeton Japan Fund and reference to
the Trust, when applicable to one or more Series of the Trust, shall refer to
any such Series.
(k) The "Trustees" means the person or persons who has or have signed
this Trust Instrument, so long as he or they shall continue in office in
accordance with the terms hereof, and all other persons who may from time to
time be duly qualified and serving as Trustees in accordance with the provisions
of Article III hereof and reference herein to a Trustee or to the Trustees shall
refer to the individual Trustees in their capacity as Trustees hereunder.
(l) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
(m) The "1940 Act" means the Investment Company Act of
1940, as amended from time to time.
ARTICLE II
BENEFICIAL INTEREST
SECTION 2.01 SHARES OF BENEFICIAL INTEREST. The beneficial interest in
the Trust shall be divided into such transferable Shares of one or more separate
and distinct Series or classes of a Series as the Trustees shall from time to
time create and
- 2 -
<PAGE>
establish. The number of Shares of each Series, and class thereof, authorized
hereunder is unlimited and each Share shall have a par value of $0.01. All
Shares issued hereunder, including without limitation, Shares issued in
connection with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
SECTION 2.02 ISSUANCE OF SHARES. The Trustees in their discretion may,
from time to time, without vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000th of a Share or
integral multiples thereof. The Trustees, the Principal Underwriter or any other
person the Trustees may authorize for the purpose may, in their discretion,
reject any application for the issuance of Shares.
SECTION 2.03 REGISTER OF SHARES AND SHARE CERTIFICATES. A
register shall be kept at the principal office of the Trust or an
office of the Trust's transfer agent which shall contain the
names and addresses of the Shareholders of each Series, the
number of Shares of that Series (or any class or classes thereof)
held by them respectively and a record of all transfers thereof.
As to Shares for which no certificate has been issued, such
register shall be conclusive as to who are the holders of the
Shares and who shall be entitled to receive dividends or other
distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or other distribution, nor to have notice
given to him as herein or in the Bylaws provided, until he has
given his address to the transfer agent or such officer or other
agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued
for the Shares; however, the Trustees, in their discretion, may
authorize the issuance of Share certificates and promulgate
appropriate rules and regulations as to their use.
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SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required. Upon such
delivery the transfer shall be recorded on the register of the Trust, after
which the transferee of Shares will be regarded as a Shareholder. Until such
record is made, the Shareholder of record shall be deemed to be the holder of
such Shares for all purposes hereunder and neither the Trustees nor the Trust,
nor any transfer agent or registrar nor any officer, employee or agent of the
Trust shall be affected by any notice of the proposed transfer.
SECTION 2.05 TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
SECTION 2.06 ESTABLISHMENT OF SERIES. The Trust created hereby shall
consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with any such
Series shall be held and accounted for separately from the assets of the Trust
or any other Series. The Trustees shall have full power and authority, in their
sole discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or classes thereof
into a greater or lesser number, to classify or reclassify any issued Shares or
any Series or classes thereof into one or more Series or classes of Shares, and
to take such other action with respect to the Shares as the Trustees may deem
desirable. The establishment and designation of any Series shall be effective
upon the adoption of a resolution by a majority of the Trustees setting forth
such establishment and designation and the relative rights and preferences of
the Shares of such Series. A Series may issue any number of Shares and need not
issue shares. At any time that there are no Shares outstanding of any particular
Series previously established and designated, the Trustees may by a majority
vote abolish that Series and the establishment and designation thereof.
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All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series of
the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of all distributions made with
respect to such Series. Upon redemption of his Shares, such Shareholder shall be
paid solely out of the funds and property of such Series of the Trust.
SECTION 2.07 INVESTMENT IN THE TRUST. The Trustees shall accept
investments in any Series of the Trust from such persons and on such terms as
they may from time to time authorize. At the Trustees' discretion, such
investments, subject to applicable law, may be in the form of cash or securities
in which the affected Series is authorized to invest, valued as provided in
Article IX, Section 9.03 hereof. Investments in a Series shall be credited to
each Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received or accepted as may be
determined by the Trustees; provided, however, that the Trustees may, in their
sole discretion, (a) fix the Net Asset Value per Share of the initial capital
contribution, (b) impose a sales charge upon investments in the Trust in such
manner and at such time determined by the Trustees or (c) issue fractional
Shares.
SECTION 2.08 ASSETS AND LIABILITIES OF SERIES. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever from the
same may be, shall be held and accounted for separately from the other assets of
the Trust and of every other Series and may be referred to herein as "assets
belonging to" that Series. The assets belonging to a particular Series shall
belong to that Series for all purposes, and to no other Series, subject only to
the rights of creditors of that Series. In addition, any assets, income,
earnings, profits or funds, or payments and proceeds with respect thereto, which
are not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more of the Series in such
manner as the Trustees, in their sole discretion, deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes, and such assets, income, earnings, profits or
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funds, or payments and proceeds with respect thereto, shall be assets belonging
to that Series. The assets belonging to a particular Series shall be so recorded
upon the books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging to each
particular Series shall be charged with the liabilities of that Series and all
expenses, costs, charges and reserves attributable to that Series. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees between or among any one or more of the Series in
such manner as the Trustees in their sole discretion deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Shareholders of
all Series for all purposes. Without limitation of the foregoing provisions of
this Section 2.08, but subject to the right of the Trustees in their discretion
to allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
enforceable against the assets of such Series only, and not against the assets
of the Trust generally. Notice of this contractual limitation on inter-Series
liabilities may, in the Trustees' sole discretion, be set forth in the
certificate of trust of the Trust (whether originally or by amendment) as filed
or to be filed in the Office of the Secretary of State of the State of Delaware
pursuant to the Delaware Act, and upon the giving of such notice in the
certificate of trust, the statutory provisions of Section 3804 of the Delaware
Act relating to limitations on inter-Series liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the certificate of
trust) shall become applicable to the Trust and each Series. Any person
extending credit to, contracting with or having any claim against any Series may
look only to the assets of that Series to satisfy or enforce any debt,
liability, obligation or expense incurred, contracted for or otherwise existing
with respect to that Series. No Shareholder or former Shareholder of any Series
shall have a claim on or any right to any assets allocated or belonging to any
other Series.
SECTION 2.09 NO PREEMPTIVE RIGHTS. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or the Trustees, whether of the same or other
Series.
SECTION 2.10 NO PERSONAL LIABILITY OF SHAREHOLDER. Each
Shareholder of the Trust and of each Series shall not be
personally liable for the debts, liabilities, obligations and
expenses incurred by, contracted for, or otherwise existing with
respect to, the Trust or by or on behalf of any Series. The
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Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust).
SECTION 2.11 ASSENT TO TRUST INSTRUMENT. Every Shareholder, by virtue
of having purchased a Share shall become a Shareholder and shall be held to have
expressly assented and agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
SECTION 3.01 MANAGEMENT OF THE TRUST. The Trustees shall have exclusive
and absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any foreign jurisdiction and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of this Trust Instrument, the presumption shall be
in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid power. The powers of the Trustees may
be exercised without order of or resort to any court.
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Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
In the event that less than a majority of the Trustees holding office have been
elected by Shareholders, the Trustees then in office will call a Shareholders'
meeting for the election of Trustees.
SECTION 3.02 TRUSTEES. The Trustees shall be the persons named herein.
On a date fixed by the Trustees, the Shareholders shall elect at least two (2)
but not more than fifteen (15) Trustees, as specified by the Trustees pursuant
to Section 3.06 of this Article III.
SECTION 3.03 TERM OF OFFICE. The Trustees shall hold office during the
lifetime of this Trust, and until its termination as herein provided; except (a)
that any Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified therein; (b) that any Trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired or who has died, become physically or mentally incapacitated by reason
of disease or otherwise, or is otherwise unable to serve, may be retired by
written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (d) that a Trustee may be removed at any meeting of
the Shareholders of the Trust by a vote of Shareholders owning at least
two-thirds of the Outstanding Shares.
SECTION 3.04 VACANCIES AND APPOINTMENTS. In case of the declination to
serve, death, resignation, retirement, removal, physical or mental incapacity by
reason of disease or otherwise, or a Trustee is otherwise unable to serve, or an
increase in the number of Trustees, a vacancy shall occur. Whenever a vacancy in
the Board of Trustees shall occur, until such vacancy is filled, the other
Trustees shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy shall be conclusive. In the case of an existing
vacancy, the remaining Trustees shall fill such vacancy by appointing such other
person as they in their discretion shall see fit consistent with the limitations
under the 1940 Act. Such appointment shall be evidenced by a written instrument
signed by a majority of the Trustees in office or by resolution of the Trustees,
duly adopted, which shall be recorded in the minutes of a meeting of the
Trustees, whereupon the appointment shall take effect.
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An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.04 shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder. The power to appoint a Trustee pursuant to this
section 3.04 is subject to the provisions of Section 16(a) of the 1940 Act.
SECTION 3.05 TEMPORARY ABSENCE. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any time to any
other Trustee or Trustees, provided that in no case shall less than two Trustees
personally exercise the other powers hereunder except as herein otherwise
expressly provided.
SECTION 3.06 NUMBER OF TRUSTEES. The number of Trustees shall be at
least two (2), and thereafter shall be such number as shall be fixed from time
to time by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be more than fifteen (15).
SECTION 3.07 EFFECT OF ENDING OF A TRUSTEE'S SERVICE. The declination
to serve, death, resignation, retirement, removal, incapacity, or inability of
the Trustees, or any one of them, shall not operate to terminate the trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
SECTION 3.08 OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust
and of each Series shall be held separate and apart for any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by or in the name of the Trust, or in the name
of any person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or of any Series or any right of
partition or possession thereof, but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest in
the Trust or Series. The Shares
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shall be personal property giving only the rights specifically set forth in this
Trust Instrument.
ARTICLE IV
POWERS OF THE TRUSTEES
SECTION 4.01 POWERS. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust, and to
vary the investments of any Series in accordance with the prospectus applicable
to such Series. The Trustees shall not in any way be bound or limited by present
or future laws or customs in regard to trust investments, but shall have full
authority and power to make any and all investments which they, in their sole
discretion, shall deem proper to accomplish the purpose of this Trust without
recourse to any court or other authority. Subject to any applicable limitation
in this Trust Instrument or the Bylaws of the Trust, the Trustees shall have the
power and authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by any
present or future law or custom in regard to investments by trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the assets of the Trust;
(b) To operate as and carry on the business of an
investment company, and exercise all the powers necessary and
appropriate to the conduct of such operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other Person and
to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not
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reserve that right to the Shareholders; such Bylaws shall be
deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and
terminate such agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that are
members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to any
conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder
servicing agents, or both;
(i) To set record dates in the manner provided herein or in
the Bylaws;
(j) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager, custodian,
underwriter or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the
Trust, subject to the provisions of Article XI, subsection
11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities;
(n) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the usual
practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having
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relative rights, powers and duties as they may provide consistent
with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series or
to apportion the same between or among two or more Series, provided that any
liabilities or expenses incurred by a particular Series shall be payable solely
out of the assets belonging to that Series as provided for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy
including, but not limited to, claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner provided herein;
(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or class, and to require the
redemption of the Shares of any Shareholders whose investment is less than such
minimum, or who does not satisfy any other criteria the Trustees may set from
time to time, upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the powers
of the Trustees to said committees and to adopt a committee charter providing
for such responsibilities, membership (including Trustees, officers or other
agents of the Trust therein) and any other characteristics of said committees as
the Trustees may deem proper. Notwithstanding the provisions of this Article IV,
and in addition to such provisions or any other provision of this Trust
Instrument or of the Bylaws, the Trustees may by resolution appoint a committee
consisting of less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust, as if
the acts of such committee were the acts of all the Trustees then in office,
with respect to the institution, prosecution, dismissal, settlement, review or
investigation of any action, suit or proceeding which shall be pending or
threatened to be brought before any court, administrative agency or other
adjudicatory body;
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(v) To interpret the investment policies, practices or
limitations of any Series;
(w) To establish a registered office and have a registered
agent in the state of Delaware; and
(x) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
SECTION 4.02 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
SECTION 4.03 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of Shares to
the same extent as if he were not a Trustee, officer or agent; and the Trustees
may issue and sell or cause to be issued and sold Shares to and buy such Shares
from any such person or any firm or company in which he is interested, subject
only to the general limitations herein contained as to the sale and purchase of
such Shares; and all subject to any restrictions which may be contained in the
Bylaws.
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SECTION 4.04 ACTION BY THE TRUSTEES. Except as otherwise provided
herein or in the Bylaws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of the entire number
of Trustees then in office. The Trustees may adopt Bylaws not inconsistent with
this Declaration to provide for the conduct of the business of the Trust and may
amend or repeal such Bylaws to the extent such power is not reserved to the
Shareholders.
SECTION 4.05 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint one
of their number to be Chairman of the Board of Trustees. The Chairman shall
preside at all meetings of the Trustees, shall be responsible for the execution
of policies established by the Trustees and the administration of the Trust, and
may be (but is not required to be) the chief executive, financial and/or
accounting officer of the Trust.
SECTION 4.06 PRINCIPAL TRANSACTIONS. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustee
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with any investment
adviser, administrator, distributor or transfer agent for the Trust or with any
Interested Person of such person; and the Trust may employ any such person, or
firm or company in which such person is an Interested Person, as broker, legal
counsel, registrar, investment adviser, administrator, distributor, transfer
agent, dividend disbursing agent, custodian or in any other capacity upon
customary terms.
ARTICLE V
EXPENSES OF THE TRUST
Subject to the provisions of Article II, Section 2.08 hereof, the
Trustees shall be reimbursed from the Trust estate or the assets belonging to
the appropriate Series for their expenses and disbursements, including, without
limitation, interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of shares; certain insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, distributors, custodian,
transfer agent and fund accountant; fees of pricing, interest, dividend, credit
and other reporting services; costs of membership in trade associations;
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telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining corporate
existence; costs of preparing and printing the Trust's prospectuses, statements
of additional information and shareholder reports and delivering them to
existing shareholders; expenses of meetings of shareholders and proxy
solicitations therefore; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trustees;
compensation of the Trust's officers and employees and costs of other personnel
performing services for the Trust; costs of Trustee meetings; Securities and
Exchange Commission registration fees and related expenses; state or foreign
securities laws registration fees and related expenses; and for such
non-recurring items as may arise, including litigation to which the Trust (or a
Trustee acting as such) is a party, and for all losses and liabilities by them
incurred in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the appropriate Series, or in the case of an expense
allocable to more than one Series, on the assets of each such Series, prior to
any rights or interests of the Shareholders thereto. This section shall not
preclude the Trust from directly paying any of the aforementioned fees and
expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
SECTION 6.01 INVESTMENT ADVISER. The Trustees may in their discretion,
from time to time, enter into an investment advisory contract or contracts with
respect to the Trust or any Series whereby the other party or parties to such
contract or contracts shall undertake to furnish the Trustees with such
investment advisory, statistical and research facilities and services and such
other facilities and services, if any, all upon such terms and conditions as may
be prescribed in the Bylaws or as the Trustees may in their discretion determine
(such terms and conditions not to be inconsistent with the provisions of this
Trust Instrument or of the Bylaws). Notwithstanding any other provision of this
Trust Instrument, the Trustees may authorize any investment adviser (subject to
such general or specific instructions as the Trustees may from time to time
adopt) to effect purchases, sales or exchanges of portfolio securities, other
investment instruments of the Trust, or other Trust Property on behalf of the
Trustees, or may authorize any officer, agent, or Trustee to effect such
purchases, sales or exchanges pursuant to recommendations of the investment
adviser (and all without further action by the Trustees). Any such purchases,
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sales and exchanges shall be deemed to have been authorized by
all of the Trustees.
The Trustees may, subject to the requirements of the 1940 Act,
authorize the investment adviser to employ, from time to time, one or more
sub-advisers to perform such of the acts and services of the investment adviser,
and upon such terms and conditions, as may be agreed upon between the investment
adviser and sub-adviser (such terms and conditions not to be inconsistent with
the provisions of this Trust Instrument or of the Bylaws). Any reference in this
Trust Instrument to the investment adviser shall be deemed to include such
sub-advisers, unless the context otherwise requires.
SECTION 6.02 PRINCIPAL UNDERWRITER. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares, whereby the
Trust may either agree to sell Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws); and such contract may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Trust.
SECTION 6.03 ADMINISTRATION. The Trustees may in their discretion from
time to time enter into one or more management or administrative contracts
whereby the other party or parties shall undertake to furnish the Trustees with
management or administrative services. The contract or contracts shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
SECTION 6.04 TRANSFER AGENT. The Trustees may in their discretion from
time to time enter into one or more transfer agency and Shareholder service
contracts whereby the other party or parties shall undertake to furnish the
Trustees with transfer agency and Shareholder services. The contract or
contracts shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws).
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SECTION 6.05 PARTIES TO CONTRACT. Any contract of the character
described in Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or any
contract of the character described in Article VIII hereof may be entered into
with any corporation, firm, partnership, trust or association, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered void or voidable by reason of the
existence of any relationship, nor shall any person holding such relationship be
disqualified from voting on or executing the same in his capacity as Shareholder
and/or Trustee, nor shall any person holding such relationship be liable merely
by reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VIII hereof or of
the Bylaws. The same person (including a firm, corporation, partnership, trust,
or association) may be the other party to contracts entered into pursuant to
Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or pursuant to Article
VIII hereof, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 6.05.
SECTION 6.06 PROVISIONS AND AMENDMENTS. Any contract entered into
pursuant to Sections 6.01 or 6.02 of this Article VI shall be consistent with
and subject to the requirements of Section 15 of the 1940 Act, if applicable, or
other applicable Act of Congress hereafter enacted with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 6.01 of this Article VI shall be effective
unless assented to in a manner consistent with the requirements of said Section
15, as modified by any applicable rule, regulation or order of the Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.01 VOTING POWERS. The Shareholders shall have power to vote
only (a) for the election of Trustees as provided in Article III, Sections 3.01
and 3.02 hereof, (b) for the removal of Trustees as provided in Article III,
Section 3.03(d) hereof, (c) with respect to any investment advisory contract as
provided in Article VI, Section 6.06 hereof, and (d) with respect to such
additional matters relating to the Trust as may be required by law, by this
Trust Instrument, or the Bylaws or any
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registration of the Trust with the Commission or any State, or as
the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall
be voted separately by individual Series, except (i) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual Series; and
(ii) when the Trustees have determined that the matter affects the interests of
more than one Series, then the Shareholders of all such Series shall be entitled
to vote thereon. The Trustees may also determine that a matter affects only the
interests of one or more classes of a Series, in which case any such matter
shall be voted on by such class or classes. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of trustees. Shares may be voted
in person or by proxy or in any manner provided for in the Bylaws. A proxy may
be given in writing. The Bylaws may provide that proxies may also, or may
instead, be given by any electronic or telecommunications device or in any other
manner. Notwithstanding anything else herein or in the Bylaws, in the event a
proposal by anyone other than the officers or Trustees of the Trust is submitted
to a vote of the Shareholders of one or more Series or of the Trust, or in the
event of any proxy contest or proxy solicitation or proposal in opposition to
any proposal by the officers or Trustees of the Trust, Shares may be voted only
in person or by written proxy. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required or
permitted by law, this Trust Instrument or any of the Bylaws of the Trust to be
taken by Shareholders.
SECTION 7.02 MEETINGS. A meeting of the Shareholders shall be held at
such times, on such day and at such hour as the Trustees may from time to time
determine, either at the principal office of the Trust, or at such other place,
within or without the State of Delaware, as may be designated by the Trustees,
for such purposes as may be specified by the Trustees.
SECTION 7.03 QUORUM AND REQUIRED VOTE. One-third of Shares entitled to
vote in person or by proxy shall be a quorum for the transaction of business at
a Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held, within a reasonable
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time after the date set for the original meeting, without the necessity Of
further notice. Except when a larger vote is required by law or by any provision
of this Trust Instrument or the Bylaws, a majority of the Shares voted in person
or by proxy shall decide any questions and a plurality shall elect a Trustee,
provided that where any provision of law or of this Trust Instrument permits or
requires that the holders of any Series shall vote as a Series (or that the
holders of any class shall vote as a class), then a majority of the Shares
present in person or by proxy of that Series (or class) or, if required by law,
a majority of the Shares of that Series (or class), voted on the matter in
person or by proxy shall decide that matter insofar as that Series (or class) is
concerned. Shareholders may act by unanimous written consent. Actions taken by
Series (or class) may be consented to unanimously in writing by Shareholders of
that Series (or class).
ARTICLE VIII
CUSTODIAN
SECTION 8.01 APPOINTMENT AND DUTIES. The Trustees shall at all times
employ a bank, a company that is a member of a national securities exchange, or
a trust company, each having capital, surplus and undivided profits of at least
two million dollars ($2,000,000) and is a member of the Depository Trust Company
as custodian with authority as its agent, but subject to such restrictions,
limitations and other requirements, if any, as may be contained in the Bylaws of
the Trust: (a) to hold the securities owned by the Trust and deliver the same
upon written order or oral order confirmed in writing; (b) to receive and
receipt for any moneys due to the Trust and deposit the same in its own banking
department or elsewhere as the Trustees may direct; and (c) to disburse such
funds upon orders or vouchers.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the Bylaws of the Trust.
SECTION 8.02 CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended,
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or such other person as may be permitted by the Commission, or otherwise in
accordance with the 1940 Act, pursuant to which system all securities of any
particular class or series of any issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities, provided that all such deposits shall be
subject to withdrawal only upon the order of the Trust or its custodians,
sub-custodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
SECTION 9.01 DISTRIBUTIONS.
(a) The Trustees may from time to time declare and pay dividends or
other distributions with respect to any Series. The amount of such dividends or
distributions and the payment of them and whether they are in cash or any other
Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding,
the Trustees may at any time declare and distribute a stock dividend pro rata
among the Shareholders of a particular Series, or class thereof, as of the
record date of that Series fixed as provided in Subsection 9.01(b) hereof.
SECTION 9.02 REDEMPTIONS. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof, he
may deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.02; and the Shareholder so requesting shall be
entitled to require the Series to purchase, and the Series or the principal
underwriter of the Series shall purchase his said Shares, but only at the Net
Asset Value thereof (as described in Section 9.03 of this Article IX). The
Series shall make payment for any such Shares to be redeemed, as
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aforesaid, in cash or property from the assets of that Series and payment for
such Shares shall be made by the Series or the principal underwriter of the
Series to the Shareholder of record within seven (7) days after the date upon
which the request is effective. Upon redemption, shares shall become Treasury
shares and may be re-issued from time to time.
SECTION 9.03 DETERMINATION OF NET ASSET VALUE AND VALUATION OF
PORTFOLIO ASSETS. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value shall be
determined separately for each Series and shall be determined on such days and
at such times as the Trustees may determine. Such determination shall be made
with respect to securities for which market quotations are readily available, at
the market value of such securities; and with respect to other securities and
assets, at the fair value as determined in good faith by the Trustees; provided,
however, that the Trustees, without Shareholder approval, may alter the method
of valuing portfolio securities insofar as permitted under the 1940 Act and the
rules, regulations and interpretations thereof promulgated or issued by the
Commission or insofar as permitted by any Order of the Commission applicable to
the Series. The Trustees may delegate any of their powers and duties under this
Section 9.03 with respect to valuation of assets and liabilities. The resulting
amount, which shall represent the total Net Asset Value of the particular
Series, shall be divided by the total number of shares of that Series
outstanding at the time and the quotient so obtained shall be the Net Asset
Value per Share of that Series. At any time the Trustees may cause the Net Asset
Value per Share last determined to be determined again in similar manner and may
fix the time when such redetermined value shall become effective. If, for any
reason, the net income of any Series, determined at any time, is a negative
amount, the Trustees shall have the power with respect to that Series (a) to
offset each Shareholder's pro rata share of such negative amount from the
accrued dividend account of such Shareholder, (b) to reduce the number of
Outstanding Shares of such Series by reducing the number of Shares in the
account of each Shareholder by a pro rata portion of that number of full and
fractional Shares which represents the amount of such excess negative net
income, (c) to cause to be recorded on the books of such Series an asset account
in the amount of such negative net income (provided that the same shall
thereupon become the property of such Series with respect to such Series and
shall not be paid to any Shareholder), which account may be reduced by the
amount, of dividends declared thereafter upon the Outstanding Shares of such
Series on the day such negative net income is experienced, until such asset
account is reduced to zero; (d) to combine the methods described in clauses (a)
and (b) and (c) of this sentence; or (e)
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to take any other action they deem appropriate, in order to cause (or in order
to assist in causing) the Net Asset Value per Share of such Series to remain at
a constant amount per Outstanding Share immediately after each such
determination and declaration. The Trustees shall also have the power not to
declare a dividend out of net income for the purpose of causing the Net Asset
Value per Share to be increased. The Trustees shall not be required to adopt,
but may at any time adopt, discontinue or amend the practice of maintaining the
Net Asset Value per Share of the Series at a constant amount.
SECTION 9.04 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
as permitted under the 1940 Act. Such suspension shall take effect at such time
as the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share next determined after the termination of
the suspension. In the event that any Series is divided into classes, the
provisions of this Section 9.03, to the extent applicable as determined in the
discretion of the Trustees and consistent with applicable law, may be equally
applied to each such class.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 10.01 LIMITATION OF LIABILITY. A Trustee, when acting in such
capacity, shall not be personally liable to any person other than the Trust or a
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his capacity as Trustee, provided that nothing contained herein or
in the Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder.
SECTION 10.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in
Subsection 10.02(b):
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(i) every person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a
Covered Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office or (B) not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or other
body approving the settlement; (B) by at least a majority of those
Trustees who are neither Interested Persons of the Trust nor are
parties to the matter based upon a review of readily available facts
(as opposed to a full trial-type inquiry); or (C) by written opinion of
independent legal counsel based upon a review of readily available
facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees or by independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights
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to which any Covered Person may now or hereafter be entitled, shall continue as
to a person who has ceased to be a Covered Person and shall inure to the benefit
of the heirs, executors and administrators of such a person. Nothing contained
herein shall affect any rights to indemnification to which Trust personnel,
other than Covered Persons, and other persons may be entitled by contract or
otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
Subsection 10.02(a) of this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be paid
over by him to the Trust or Series if it is ultimately determined that he is not
entitled to indemnification under this Section 10.02; provided, however, that
either (i) such Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of any such
advance payments or (iii) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under Section 10.02.
SECTION 10.03 SHAREHOLDERS. In case any Shareholder of any Series shall
be held to be personally liable solely by reason of his being or having been a
Shareholder of such Series and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives, or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled out
of the assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The Trust,
on behalf of the affected Series, shall, upon request by the Shareholder, assume
the defense of any claim made against the Shareholder for any act or obligation
of the Series and satisfy any judgment thereon from the assets of the Series.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 TRUST NOT A PARTNERSHIP. It is hereby
expressly declared that a trust and not a partnership is created
hereby; provided, however, that it is acknowledged that, for
federal tax purposes, the trust created hereby may be
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characterized as a corporation. No Trustee hereunder shall have any power to
bind personally either the Trust officers or any Shareholder. All persons
extending credit to, contracting with or having any claim against the Trust or
the Trustees shall look only to the assets of the appropriate Series or (if the
Trustees shall have yet to have established Series) of the Trust for payment
under such credit, contract or claim; and neither the Shareholders nor the
Trustees, nor any of their agents, whether past, present or future, shall be
personally liable therefor. Nothing in this Trust Instrument shall protect a
Trustee against any liability to which the Trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Trustee hereunder.
SECTION 11.02 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretion hereunder in
good faith and with reasonable care under the circumstances then prevailing
shall be binding upon everyone interested. Subject to the provisions of Article
X hereof and to Section 11.01 of this Article XI, the Trustees shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and operation of
this Trust Instrument, and subject to the provisions of Article X hereof and
Section 11.01 of this Article XI, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is obtained.
SECTION 11.03 ESTABLISHMENT OF RECORD DATES. The Trustees
may close the Share transfer books of the Trust for a period not
exceeding sixty (60) days preceding the date of any meeting of
Shareholders, or the date for the payment of any dividends or
other distributions, or the date for the allotment of rights, or
the date when any change or conversion or exchange of Shares
shall go into effect; or in lieu of closing the stock transfer
books as aforesaid, the Trustees may fix in advance a date, not
exceeding sixty (60) days preceding the date of any meeting of
Shareholders, or the date for payment of any dividend or other
distribution, or the date for the allotment of rights, or the
date when any change or conversion or exchange of Shares shall go
into effect, as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such
meeting, or entitled to receive payment of any such dividend or
other distribution, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or
exchange of Shares, and in such case such Shareholders and only
such Shareholders as shall be Shareholders of record on the date
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so fixed shall be entitled to such notice of, and to vote at, such meeting, or
to receive payment of such dividend or other distribution, or to receive such
allotment or rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any Shares on the books of the Trust after any
such record date fixed as aforesaid.
SECTION 11.04 TERMINATION OF TRUST.
(a) This Trust shall continue without limitation of time
but subject to the provisions of Subsection 11.04(b).
(b) The Trustees may, subject to a Majority Shareholder Vote of each
Series affected by the matter or, if applicable, to a Majority Shareholder Vote
of the Trust, and subject to a vote of a majority of the Trustees,
(i) sell and convey all or substantially all of the assets of
the Trust or any affected Series to another trust, partnership,
association or corporation, or to a separate series of shares thereof,
organized under the laws of any state which trust, partnership,
association or corporation is an open-end management investment company
as defined in the 1940 Act, or is a series thereof, for adequate
consideration which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or contingent, of the
Trust or any affected Series, and which may include shares of
beneficial interest, stock or other ownership interests of such trust,
partnership, association or corporation or of a series thereof; or
(ii) at any time sell and convert into money all of the
assets of the Trust or any affected Series.
Upon making reasonable provision, in the determination of the Trustees, for the
payment of all such liabilities in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) of each Series (or class) ratably among the holders of Shares
of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in Subsection 11.05(b), the Trust or any
affected Series shall terminate and the Trustees and the Trust shall be
discharged of any and all further liabilities and duties hereunder and the
right, title and interest of all parties with respect to the Trust or Series
shall be cancelled and discharged.
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Upon termination of the Trust, following completion of winding up of
its business, the Trustees shall cause a certificate of cancellation of the
Trust's certificate of trust to be filed in accordance with the Delaware Act,
which certificate of cancellation may be signed by any one Trustee.
Without limiting the generality of the foregoing, existence of the
Trust shall not be affected by sales or purchases of Shares or status of any
Shareholders.
SECTION 11.05 REORGANIZATION. The Trustees may cause (i) the Trust or
one or more of its Series to the extent consistent with applicable law to be
merged into or consolidated with another Trust or company, (ii) the Shares of
the Trust or any Series to be converted into beneficial interests in another
business trust (or series thereof) created pursuant to this Section 3 of Article
VIII, or (iii) the Shares to be exchanged under or pursuant to any state or
federal statute to the extent permitted by law. Such merger or consolidation,
Share conversion or Share exchange must be authorized by vote of a majority of
the outstanding Shares of the Trust, as a whole, or any affected Series, as may
be applicable; provided that in all respects not governed by statute or
applicable law, the Trustees shall have power to prescribe the procedure
necessary or appropriate to accomplish a sale of assets, merger or consolidation
including the power to create one or more separate business trusts to which all
or any part of the assets, liabilities, profits or losses of the Trust may be
transferred and to provide for the conversion of Shares of the Trust or any
Series into beneficial interests in such separate business trust or trusts (or
series thereof). Any agreement of merger or consolidation or certificate of
merger may be signed by a majority of Trustees and facsimile signatures conveyed
by electronic or telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, and notwithstanding anything to the contrary contained in this
Trust Instrument, an agreement of merger or consolidation approved in accordance
with this Section 11.05 may effect any amendment to the Trust Instrument or
effect the adoption of a new trust instrument of the Trust if it is the
surviving or resulting trust in the merger or consolidation.
SECTION 11.06 FILING OF COPIES, REFERENCES, HEADINGS. The
original or a copy of this Trust Instrument and of each amendment
hereof or Trust Instrument supplemental hereto shall be kept at
the office of the Trust where it may be inspected by any
Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether
or not any such amendments or supplements have been made and as
to any matters in connection with the Trust hereunder, and with
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the same effect as if it were the original, may rely on a copy certified by an
officer or Trustee of the Trust to be a copy of this Trust Instrument or of any
such amendment or supplemental Trust Instrument. In this Trust Instrument or in
any such amendment or supplemental Trust Instrument, references to this Trust
Instrument, and all expressions like "herein," "hereof" and "hereunder," shall
be deemed to refer to this Trust Instrument as amended or affected by any such
supplemental Trust Instrument. All expressions like "his", "he" and "him", shall
be deemed to include the feminine and neuter, as well as masculine, genders.
Headings are placed herein for convenience of reference only and in case of any
conflict, the text of this Trust Instrument, rather than the headings, shall
control. This Trust Instrument may be executed in any number of counterparts
each of which shall be deemed an original.
SECTION 11.07 APPLICABLE LAW. The trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
laws of said State; provided, however, that there shall not be applicable to the
Trust, the Trustees or this Trust Instrument (a) the provisions of Section 3540
of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Delaware Act) pertaining to
trusts which relate to or regulate (i) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges,
(ii) affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards of responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
"business trust", and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Delaware Act, and the absence of a specific reference herein to
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any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
SECTION 11.08 AMENDMENTS. Except as specifically provided
herein, the Trustees may, without shareholder vote, amend or
otherwise supplement this Trust Instrument by making an amendment, a Trust
Instrument supplemental hereto or an amended and restated trust instrument.
Shareholders shall have the right to vote (a) on any amendment which would
affect their right to vote granted in Section 7.01 of Article VII hereof, (b) on
any amendment to this Section 11.08, (c) on any amendment as may be required by
law or by the Trust's registration statement filed with the Commission and (d)
on any amendment submitted to them by the Trustees. Any amendment required or
permitted to be submitted to Shareholders which, as the Trustees determine,
shall affect the Shareholders of one or more Series shall be authorized by vote
of the Shareholders of each Series affected and no vote of shareholders of a
Series not affected shall be required. Notwithstanding anything else herein, any
amendment to Article X hereof shall not limit the rights to indemnification or
insurance provided therein with respect to action or omission of Covered Persons
prior to such amendment.
SECTION 11.09 FISCAL YEAR. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws, provided, however, that the Trustees
may, without Shareholder approval, change the fiscal year of the Trust.
SECTION 11.10 NAME RESERVATION. The Trustees on behalf of the Trust
acknowledge that Franklin Resources, Inc. ("FRI") has licensed to the Trust the
non-exclusive right to use the names "Franklin" and "Templeton" as part of the
name of the Trust, and has reserved the right to grant the non-exclusive use of
the names "Franklin" and "Templeton" or any derivative thereof to any other
party. In addition, FRI reserves the right to grant the non-exclusive use of the
names "Franklin" and "Templeton" to, and to withdraw such right from, any other
business or other enterprise. FRI reserves the right to withdraw from the Trust
the right to use said names "Franklin" and "Templeton" and will withdraw such
right if the Trust ceases to employ, for any reason, FRI, an affiliate or any
successor as adviser of the Trust.
SECTION 11.11 PROVISIONS IN CONFLICT WITH LAW. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting
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provision shall be deemed never to have constituted a part of this Trust
Instrument; provided, however, that such determination shall not affect any of
the remaining provisions of this Trust Instrument or render invalid or improper
any action taken or omitted prior to such determination. If any provision of
this Trust Instrument shall be held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall attach only to such
provision in such jurisdiction and shall not in any matter affect such
provisions in any other jurisdiction or any other provision of this Trust
Instrument in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this instrument as of the 22nd day of October, 1994.
/s/ JOHN M. TEMPLETON /s/ JOHN G. BENNETT, JR.
John M. Templeton John G. Bennett, Jr.
/s/ CHARLES E. JOHNSON /s/ ANDREW H. HINES, JR.
Charles E. Johnson Andrew H. Hines, Jr.
/s/ MARTIN L. FLANGAN /s/ HARRIS J. ASHTON
Martin L. Flanagan Harris J. Ashton
/s/ HASSO-O G VON DIERGARDT-NAGLO /s/ S. JOSEPH FORTUNATO
Hasso-G von Diergardt-Naglo S. Joseph Fortunato
/s/ F. BRUCE CLARKE /s/ GORDON S. MACKLIN
F. Bruce Clarke Gordon S. Macklin
/s/ BETTY P. KRAHMER /s/ NICHOLAS F. BRADY
Betty P. Krahmer Nicholas F. Brady
/s/FRED R. MILLSAPS
Fred R. Millsaps
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BYLAWS
OF
FRANKLIN TEMPLETON JAPAN FUND
AMENDED AND RESTATED
AS OF MAY 25, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - DEFINITIONS 1
ARTICLE II - OFFICES 1
Section 1. Resident Agent 1
Section 2. Offices 1
ARTICLE III - SHAREHOLDERS 2
Section 1. Meetings 2
Section 2. Notice of Meetings 2
Section 3. Record Date for Meetings
and Other Purposes 2
Section 4. Proxies 3
Section 5. Action without Meeting 4
ARTICLE IV - TRUSTEES 4
Section 1. Meetings of the Trustees 4
Section 2. Quorum and Manner of Acting 6
ARTICLE V - COMMITTEES 6
Section 1. Executive and Other Committees 6
Section 2. Meetings, Quorum and Manner of Acting 7
ARTICLE VI - OFFICERS 8
Section 1. General Provisions 8
Section 2. Term of Office and Qualifications 8
Section 3. Removal 9
Section 4. Powers and Duties of the President 9
Section 5. Powers and Duties of Vice Presidents 9
Section 6. Powers and Duties of the Treasurer 10
Section 7. Powers and Duties of the Secretary 11
Section 8. Powers and Duties of Assistant
Treasurers 11
Section 9. Powers and Duties of Assistant
Secretaries 11
Section 10. Compensation of Officers and Trustees
and Members of the Advisory Board 11
ARTICLE VII - FISCAL YEAR 12
ARTICLE VIII - SEAL 12
ARTICLE IX - WAIVERS OF NOTICE 12
<PAGE>
TABLE OF CONTENTS (continued)
PAGE
ARTICLE X - CUSTODY OF SECURITIES 13
Section 1. Employment of a Custodian 13
Section 2. Action Upon Termination of
Custodian Agreement 13
Section 3. Provisions of Custodian Agreement 14
Section 4. Central Certificate System 15
Section 5. Acceptance of Receipts in Lieu of
Certificates 15
ARTICLE XI - AMENDMENTS 16
ARTICLE XII - INSPECTION OF BOOKS 16
ARTICLE XIII - MISCELLANEOUS 17
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<PAGE>
BYLAWS
OF
FRANKLIN TEMPLETON JAPAN FUND
AMENDED AND RESTATED
AS OF MAY 25, 1995
ARTICLE I
DEFINITIONS
Any terms defined in the Trust Instrument of Franklin
Templeton Japan Fund dated October 18, 1991, as amended from time to time, shall
have the same meaning when used herein.
ARTICLE II
OFFICES
SECTION 1. RESIDENT AGENT. The Trust shall maintain a resident
agent in the State of Delaware, which agent shall initially be The Corporation
Trust Company, 30 The Green, Dover, Delaware 19901. The Trustees may designate a
successor resident agent, provided, however, that such appointment shall not
become effective until written notice thereof is delivered to the office of the
Secretary of State.
SECTION 2. OFFICES. The Trust may have its principal office
and other offices in such places within as well as without the State of Delaware
as the Trustees may from time to time determine.
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<PAGE>
ARTICLE III
SHAREHOLDERS
SECTION 1. MEETINGS. Meetings of the Shareholders shall be
held as provided in the Trust Instrument at such place within or without the
State of Delaware as the Trustees shall designate.
SECTION 2. NOTICE OF MEETINGS. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder at his address as recorded on
the register of the Trust mailed at least ten (10) days and not more than sixty
(60) days before the meeting. Only the business stated in the notice of the
meeting shall be considered at such meeting. Any adjourned meeting may be held
as adjourned without further notice. No notice need be given to any Shareholder
who shall have failed to inform the Trust of his current address or if a written
waiver of notice, executed before or after the meeting by the Shareholder or his
attorney thereunto authorized, is filed with the records of the meeting.
SECTION 3. RECORD DATE FOR MEETINGS AND OTHER
PURPOSES. For the purpose of determining the Shareholders who
are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer
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books for such period, not exceeding sixty (60) days, as the Trustees may
determine; or without closing the transfer books the Trustees may fix a date not
more than sixty (60) days prior to the date of any meeting of Shareholders or
distribution or other action as a record date for the determinations of the
persons to be treated as Shareholders of record for such purposes, subject to
the provisions of the Trust Instrument.
SECTION 4. PROXIES. At any meeting of Shareholders, any holder
of Shares entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Shareholders of record shall be entitled to
vote. Each whole share shall be entitled to one vote as to any matter on which
it is entitled by the Trust Instrument to vote, and each fractional Share shall
be entitled to a proportionate fractional vote. When any Share is held jointly
by several persons, any one of them may vote at any meeting in person or by
proxy in respect of such Share, but if more than one of them shall be present at
such meeting in person or by proxy, and such joint owners or their proxies so
present disagree as to any vote to be cast, such vote shall not be received in
respect of such Share. A proxy
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<PAGE>
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or legally incompetent, and subject to guardianship or the legal control
of any other person as regards the charge or management of such Share, he may
vote by his guardian or such other person appointed or having such control, and
such vote may be given in person or by proxy.
SECTION 5. ACTION WITHOUT MEETING. Any action which may be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of the meetings of Shareholders. Such consents shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
SECTION 1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the President,
or by any one of the Trustees, at the time being in office. Notice of
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<PAGE>
the time and place of each meeting other than regular or stated meetings shall
be given by the Secretary or an Assistant Secretary or by the officer or Trustee
calling the meeting and shall be mailed to each Trustee at least two days before
the meeting, or shall be telegraphed, cabled, or wirelessed to each Trustee at
his business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be waived by any Trustee. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A notice or waiver of notice need not
specify the purpose of any meeting. The Trustees may meet by means of a
telephone conference circuit or similar communications equipment by means of
which all persons participating in the meeting shall be deemed to have been held
at a place designated by the Trustees at the meeting. Participation in a
telephone conference meeting shall constitute presence in person at such
meeting. Any action required or permitted to be taken at any meeting of the
Trustees may be taken by the Trustees without a meeting if all the Trustees
consent to the action in writing and the written consents are filed with the
records of the Trustees' meetings. Such consents shall be treated as a vote for
all purposes.
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<PAGE>
SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the
Trustees shall be present in person at any regular or special meeting of the
Trustees in order to constitute a quorum for the transaction of business at such
meeting and (except as otherwise required by law, the Trust Instrument or these
Bylaws) the act of a majority of the Trustees present at any such meeting, at
which a quorum is present, shall be the act of the Trustees. In the absence of a
quorum, a majority of the Trustees present may adjourn the meeting from time to
time until a quorum shall be present. Notice of an adjourned meeting need not be
given.
ARTICLE V
COMMITTEES
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The Trustees by
vote of a majority of all the Trustees may elect from their own number an
Executive Committee to consist of not less than three (3) to hold office at the
pleasure of the Trustees, which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session, including
the purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to them except those
powers which by law, the Trust Instrument or these Bylaws they are prohibited
from delegating. The Trustees may also elect from their own
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<PAGE>
number other Committees from time to time, the number composing such Committees,
the powers conferred upon the same (subject to the same limitations as with
respect to the Executive Committee) and the term of membership on such
Committees to be determined by the Trustees. The Trustees may designate a
chairman of any such Committee. In the absence of such designation, the
Committee may elect its own Chairman.
SECTION 2. MEETINGS, QUORUM AND MANNER OF ACTING. The Trustees
may (1) provide for stated meetings of any Committee, (2) specify the manner of
calling and notice required for special meetings of any Committee, (3) specify
the number of members of a Committee required to constitute a quorum and the
number of members of a Committee required to exercise specified powers delegated
to such Committee, (4) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its
meetings and records of decisions taken without a meeting and cause them to be
recorded in a book designated for that purpose and kept in the Office of the
Trust.
ARTICLE VI
OFFICERS
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<PAGE>
SECTION 1. GENERAL PROVISIONS. The officers of the Trust shall
be a President, a Treasurer and a Secretary, who shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as the
business of the Trust may require, including one or more Executive Vice
Presidents, one or more Vice Presidents, one or more Assistant Secretaries, and
one or more Assistant Treasurers. The Trustees may delegate to any officer or
Committee the power to appoint any subordinate officers or agents.
SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as
otherwise provided by law, the Trust Instrument or these Bylaws, the President,
the Treasurer and the Secretary shall each hold office until his successor shall
have been duly elected and qualified, and all other officers shall hold office
at the pleasure of the Trustees. The Secretary and Treasurer may be the same
person. A Vice President and the Treasurer or Assistant Treasurer or a Vice
President and the Secretary or Assistant Secretary may be the same person, but
the offices of Vice President and Secretary and Treasurer shall not be held by
the same person. The President shall hold no other office. Except as above
provided, any two offices may be held by the same person. Any officer may be,
but none need be, a Trustee or Shareholder.
SECTION 3. REMOVAL. The Trustees, at any regular or
special meeting of the Trustees, may remove any officer without
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<PAGE>
cause, by a vote of a majority of the Trustees then in office. Any officer or
agent appointed by an officer or Committee may be removed with or without cause
by such appointing officer or Committee.
SECTION 4. POWERS AND DUTIES OF THE PRESIDENT. The President
may call meetings of the Trustees and of any Committee thereof when he deems it
necessary and shall preside at all meetings of the Shareholders. Subject to the
control of the Trustees and to the control of any Committees of the Trustees,
within their respective spheres, as provided by the Trustees, he shall at all
times exercise a general supervision and direction over the affairs of the
Trust. He shall have the power to employ attorneys and counsel for the Trust and
to employ such subordinate officers, agents, clerks and employees as he may find
necessary to transact the business of the Trust. He shall also have the power to
grant, issue, execute or sign such powers of attorney, proxies or other
documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust. The President shall have such other powers and duties as
from time to time may be conferred upon or assigned to him by the Trustees.
SECTION 5. POWERS AND DUTIES OF VICE PRESIDENTS. In
the absence or disability of the President, any Vice President
designated by the Trustees shall perform all the duties and may
exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such
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<PAGE>
other duties as may be assigned to him from time to time by the
Trustees and the President.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer
shall be the principal financial and accounting officer of the Trust. He shall
deliver all funds of the Trust which may come into his hands to such Custodian
as the Trustees may employ pursuant to Article X of these Bylaws. He shall in
general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Trustees.
SECTION 7. POWERS AND DUTIES OF THE SECRETARY. The Secretary
shall keep the minutes of all meetings of the Trustees and of the Shareholders
in proper books provided for that purpose; he shall have custody of the seal of
the Trust; he shall have charge of the Share transfer books, lists and records
unless the same are in the charge of the Transfer Agent. He shall attend to the
giving and serving of all notices by the Trust in accordance with the provisions
of these Bylaws and as required by law; and subject to these Bylaws, he shall in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Trustees.
SECTION 8. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the
absence or disability of the Treasurer, any Assistant Treasurer designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Treasurer.
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<PAGE>
Each Assistant Treasurer shall perform such other duties as from time to time
may be assigned to him by the Trustees.
SECTION 9. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the
absence or disability of the Secretary, any Assistant Secretary designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Secretary. Each Assistant Secretary shall perform such other duties as
from time to time may be assigned to him by the Trustees.
SECTION 10. COMPENSATION OF OFFICERS AND TRUSTEES AND MEMBERS
OF THE ADVISORY BOARD. Subject to any applicable provisions of the Trust
Instrument, the compensation of the officers and Trustees and members of any
Advisory Board shall be fixed from time to time by the Trustees or, in the case
of officers, by any Committee or officer upon whom such power may be conferred
by the Trustees. No officer shall be prevented from receiving such compensation
as such officer by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of
April in each year and shall end on the 31st day of March in each year,
provided, however, that the Trustees may from time to time change the fiscal
year.
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<PAGE>
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and
shall have such inscription thereon as the Trustees may from time to time
prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the Trust
Instrument or these Bylaws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been telegraphed, cabled or wirelessed for the purposes of these Bylaws when it
has been delivered to a representative of any telegraph, cable or wireless
company with instructions that it be telegraphed, cabled or wirelessed.
ARTICLE X
CUSTODY OF SECURITIES
SECTION 1. EMPLOYMENT OF A CUSTODIAN. The Trust shall place
and at all times maintain in the custody of a Custodian (including any
sub-custodian for the Custodian, which may be a foreign bank which meets
applicable requirements of law) all trusts, securities and similar investments
included in the Trust
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<PAGE>
Property. The Custodian (and any sub-custodian) shall be a bank having not less
than $2,000,000 aggregate capital, surplus and undivided profits and shall be
appointed from time to time by the Trustees, who shall fix its remuneration.
SECTION 2. ACTION UPON TERMINATION OF CUSTODIAN AGREEMENT.
Upon termination of a Custodian Agreement or inability of the Custodian to
continue to serve, the Trustees shall promptly appoint a successor custodian,
but in the event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Trustees shall call as promptly as
possible a special meeting of the Shareholders to determine whether the Trust
shall function without a custodian or shall be liquidated. If so directed by
vote of the holders of a majority of the outstanding voting securities, the
Custodian shall deliver and pay over all Trust Property held by it as specified
in such vote.
SECTION 3. PROVISIONS OF CUSTODIAN AGREEMENT. The following
provisions shall apply to the employment of a Custodian and to any contract
entered into with the Custodian so employed:
The Trustees shall cause to be delivered to the Custodian all
securities included in the Trust Property or to which the
Trust may become entitled, and shall order the same to be
delivered by the Custodian only in completion of a sale,
exchange, transfer, pledge, loan of portfolio securities to
another person, or other
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disposition thereof, all as the Trustees may generally or from
time to time require or approve or to a successor Custodian;
and the Trustees shall cause all trusts included in the Trust
Property or to which it may become entitled to be paid to the
Custodian, and shall order the same disbursed only for
investment against delivery of the securities acquired, or the
return of cash held as collateral for loans of portfolio
securities, or in payment of expenses, including management
compensation, and liabilities of the Trust, including
distributions to shareholders, or to a successor Custodian. In
connection with the Trust's purchase or sale of futures
contracts, the Custodian shall transmit, prior to receipt on
behalf of the Trust of any securities or other property, funds
from the Trust's custodian account in order to furnish to and
maintain funds with brokers as margin to guarantee the
performance of the Trust's futures obligations in accordance
with the applicable requirements of commodities exchanges and
brokers. SECTION 4. CENTRAL CERTIFICATE SYSTEM. Subject
to such rules, regulations and orders as the Commission may adopt, the Trustees
may direct the Custodian to deposit all or any part of the securities owned by
the Trust in a system for the central handling of securities established by a
national
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<PAGE>
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
SECTION 5. ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES.
Subject to such rules, regulations and orders as the Commission may adopt, the
Trustees may direct the Custodian to accept written receipts or other written
evidences indicating purchases of securities held in book-entry form in the
Federal Reserve System in accordance with regulations promulgated by the Board
of Governors of the Federal Reserve System and the local Federal Reserve Banks
in lieu of receipt of certificates representing such securities.
ARTICLE XI
AMENDMENTS
These Bylaws, or any of them, may be altered, amended or
repealed, or new Bylaws may be adopted by (a) vote of a majority of the Shares
outstanding and entitled to vote or (b)
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the Trustees, provided, however, that no Bylaw may be amended, adopted or
repealed by the Trustees if such amendment, adoption or repeal requires,
pursuant to law, the Trust Instrument or these Bylaws, a vote of the
Shareholders.
ARTICLE XII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to
what extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust or any of them shall be open to
the inspection of the shareholders; and no shareholder shall have any right of
inspecting any account or book or document of the Trust except as conferred by
laws or authorized by the Trustees or by resolution of the shareholders.
ARTICLE XIII
MISCELLANEOUS
(A) Except as hereinafter provided, no officer or Trustee of
the Trust and no partner, officer, director or shareholder of the Investment
Adviser of the Trust or of the Distributor of the Trust, and no Investment
Adviser or Distributor of the Trust, shall take long or short positions in the
securities issued by the Trust.
(1) The foregoing provisions shall not prevent
the Distributor from purchasing Shares from the Trust
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<PAGE>
if such purchases are limited (except for reasonable
allowances for clerical errors, delays and errors of
transmission and cancellation of orders) to purchases for the
purpose of filling orders for such Shares received by the
Distributor, and provided that orders to purchase from the
Trust are entered with the Trust or the Custodian promptly
upon receipt by the Distributor of purchase orders for such
Shares, unless the Distributor is otherwise instructed by its
customer. (2) The foregoing provision shall not prevent the
Distributor from purchasing Shares of the Trust as agent for the
account of the Trust.
(3) The foregoing provision shall not prevent the purchase
from the Trust or from the Distributor of Shares issued by the
Trust, by any officer, or Trustee of the Trust or by any partner,
officer, director or shareholder of the Investment Adviser of the
Trust or of the Distributor of the Trust at the price available to
the public generally at the moment of such purchase, or as
described in the then currently effective Prospectus for the Series
of such Shares.
(4) The foregoing shall not prevent the Distributor, or any
affiliate thereof, of the Trust from purchasing Shares prior to the
effectiveness of the first
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registration statement relating to the Shares under the
Securities Act of 1933.
(B) The Trust shall not lend assets of the Trust to any
officer or Trustee of the Trust, or to any partner, officer, director or
shareholder of, or person financially interested in, the Investment Adviser of
the Trust, or the Distributor of the Trust, or to the Investment Adviser of the
Trust or to the Distributor of the Trust.
(C) The Trust shall not impose any restrictions upon the transfer
of the Shares of the Trust except as provided in the Trust Instrument, but this
requirement shall not prevent the charging of customary transfer agent fees.
(D) The Trust shall not permit any officer or Trustee of the Trust,
or any partner, officer or director of the Investment Adviser or Distributor of
the Trust to deal for or on behalf of the Trust with himself as principal or
agent, or with any partnership, association or corporation in which he has a
financial interest; provided that the foregoing provisions shall not prevent (a)
officers and Trustees of the Trust or partners, officers or directors of the
Investment Adviser or Distributor of the Trust from buying, holding or selling
shares in the Trust, or from being partners, officers or directors or otherwise
financially interested in the Investment Adviser or Distributor of the Trust;
(b) purchases or sales of securities or other property by the Trust from or to
an affiliated person or to the
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Investment Adviser or Distributor of the Trust if such transaction is exempt
from the applicable provisions of the 1940 Act; (c) purchases of investments for
the portfolio of any Series of the Trust or sales of investments owned by any
Series of the Trust through a security dealer who is, or one or more of whose
partners, shareholders, officers or directors is, an officer or Trustee of the
Trust, or a partner, officer or director of the Investment Adviser or
Distributor of the Trust, if such transactions are handled in the capacity of
broker only and commissions charged do not exceed customary brokerage charges
for such services; (d) employment of legal counsel, registrar, Transfer Agent,
dividend disbursing agent or Custodian who is, or has a partner, shareholder,
officer, or director who is, an officer or Trustee of the Trust, or a partner,
officer or director of the Investment Adviser or Distributor of the Trust, if
only customary fees are charged for services to the Trust; (e) sharing
statistical research, legal and management expenses and office hire and expenses
with any other investment company in which an officer or Trustee of the Trust,
or a partner, officer or director of the Investment Adviser or Distributor of
the Trust, is an officer or director or otherwise financially interested.
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INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 28th day of July, 1994, and amended
and restated the 25th day of May, 1995, between FRANKLIN TEMPLETON JAPAN FUND
(hereinafter referred to as the "Trust"), and TEMPLETON INVESTMENT COUNSEL, INC.
(hereinafter referred to as the "Investment Manager").
NOW THEREFORE, in consideration of the mutual agreements
herein made, the Trust and the Investment Manager understand and agree as
follows:
(1) The Investment Manager shall manage the investment and
Trust's assets consistent with the provisions of the Trust Instrument of the
Trust and the investment policies adopted and declared by the Trust's Board of
Trustees. In pursuance of the foregoing, the Investment Manager shall make all
determinations with respect to the investment of the Trust's assets and the
purchase and sale of its investment securities, and shall take all such steps as
may be necessary to implement those determinations. Such determinations and
services shall include determining the manner in which any voting rights, rights
to consent to corporate action and any other rights pertaining to the Trust's
investment securities shall be exercised, subject to guidelines adopted by the
Board of Trustees.
(2) The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Trust, including trading desk
facilities or daily pricing of the Trust's portfolio.
(3) The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as "brokers") for the execution of the
Trust's portfolio trans-actions consistent with the Trust's brokerage policies
and, when applicable, the negotiation of commissions in connection
<PAGE>
therewith.
All decisions and placements shall be made in accor-dance with
the following principles:
A. Purchase and sale orders will usually be placed
with brokers able to achieve "best execution" of
such orders. "Best execution" shall mean prompt
and reliable execution at the most favorable
securities price, taking into account the other
provisions hereinafter set forth. The
determination of what may constitute best
execution and price in the execution of a
securities transaction by a broker involves a
number of considerations, including, without
limitation, the overall direct net economic result
to the Trust (involving both price paid or
received and any commissions and other costs
paid), the efficiency with which the transaction
is effected, the ability to effect the transaction
at all where a large block is involved,
availability of the broker to stand ready to
execute possibly difficult transactions in the
future, and the financial strength and stability
of the broker. Such considerations are judgmental
and are weighed by the Investment Manager in
determining the overall reasonableness of broker-
age commissions.
B. In selecting brokers for portfolio transactions the
Investment Manager shall take into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by the Trust.
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<PAGE>
C. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services
are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for the
Trust and/or other accounts, if any, for which the
Investment Manager exercises investment discretion
(as defined in Section 3(a)(35) of the 1934 Act)
and, as to transactions in which fixed minimum
commission rates are not applicable, to cause the
Trust to pay a commission for effecting a
securities transaction in excess of the amount
another broker would have charged for effecting
that transaction, if the Investment Manager
determines in good faith that such amount of
commission is reasonable in relation to the value
of the brokerage and research services provided by
such broker, viewed in terms of either that
particular transaction or the Investment Manager's
overall responsibilities with respect to the Trust
and the other accounts, if any, as to which it
exercises investment discretion. In reaching such
determination, the Investment Manager will not be
required to place or attempt to place a specific
dollar value on the research or execution services
of a broker or on the portion of any commission
reflecting either of said services. In
demonstrating that such determinations were made
in good faith, the Investment Manager shall be
prepared to show that all commissions were
allocated and paid for purposes contemplated by
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<PAGE>
the Trust's brokerage policy; that the research
services provide lawful and appropriate assistance to
the Investment Manager in the performance of its
investment decision-making responsibilities; and that
the commissions paid were within a reasonable range.
Whether commissions were within a reasonable range
shall be based on any available information as to the
level of commission known to be charged by other
brokers on comparable transac-tions, but there shall
be taken into account the Company's policies that (i)
obtaining a low commission is deemed secondary to
obtaining a favorable securities price, since it is
recognized that usually it is more beneficial to the
Trust to obtain a favorable price than to pay the
lowest commission; and (ii) the quality,
comprehensive-ness and frequency of research studies
that are provided for the Investment Manager are
useful to the Investment Manager in performing its
advisory activities under this Agreement. Research
services provided by brokers to the Investment
Manager are considered to be in addition to, and not
in lieu of, services required to be performed by the
Investment Manager under this Agreement. Research
furnished by brokers through which the Trust effects
securities transactions may be used by the Investment
Manager for any of its accounts, and not all research
may be used by the Investment Manager for the Trust.
When execution of portfolio transactions is allocated
to brokers trading on exchanges with fixed brokerage
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<PAGE>
commission rates, account may be taken of various
services provided by the broker.
D. Purchases and sales of portfolio securities within
the United States other than on a securities exchange
shall be executed with primary market makers acting
as principal, except where in the judgment of the
Investment Manager, better prices and execution may
be obtained on a commission basis or from other
sources.
E. Sales of the Trust's shares (which shall be deemed
to include also shares of other registered
investment companies which have either the same
adviser or an investment adviser affiliated with
the Investment Manager) by a broker are one factor
among others to be taken into account in deciding
to allocate portfolio transactions (including
agency transactions, principal transactions,
purchases in underwritings or tenders in response
to tender offers) for the account of the Trust to
that broker; provided that the broker shall
furnish "best execution," as defined in
subparagraph A above, and that such allocation
shall be within the scope of the trust's policies
as stated above; provided further, that in every
allocation made to a broker in which the sale of
Trust shares is taken into account, there shall be
no increase in the amount of the commissions or
other compensation paid to such broker beyond a
reasonable commission or other compensation
determined, as set forth in subparagraph C above,
on the basis of best execution alone or best
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<PAGE>
execution plus research services, without taking
account of or placing any value upon such sale of the
Trust's shares.
(4) The Trust shall pay to the Investment Manager a monthly
fee in dollars at an annual rate of 0.75% of the Trust's average daily net
assets, payable at the end of each calendar month. The Investment Manager may
waive all or a portion of its fees provided for hereunder and such waiver shall
be treated as a reduction in purchase price of its services. The Investment
Manager shall be contractually bound hereunder by the terms of any publicly
announced waiver of its fee, or any limitation of the Trust's expenses, as if
such waiver or limitation were fully set forth herein.
Notwithstanding the foregoing, if the total expenses of the
Trust (including the fee to the Investment Manager) in any fiscal year of the
Trust exceed any expense limitation imposed by applicable State law, the
Investment Manager shall reimburse the Trust for such excess in the manner and
to the extent required by applicable State law. The term "total expenses," as
used in this paragraph, does not include interest, taxes, litigation expenses,
distribution expenses, brokerage commissions or other costs of acquiring or
disposing of any of the Trust's portfolio securities or any costs or expenses
incurred or arising other than in the ordinary and necessary course of the
Trust's business. When the accrued amount of such expenses exceeds this limit,
the monthly payment of the Investment Manager's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the balance
of the Trust's fiscal year if accrued expenses thereafter fall below the limit.
(5) This Agreement shall continue in effect until July
31, 1996. If not sooner terminated, this Agreement shall continue
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<PAGE>
in effect for successive periods of 12 months each thereafter, PROVIDED that
each such continuance shall be specifically approved annually by the vote of a
majority of the Trust's Board of Trustees who are not parties to this Agreement
or "interested persons" (as defined in Investment Company Act of 1940 (the "1940
Act")) of any such party, cast in person at a meeting called for the purpose of
voting on such approval and either the vote of (a) a majority of the outstanding
voting securities of the Trust, as defined in the 1940 Act, or (b) a majority of
the Trust's Board of Trustees as a whole.
(6) Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination by
the Trust is approved by vote of a majority of the Trust's Board of Trustees in
office at the time or by vote of a majority of the outstanding voting securities
of the Trust (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its "assignment" (as defined in the
1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the Trust, the
Investment Manager reserves the right to withdraw from the Trust the use of the
name "Templeton" or any name misleadingly implying a continuing relationship
between the Trust and the Investment Manager or any of its affiliates.
(9) Except as may otherwise be provided by the 1940 Act,
neither the Investment Manager nor its officers, directors, employees or agents
shall be subject to any liability for any error of judgment, mistake of law, or
any loss arising out of any investment or other act or omission in the
performance by the
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<PAGE>
Investment Manager of its duties under the Agreement or for any loss or damage
resulting from the imposition by any government of exchange control restrictions
which might affect the liquidity of the Trust's assets, or from acts or
omissions of custodians or securities depositories, or from any war or political
act of any foreign government to which such assets might be exposed, or for
failure, on the part of the custodian or otherwise, timely to collect payments,
except for any liability, loss or damage resulting from willful misfeasance, bad
faith or gross negligence on the Investment Manager's part or by reason of
reckless disregard of the Investment Manager's duties under this Agreement. It
is hereby understood and acknowledged by the Trust that the value of the
investments made for the Trust may increase as well as decrease and are not
guaranteed by the Investment Manager. It is further understood and acknowledged
by the Trust that investment decisions made on behalf of the Trust by the
Investment Manager are subject to variety of factors which may affect the values
and income generated by the Trust's portfolio securities, including general
economic conditions, market factors and currency exchange rates, and that
investment decisions made by the Investment Manager will not always be
profitable or prove to have been correct.
(10) It is understood that the services of the Investment
Manager are not deemed to be exclusive, and nothing in this Agreement shall
prevent the Investment Manager, or any affiliate thereof, from providing similar
services to other investment companies and other clients, including clients
which may invest in the same types of securities as the Trust, or, in providing
such services, from using information furnished by others. When the Investment
Manager determines to buy or sell the same security for the Trust that the
Investment Manager or one or
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<PAGE>
more of its affiliates has selected for clients of the Investment Manager or its
affiliates, the orders for all such securities transactions shall be placed for
execution by methods determined by the Investment Manager, with approval by the
Trust's Board of Trustees, to be impartial and fair.
(11) This Agreement shall be construed in accordance with the
laws of the State of Delaware, provided that nothing herein shall be construed
as being inconsistent with applicable Federal and state securities laws or any
rules, regulations or orders thereunder.
(12) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting
the Investment Manager an agent of the Trust.
(14) It is understood and expressly stipulated that neither
the holders of shares of the Trust nor any Trustee, officer, agent or employee
of the Trust shall be personally liable hereunder, nor shall any resort be had
to other private property for the satisfaction of any claim or obligation
hereunder, but the Trust only shall be liable.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
FRANKLIN TEMPLETON JAPAN FUND
By:______________________________
TEMPLETON INVESTMENT COUNSEL, INC.
By: _______________________________
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FRANKLIN TEMPLETON JAPAN FUND
700 Central Avenue
St. Petersburg, Florida 33701-3628
Franklin Templeton Distributors, Inc.
700 Central Avenue
St. Petersburg, Florida 33701-3628
Re: Amended and Restated Distribution Agreement
Gentlemen:
We, FRANKLIN TEMPLETON JAPAN FUND, (the "Trust") are a Delaware
business trust operating as an open-end management investment company
or "mutual fund", which is registered under the Investment Company Act
of 1940 (the "1940 Act") and whose shares are registered under the
Securities Act of 1933 (the "1933 Act"). We desire to issue one or more
series or classes of our authorized but unissued shares of capital
stock or beneficial interest (the "Shares") to authorized persons in
accordance with applicable Federal and State securities laws. The
Trust's Shares may be made available in one or more separate series,
each of which may have one or more classes.
You have informed us that your company is registered as a broker-dealer
under the provisions of the Securities Exchange Act of 1934 and that
your company is a member of the National Association of Securities
Dealers, Inc. You have indicated your desire to act as the exclusive
selling agent and distributor for the Shares. We have been authorized
to execute and deliver this Distribution Agreement ("Agreement") to you
by a resolution of our Board of Trustees ("Board") passed at a meeting
at which a majority of Board members, including a majority who are not
otherwise interested persons of the Trust and who are not interested
persons of our investment adviser, its related organizations or with
you or your related organizations, were present and voted in favor of
the said resolution approving this Agreement.
<PAGE>
1. APPOINTMENT OF UNDERWRITER. Upon the execution of this
Agreement and in consideration of the agreements on your part herein
expressed and upon the terms and conditions set forth herein, we hereby
appoint you as the exclusive sales agent for our Shares and agree that
we will deliver such Shares as you may sell. You agree to use your best
efforts to promote the sale of Shares, but are not obligated to sell
any specific number of Shares.
However, the Trust and each series retain the right to make
direct sales of its Shares without sales charges consistent with the
terms of the then current prospectus and applicable law, and to engage
in other legally authorized transactions in its Shares which do not
involve the sale of Shares to the general public. Such other
transactions may include, without limitation, transactions between the
Trust or any series or class and its shareholders only, transactions
involving the reorganization of the Trust or any series, and
transactions involving the merger or combination of the Trust or any
series with another corporation or trust.
2. INDEPENDENT CONTRACTOR. You will undertake and discharge
your obligations hereunder as an independent contractor and shall have
no authority or power to obligate or bind us by your actions, conduct
or contracts except that you are authorized to promote the sale of
Shares. You may appoint sub-agents or distribute through dealers or
otherwise as you may determine from time to time, but this Agreement
shall not be construed as authorizing any dealer or other person to
accept orders for sale or repurchase on our behalf or otherwise act as
our agent for any purpose.
3. OFFERING PRICE. Shares shall be offered for sale at a price
equivalent to the net asset value per share of that series and class
plus any applicable percentage of the public offering price as sales
commission or as otherwise set forth in our then current prospectus. On
each business day on which the New York Stock Exchange is open for
business, we will furnish you with the net asset value of the Shares of
each available series and class which shall be determined in accordance
with our then effective prospectus. All Shares will be sold in the
manner set forth in our then effective prospectus and statement of
additional information, and in compliance with applicable law.
<PAGE>
4. COMPENSATION.
A. SALES COMMISSION. You shall be entitled to charge
a sales commission on the sale or redemption, as appropriate, of each
series and class of each Trust's Shares in the amount of any initial,
deferred or contingent deferred sales charge as set forth in our then
effective prospectus. You may allow any sub-agents or dealers such
commissions or discounts from and not exceeding the total sales
commission as you shall deem advisable, so long as any such commissions
or discounts are set forth in our current prospectus to the extent
required by the applicable Federal and State securities laws. You may
also make payments to sub-agents or dealers from your own resources,
subject to the following conditions: (a) any such payments shall not
create any obligation for or recourse against the Trust or any series
or class, and (b) the terms and conditions of any such payments are
consistent with our prospectus and applicable federal and state
securities laws and are disclosed in our prospectus or statement of
additional information to the extent such laws may require.
B. DISTRIBUTION PLANS. You shall also be entitled to
compensation for your services as provided in any Distribution
Plan adopted as to any series and class of any Trust's Shares
pursuant to Rule 12b-1 under the 1940 Act.
5. TERMS AND CONDITIONS OF SALES. Shares shall be offered for
sale only in those jurisdictions where they have been properly
registered or are exempt from registration, and only to those groups of
people which the Board may from time to time determine to be eligible
to purchase such shares.
6. ORDERS AND PAYMENT FOR SHARES. Orders for Shares shall be
directed to the Trust's shareholder services agent, for acceptance on
behalf of the Trust. At or prior to the time of delivery of any of our
Shares you will pay or cause to be paid to the custodian of the Trust's
assets, for our account, an amount in cash equal to the net asset value
of such Shares. Sales of Shares shall be deemed to be made when and
where accepted by the Trust's shareholder services agent. The Trust's
custodian and shareholder services agent shall be identified in its
prospectus.
7. PURCHASES FOR YOUR OWN ACCOUNT. You shall not purchase
our Shares for your own account for purposes of resale to the
public, but you may purchase Shares for your own investment
<PAGE>
account upon your written assurance that the purchase is for investment
purposes and that the Shares will not be resold except through
redemption by us.
8. SALE OF SHARES TO AFFILIATES. You may sell our Shares at
net asset value to certain of your and our affiliated persons pursuant
to the applicable provisions of the federal securities statutes and
rules or regulations thereunder (the "Rules and Regulations"),
including Rule 22d-1 under the 1940 Act, as amended from time to time.
9. ALLOCATION OF EXPENSES. We will pay the expenses:
(a) Of the preparation of the audited and certified
financial statements of our company to be included in
any Post-Effective Amendments ("Amendments") to our
Registration Statement under the 1933 Act or 1940
Act, including the prospectus and statement of
additional information included therein;
(b) Of the preparation, including legal fees, and
printing of all Amendments or supplements filed
with the Securities and Exchange Commission,
including the copies of the prospectuses included
in the Amendments and the first 10 copies of the
definitive prospectuses or supplements thereto,
other than those necessitated by your (including
your "Parent's") activities or Rules and
Regulations related to your activities where such
Amendments or supplements result in expenses which
we would not otherwise have incurred;
(c) Of the preparation, printing and distribution of
any reports or communications which we send to our
existing shareholders; and
(d) Of filing and other fees to Federal and State
securities regulatory authorities necessary to
continue offering our Shares.
<PAGE>
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any
supplements thereto and statements of additional
information which are necessary to continue to
offer our Shares;
(b) Of the preparation, excluding legal fees, and
printing of all Amendments and supplements to our
prospectuses and statements of additional
information if the Amendment or supplement arises
from your (including your "Parent's") activities
or Rules and Regulations related to your
activities and those expenses would not otherwise
have been incurred by us;
(c) Of printing additional copies, for use by you as
sales literature, of reports or other
communications which we have prepared for
distribution to our existing shareholders; and
(d) Incurred by you in advertising, promoting and
selling our Shares.
10. FURNISHING OF INFORMATION. We will
furnish to you such information with respect to each
series and class of Shares, in such form and signed
by such of our officers as you may reasonably
request, and we warrant that the statements therein
contained, when so signed, will be true and correct.
We will also furnish you with such information and
will take such action as you may reasonably request
in order to qualify our Shares for sale to the public
under the Blue Sky Laws of jurisdictions in which you
may wish to offer them. We will furnish you with
annual audited financial statements of our books and
accounts certified by independent public accountants,
with semi-annual financial statements prepared by us,
with registration statements and, from time to time,
with such additional information regarding our
financial condition as you may reasonably request.
11. CONDUCT OF BUSINESS. Other than our currently
effective prospectus, you will not issue any sales
material or statements except literature or
advertising which conforms to the requirements of
Federal and State securities laws and regulations
<PAGE>
and which have been filed, where necessary, with the
appropriate regulatory authorities. You will furnish
us with copies of all such materials prior to their
use and no such material shall be published if we
shall reasonably and promptly object.
You shall comply with the applicable
Federal and State laws and regulations where our
Shares are offered for sale and conduct your affairs
with us and with dealers, brokers or investors in
accordance with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
12. REDEMPTION OR REPURCHASE WITHIN SEVEN
DAYS. If Shares are tendered to us for redemption or
repurchase by us within seven business days after
your acceptance of the original purchase order for
such Shares, you will immediately refund to us the
full sales commission (net of allowances to dealers
or brokers) allowed to you on the original sale, and
will promptly, upon receipt thereof, pay to us any
refunds from dealers or brokers of the balance of
sales commissions reallowed by you. We shall notify
you of such tender for redemption within 10 days of
the day on which notice of such tender for redemption
is received by us.
13. OTHER ACTIVITIES. Your services pursuant
to this Agreement shall not be deemed to be
exclusive, and you may render similar services and
act as an underwriter, distributor or dealer
for other investment companies in the offering of
their shares.
14. TERM OF AGREEMENT. This Agreement shall
become effective on the date of its execution, and
shall remain in effect for a period of two (2) years.
The Agreement is renewable annually thereafter, with
respect to the Trust or, if the Trust has more than
one series, with respect to each series, for
successive periods not to exceed one year (i) by a
vote of (a) a majority of the outstanding voting
securities of the Trust or, if the Trust has more
than one series, of each series, or (b) by a vote of
the Board, AND (ii) by a vote of a majority of the
members of the Board who are not parties to the
Agreement or interested persons of any parties to the
Agreement (other than as members of the Board), cast
in person at a meeting called for the purpose of
voting on the Agreement.
This Agreement may at any time be terminated by
the Trust or by any series without the payment of any
penalty, (i)
<PAGE>
either by vote of the Board or by vote of a majority
of the outstanding voting securities of the Trust or
any series on 90 days' written notice to you; or (ii)
by you on 90 days' written notice to the Trust; and
shall immediately terminate with respect to the Trust
and each series in the event of its assignment.
15. SUSPENSION OF SALES. We reserve the right
at all times to suspend or limit the public offering
of Shares upon two days' written notice to you.
16. MISCELLANEOUS. This Agreement shall be
subject to the laws of the State of California and
shall be interpreted and construed to further promote
the operation of the Trust as an open-end investment
company. This Agreement shall supersede all
Distribution Agreements and Amendments previously in
effect between the parties. As used herein, the terms
"Net Asset Value," "Offering Price," "Investment
Company," "Open-End Investment Company,"
"Assignment," "Principal Underwriter," "Interested
Person," "Parent," "Affiliated Person," and "Majority
of the Outstanding Voting Securities" shall have the
meanings set forth in the 1933 Act or the 1940 Act
and the Rules and Regulations thereunder.
Nothing herein shall be deemed to protect you against
any liability to us or to our securities holders to
which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations
and duties hereunder.
If the foregoing meets with your approval, please
acknowledge your acceptance by signing each of the
enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
Franklin Templeton Japan Fund
By: /s/THOMAS M. MISTELE
Thomas M. Mistele
<PAGE>
Accepted:
Franklin Templeton Distributors, Inc.
By: /s/PETER D. JONES
Peter D. Jones
DATED: May 1, 1995
CUSTODY AGREEMENT
AGREEMENT dated as of July 28, 1994 between THE CHASE
MANHATTAN BANK, N.A. ("Chase"), having its principal place of business at 1
Chase Manhattan Plaza, New York, New York 10081, and FRANKLIN/TEMPLETON JAPAN
FUND (the "Trust"), an investment company registered under the Investment
Company Act of 1940 ("Act of 1940"), having its principal place of business at
700 Central Avenue, St. Petersburg, Florida 33701.
WHEREAS, the Trust wishes to appoint Chase as custodian to the
securities and assets of the Trust and Chase is willing to act as custodian
under the terms and conditions hereinafter set forth;
NOW, THEREFORE, the Trust and its successors and assigns and
Chase and its successors and assigns, hereby agree as follows:
1. APPOINTMENT AS CUSTODIAN. Chase agrees to act as custodian
for the Trust, as provided herein, in connection with (a) cash ("Cash") received
from time to time from, or for the account of, the Trust for credit to the
Trust's deposit account or accounts administered by Chase, Chase Branches and
Domestic Securities Depositories (as hereinafter defined), and/or Foreign Banks
and Foreign Securities Depositories (as hereinafter defined) (the "Deposit
Account"); (b) all stocks, shares, bonds, debentures, notes, mortgages, or other
obligations for the payment of money and any certificates, receipts, warrants,
or other instruments representing rights to receive, purchase, or subscribe for
the same or evidencing or representing any other
<PAGE>
rights or interests therein and other similar property ("Securities") from time
to time received by Chase and/or any Chase Branch, Domestic Securities
Depository, Foreign Bank or Foreign Securities Depository for the account of the
Trust (the "Custody Account"); and (c) original margin and variation margin
payments in a segregated account for futures contracts (the "Segregated
Account").
All Cash held in the Deposit Account or in the Segregated
Account in connection with which Chase agrees to act as custodian is hereby
denominated as a special deposit which shall be held in trust for the benefit of
the Trust and to which Chase, Chase Branches and Domestic Securities
Depositories and/or Foreign Banks and Foreign Securities Depositories shall have
no ownership rights, and Chase will so indicate on its books and records
pertaining to the Deposit Account and the Segregated Account. All cash held in
auxiliary accounts that may be carried for the Trust with Chase (including a
Money Market Account, Redemption Account, Distribution Account and Imprest
Account) is not so denominated as a special deposit and title thereto is held by
Chase subject to the claims of creditors.
2. AUTHORIZATION TO USE BOOK-ENTRY SYSTEM, DOMESTIC
SECURITIES DEPOSITORIES, BRANCH OFFICES, FOREIGN BANKS AND
FOREIGN SECURITIES DEPOSITORIES. Chase is hereby authorized to
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<PAGE>
appoint and utilize, subject to the provisions of Sections 4 and
5 hereof:
A. The Book Entry System and The Depository Trust
Fund; and also such other Domestic Securities Depositories
selected by Chase and as to which Chase has received a
certified copy of a resolution of the Trust's Board of
Trustees authorizing deposits therein;
B. Chase's foreign branch offices in the United
Kingdom, Hong Kong, Singapore, and Tokyo, and such other
foreign branch offices of Chase located in countries approved
by the Board of Trustees of the Trust as to which Chase shall
have given prior notice to the Trust;
C. Foreign Banks which Chase shall have
selected, which are located in countries approved by
the Board of Trustees of the Trust, and as to which
banks Chase shall have given prior notice to the Trust;
and
D. Foreign Securities Depositories which Chase
shall have selected and as to which Chase has received
a certified copy of a resolution of the Trust's Board
of Trustees authorizing deposits therein;
to hold Securities and Cash at any time owned by the Trust, it being understood
that no such appointment or utilization shall in any way relieve Chase of its
responsibilities as provided for in
- 3 -
<PAGE>
this Agreement. Foreign branch offices of Chase appointed and utilized by Chase
are herein referred to as "Chase Branches." Unless otherwise agreed to in
writing, (a) each Chase Branch, each Foreign Bank and each Foreign Securities
Depository shall be selected by Chase to hold only Securities as to which the
principal trading market or principal location as to which such Securities are
to be presented for payment is located outside the United States; and (b) Chase
and each Chase Branch, Foreign Bank and Foreign Securities Depository will
promptly transfer or cause to be transferred to Chase, to be held in the United
States, Securities and/or Cash that are then being held outside the United
States upon request of the Trust and/or of the Securities and Exchange
Commission. Utilization by Chase of Chase Branches, Domestic Securities
Depositories, Foreign Banks and Foreign Securities Depositories shall be in
accordance with provisions as from time to time amended, of an operating
agreement to be entered into between Chase and the Trust (the "Operating
Agreement").
3. DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
(a) "Authorized Persons of the Trust" shall mean such
officers or employees of the Trust or any other person or
persons as shall have been designated by a resolution of the
Board of Trustees of the Trust, a certified copy of which has
been filed with Chase, to
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<PAGE>
act as Authorized Persons hereunder. Such persons shall
continue to be Authorized Persons of the Trust, authorized to
act either singly or together with one or more other of such
persons as provided in such resolution, until such time as the
Trust shall have filed with Chase a written notice of the
Trust supplementing, amending, or revoking the authority of
such persons.
(b) "Book-Entry system" shall mean the Federal
Reserve/Treasury book-entry system for United States and
federal agency securities, its successor or successors and its
nominee or nominees.
(c) "Domestic Securities Depository" shall mean The
Depository Trust Fund, a clearing agency registered with the
Securities and Exchange Commission, its successor or
successors and its nominee or nominees; and (subject to the
receipt by Chase of a certified copy of a resolution of the
Trust's Board of Trustees specifically approving deposits
therein as provided in Section 2(a) of this Agreement) any
other person authorized to act as a depository under the Act
of 1940, its successor or successors and its nominee or
nominees.
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(d) "Foreign Bank" shall mean any banking institution
organized under the laws of a jurisdiction other than the
United States or of any state thereof.
(e) A "Foreign Securities Depository" shall mean any
system for the central handling of securities abroad where all
securities of any particular class or series of any issuer
deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping without physical
delivery of the securities by any Chase Branch or Foreign
Bank.
(f) "Written Instructions" shall mean
instructions in writing signed by Authorized Persons of
the Trust giving such instructions, and/or such other
forms of communications as from time to time shall be
agreed upon in writing between the Trust and Chase.
4. SELECTION OF COUNTRIES IN WHICH SECURITIES MAY BE
HELD. Chase shall not cause Securities and Cash to be held in any country
outside the United States until the Trust has directed the holding of Trust
assets in such country. Chase will be provided with a copy of a resolution of
the Trust's Board of Trustees authorizing such custody in any country outside of
the United States, which resolution shall be based upon, among other factors,
the following:
(a) comparative operational efficiencies of
custody;
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(b) clearance and settlement and the costs
thereof; and
(c) political and other risks, other than those
risks specifically assumed by Chase.
5. RESPONSIBILITY OF CHASE TO SELECT CUSTODIANS IN INDIVIDUAL
FOREIGN COUNTRIES. The responsibility for selecting the Chase Branch, Foreign
Bank or Foreign Securities Depository to hold the Trust's Securities and Cash in
individual countries authorized by the Trust shall be that of Chase. Chase
generally shall utilize Chase Branches where available. In locations where there
are no Chase Branches providing custodial services, Chase shall select as its
agent a Foreign Bank, which may be an affiliate or subsidiary of Chase. To
facilitate the clearance and settlement of securities transactions, Chase
represents that, subject to the approval of the Trust, it may deposit Securities
in a Foreign Securities Depository in which Chase is a participant. In
situations in which Chase is not a participant in a Foreign Securities
Depository, Chase may, subject to the approval of the Trust, authorize a Foreign
Bank acting as its subcustodian to deposit the Securities in a Foreign
Securities Depository in which the Foreign Bank is a participant.
Notwithstanding the foregoing, such selection by Chase of a Foreign Bank or
Foreign Securities Depository shall not become effective until Chase has been
advised by the Trust that a majority of its Board of Trustees:
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(a) Has approved Chase's selection of the particular
Foreign Bank or Foreign Securities Depository, as the case may
be, as consistent with the best interests of the Trust and its
Shareholders; and
(b) Has approved as consistent with the best
interests of the Trust and its Shareholders a written
contract prepared by Chase which will govern the manner
in which such Foreign Bank will maintain the Trust's
assets.
6. CONDITIONS ON SELECTION OF FOREIGN BANK OR FOREIGN
SECURITIES DEPOSITORY. Chase shall authorize the holding of
Securities and Cash by a Chase Branch, Foreign Bank or Foreign
Securities Depository only:
(a) to the extent that the Securities and Cash are
not subject to any right, charge, security interest, lien or
claim of any kind in favor of any such Foreign Bank or Foreign
Securities Depository, except for their safe custody or
administration; and
(b) to the extent that the beneficial ownership
of Securities is freely transferable without the
payment of money or value other than for safe custody
or administration.
7. CHASE BRANCHES AND FOREIGN BANKS NOT AGENTS OF THE
TRUST. Chase Branches, Foreign Banks and Foreign Securities
Depositories shall be subject to the instructions of Chase and/or
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the Foreign Bank, and not to those of the Trust. Chase warrants and represents
that all such instructions shall afford protection to the Trust at least equal
to that afforded for Securities held directly by Chase. Any Chase Branch,
Foreign Bank or Foreign Securities Depository shall act solely as agent of Chase
or of such Foreign Bank.
8. CUSTODY ACCOUNT. Securities held in the Custody
Account shall be physically segregated at all times from those of
any other person or persons except that (a) with respect to
Securities held by Chase Branches, such Securities may be placed
in an omnibus account for the customers of Chase, and Chase shall
maintain separate book entry records for each such omnibus
account, and such Securities shall be deemed for the purpose of
this Agreement to be held by Chase in the Custody Account; (b)
with respect to Securities deposited by Chase with a Foreign
Bank, a Domestic Securities Depository or a Foreign Securities
Depository, Chase shall identify on its books as belonging to the
Trust the Securities shown on Chase's account on the books of the
Foreign Bank, Domestic Securities Depository or Foreign
Securities Depository; and (c) with respect to Securities
deposited by a Foreign Bank with a Foreign Securities Depository,
Chase shall cause the Foreign Bank to identify on its books as
belonging to Chase, as agent, the Securities shown on the Foreign
Bank's account on the books of the Foreign Securities Depository.
All Securities of the Trust maintained by Chase pursuant to this
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Agreement shall be subject only to the instructions of Chase, Chase Branches or
their agents. Chase shall only deposit Securities with a Foreign Bank in
accounts that include only assets held by Chase for its customers.
8a. SEGREGATED ACCOUNT FOR FUTURES CONTRACTS. With
respect to every futures contract purchased, sold or cleared for
the Custody Account, Chase agrees, pursuant to Written
Instructions, to:
(a) deposit original margin and variation margin
payments in a segregated account maintained by Chase;
and
(b) perform all other obligations attendant to
transactions or positions in such futures contracts, as
such payments or performance may be required by law or
the executing broker.
8b. SEGREGATED ACCOUNT FOR REPURCHASE AGREEMENTS.
With respect to purchases for the Custody Account from banks (including Chase)
or broker-dealers, of United States or foreign government obligations subject to
repurchase agreements, Chase agrees, pursuant to Written Instructions, to:
(a) deposit such securities and repurchase
agreements in a segregated account maintained by Chase;
and
(b) promptly show on Chase's records that such
securities and repurchase agreements are being held on
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behalf of the Trust and deliver to the Trust a written
confirmation to that effect.
8c. SEGREGATED ACCOUNTS FOR DEPOSITS OF COLLATERAL.
Chase agrees, with respect to (i) cash or high quality debt securities to secure
the Trust's commitments to purchase new issues of debt obligations offered on a
when-issued basis; (ii) cash, U.S. government securities, or irrevocable letters
of credit of borrowers of the Trust's portfolio securities to secure the loan to
them of such securities; and/or (iii) cash, securities or any other property
delivered to secure any other obligations; (all of such items being hereinafter
referred to as "collateral"), pursuant to Written Instructions, to:
(a) deposit the collateral for each such
obligation in a separate segregated account maintained
by Chase; and
(b) promptly to show on Chase's records that
such collateral is being held on behalf of the Trust and
deliver to the Trust a written confirmation to that
effect.
9. DEPOSIT ACCOUNT. Subject to the provisions of
this Agreement, the Trust authorizes Chase to establish and maintain in each
country or other jurisdiction in which the principal trading market for any
Securities is located or in which any Securities are to be presented for
payment, an account or accounts, which may include nostro accounts with Chase
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Branches and omnibus accounts of Chase at Foreign Banks, for receipt of cash in
the Deposit Account, in such currencies as directed by Written Instructions. For
purposes of this Agreement, cash so held in any such account shall be evidenced
by separate book entries maintained by Chase at its office in London and shall
be deemed to be Cash held by Chase in the Deposit Account. Unless Chase receives
Written Instructions to the contrary, cash received or credited by Chase or any
other Chase Branch, Foreign Bank or Foreign Securities Depository for the
Deposit Account in a currency other than United States dollars shall be
converted promptly into United States dollars whenever it is practicable to do
so through customary banking channels (including without limitation the
effecting of such conversions at Chase's preferred rates through Chase, its
affiliates or Chase Branches), and shall be automatically transmitted back to
Chase in the United States.
10. SETTLEMENT PROCEDURES. Settlement procedures for
transactions in Securities delivered to, held in, or to be
delivered from the Custody Account in Chase Branches, Domestic
Securities Depositories, Foreign Banks and Foreign Securities
Depositories, including receipts and payments of cash held in any
nostro account or omnibus account for the Deposit Account as
described in Section 9, shall be carried out in accordance with
the provisions of the Operating Agreement. It is understood that
such settlement procedures may vary, as provided in the Operating
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Agreement, from securities market to securities market, to reflect particular
settlement practices in such markets.
Chase shall make or cause the appropriate Chase Branch or
Foreign Bank to move payments of Cash held in the Deposit Account only:
(a) in connection with the purchase of Securities for
the account of the Trust and only against the receipt of such
Securities by Chase or by another appropriate Chase Branch,
Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository, or otherwise as provided in the
Operating Agreement, each such payment to be made at prices
confirmed by Written Instructions, or
(b) in connection with any dividend, interim
dividend or other distribution declared by the Trust,
or
(c) as directed by the Fund by Written Instructions
setting forth the name and address of the person to whom the
payment is to be made and the purpose for which the payment is
to be made.
Upon the receipt by Chase of Written Instructions specifying
the Securities to be so transferred or delivered, which instructions shall name
the person or persons to whom transfers or deliveries of such Securities shall
be made and
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<PAGE>
shall indicate the time(s) for such transfers or deliveries, Securities held in
the Custody Account shall be transferred, exchanged, or delivered by Chase, any
Chase Branch, Domestic Securities Depository, Foreign Bank, or Foreign
Securities Depository, as the case may be, against payment in Cash or
Securities, or otherwise as provided in the Operating Agreement, only:
(a) upon sale of such Securities for the account of
the Trust and receipt of such payment in the amount shown in a
broker's confirmation of sale of the Securities or other
proper authorization received by Chase before such payment is
made, as confirmed by Written Instructions;
(b) in exchange for or upon conversion into other
Securities alone or other Securities and Cash pursuant to any
plan of merger, consolidation, reorganization,
recapitalization, readjustment, or tender offer;
(c) upon exercise of conversion, subscription,
purchase, or other similar rights represented by such
Securities; or
(d) otherwise as directed by the Trust by
Written Instructions which shall set forth the amount and
purpose of such transfer or delivery.
Until Chase receives Written Instructions to the contrary,
Chase shall, and shall cause each Chase Branch,
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Domestic Securities Depository, Foreign Bank and Foreign Securities Depository
holding Securities or Cash to, take the following actions in accordance with
procedures established in the Operating Agreement:
(a) collect and timely deposit in the Deposit Account
all income due or payable with respect to any Securities and
take any action which may be necessary and proper in
connection with the collection and receipt of such income;
(b) present timely for payment all Securities in the
Custody Account which are called, redeemed or retired or
otherwise become payable and all coupons and other income
items which call for payment upon presentation and to receive
and credit to the Deposit Account Cash so paid for the account
of the Trust except that, if such Securities are convertible,
such Securities shall not be presented for payment until two
business days preceding the date on which such conversion
rights would expire unless Chase previously shall have
received Written Instructions with respect thereto;
(c) present for exchange all Securities in the
Custody Account converted pursuant to their terms into
other Securities;
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(d) in respect of securities in the Custody Account,
execute in the name of the Trust such ownership and other
certificates as may be required to obtain payments in respect
thereto, provided that Chase shall have requested and the
Trust shall have furnished to Chase any information necessary
in connection with such certificates;
(e) exchange interim receipts or temporary
Securities in the Custody Account for definitive
Securities; and
(f) receive and hold in the Custody Account all
Securities received as a distribution on Securities
held in the Custody Account as a result of a stock
dividend, share split-up or reorganization,
recapitalization, readjustment or other rearrangement
or distribution of rights or similar Securities issued
with respect to any Securities held in the Custody
Account.
11. RECORDS. Chase hereby agrees that Chase and any
Chase Branch or Foreign Bank shall create, maintain, and retain all records
relating to their activities and obligations as custodian for the Trust under
this Agreement in such manner as will meet the obligations of the Trust under
the Act of 1940, particularly Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, and Federal, state and foreign tax laws and other
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<PAGE>
legal or administrative rules or procedures, in each case as currently in effect
and applicable to the Trust. All records so maintained in connection with the
performance of its duties under this Agreement shall, in the event of
termination of this Agreement, be preserved and maintained by Chase as required
by regulation, and shall be made available to the Trust or its agent upon
request, in accordance with the provisions of Section 19.
Chase hereby agrees, subject to restrictions under applicable
laws, that the books and records of Chase and any Chase Branch pertaining to
their actions under this Agreement shall be open to the physical, on-premises
inspection and audit at reasonable times by the independent accountants
("Accountants") employed by, or other representatives of, the Trust. Chase
hereby agrees that, subject to restrictions under applicable laws, access shall
be afforded to the Accountants to such of the books and records of any Foreign
Bank, Domestic Securities Depository or Foreign Securities Depository with
respect to Securities and Cash as shall be required by the Accountants in
connection with their examination of the books and records pertaining to the
affairs of the Trust. Chase also agrees that as the Trust may reasonably request
from time to time, Chase shall provide the Accountants with information with
respect to Chase's and Chase Branches' systems of internal accounting controls
as they relate to the services provided under this Agreement, and Chase shall
use its best efforts to obtain
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and furnish similar information with respect to each Domestic
Securities Depository, Foreign Bank and Foreign Securities
Depository holding Securities and Cash.
12. REPORTS. Chase shall supply periodically, upon the
reasonable request of the Trust, such statements, reports, and advices with
respect to Cash in the Deposit Account and the Securities in the Custody Account
and transactions in Securities from time to time received and/or delivered for
or from the Custody Account, as the case may be, as the Trust shall require.
Such statements, reports and advices shall include an identifi-cation of the
Chase Branch, Domestic Securities Depository, Foreign Bank and Foreign
Securities Depository having custody of the Securities and Cash, and
descriptions thereof.
13. REGISTRATION OF SECURITIES. Securities in the Custody
Account which are issued or issuable only in bearer form (except such securities
as are held in the Book-Entry System) shall be held by Chase, Chase Branches,
Domestic Securities Depositories, Foreign Banks or Foreign Securities
Depositories in that form. All other Securities in the Custody Account shall be
held in registered form in the name of Chase, or any Chase Branch, the
Book-Entry System, Domestic Securities Depository, Foreign Bank or Foreign
Securities Depository and their nominees, as custodian or nominee.
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14. STANDARD OF CARE.
(a) GENERAL. Chase shall assume entire responsibility
for all Securities held in the Custody Account, Cash held in
the Deposit Account, Cash or Securities held in the Segregated
Account and any of the Securities and Cash while in the
possession of Chase or any Chase Branch, Domestic Securities
Depository, Foreign Bank or Foreign Securities Depository, or
in the possession or control of any employees, agents or other
personnel of Chase or any Chase Branch, Domestic Securities
Depository, Foreign Bank or Foreign Securities Depository; and
shall be liable to the Trust for any loss to the Trust
occasioned by any destruction of the Securities or Cash so
held or while in such possession, by any robbery, burglary,
larceny, theft or embezzlement by any employees, agents or
personnel of Chase or any Chase Branch, Domestic Securities
Depository, Foreign Bank or Foreign Securities Depository,
and/or by virtue of the disappearance of any of the Securities
or Cash so held or while in such possession, with or without
any fault attributable to Chase ("fault attributable to Chase"
for the purposes of this Agreement being deemed to mean any
negligent act or omission, robbery, burglary, larceny, theft
or embezzlement by any employees or
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agents of Chase or any Chase Branch, Domestic Securities
Depository, Foreign Bank or Foreign Securities Depository). In
the event of Chase's discovery or notification of any such
loss of Securities or Cash, Chase shall promptly notify the
Trust and shall reimburse the Trust to the extent of the
market value of the missing Securities or Cash as at the date
of the discovery of such loss. The Trust shall not be
obligated to establish any negligence, misfeasance or
malfeasance on Chase's part from which such loss resulted, but
Chase shall be obligated hereunder to make such reimbursement
to the Trust after the discovery or notice of such loss,
destruction or theft of such Securities or Cash. Chase may at
its option insure itself against loss from any cause but shall
be under no obligation to insure for the benefit of the Trust.
(b) COLLECTIONS. All collections of funds or other
property paid or distributed in respect of Securities held in
the Custody Account shall be made at the risk of the Trust.
Chase shall have no liability for any loss occasioned by delay
in the actual receipt of notice by Chase (or by any Chase
Branch or Foreign Bank in the case of Securities or Cash held
outside of the United States) of any payment, redemption or
other
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transaction regarding Securities held in the Custody Account
or Cash held in the Deposit Account in respect of which Chase
has agreed to take action in the absence of Written
Instructions to the contrary as provided in Section 10 of this
Agreement, which does not appear in any of the publications
referred to in Section 16 of this Agreement.
(c) EXCLUSIONS. Notwithstanding any other provision
in this Agreement to the contrary, Chase shall not be
responsible for (i) losses resulting from war or from the
imposition of exchange control restrictions, confiscation,
expropriation, or nationalization of any securities or assets
of the issuer of such securities, or (ii) losses resulting
from any negligent act or omission of the Trust or any of its
affiliates, or any robbery, theft, embezzlement or fraudulent
act by any employee or agent of the Trust or any of its
affiliates. Chase shall not be liable for any action taken in
good faith upon Written Instructions of Authorized Persons of
the Trust or upon any certified copy of any resolution of the
Board of Directors of the Trust, and may rely on the
genuineness of any such documents which it may in good faith
believe to be validly executed.
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(d) LIMITATION ON LIABILITY UNDER SECTION 14(A).
Notwithstanding any other provision in this Agreement to the
contrary, it is agreed that Chase's sole responsibility with
respect to losses under Section 14(a) shall be to pay the
Trust the amount of any such loss as provided in Section 14(a)
(subject to the limitation provided in Section 14(e) of this
Agreement). This limitation does not apply to any liability of
Chase under Section 14(f) of this Agree-ment.
(e) ANNUAL ADJUSTMENT OF LIMITATION OF LIABILITY. As
soon as practicable after June 1 of every year, the Trust
shall provide Chase with the amount of its total net assets as
of the close of business on such date (or if the New York
Stock Exchange is closed on such date, then in that event as
of the close of business on the next day on which the New York
Stock Exchange is open for business).
It is understood by the parties to this Agreement (1)
that Chase has entered into substantially similar custody
agreements with other Templeton Funds, all of which Trusts
have as their investment adviser either the Investment Manager
of the Trust or companies which are affiliated with the
Investment Manager; and (2) that Chase may enter into
substantially similar custody
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agreements with additional mutual funds under Templeton
management which may hereafter be organized. Each of such
custody agreements with each of such other Templeton Funds
contains (or will contain) a "Standard of Care" section
similar to this Section 14, except that the limit of Chase's
liability is (or will be) in varying amounts for each Trust,
with the aggregate limits of liability in all of such
agreements, including this Agreement, amounting to
$150,000,000.
On each June 1, Chase will total the net assets
reported by each one of the Templeton Funds, and will
calculate the percentage of the aggregate net assets of all
the Templeton Funds that is represented by the net asset value
of this Trust. Thereupon Chase shall allocate to this
Agreement with this Trust that propor-tion of its total of
$150,000,000 responsibility undertaking which is substantially
equal to the propor-tion which this Trust's net assets bears
to the total net assets of all such Templeton Funds subject to
adjustments for claims paid as follows: all claims previously
paid to this Trust shall first be deducted from its
proportionate allocable share of the $150,000,000 Chase
responsibility, and if the claims paid to this Trust amount to
more than its allocable share of the Chase responsibility,
then the excess of
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such claims paid to this Trust shall diminish the balance of
the $150,000,000 Chase responsibility available for the
proportionate shares of all of the other Templeton Funds
having similar custody agreements with Chase. Based on such
calculation, and on such adjustment for claims paid, if any,
Chase thereupon shall notify the Trust of such limit of
liability under this Section 14 which will be available to the
Trust with respect to (1) losses in excess of payment
alloca-tions for previous years and (2) losses discovered
during the next year this Agreement remains in effect and
until a new determination of such limit of respon-sibility is
made on the next succeeding June 1.
(f) OTHER LIABILITY. Independently of Chase's
liability to the Trust as provided in Section 14(a) above (it
being understood that the limitations in Sections 14(d) and
14(e) do not apply to the provisions of this Section 14(f)),
Chase shall be responsible for the performance of only such
duties as are set forth in this Agreement or contained in
express instructions given to Chase which are not contrary to
the provisions of this Agreement. Chase will use and require
the same care with respect to the safekeeping of all
Securities held in the Custody Account, Cash held in the
Deposit Account, and Securities or Cash held in the Segregated
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Account as it uses in respect of its own similar property, but
it need not maintain any insurance for the benefit of the
Trust. With respect to Securities and Cash held outside of the
United States, Chase will be liable to the Trust for any loss
to the Trust resulting from any disappearance or destruction
of such Securities or Cash while in the possession of Chase or
any Chase Branch, Foreign Bank or Foreign Securities
Depository, to the same extent it would be liable to the Trust
if Chase had retained physical possession of such Securities
and Cash in New York. It is specifically agreed that Chase's
liability under this Section 14(f) is entirely independent of
Chase's liability under Section 14(a). Notwithstanding any
other provision in this Agreement to the contrary, in the
event of any loss giving rise to liability under this Section
14(f) that would also give rise to liability under Section
14(a), the amount of such liability shall not be charged
against the amount of the limitation on liability provided in
Section 14(d).
(g) COUNSEL; LEGAL EXPENSES. Chase shall be
entitled to the advice of counsel (who may be counsel
for the Trust) at the expense of the Trust, in
connection with carrying out Chase's duties hereunder
and in no event shall Chase be liable for any action
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taken or omitted to be taken by it in good faith
pursuant to advice of such counsel. If, in the absence
of fault attributable to Chase and in the course of or
in connection with carrying out its duties and
obligations hereunder, any claims or legal proceedings
are instituted against Chase or any Chase Branch by
third parties, the Trust will hold Chase harmless
against any claims, liabilities, costs, damages or
expenses incurred in connection therewith and, if the
Trust so elects, the Trust may assume the defense
thereof with counsel satisfactory to Chase, and
thereafter shall not be responsible for any further
legal fees that may be incurred by Chase, provided,
however, that all of the foregoing is conditioned upon
the Trust's receipt from Chase of prompt and due notice
of any such claim or proceeding.
15. EXPROPRIATION INSURANCE. Chase represents that it
does not intend to obtain any insurance for the benefit of the Trust which
protects against the imposition of exchange control restrictions on the transfer
from any foreign jurisdiction of the proceeds of sale of any Securities or
against confiscation, expropriation or nationalization of any securities or the
assets of the issuer of such securities by a government of any foreign country
in which the issuer of such securities is organized or in which securities are
held for safekeeping either by Chase, or any
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Chase Branch, Foreign Bank or Foreign Securities Depository in such country.
Chase has discussed the availability of expropriation insurance with the Trust,
and has advised the Trust as to its understanding of the position of the staff
of the Securities and Exchange Commission that any investment company investing
in securities of foreign issuers has the responsibility for reviewing the
possibility of the imposition of exchange control restrictions which would
affect the liquidity of such investment company's assets and the possibility of
exposure to political risk, including the appropriateness of insuring against
such risk. The Trust has acknowledged that it has the responsibility to review
the possibility of such risks and what, if any, action should be taken.
16. PROXY, NOTICES, REPORTS, ETC. Chase shall watch for the
dates of expiration of (a) all purchase or sale rights (including warrants,
puts, calls and the like) attached to or inherent in any of the Securities held
in the Custody Account and (b) conversion rights and conversion price changes
for each convertible Security held in the Custody Account as published in
Telstat Services, Inc., Standard & Poor's Financial Inc. and/or any other
publications listed in the Operating Agreement (it being understood that Chase
may give notice to the Trust as provided in Section 21 as to any change,
addition and/or omission in the publications watched by Chase for these
purposes). If Chase or any Chase Branch, Foreign Bank or Foreign Securities
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Depository shall receive any proxies, notices, reports, or other communications
relative to any of the Securities held in the Custody Account, Chase shall, on
its behalf or on behalf of a Chase Branch, Foreign Bank or Foreign Securities
Depository, promptly transmit in writing any such communication to the Trust. In
addition, Chase shall notify the Trust by person-to-person collect telephone
concerning any such notices relating to any matters specified in the first
sentence of this Section 16.
As specifically requested by the Trust, Chase shall execute or
deliver or shall cause the nominee in whose name Securities are registered to
execute and deliver to such person as may be designated by the Trust proxies,
consents, authoriza-tions and any other instruments whereby the authority of the
Trust as owner of any Securities in the Custody Account registered in the name
of Chase or such nominee, as the case may be, may be exercised. Chase shall vote
Securities in accordance with Written Instructions timely received by Chase, or
such other person or persons as designated in or pursuant to the Operating
Agreement.
Chase and any Chase Branch shall have no liability for any
loss or liability occasioned by delay in the actual receipt by them or any
Foreign Bank or Foreign Securities Depository of notice of any payment or
redemption which does not appear in any of the publications referred to in the
first sentence of this Section 16.
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17. COMPENSATION. The Trust agrees to pay to Chase from time
to time such compensation for its services pursuant to this Agreement as may be
mutually agreed upon in writing from time to time and Chase's out-of-pocket or
incidental expenses, as from time to time shall be mutually agreed upon by Chase
and the Trust. The Trust shall have no responsibility for the payment of
services provided by any Domestic Securities Depository, such fees being paid
directly by Chase. In the event of any advance of Cash for any purpose made by
Chase pursuant to any Written Instruction, or in the event that Chase or any
nominee of Chase shall incur or be assessed any taxes in connection with the
performance of this Agreement, the Trust shall indemnify and reimburse Chase
therefor, except such assessment of taxes as results from the negligence, fraud,
or willful misconduct of Chase, any Domestic Securities Depository, Chase
Branch, Foreign Bank or Foreign Securities Depository, or as constitutes a tax
on income, gross receipts or the like of any one or more of them. Chase shall
have a lien on Securities in the Custody Account and on Cash in the Deposit
Account for any amount owing to Chase from time to time under this Agreement
upon due notice to the Trust.
18. AGREEMENT SUBJECT TO APPROVAL OF THE TRUST. It is
understood that this Agreement and any amendments shall be
subject to the approval of the Trust.
19. TERM. This Agreement shall remain in effect until
terminated by either party upon 60 days' written notice to the
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other, sent by registered mail. Notwithstanding the preceding sentence, however,
if at any time after the execution of this Agreement Chase shall provide written
notice to the Trust, by registered mail, of the amount needed to meet a
substantial increase in the cost of maintaining its present type and level of
bonding and insurance coverage in connection with Chase's under-takings in
Section 14(a), (d) and (e) of this Agreement, said Section 14(a), (d) and (e) of
this Agreement shall cease to apply 60 days after the providing of such notice
by Chase, unless prior to the expiration of such 60 days the Trust agrees in
writing to assume the amount needed for such purpose. Chase, upon the date this
Agreement terminates pursuant to notice which has been given in a timely
fashion, shall, and/or shall cause each Domestic Securities Depository to,
deliver the Securities in the Custody Account, pay the Cash in the Deposit
Account, and deliver and pay Securities and Cash in the Segregated Account to
the Trust unless Chase has received from the Trust 60 days prior to the date on
which this Agreement is to be terminated Written Instructions specifying the
name(s) of the person(s) to whom the Securities in the Custody Account shall be
delivered, the Cash in the Deposit Account shall be paid, and Securities and
Cash in the Segregated Account shall be delivered and paid. Concurrently with
the delivery of such Securities, Chase shall deliver to the Trust, or such other
person as the Trust shall instruct, the records referred to in Section 11 which
are in the possession or control
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<PAGE>
of Chase, any Chase Branch, or any Domestic Securities Deposi-tory, or any
Foreign Bank or Foreign Securities Depository, or in the event that Chase is
unable to obtain such records in their original form Chase shall deliver true
copies of such records.
20. AUTHORIZATION OF CHASE TO EXECUTE NECESSARY DOCUMENTS. In
connection with the performance of its duties hereunder, the Trust hereby
authorizes and directs Chase and each Chase Branch acting on behalf of Chase,
and Chase hereby agrees, to execute and deliver in the name of the Trust, or
cause such other Chase Branch to execute and deliver in the name of the Trust,
such certificates, instruments, and other documents as shall be reasonably
necessary in connection with such performance, provided that the Trust shall
have furnished to Chase any information necessary in connection therewith.
21. NOTICES. Any notice or other communication
authorized or required by this Agreement to be given to the
parties shall be sufficiently given (except to the extent
otherwise specifically provided) if addressed and mailed postage
prepaid or delivered to it at its office at the address set forth
below:
If to the Trust, then to
Franklin/Templeton Japan Fund
700 Central Avenue, P.O. Box 33030
St. Petersburg, Florida 33733
Attention: Thomas M. Mistele, Secretary
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<PAGE>
If to Chase, then to
The Chase Manhattan Bank, N.A.
1211 Avenue of the Americas
33rd Floor
New York, New York 10036
Attention: Global Custody Division Executive
or such other person or such other address as any party shall have furnished to
the other party in writing.
22. NON-ASSIGNABILITY OF AGREEMENT. This Agreement shall not
be assignable by either party hereto; provided, however, that any corporation
into which the Trust, the Trust or Chase, as the case may be, may be merged or
converted or with which it may be consolidated, or any corporation succeeding to
all or substantially all of the trust business of Chase, shall succeed to the
respective rights and shall assume the respective duties of the Trust or of
Chase, as the case may be, hereunder.
23. GOVERNING LAW. This Agreement shall be governed
by the laws of the State of New York.
THE CHASE MANHATTAN BANK, N.A.
By:/s/ LENORE VANDEN-HANDEL
Vice President
FRANKLIN/TEMPLETON JAPAN FUND
By: /s/ THOMAS M. MISTELE
Thomas M. Mistele
Secretary
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<PAGE>
BUSINESS MANAGEMENT AGREEMENT BETWEEN
FRANKLIN TEMPLETON JAPAN FUND AND
TEMPLETON GLOBAL INVESTORS, INC.
AGREEMENT dated as of July 28, 1994, and amended May 25, 1995,
between Franklin Templeton Japan Fund, a Delaware corporation which is a
registered open-end investment company (the "Fund") and Templeton Global
Investors, Inc. ("TGII").
In consideration of the mutual promises herein made, the
parties hereby agree as follows:
(1) TGII agrees, during the life of this Agreement, to
be responsible for:
(a) providing office space, telephone, office
equipment and supplies for the Company;
(b) paying compensation of the Fund's officers for
services rendered as such;
(c) authorizing expenditures and approving bills for
payment on behalf of the Fund;
(d) supervising preparation of annual and semiannual
reports to Shareholders, notices of dividends,
capital gains distributions and tax credits, and
attending to routine correspondence and other
communications with individual Shareholders;
(e) daily pricing of the Fund's investment portfolios and
preparing and supervising publication of daily
quotations of the bid and asked prices of the Fund's
Shares, earnings reports and other financial data;
(f) monitoring relationships with organizations
serving the Fund, including custodians, transfer
agents and printers;
(g) providing trading desk facilities for the Fund;
(h) supervising compliance by the Fund with
recordkeeping requirements under the Investment
<PAGE>
Company Act of 1940 (the "1940 Act") and the rules
and regulations thereunder, with state regulatory
requirements, maintenance of books and records for
the Fund (other than those maintained by the
custodian and transfer agent), preparing and
filing of tax reports other than the Fund's income
tax returns; and
(i) providing executive, clerical and secretarial
personnel needed to carry out the above
responsibilities.
(2) The Fund agrees, during the life
of this Agreement, to pay to TGII as compensation for
the foregoing a monthly fee equal on an annual basis
to 0.15% of the first $200 million of the aggregate
average daily net assets of the Fund during the month
preceding each payment, reduced as follows: on such
net assets in excess of $200 million up to $700
million, a monthly fee equal on an annual basis to
0.135%; on such net assets in excess of $700 million
up to $1.2 billion, a monthly fee equal on an annual
basis to 0.1%; and on such net assets in excess of
$1.2 billion, a monthly fee equal on an annual basis
to 0.075%. TGII may waive all or a portion of its
fees provided for hereunder and such waiver shall be
treated as a reduction in purchase price of its
services. TGII shall be contractually bound hereunder
by the terms of any publicly announced waiver of its
fees, or any limitation of the Fund's expenses, as if
such waiver or limitation were fully set forth
herein.
(3) This Agreement shall remain in
full force and effect through July 31, 1996, and
thereafter from year to year to the extent
continuance is approved annually by the Board of
Directors of the Fund.
(4) This Agreement may be terminated
by the Fund at any time on sixty (60) days' written
notice without payment of penalty, provided that such
termination by the Fund shall be directed or approved
by the vote of a majority of the Directors of the
Fund in office at the time or by the vote of a
majority of the outstanding voting securities of the
Fund (as defined by the
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<PAGE>
1940 Act); and shall automatically and immediately
terminate in the event of its assignment (as defined
by the 1940 Act).
(5) In the absence of willful
misfeasance, bad faith or gross negligence on the
part of TGII, or of reckless disregard of its duties
and obligations hereunder, TGII shall not be subject
to liability for any act or omission in the course
of, or connected with, rendering services hereunder.
(6) TGII has advanced for the
account of the Fund all organizational expenses of
the Fund, all of which expenses are being deferred by
the Fund and amortized ratably over a five-year
period commencing on January 14, 1991; and during the
amortization period, the proceeds of any redemption
of the original Shares will be reduced by a pro rata
portion of any then unamortized organizational
expenses based on the ratio of the
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<PAGE>
- 4 -
<PAGE>
Shares redeemed to the total initial Shares
outstanding immediately prior to the redemption.
IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be duly executed
by their duly authorized officers and their
respective corporate seals to be hereunto duly
affixed and attested.
FRANKLIN TEMPLETON JAPAN FUND
By: /s/THOMAS M. MISTELE
Thomas M. Mistele
TEMPLETON GLOBAL INVESTORS, INC.
By:/s/JOHN R. KAY
John R. Kay
- 5 -
<PAGE>
TRANSFER AGENT AGREEMENT BETWEEN
FRANKLIN/TEMPLETON JAPAN FUND AND
FRANKLIN/TEMPLETON INVESTOR SERVICES, INC.
AGREEMENT dated as of July 28, 1994 between FRANKLIN/ TEMPLETON JAPAN
FUND, a registered open-end investment company with offices at 700 Central
Avenue, St. Petersburg, Florida 33701 (the "Trust"), and FRANKLIN/TEMPLETON
INVESTOR SERVICES, INC., a registered transfer agent with offices at 700 Central
Avenue, St.
Petersburg, Florida 33701 ("FTIS").
W I T N E S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Trust and FTIS agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise
requires, shall have the following meanings:
(a) "Declaration of Trust" shall mean the Declaration
of Trust of the Trust as the same may be amended from time to
time;
(b) "Authorized Person" shall be deemed to include any person,
whether or not such person is an officer or employee of the Trust, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Trust as indicated in a certificate furnished to FTIS pursuant to Section 4(c)
hereof as may be received by FTIS from time to time;
(c) "Custodian" refers to the custodian and any sub-custodian
of all securities and other property which the Trust may from time to time
deposit, or cause to be deposited or held under the name or account of such
custodian pursuant to the Custody Agreement;
(d) "Oral Instructions" shall mean instructions, other than
written instructions, actually received by FTIS from a person reasonably
believed by FTIS to be an Authorized Person;
(e) "Shares" refers to shares of beneficial interest,
par value $.01 per share, of the Trust; and
(f) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by FTIS to be an Authorized Person and
actually received by FTIS.
<PAGE>
2. APPOINTMENT OF FTIS. The Trust hereby appoints and constitutes FTIS
as transfer agent for Shares of the Trust and as shareholder servicing agent for
the Trust, and FTIS accepts such appointment and agrees to perform the duties
hereinafter set forth.
3. COMPENSATION.
(a) The Trust will compensate or cause FTIS to be compensated
for the performance of its obligations hereunder in accordance with the fees set
forth in the written schedule of fees annexed hereto as Schedule A and
incorporated herein. Schedule A does not include out-of-pocket disbursements of
FTIS for which FTIS shall be entitled to bill the Trust separately. FTIS will
bill the Trust as soon as practicable after the end of each calendar month, and
said billings will be detailed in accordance with Schedule A. The Trust will
promptly pay to FTIS the amount of such billing.
Out-of-pocket disbursements shall include, but shall not be
limited to, the items specified in the written schedule of out-of-pocket
expenses annexed hereto as Schedule B and incorporated herein. Schedule B may be
modified by FTIS upon not less than 30 days' prior written notice to the Trust.
Unspecified out-of-pocket expenses shall be limited to those out-of-pocket
expenses reasonably incurred by FTIS in the performance of its obligations
hereunder. Reimbursement by the Trust for expenses incurred by FTIS in any month
shall be made as soon as practicable after the receipt of an itemized bill from
FTIS.
(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A of this Agreement a revised Fee
Schedule.
4. DOCUMENTS. In connection with the appointment of FTIS, the Trust
shall, on or before the date this Agreement goes into effect, but in any case,
within a reasonable period of time for FTIS to prepare to perform its duties
hereunder, deliver or cause to be delivered to FTIS the following documents:
(a) If applicable, specimens of the certificates for
Shares of the Trust;
(b) All account application forms and other documents
relating to Shareholder accounts or to any plan, program or
service offered by the Trust;
(c) A certificate identifying the Authorized Persons
and specimen signatures of Authorized Persons who will sign
Written Instructions; and
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<PAGE>
(d) All documents and papers necessary under the laws of
Florida, under the Trust's Declaration of Trust, and as may be required for the
due performance of FTIS's duties under this Agreement or for the due performance
of additional duties as may from time to time be agreed upon between the Trust
and FTIS.
5. DISTRIBUTIONS PAYABLE IN SHARES. In the event that the Board of
Trustees of the Trust shall declare a distribution payable in Shares, the Trust
shall deliver or cause to be delivered to FTIS written notice of such
declaration signed on behalf of the Trust by an officer thereof, upon which FTIS
shall be entitled to rely for all purposes, certifying (i) the number of Shares
involved, and (ii) that all appropriate action has been taken.
6. DUTIES OF THE TRANSFER AGENT. FTIS shall be responsible for
administering and/or performing transfer agent functions; for acting as service
agent in connection with dividend and distribution functions; and for performing
shareholder account and administrative agent functions in connection with the
issuance, transfer and redemption or repurchase (including coordination with the
Custodian) of Shares. The operating standards and procedures to be followed
shall be determined from time to time by agreement between the Trust and FTIS.
Without limiting the generality of the foregoing, FTIS agrees to perform the
specific duties listed on Schedule C.
7. RECORDKEEPING AND OTHER INFORMATION. FTIS shall create
and maintain all necessary records in accordance with all
applicable laws, rules and regulations.
8. OTHER DUTIES. In addition, FTIS shall perform such other duties and
functions, and shall be paid such amounts therefor, as may from time to time be
agreed upon in writing between the Trust and FTIS. Such other duties and
functions shall be reflected in a written amendment to Schedule C, and the
compensation for such other duties and functions shall be reflected in a written
amendment to Schedule A.
9. RELIANCE BY TRANSFER AGENT; INSTRUCTIONS.
(a) FTIS will be protected in acting upon Written or Oral
Instructions reasonably believed to have been executed or orally communicated by
an Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from an
officer of the Trust. FTIS will also be protected in processing Share
certificates which it reasonably believes to bear the proper
- 3 -
<PAGE>
manual or facsimile signatures of the officers of the Trust and
the proper countersignature of FTIS.
(b) At any time FTIS may apply to any Authorized Person of the
Trust for Written Instructions and may seek advice at the Trust's expense from
legal counsel for the Trust or from its own legal counsel, with respect to any
matter arising in connection with this Agreement, and it shall not be liable for
any action taken or not taken or suffered by it in good faith in accordance with
such Written Instructions or in accordance with the opinion of counsel for the
Trust or for FTIS. Written Instructions requested by FTIS will be provided by
the Trust within a reasonable period of time. In addition, FTIS, or its
officers, agents or employees, shall accept Oral Instructions or Written
Instructions given to them by any person representing or acting on behalf of the
Trust only if said representative is known by FTIS, or its officers, agents or
employees, to be an Authorized Person.
10. ACTS OF GOD, ETC. FTIS will not be liable or responsible for delays
or errors by reason of circumstances beyond its control, including acts of civil
or military authority, national emergencies, labor difficulties, fire,
mechanical breakdown beyond its control, flood or catastrophe, acts of God,
insurrection, war, riots or failure beyond its control of transportation,
communication or power supply.
11. TERM AND TERMINATION.
(a) This Agreement shall be effective as of the date first
written above and shall continue until July 31, 1995 and thereafter shall
continue automatically for successive annual periods ending on July 31st of each
year, provided such continuance is specifically approved at least annually by
(i) the Trust's Board of Trustees or (ii) a vote of a "majority" (as defined in
the Investment Company Act of 1940 (the "1940 Act")) of the Trust's outstanding
voting securities, provided that in either event the continuance is also
approved by a majority of the Board of Trustees who are not "interested persons"
(as defined in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting such approval.
(b) Either party hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than 60 days after the date of receipt of such notice.
In the event such notice is given by the Trust, it shall be accompanied by a
resolution of the Board of Trustees of the Trust, certified by the Secretary of
the Trust, designating a successor transfer
- 4 -
<PAGE>
agent or transfer agents. Upon such termination and at the expense of the Trust,
FTIS will deliver to such successor a certified list of Shareholders of the
Trust (with names and addresses), an historical record of the account of each
Shareholder and the status thereof, and all other relevant books, records,
correspondence, and other data established or maintained by FTIS under this
Agreement in a form reasonably acceptable to the Trust, and will cooperate in
the transfer of such duties and responsibilities, including provisions for
assistance from FTIS's personnel in the establishment of books, records and
other data by such successor or successors.
12. AMENDMENT. This Agreement may not be amended or
modified in any manner except by a written agreement executed by
both parties.
13. SUBCONTRACTING. The Trust agrees that FTIS may, in its
discretion, subcontract for certain of the services described
under this Agreement or the Schedules hereto; provided that the
appointment of any such agent shall not relieve FTIS of its
responsibilities hereunder.
14. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Trust or FTIS shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
To the Trust:
Franklin/Templeton Japan Fund
700 Central Avenue
St. Petersburg, Florida 33701
To FTIS:
Franklin/Templeton Investor Services, Inc.
700 Central Avenue
St. Petersburg, Florida 33701
(b) This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable without the written consent
of the other party.
(c) This Agreement shall be construed in accordance
with the laws of the State of Florida.
- 5 -
<PAGE>
(d) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
(e) The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized as of
the day and year first above written.
FRANKLIN/TEMPLETON JAPAN FUND
BY: /s/ THOMAS M. MISTELE
FRANKLIN/TEMPLETON INVESTOR SERVICES, INC.
BY: /s/ ROBERT M. SMITH, III
- 6 -
<PAGE>
Schedule A
FEES
Shareholder account maintenance
(per annum, prorated payable monthly) $13.42, adjusted as of February 1
of each year to reflect changes
in the Department of Labor
Consumer Price Index.
Cash withdrawal program No charge to the Trust.
Retirement Plans No charge to the Trust ($10.00
annual maintenance charge is
applied against each Plan
account).
Wire orders of redemptions or express
mailing of redemption proceeds No charge to the Trust ($15.00
fee is deducted for each order).
February 1, 1995
<PAGE>
Schedule B
OUT-OF-POCKET EXPENSES
The Trust shall reimburse FTIS monthly for the following out-of-pocket
expenses:
o postage and mailing
o forms
o outgoing wire charges
o telephone
o Federal Reserve charges for check clearance
o if applicable, magnetic tape and freight
o retention of records
o microfilm/microfiche
o stationery
o insurance
o if applicable, terminals, transmitting lines and any
expenses incurred in connection with such terminals and
lines
o all other miscellaneous expenses reasonably incurred by
FTIS
The Trust agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with FTIS. In addition, the Trust will
promptly reimburse FTIS for any other expenses incurred by FTIS as to which the
Trust and FTIS mutually agree that such expenses are not otherwise properly
borne by FTIS as part of its duties and obligations under the Agreement.
<PAGE>
Schedule C
DUTIES
AS TRANSFER AGENT FOR INVESTORS IN THE TRUST, FTIS WILL:
o Record in its transfer record, countersign as transfer agent,
and deliver certificates signed manually or by facsimile, by
the President or a Vice-President and by the Secretary or the
Treasurer of the Trust, in such names and for such number of
authorized but hitherto unissued Shares of the Trust as to
which FTIS shall receive instructions; and
o Transfer on its records from time to time, when
presented to it for that purpose, certificates of said
Shares, whether now outstanding or hereafter issued,
when countersigned by a duly authorized transfer agent,
and upon the cancellation of the old certificates,
record and countersign new certificates for a
corresponding aggregate number of Shares and deliver
said new certificates.
AS SHAREHOLDER SERVICE AGENT FOR INVESTORS IN THE TRUST, FTIS
WILL:
o Receive from the Trust, from the Trust's Principal Underwriter
or from a Shareholder, on a form acceptable to FTIS,
information necessary to record sales and redemptions and to
generate sale and/or redemption confirmations;
o Mail sale and/or redemption confirmations using
standard forms;
o Accept and process cash payments from investors, and
clear checks which represent payments for the purchase
of Shares;
o Requisition Shares in accordance with instructions of
the Principal Underwriter of the Shares of the Trust;
o Produce periodic reports reflecting the accounts
receivable and the paid pending (free stock) items;
o Open, maintain and close Shareholder accounts;
o Establish registration of ownership of Shares in
accordance with generally accepted form;
o Maintain monthly records of (i) issued Shares and (ii) number
of Shareholders and their aggregate Shareholdings classified
according to their residence in each State of the United
States or foreign country;
<PAGE>
o Accept and process telephone exchanges for Shares in
accordance with the Trust's Telephone Exchange
Privilege as described in the Trust's current
prospectus;
o Maintain and safeguard records for each Shareholder
showing name(s), address, number of any certificates
issued, and number of Shares registered in such
name(s), together with continuous proof of the
outstanding Shares, and dealer identification, and
reflecting all current changes; on request, provide
information as to an investor's qualification for
Cumulative Quantity Discount; and provide all accounts
with year-to-date and year-end historical confirmation
statements;
o Provide on request a duplicate set of records for file
maintenance in the Trust's office in St. Petersburg,
Florida;
o Out of money received in payment for Share sales, pay to the
Trust's Custodian Account with the Custodian, the net asset
value per Share and pay to the Principal Underwriter its
commission;
o Redeem Shares and prepare and mail liquidation checks;
o Pass upon the adequacy of documents submitted by a
Shareholder or his legal representative to substantiate
the transfer of ownership of Shares from the registered
owner to transferees;
o From time to time, make transfers upon the books of the Trust
in accordance with properly executed transfer instructions
furnished to FTIS and make transfers of certificates for such
Shares as may be surrendered for transfer properly endorsed,
and countersign new certificates issued in lieu thereof;
o Upon receipt of proper documentation, place stop transfers,
obtain necessary insurance forms, and reissue replacement
certificates against lost, stolen or destroyed Share
certificates;
-C2-
<PAGE>
o Check surrendered certificates for stop transfer restrictions.
Although FTIS cannot insure the genuineness of certificates
surrendered for cancellation, it will employ all due
reasonable care in deciding the genuineness of such
certificates and the guarantor of the signature(s) thereon;
o Cancel surrendered certificates and record and
countersign new certificates;
o Certify outstanding Shares to auditors;
o In connection with any meeting of Shareholders, upon
receiving appropriate detailed instructions and written
materials prepared by the Trust and proxy proofs
checked by the Trust, print proxy cards; deliver to
Shareholders all reports, prospectuses, proxy cards and
related proxy materials of suitable design for
enclosing; receive and tabulate executed proxies; and
furnish a list of Shareholders for the meeting;
o Answer routine correspondence and telephone inquiries about
individual accounts; prepare monthly reports for
correspondence volume and correspondence data necessary for
the Trust's Semi-Annual Report on Form N-SAR;
o Prepare and mail dealer commission statements and
checks;
o Maintain and furnish the Trust and its Shareholders with such
information as the Trust may reasonably request for the
purpose of compliance by the Trust with the applicable tax and
securities laws of applicable jurisdictions;
o Mail confirmations of transactions to investors and
dealers in a timely fashion;
o Pay or reinvest income dividends and/or capital gains
distributions to Shareholders of record, in accordance with
the Trust's and/or Shareholder's instructions, provided that:
(a) The Trust shall notify FTIS in writing
promptly upon declaration of any such
dividend and/or distribution, and in any
event at least forty-eight (48) hours before
the record date;
-C3-
<PAGE>
(b) Such notification shall include the
declaration date, the record date, the
payable date, the rate, and, if applicable,
the reinvestment date and the reinvestment
price to be used; and
(c) Prior to the payable date, the Trust shall
furnish FTIS with sufficient fully and
finally collected funds to make such
distribution.
o Prepare and file annual United States information
returns of dividends and capital gains distributions
(Form 1099) and mail payee copies to Shareholders;
report and pay United States income taxes withheld from
distributions made to nonresidents of the United
States; and prepare and mail to Shareholders the notice
required by the U.S. Internal Revenue Code as to
realized capital gains distributed and/or retained, and
their proportionate share of any foreign taxes paid by
the Trust;
o Prepare transfer journals;
o Set up wire order trades on file;
o Receive payment for trades and update the trade file;
o Produce delinquency and other trade file reports;
o Provide dealer commission statements and payments
thereof for the Principal Underwriter;
o Sort and print Shareholder information by state, social
code, price break, etc.; and
o Mail promptly the Statement of Additional Information
of the Trust to each Shareholder who requests it, at no
cost to the Shareholder.
In connection with the Trust's Cash Withdrawal Program, FTIS will:
o Make payment of amounts withdrawn periodically by the
Shareholder pursuant to the Program by redeeming
Shares, and confirm such redemptions to the
Shareholder; and
o Provide confirmations of all redemptions, reinvestment
of dividends and distributions, and any additional
-C4-
<PAGE>
investments in the Program, including a summary
confirmation at the year-end.
In connection with Tax Deferred Retirement Plans involving the Trust,
FTIS will:
o Receive and process applications, accept contributions,
record Shares issued and dividends reinvested;
o Make distributions when properly requested; and
o Furnish reports to regulatory authorities as required.
-C5-
SUB-TRANSFER AGENT SERVICES AGREEMENT
AGREEMENT made as of March 1, 1992 by and between (i) each of the
investment companies listed herein (collectively the "FUNDS"); (ii)
Templeton Funds Trust Company ("TFTC"); and (iii) THE SHAREHOLDER
SERVICES GROUP, INC. ("TSSG").
WITNESSETH
WHEREAS, the FUNDS are investment companies registered under
the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the FUNDS have engaged TFTC to act as their transfer
agent, dividend disbursing agent and shareholder servicing agent;
and
WHEREAS, the FUNDS and TFTC have entered into a separate
agreements pursuant to which TFTC agreed to arrange for the
performance of certain administrative services for shareholders of
the FUNDS who maintain shares of such Funds; and
WHEREAS, TSSG, a transfer agent registered under the
Securities Exchange Act of 1934, has presented to the FUNDS the
various shareholder administrative services that may be performed
by TSSG; and
WHEREAS, the FUNDS desire to retain TSSG in a sub-transfer
agent capacity to perform such services and TSSG is willing and
able to furnish such services on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual
covenants hereinafter contained, each party hereto severally
agrees, as follows:
1. TSSG agrees to perform the shareholder administrative
services and functions specified in Exhibit A hereto (the
"Services") for the benefit of the shareholders of the FUNDS who
maintain shares of any such FUND in brokerage accounts with
Shearson Lehman Brothers (the "Broker"), where the shareholders'
shares are included in the master account referred to in Exhibit A
(collectively, the "Broker Customers").
2. TSSG agrees that it will maintain and preserve all records
as required by law to be maintained and preserved in connection
with providing the services, and will otherwise comply with the
law, rules and regulations applicable to the services. Upon the
written authorization of the Broker and the FUND, TSSG shall
provide copies of all the historical records relating to
transactions involving the FUNDS and Broker Customers, data formats
for written communication regarding that FUND to or from such
customers and other materials, in each case as may reasonably be
requested to enable the FUND or its representatives, including
without limitation its auditors, investment advisor, transfer agent
or successor transfer agent or distributor, to monitor and review
the Services, or to copmly with any request of the board of
directors, trustees or general partners (collectively, the
"Directors") of the FUNDS or of a governmental body, self-
regulatory organization or a shareholder. TSSG agrees that it will
permit the FUNDS to have reasonable access to its personnel and
records in order to facilitate the monitoring of the quality of the
services. It is understood that notwithstanding anything herein to
the contrary, TSSG shall not be required to provide the names,
addresses and account numbers of Broker Customers to the TFTC, the
FUNDS or their representatives, unless applicable laws or
regulations otherwise require.
3. TSSG may contract with or establish relationships with
third parties, including, without limitation, the Broker, for the
provision of services or activities of TSSG required by the
Agreement.
4. TSSG hereby agrees to notify promptly TFTC and the FUNDS
if for any reason TSSG is unable to perform fully and promptly any
of its obligations under this Agreement.
5. The provisions of this Agreement shall in no way limit the
authority of any of the FUNDS to take such actions as it may deem
appropriate or advisable in connection with all matters relating to
the operations of such FUND and/or sale of its shares.
6. In consideration of the performance of the services by
TSSG, hereunder, the FUNDS severally agree to compensate TSSG at
the rate specified in Schedule A, which rate may change pursuant to
a written amendment to this Agreement executed by and among the
parties hereto. Payment shall be made monthly based upon the
number of shareholders of a FUND who hold shares of such FUND in a
broker's account for any part of the subject month. This number
shall be certified each year by independent public accountants of
TSSG. The FUNDS also agree to reimburse TSSG or its designated
agent for postage and handling expenses associated with teh
distribution of proxies, prospectuses, reports and other
communications to shareholders prepared by the FUNDS or
necessitated by the actions of the FUNDS.
7. TSSG shall indemnify and hold harmless TFTC and the FUNDS
from and against any and all losses or liabilities that any one or
more of them may incur, including without limitation reasonable
attorneys' fees, expenses and cost, arising out of or related to
the perofrmance or non-performance of TSSG of its responsibilities
under this Agreement, excluding, however, any such claims, suits,
loss, damage or cost caused by, materially contributed to or
arising from any noncompliance by TFTC or a FUND with its
obligations under this Agreement, as to which TFTC and each of the
FUNDS shall indemnify, hold harmless and defend TSSG on the same
basis as set forth above.
8. This Agreement may be terminated at any time by each of
TSSG, TFTC or by any FUNDS as to itself upon 30 days written notice
to TSSG. The provisions of paragraphs 2 and 7 shall continue in
full force and effect after termination of this Agreement.
Notwithstanding the foregoing, this Agreement shall not require
TSSG to preserve any records relating to this Agreement beyond the
time periods otherwise required by the laws to which TSSG is
subject.
9. Any other investment company affiliated with the FUNDS may
become a party to this Agreement by giving written notice to TSSG
that it has elected to become a party hereto and by having this
Agreement executed on its behalf.
10. TSSG understands and agrees that the obligations of each
FUND under this Agreement are not binding upon any shareholder of
the FUND personally, but bind only each FUND and each FUND'S
property; TSSG represents that it has notice of the provisions of
the Declaration of Trust, if applicable, of each FUND disclaiming
shareholder liability for acts or obligations of the FUNDS.
11. The parties agree that they are independent contractors
and not partners or co-venturers.
12. No amendment of any provision of this Agreement shall in
any event be effective unless the same shall be in writing and
signed by both parties. Any failure of any party to comply with
any obligation, agreement or condition hereunder may only be waived
in writing by the other party, but such waiver shall not operate as
a waiver of, or estoppel with respect to, any subsequent or other
failure. No failure by any party to take any action against any
breach of this Agreement of default by any other party shall
constitute a waiver of such party's right to enforce any provision
hereof or to take such action.
13. All notices, demands and other communications hereunder
shall be in writing and shall be sent by personal delivery or
registered or certified mail, postage prepaid, or by telecopier
confirmed in writing within three business days as follows:
(a) if to the FUNDS:
Templeton Funds Management, Inc.
700 Central Avenue
St. Petersburg, FL 33701
Attention: President
(b) if to TFTC:
Templeton Funds Trust Company
700 Central Avenue
St. Petersburg, FL 33701
Attention: President
(c) if to TSSG:
The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Attention: President
With a copy to:
The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Attention: General Counsel
Any party may change its address for receiving notices by written
notice given to the others named above. All notices shall be
effective upon the earlier of actual delivery or when deposited in
the mail addressed as set forth above.
14. This agreement shall be governed by and construed in
accordance with the law of the State of New York, without regard to
its conflicts of laws doctrine, and the parties hereby consent to
the jurisdiction of New York courts over all matter relating to
this Agreement and irrevocably waive any objection, including
without limitation, any objection of the laying of venue or based
on the grounds of forum non conveniens, which they may now have or
may hereafter have to bringing of any action or proceeding in such
jurisdiction.
IN WITNESS HEREOF, the parties hereto have executed and
delivered this agreement as of the date first above written.
THE SHAREHOLDER SERVICES GROUP, INC.
By:________________________________
Title:_____________________________
Templeton Funds Trust Company Templeton Income
Templeton Growth Fund, Inc.
Templeton Smaller Companies Growth
Fund, Inc.
Templeton Foreign Fund
Templeton World Fund
Templeton Real Estate Securities Fund
Templeton Global Opportunities Trust
Templeton Insured Tax Free Fund
Templeton Value Fund, Inc.
Templeton American Trust, Inc.
Templeton Developing Markets Trust
By:_______________________ By:________________________
Print Name: Harold F. McElraft Print Name:________________
Title:____________________ Title:_____________________
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto,
TSSG shall, upon the effective date of this Agreement, perform or
cause to be performed, the following services, as well as
telephonic and personal shareholder services related to the
following services:
1. Transmit to TFTC purchase and redemption order placements
and registration instructions. Collect and remit to TFTC payments
for all purchase orders placed on behalf of Broker Customers.
2. Maintain separate records for each shareholder of any of
the FUNDS who hold shares of a FUND in a brokerage account with
Broker Customers, which records shall reflect shares purchased and
redeemed, as well as account and share balances. Process
transactions versus master accounts maintained by TFTC on behalf of
Broker Customers and such account shall be in the name of the
Broker or its nominee as the record owner of the shares owned by
such customers.
3. Disburse or credit to the Broker Customers all proceeds of
redemptions of shares of the FUNDS and all dividends and other
distributions not reinvested in shares of the FUNDS.
4. Prepare and transmit to Broker Customers:
(a) Periodic account statements which show the total number of
FUND shares owned by the Broker Customer in that account as of the
closing date, as well as purchases, redemption dividends (cash and
reinvested) and other distributions in the account during the
period covered by the statement;
(b) Proxy materials and reports and other information received
by TSSG or its agent from any of the FUNDS and required to be sent
to shareholders under the federal securities laws, and, upon
request of TFTC transmit to Broker Customers material fund
communications deemed by the FUND, through its Directors or other
similar governing body, to be necessary and proper for receipt by
all FUND beneficial shareholders.
(c) Provide to TFTC, or the FUNDS, or any of the agents
designated by any of them, such information as shall reasonably
conclude is necessary to enable any of the FUNDS and its
distributor to comply with State Blue Sky requirements.
(d) All tax information reports or statements required to be
furnished to shareholders of the FUNDS with respect to their FUND
shares by the Internal Revenue Code and the Regulations promulgated
thereunder.
The following fees shall be billed by TSSG monthly in arrears
on a prorated basis of 1/12 of the annualized fee for all accounts
that are open during such month.
Upon execution of this Agreement, the FUND shall pay TSSG an
annualized fee of $6.00 for each Broker Customer account in the
FUND that is open during any monthly period effective March 1,
1992.
SHAREHOLDER SUB-ACCOUNTING SERVICES AGREEMENT
Agreement made as of the 1st day of May, 1991 by and between (i) each of
the investment companies listed (collectively the "Templeton Funds"), as such
Schedule may be amended from time to time; (ii) Templeton Funds Trust Company
("Templeton Funds Trust Company"); (iii) Financial Data Service, Inc.
("FDS"), a New Jersey corporation; and (iv) Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S"), a Delaware corporation.
WITNESSETH:
WHEREAS, the Templeton Funds are investment companies registered under
the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Templeton Funds Trust Company, is the transfer agent, dividend
disbursing agent and shareholder servicing agent for the Templeton Funds; and
WHEREAS, Templeton Funds and Templeton Funds Trust Company have entered
into a separate agreement pursuant to which Templeton Funds Trust Company
agreed to arrange for the performance of certain administrative services for
shareholders of the Templeton Funds who maintain shares of any such Funds in
a brokerage account with MLPF&S, a broker-dealer affiliated with FDS; and
WHEREAS, FDS, a transfer agent registered under the Securities Exchange
Act of 1934, has presented to Templeton Funds Trust Company the various
administrative services that may be performed by MLPF&S; and
WHEREAS, Templeton Funds Trust Company desires to retain MLPF&S to
perform such services and MLPF&S is willing and able to furnish such services
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agree, as follows:
1. MLPF&S agrees to perform the administrative services and functions
specified in Exhibit A hereto (the "Services") for the benefit of the
shareholders of the Templeton Funds who maintain shares of any of such Funds
in brokerage accounts with MLPF&S and whose shares are included in the master
account referred to in paragraph 1 to Exhibit A (collectively, the "MLPF&S
customers").
2. MLPF&S agrees that it will maintain and preserve all records as
required by law to be maintained and preserved in connection with providing
the services, and will other wise comply with all law, rules and regulations
applicable to the services. Upon the request of Templeton Funds Trust
Company, MLPF&S shall provide copies of all the historical records relating
to transactions involving any Templeton Fund and MLPF&S customers, written
communication regarding that Fund to or from such customers and other
materials, in each case as may reasonably be requested to enable any of the
Funds or its representatives, including without limitation its auditors,
investment adviser, Templeton Funds Trust Company or successor transfer agent
or distributor, to monitor and review the Services, or to comply with any
request of the board of directors, trustees or general partners
(collectively, the "Directors") of Templeton Funds or of a governmental body,
self-regulatory organization or a shareholder. MLPF&S agrees that it will
permit Templeton Funds Trust Company, and any Templeton Fund or their
representatives to have reasonable access to its personnel and records in
order to facilitate the monitoring of the quality of the services. It is
understood that notwithstanding anything herein to the contrary, neither FDS
nor MLPF&S shall be required to provide the names and addresses of MLPF&S
customers to Templeton Funds Trust Company, any Templeton Fund of their
representatives, unless applicable laws otherwise require.
3. MLPF&S may contract with or establish relationships with FDS or
other parties for the provision of services or activities of MLPF&S required
by the Agreement.
4. Each of MLPF&S and FDS hereby agrees to notify promptly Templeton
Funds Trust Company if for any reason either of them is unable to perform
fully and promptly any of its obligations under this Agreement.
5. Each of MLPF&S and FDS hereby represent that neither of them now
owns or holds with power to vote any shares of the Templeton Funds which are
registered in the name of MLPF&S or the name of its nominee and which are
maintained in MLPF&S brokerage accounts.
6. The provisions of the Agreement shall in no way limit the authority
of Templeton Funds Trust Company or any Templeton Fund to take such action as
it may deem appropriate or advisable in connection with all matters relating
to the operations of such Fund and/or sale of it shares.
7. In consideration of the performance of the services by MLPF&S and
FDS, hereunder, each Templeton Fund severally agrees to compensate FDS at the
rate of $6.00 annually per shareholder account which rate may change
pursuant to a written amendment to this Agreement executed by and among the
parties hereto. Payment shall be made monthly based upon the number of
shareholders of a Fund who hold shares of such Fund in a MLPF&S brokerage
account for any part of the subject month. MLPF&S agrees that,
notwithstanding anything herein to the contrary, it will not request any
increase in it compensation hereunder prior to May 3, 1993. In the event
MLPF&S or FDS as it's agent were to mail any such Fund's proxy materials,
reports, prospectuses, and other information to shareholders of any Templeton
Fund who are Merrill Lynch customers pursuant to paragraph 4 of Exhibit A,
Templeton Funds Trust Company or any such Templeton Fund agrees to reimburse
MLPF&S or FDS, as the case may be, for postage, handling fees and reasonable
costs of supplies used by it in such mailings in an amount to be determined
in accordance with the rates set forth in Rule 451.90 of the New York Stock
Exchange, Inc.
The accuracy of the account charges and the expenses for postage, handling
fees and reasonable costs of supplies billed pursuant to this paragraph shall
be certified once each year by independent public accountants of MLPF&S as of
a month selected by Templeton Funds Trust Company, such certification to be
at the expense of MLPF&S.
8. FDS shall indemnify and hold harmless each Templeton Fund and
Templeton Funds Trust Company, from and against any and all losses or
liabilities that any one or more of them may incur, including without
limitation reasonable attorneys' fees, expense and cost, arising out of or
related to the performance or non-performance of MLPF&S or FDS of its
responsibilities under this Agreement, excluding, however, any such claims,
suits, loss, damage or cost caused by, contributed to or arising from any
noncompliance by Templeton Funds Trust company or any of the Templeton Funds
with its obligations under this Agreement, as to which Templeton Funds Trust
Company and the Templeton Funds shall indemnify, hold harmless and defend FDS
and MLPF&S on the same basis as set forth above.
9. This Agreement may be terminated at any time by each of MLPF&S, FDS
and Templeton Funds Trust Company or by any Templeton Funds as to itself upon
30 days written notice to FDS. This Agreement may also be terminated at any
time without penalty upon 30 days written notice to FDS that a majority of
the Directors of any Templeton Fund have determined to terminate its
agreement(s) with Templeton Funds Trust Company pertaining to the services
hereunder. The provisions of paragraph 2 and 8 shall continue in full force
and effect after termination of this Agreement. Notwithstanding the
foregoing, this Agreement shall require MLPF&S to preserve any records
relating to this Agreement beyond the time periods otherwise required by the
laws to which MLPF&S is subject.
10. Any other Templeton Fund for which Templeton Funds Trust Company
serves as transfer agent may become a party to this Agreement by giving
written notice to MLPF&S or FDS that it has elected to become a party hereto
and by having this Agreement executed on its behalf.
11. Each of MLPF&S and FDS understand and agree that the obligations of
the Templeton Funds under this Agreement are not binding upon any shareholder
of any of the Funds personally, but bind only each Fund and each Fund's
property; each of MLPF&S and FDS represents that it has notice of the
provisions of the Declaration of trust of each of the Templeton Funds
disclaiming shareholder liability for acts or obligations of the Fund.
12. It is understood and agreed that in performing the services under
this Agreement, neither MLPF&S nor FDS shall be acting as an agent for any of
the Templeton Funds.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH, PIERCE, FENNER FINANCIAL DATA SERVICES, INC.
& SMITH INC.
By: By:
Print Name: Harry P. Allex Print Name: Robert C. Doan
Title: Sr. Vice President Title: President
Templeton Funds Trust Company Templeton Income
Templeton Growth Fund, Inc.
Templeton Smaller Companies Growth Fund
Templeton Foreign Fund
Templeton World Fund
Templeton Real Estate Securities Fund
Templeton Global Opportunities Tr.
Templeton Tax Free Insured Fund
Templeton Value Fund, Inc.
Templeton American Trust, Inc.
By: By:
Print Name: Print Name:
Title: President Title: Vice President
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, MLPF&S shall
perform the following services:
1. Maintain separate records for each shareholder of any of the
Templeton Funds who hold shares of a Fund in brokerage account with MLPF&S
("MLPF&S customers"), which records shall reflect shares purchased and
redeemed and share balances. MLPF&S shall maintain a single master account
with the transfer agent of the Fund on behalf of MLPF&S customers and such
account shall be in the name of MLPF&S or its nominee as the record owner of
the shares owned by such customers.
2. Disburse or credit to MLPF&S customers all proceeds of redemptions
of shares of the Funds and all dividends and other distributions not
reinvested in shares of the Funds.
3. Prepare and transmit to MLPF&S customers periodic account
statements showing the total number of shares owned by the customer as of the
statement closing date, purchases and redemption of Templeton Fund shares by
the customer during the period covered by the statement and the dividends and
other distributions paid to the customer during the statement period (whether
paid in cash or reinvested in Fund shares).
4. Transmit to MLPF&S customers proxy materials and reports and other
information received by MLPF&S from any of the Templeton Funds and required
to be sent to shareholders under the federal securities laws, and upon
request of the Fund's transfer agent transmit to MLPF&S customers material
fund communications deemed by the fund, through its Board of Directors or
other similar governing body, to be necessary and proper for receipt by all
Fund beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption
orders on behalf of Merrill Lynch customers in accordance with the commission
schedule (front and rear end) in the Fund's then current prospectus.
6. Provide to Templeton Funds Trust Company, or the Funds, or any of
the agents designated by any of them, such periodic reports as Templeton
Funds Trust Company shall reasonably conclude is necessary to enable any of
the Templeton Funds and its distributor to comply with State Blue Sky
requirements.
7. Prepare and transmit to MLPF&S customers annually all tax
information reports or statements required to be furnished to shareholders of
the Templeton Funds with respect to their Fund shares by the Internal Revenue
Code and the Regulations promulgated thereunder.
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated April 28, 1995 on the
financial statements of Franklin/Templeton Japan Fund referred to therein which
appears in the 1995 Annual Report to Shareholders, and which is incorporated
herein by referenced, in Post Effective Amendment No. 2 to the Registration
Statement on Form N-1A No. 33-47666, as filed with the Securities and Exchange
Commission.
We also consent to the reference to our firm in the Prospectus under
the caption "Financial Highlights" and in the Statement of Additional
Information under the caption "Independent Accountants".
McGladrey & Pullen, LLP
New York, New York
July 20, 1995
<PAGE>
DISTRIBUTION PLAN
WHEREAS, Franklin/Templeton Japan Fund (the "Trust") is
registered as an open-end diversified management investment company under the
Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Trust and Franklin/Templeton Distributors, Inc.
(the "Selling Company"), a wholly owned subsidiary of Franklin Resources, Inc.
and a broker-dealer registered under the Securities Exchange Act of 1934, have
entered into a Distribution Agreement pursuant to which the Selling Company will
act as principal underwriter of Shares of the Trust for sale to the public; and
WHEREAS, the Board of Trustees of the Trust has determined to
adopt this Distribution Plan (the "Plan"), in accordance with the requirements
of the 1940 Act and has determined that there is a reasonable likelihood that
the Plan will benefit the Trust and its Shareholders.
NOW THEREFORE, the Trust hereby adopts the Plan on the
following terms and conditions:
1. The Trust will reimburse the Selling Company for
costs and expenses incurred in connection with the distribution
and marketing of Shares of the Trust. Such distribution costs
<PAGE>
and expenses may include: (a) payments to broker-dealers who provide certain
services of value to the Trust's Shareholders (sometimes referred to as a "trail
fee"); (b) reimbursement of expenses relating to selling and servicing efforts
or of organizing and conducting sales seminars; (c) payments to employees or
agents of the Selling Company who engage in or support distribution of Shares;
(d) payment of the costs of preparing, printing and distributing prospectuses
and reports to prospective investors and of printing and advertising expenses;
(e) payment of dealer commissions and wholesaler compensation in connection with
sales of Trust Shares exceeding $1 million (for which the Trust imposes no sales
charge) and interest or carrying charges in connection therewith; and (f) such
other similar services as the Trust's Board of Trustees determines to be
reasonably calculated to result in the sale of Shares.
The Selling Company will be reimbursed for such costs,
expenses or payments on a monthly basis, subject to a limit of 0.35% per annum
of the Trust's average daily net assets. Payments made out of or charged against
the assets of the Trust must be in reimbursement for costs and expenses in
connection with any activity which is primarily intended to result in the sale
of Trust Shares. The costs and expenses not reimbursed in any one given month
(including costs and expenses not reimbursed because they exceeded the limit of
0.35% per annum of the Trust's
-2-
<PAGE>
average daily net assets) may be reimbursed in subsequent months
or years.
2. The Plan shall not take effect with respect to the Trust
until it has been approved by a vote of at least a majority (as defined in the
1940 Act) of the outstanding voting Shares of the Trust. With respect to the
submission of the Plan for such a vote, it shall have been effectively approved
with respect to the Trust if a majority of the outstanding voting Shares of the
Trust votes for approval of the Plan.
3. The Plan shall not take effect until it has been approved,
together with any related agreements and supplements, by votes of a majority of
both (a) the Board of Trustees of the Trust, and (b) those Trustees of the Trust
who are not "interested persons" (as defined in the 1940 Act) and have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to it (the "Plan Trustees"), cast in person at a meeting (or meetings)
called for the purpose of voting on the Plan and such related agreements.
4. The Plan shall continue in effect so long as such
continuance is specifically approved at least annually in the manner provided
for approval of the Plan in paragraph 3.
-3-
<PAGE>
5. Any person authorized to direct the disposition of monies
paid or payable by the Trust pursuant to the Plan or any related agreement shall
provide to the Trust's Board of Trustees, and the Board shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
6. Any agreement related to the Plan shall be in writing and
shall provide: (a) that such agreement may be terminated at any time as to the
Trust, without payment of any penalty, by vote of a majority of the Plan
Trustees or by vote of a majority of the outstanding voting Shares of the Trust,
on not more than sixty days' written notice to any other party to the agreement;
and (b) that such agreement shall terminate automatically in the event of its
assignment.
7. The Plan may be terminated at any time with respect to the
Trust, without payment of any penalty, by vote of a majority of the Plan
Trustees, or by vote of a majority of the outstanding voting Shares of the
Trust.
8. The Plan may be amended at any time with respect to the
Trust by the Trust's Board of Trustees, provided that (a) any amendment to
increase materially the costs which the Trust may bear for distribution pursuant
to the Plan shall be effective
-4-
<PAGE>
only upon approval by a vote of a majority of the outstanding voting Shares of
the Trust, and (b) any material amendments of the terms of the Plan shall become
effective only upon approval as provided in paragraph 3 hereof.
9. While the Plan is in effect, the selection and nomination
of Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust shall be committed to the discretion of the Trustees who are not
interested persons.
10. The Trust shall preserve copies of the Plan, any related
agreement and any report made pursuant to paragraph 5 hereof, for a period of
not less than six years from the date of the Plan, such agreement or report, as
the case may be, the first two years of which shall be in an easily accessible
place.
11. It is understood and expressly stipulated that neither the
holders of Shares of the Trust nor any Trustee, officer, agent or employee of
the Trust shall be personally liable hereunder, nor shall any resort be had to
other private property for the satisfaction of any claim or obligation
hereunder, but the Trust only shall be liable.
-5-
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this Distribution
Plan on this 28th day of July 1994.
FRANKLIN/TEMPLETON JAPAN FUND
By: /s/ THOMAS M. MISTELE
Thomas M. Mistele
-6-
EXHIBIT 16
COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)
FRANKLIN TEMPLETON JAPAN FUND
TOTAL RETURN FOR THE PERIOD FROM 7/27/94
(COMMENCEMENT OF OPERATIONS) THROUGH
3/31/95 - .68 YEARS
P (1 + T)N = ERV
$1000 (1 + T).68 = $959
(1 + T).68 = .9593
1 + T = .9407
T = -.0593
T = -5.93%
FRANKLIN/TEMPLETON JAPAN FUND
ASSISTANT SECRETARY'S CERTIFICATE
The undersigned, being the duly elected Assistant
Secretary of Franklin/Templeton Japan Fund, (the "Trust"), hereby
certifies that the following resolution has been duly adopted by
the Trust's Board of Trustees, and that said resolution remains in
effect on the date hereof.
RESOLVED, that (i) the Notification of Registration on Form
N-8A registering the Trust as an investment company under the
Investment Company Act of 1940, and (ii) the Registration
Statement on Form N-1A registering shares of beneficial
interest of the Trust for sale under the Securities Act of
1933 to be filed with the Securities and Exchange Commission,
be, and both hereby are, approved for filing; and
FURTHER RESOLVED, that the appropriate officers of the Trust,
or their attorneys-in-fact, are hereby authorized, empowered,
and directed on behalf of the Trust to arrange for the
preparation, execution, and filing of said Registration
Statement and any and all amendments or exhibits thereto, or
other documents (including application for exemptive orders)
which they deem necessary or appropriate, upon advice of
counsel, to obtain the effectiveness of such Registration
Statement, which amendments, exhibits, and documents filed in
connection therewith shall be in such form as they, by the
execution and filing thereof, upon advice of counsel, shall
approve.
Dated: April 14, 1994
/s/ Jeffrey L. Steele
Jeffrey L. Steele
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FRANKLIN TEMPLETON JAPAN FUND MARCH 31, 1995 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000887400
<NAME> FRANKLIN TEMPLETON JAPAN FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 1341453
<INVESTMENTS-AT-VALUE> 1343107
<RECEIVABLES> 63301
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 103514
<TOTAL-ASSETS> 1509922
<PAYABLE-FOR-SECURITIES> 34786
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31621
<TOTAL-LIABILITIES> 66407
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1437635
<SHARES-COMMON-STOCK> 145366
<SHARES-COMMON-PRIOR> 50000
<ACCUMULATED-NII-CURRENT> 7426
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3200)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1654
<NET-ASSETS> 1443515
<DIVIDEND-INCOME> 3687
<INTEREST-INCOME> 16368
<OTHER-INCOME> 0
<EXPENSES-NET> 7888
<NET-INVESTMENT-INCOME> 12167
<REALIZED-GAINS-CURRENT> (3200)
<APPREC-INCREASE-CURRENT> 1654
<NET-CHANGE-FROM-OPS> 10621
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4741)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 132082
<NUMBER-OF-SHARES-REDEEMED> (37012)
<SHARES-REINVESTED> 296
<NET-CHANGE-IN-ASSETS> 943515
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4738
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 76204
<AVERAGE-NET-ASSETS> 842541
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> (.12)
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.93
<EXPENSE-RATIO> 1.25<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>THE EXPENSE RATIO PER THE FRANKLIN TEMPLETON JAPAN FUND ANNUAL REPORT
MARCH 31, 1995 WITHOUT REIMBURSEMENT EQUALED 12.05%.
</FN>
</TABLE>
