<PAGE>
FRANKLIN TEMPLETON PROSPECTUS -- AUGUST 1, 1995
JAPAN FUND AS AMENDED FEBRUARY 29, 1996
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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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TeleFACTS(R) Franklin Templeton's automated customer servicing system
(24 hours, seven days a week access to current prices, shareholder account
balances/values, and last transaction). The code for the Fund, which is needed
to access system information, is 417. -- 1-800-247-1753
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TABLE OF CONTENTS
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EXPENSE TABLE............................................................. 2
FINANCIAL HIGHLIGHTS...................................................... 3
GENERAL DESCRIPTION....................................................... 4
Investment Objective and Policies......................................... 4
INVESTMENT TECHNIQUES..................................................... 5
Temporary Investments..................................................... 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 Agreements..................................................... 7
Depositary Receipts....................................................... 7
Illiquid and Restricted Securities........................................ 8
RISK FACTORS.............................................................. 8
Investment in Japanese Issuers............................................ 8
Foreign Investments....................................................... 9
Emerging Growth Companies................................................. 10
High-Risk Debt Securities................................................. 10
Leverage.................................................................. 10
Futures Contracts and Related Options..................................... 11
HOW TO BUY SHARES OF THE FUND............................................. 11
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Offering Price............................................................ 11
Net Asset Value Purchases................................................. 13
Description of Special Net Asset Value Purchases.......................... 14
Additional Dealer Compensation............................................ 15
Purchasing Fund Shares.................................................... 15
Automatic Investment Plan................................................. 15
Institutional Accounts.................................................... 16
Account Statements........................................................ 16
TeleFACTS(R) Systems...................................................... 16
Retirement Plans.......................................................... 16
Net Asset Value........................................................... 16
EXCHANGE PRIVILEGE........................................................ 16
Transfers................................................................. 18
Exchanges by Timing Accounts.............................................. 18
HOW TO SELL SHARES OF THE FUND............................................ 18
Reinstatement Privilege................................................... 20
Systematic Withdrawal Plan................................................ 20
Redemptions by Telephone.................................................. 21
Contingent Deferred Sales Charge.......................................... 22
TELEPHONE TRANSACTIONS.................................................... 22
Verification Procedures................................................... 22
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Restricted Accounts....................................................... 23
General................................................................... 23
MANAGEMENT OF THE FUND.................................................... 23
Investment Manager........................................................ 23
Business Manager.......................................................... 24
Transfer Agent............................................................ 24
Custodian................................................................. 25
Plan of Distribution...................................................... 25
Brokerage Commissions..................................................... 25
GENERAL INFORMATION....................................................... 25
Description of Shares/Share Certificates.................................. 25
Meetings of Shareholders.................................................. 25
Dividends and Distributions............................................... 26
Federal Tax Information................................................... 26
Japan Taxes............................................................... 26
Inquiries................................................................. 27
Performance Information................................................... 27
Statements and Reports.................................................... 27
WITHHOLDING INFORMATION................................................... 28
CORPORATE RESOLUTION...................................................... 29
AUTHORIZATION AGREEMENT................................................... 30
THE FRANKLIN TEMPLETON GROUP.............................................. 31
</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. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF CAPITAL.
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.
<PAGE>
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 (after expense reimbursement).................................................................... 0.00%
Rule 12b-1 Fees/3/............................................................................................... .35%
Other Expenses (audit, legal, business management, transfer agent and custodian) (after expense reimbursement)... 1.65%
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 of 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.
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, $364 for three years, $533 for five years and $864
for ten 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.
2
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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 rate of
return of 5%, but the Fund's actual return may be more or less than 5%.
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
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<S> <C>
Net asset value,
beginning of period $10.00
------
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)
------
Change in net asset value (.07)
------
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
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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. There can be no assurance that the Fund's investment objective
will be achieved.
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 bonds 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, and which may
include structured investments) 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
4
<PAGE>
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 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
5
<PAGE>
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.
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
6
<PAGE>
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 constitute an
effective hedge against fluctuations in exchange rates although, in the event
of rate movements adverse to the Fund's position, the Fund may forfeit the
entire amount of the premium plus related transaction costs. Options on
foreign currencies to be written or purchased by the Fund 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
7
<PAGE>
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.
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
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<PAGE>
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 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.
Brokerage commissions, custodial services and other costs relating to
investment in foreign countries are generally more expensive than in the
United States. 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
9
<PAGE>
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. See
"Investment Objective and Policies -- Risk Factors" in the SAI. 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.
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 Objective 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.
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<PAGE>
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.
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
payable in U.S. currency. 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 together with his or her spouse and
their children under age 21 and their grandchildren 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.
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<PAGE>
No front-end sales charge applies to 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 of such investments ("contingency period"). See "How to Sell
Shares of the Fund--Contingent Deferred Sales Charge."
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"); and (ii) 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 Franklin Templeton Funds 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 $1
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 was 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.
Payments by FTD or one of its affiliates to securities dealers of up to 1%
of the purchase price of Shares (purchased at net asset value), may not be
made to the extent such persons are compensated by FTD or one of its
affiliates for administration or recordkeeping costs for retirement plans.
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 Funds. The cumulative quantity discount applies to Franklin
Templeton Funds owned at the time of purchase by the purchaser, his or her
spouse, their children under age 21, and grandchildren under age 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. An investor may be eligible for reduced 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
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<PAGE>
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.
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 Fund, any of the Franklin Templeton Funds, or 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) group
annuity separate accounts offered to retirement plans; (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 affiliates, and by 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 (unless the redemption proceeds are from Class I
shares of a fund with a lower initial sales charge than that charged by the
Fund and have been held in that fund for less than six months), and except any
of the Franklin Templeton money market funds, or (ii) a dividend or
distribution paid by any of the Franklin Templeton Funds or received from a
real estate investment trust ("REIT") sponsored or advised by Franklin
Properties, Inc., within 365 days after the date of the redemption or dividend
or distribution. See "How to Sell Shares of the Fund--Reinstatement
Privilege."
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<PAGE>
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).
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 Fund, 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 its 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.
To qualify to buy Shares at net asset value, please specify in writing the
privilege that applies to the purchase and include that written statement with
the purchase order. Neither the Fund nor the Transfer Agent will be
responsible for purchases that are not made at net asset value if this written
statement is not included with the order.
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
Funds 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 Funds
must total at least $1 million. Orders for such
14
<PAGE>
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 $1 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-
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 on or after
February 1, 1995 for which FTD advanced a commission to a securities dealer,
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
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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 and 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.
TELEFACTS(R) SYSTEM. From a touch-tone phone, Templeton and Franklin
shareholders may access an automated system (day or night) which offers the
following features. By calling the TeleFACTS(R) System at 1-800-247-1753,
shareholders may obtain account information, current price and, if available,
yield or other performance information specific to the Fund or any Franklin
Templeton Fund. The code for the Fund, which will be needed to access system
information, is 417. In addition, Franklin Class I shareholders may process an
exchange, within the same class, into an identically registered Franklin
account and request duplicate confirmation or year-end statements and deposit
slips.
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 FTD. 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, 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 funds' stated eligibility requirements
and investment minimums. Shares
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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 of the original purchase date, a contingent
deferred sales charge will be imposed. The period will be tolled (or stopped)
for the period Shares are exchanged into and held in a Franklin Templeton
money market fund. See also "How to Sell Shares of the Fund--Contingent
Deferred Sales Charge."
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 market funds are subject to applicable sales charges on the funds being
purchased, unless the Franklin Templeton money market 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 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 Fund 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 objective 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 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 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 Fund--Contingent Deferred
Sales Charge."
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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.
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 temporarily or permanently to 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 and
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. The request must be 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
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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 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 custodial
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.
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 the
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 redemption 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.
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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 Shareholder'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.,
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, except any of the Franklin
Templeton money market funds (unless the redemption proceeds are from Class I
shares of a fund with a lower initial sales charge than that charged by the
Fund and have been held in that fund for less than six months), 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.
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 Shares 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 an account
provided that the net asset value of the Shares held in the account 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
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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 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 telephone
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.
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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 of 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. See
below.
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 from an individual retirement plan
account due to death or disability, or upon periodic distributions based on
life expectancy; tax-free returns of excess contributions from employee
benefit plans; distributions from employee benefit plans, including those due
to 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 the caller to provide certain
personal and/or account information at the time of the call to establish 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 telephone instructions 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
22
<PAGE>
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.
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.
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, with its affiliates, provides investment
management and advisory services to a worldwide client base, including over
4.3 million mutual fund shareholders, foundations, endowments, employee
benefit plans and individuals. The Investment Manager and its affiliates have
approximately 4,100 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 performs similar services for other funds and
accounts and there may be times when the actions taken with respect to the
Fund's portfolio will differ from those taken by the Investment Manager on
behalf of other funds and accounts. Neither the Investment Manager and its
affiliates, its officers, directors or employees, nor the officers and
Trustees of the Fund are
23
<PAGE>
prohibited from investing in securities held by the Fund or other funds and
accounts which are managed or administered by the Investment Manager, to the
extent such transactions comply with the Fund's Code of Ethics. Please see
"Investment Management and Other Services--Investment Management Agreements"
in the SAI for further information on securities transactions and a summary of
the Fund's Code of Ethics.
The Investment Manager does not furnish any other services 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 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.
24
<PAGE>
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 Fund 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.
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
25
<PAGE>
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. By completing the "Special Payment
Instructions for Distributions" section of the Shareholder Application,
Shareholders may direct that their dividend and/or capital gain distributions
be reinvested in Shares of the Fund or Class I shares of any other Franklin
Templeton Fund. Shareholders may also direct the payment of their dividend or
capital gain distributions to another person. 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
gain distributions which have been declared but not yet paid should be
carefully considered. Any dividend or capital gain 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 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 net 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 Japanese
corporations 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.
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<PAGE>
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. 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 sent to one household as well as to
reduce Fund expenses, the Transfer Agent will attempt to identify related
Shareholders within a household and send only one copy of the report.
Additional copies may be obtained, without charge, upon request to the Fund
Information Department--telephone 1-800/DIAL BEN. 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.
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<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the 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 Individual Actual owner of account, . Corporation, Partnership, Corporation, Partnership,
or if combined funds, the or other organization or other organization
first-named individual
- ------------------------------------------------------------------------------------------------------------------------------
. Unif. Gift/Transfer to Minor Minor . Broker nominee Broker nominee
- ------------------------------------------------------------------------------------------------------------------------------
. Sole Proprietor Owner of business
- ------------------------------------------------------------------------------------------------------------------------------
. Legal Guardian Ward, Minor, or Incompetent
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient"
box if you are an exempt recipient. Exempt recipients 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 under An entity registered at all times under
section 501(a), or an individual the Investment Company Act of 1940
retirement plan
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.
28
<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that 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
________________________ and that the following is a true and correct copy of a
STATE
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
NUMBER
authorized to sign any share assignment on behalf of this Corporation or
Association and to take any other actions as may be necessary to sell or
redeem its shares in the Funds or to sign checks or drafts withdrawing funds
from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
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)
29
<PAGE>
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.
30
<PAGE>
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.
<TABLE>
<S> <C> <C>
TEMPLETON FUNDS Maryland FRANKLIN FUNDS SEEKING
American Trust Massachusetts*** HIGH CURRENT INCOME
Americas Government Securities Fund Michigan*** AGE High Income Fund
Developing Markets Trust Minnesota*** German Government Bond Fund
Foreign Fund Missouri Global Government Income Fund
Global Infrastructure Fund New Jersey Investment Grade Income Fund
Global Opportunities Trust New York* U.S. Government Securities Fund
Greater European Fund North Carolina
Growth Fund Ohio*** FRANKLIN FUNDS SEEKING HIGH CURRENT
Growth and Income Fund Oregon INCOME AND STABILITY OF PRINCIPAL
Income Fund Pennsylvania Adjustable Rate Securities Fund
Japan Fund Tennessee** Adjustable U.S. Government Securities Fund
Latin America Fund Texas Short-Intermediate U.S. Government Securities Fund
Money Fund Virginia
Real Estate Securities Fund Washington** FRANKLIN FUNDS FOR NON-U.S. INVESTORS
Smaller Companies Growth Fund Tax-Advantaged High Yield Securities Fund
World Fund FRANKLIN FUNDS Tax-Advantaged International Bond Fund
SEEKING CAPITAL GROWTH Tax-Advantaged U.S. Government Securities Fund
FRANKLIN FUNDS California Growth Fund
SEEKING TAX-FREE INCOME DynaTech Fund FRANKLIN TEMPLETON INTERNATIONAL
Federal Intermediate Term Equity Fund CURRENCY FUNDS
Tax-Free Income Fund Global Health Care Fund Global Currency Fund
Federal Tax-Free Income Fund Gold Fund Hard Currency Fund
High Yield Tax-Free Income Fund Growth Fund High Income Currency Fund
Insured Tax-Free Income Fund*** International Equity Fund
Puerto Rico Tax-Free Income Fund Pacific Growth Fund FRANKLIN MONEY MARKET FUNDS
Real Estate Securities Fund California Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS Small Cap Growth Fund Federal Money Fund
SEEKING TAX-FREE INCOME IFT U.S. Treasury Money Market Portfolio
Alabama FRANKLIN FUNDS SEEKING Money Fund
Arizona* GROWTH AND INCOME New York Tax-Exempt Money Fund
Arkansas** Balance Sheet Investment Fund Tax-Exempt Money Fund
California* Convertible Securities Fund
Colorado Equity Income Fund FRANKLIN FUND FOR CORPORATIONS
Connecticut Global Utilities Fund Corporate Qualified Dividend Fund
Florida* Income Fund
Georgia Premier Return Fund FRANKLIN TEMPLETON VARIABLE ANNUITIES
Hawaii** Rising Dividends Fund Franklin Valuemark
Indiana Strategic Income Fund Franklin Templeton Valuemark Income
Kentucky Utilities Fund Plus (an immediate annuity)
Louisiana
</TABLE>
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.
31
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------------------------
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
Dealer Services
1-800-524-4040
Retirement Plan Services
1-800-527-2020
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.
- -------------------------------------------------------
[RECYCLED PAPER LOGO APPEARS HERE] TL417 P96 02/96
FRANKLIN
TEMPLETON
JAPAN
FUND
Prospectus
August 1, 1995
as amended
February 29, 1996
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
- --------------------------------------------------------------------------------
<PAGE>
[LOGO APPEARS HERE]
Franklin Templeton
Mail to: FRANKLIN TEMPLETON
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 __________________
CLASS
I II TEMPLETON
[ ] [ ] $______ AMERICAN TRUST
[ ] ______ AMERICAS GOVERNMENT SECURITIES FUND
[ ] [ ] ______ DEVELOPING MARKETS TRUST
[ ] [ ] ______ FOREIGN FUND
[ ] [ ] ______ GLOBAL INFRASTRUCTURE FUND
CLASS
I II TEMPLETON
[ ] [ ] $______ GLOBAL OPPORTUNITIES TRUST
[ ] [ ] ______ GREATER EUROPEAN FUND
[ ] [ ] ______ GROWTH FUND
[ ] [ ] ______ GROWTH AND INCOME FUND
[ ] [ ] ______ INCOME FUND
CLASS
I II TEMPLETON
[ ] $______ JAPAN FUND
[ ] [ ] ______ LATIN AMERICA FUND
[ ] [ ] ______ REAL ESTATE SECURITIES FUND
[ ] [ ] ______ SMALLER COMPANIES GROWTH FUND
[ ] [ ] ______ WORLD FUND
CLASS
I II
[ ] [ ] OTHER: $______
(except for Class II Money Fund)
________________________________
________________________________
________________________________
- --------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION (PLEASE PRINT)
- --------------------------------------------------------------------------------
[ ] INDIVIDUAL OR JOINT ACCOUNT
- -
___________________________________________________ ____________________________
First Name Middle Initial Last Name Social Security Number (SSN)
- -
___________________________________________________ ____________________________
Joint Owner(s) Social Security Number (SSN)
(Joint ownership means "Joint 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 Date of Trust Document
(if to be included in the Registration) (must be 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 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_____________________________________
Signature Signature
Please make a photocopy of this application for your records.
- --------------------------------------------------------------------------------
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
- --------------------------------------------------------------------------------
We hereby submit this application for the purchase of 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
[ ] SYSTEMATIC WITHDRAWAL PLAN
[ ] SPECIAL INSTRUCTIONS FOR DISTRIBUTIONS
[ ] AUTOMATIC INVESTMENT PLAN
[ ] TELEPHONE EXCHANGE SERVICE
[ ] CUMULATIVE QUANTITY DISCOUNT
[ ] LETTER OF INTENT
This application must be preceded or accompanied by a prospectus for the
Fund(s) being purchased.
<PAGE>
- --------------------------------------------------------------------------------
6 DISTRIBUTION OPTIONS (CHECK ONE)
- --------------------------------------------------------------------------------
Check one - if no box is checked, all dividends and capital gains will be
reinvested in additional shares of the Fund.
[ ] Reinvest all dividends and capital gains.
[ ] Pay all dividends in cash and reinvest capital gains.
[ ] Pay capital gains in cash and reinvest dividends.
[ ] Pay all dividends and capital gains in cash.
- --------------------------------------------------------------------------------
7 OPTIONAL SHAREHOLDER PRIVILEGES
- --------------------------------------------------------------------------------
A. SPECIAL PAYMENT INSTRUCTIONS FOR DISTRIBUTIONS (Check one box)
[ ] Invest Distributions, as noted in Section 6, or [ ] withdrawals, as noted in
section 7(B), in another Franklin or Templeton Fund. Restrictions may apply
to purchases of shares of a different class. See the prospectus for details.
Fund Name________________________ Existing Account Number ______________________
[ ] Send my Distributions to the person, named below, instead of as registered
and addressed in Sections 1 and 2.
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 withdrawals 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 with out cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever.
X_______________________________________________________________ ______________
SIGNATURE(S) EXACTLY AS SHOWN ON YOUR BANK RECORDS Date
_______________________________________________ ______________________________
Print Name(s) Account Number
___________________________ _________________ _____________ ______________
Your Street Address City State Zip Code
- --------------------------------------------------------------------------------
E. LETTER OF INTENT (LOI) -- NOT APPLICABLE TO PURCHASES OF CLASS II
[ ] I(We) agree to the terms of the LOI and provisions for reservations of Class
I shares and grant FTD the security interest set forth in the Prospectus.
Although I am (we are) not obligated to do so, it is my(our) intention to
invest over a 13 month period in Class I and/or Class II shares of one or
more Franklin or Templeton Funds (including all money market funds in the
Franklin Templeton Group) an aggregate amount at least equal to that which
is checked below. I understand that reduced sales charges will apply only to
purchases of Class I shares.
[ ] $50,000-99,999 (except for Income Fund
and Americas Government Securities Fund)
[ ] $100,000-249,999
[ ] $250,000-499,999
[ ] $500,000-999,999
[ ] $1,000,000 or more
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 -- NOT APPLICABLE TO PURCHASES OF CLASS II
Class I shares may be purchased at the offering price applicable to the total of
(a) the dollar amount then being purchased plus (b) the amount equal to the cost
or current value (whichever is higher) of the combined holdings of the
purchaser, his or her spouse, and their children or grandchildren under age 21,
of Class I and/or Class II shares of funds in the Franklin Templeton Group, as
well as other holdings of Franklin Templeton Investments, as that term is
defined in the prospectus. In order for this cumulative quantity discount to be
made available, the shareholder or his or her securities dealer must notify 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 12/95
