PROSPECTUS & APPLICATION
INVESTMENT STRATEGY: Franklin
GLOBAL GROWTH Templeton
Japan Fund
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AUGUST 1, 1997
[FRANKLIN TEMPLETON LOGO]
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This prospectus describes Class I shares of Franklin Templeton Japan Fund (the
"Fund"). It contains information you should know before investing in the Fund.
Please keep it for future reference.
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 "WHAT
ARE THE FUND'S POTENTIAL RISKS?"
The Fund currently offers another class of shares with a different sales charge
and expense structure, which affects performance. This class is described in a
separate prospectus. For more information, contact your investment
representative or call 1-800/DIAL BEN.
The Fund has a Statement of Additional Information ("SAI") for its Class I
shares, dated August 1, 1997, which may be amended from time to time. It
includes more information about the Fund's procedures and policies. It has been
filed with the SEC and is incorporated by reference into this prospectus. For a
free copy or a larger print version of this prospectus, call 1-800/DIAL BEN or
write the Fund at its address.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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FRANKLIN TEMPLETON
JAPAN FUND
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THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE, JURISDICTION OR COUNTRY IN WHICH THE OFFERING IS NOT AUTHORIZED. NO
SALES REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. FURTHER INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.
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FRANKLIN TABLE OF CONTENTS
TEMPLETON ABOUT THE FUND
JAPAN FUND Expense Summary......................................2
---------------------
Financial Highlights.................................3
August 1, 1997 How Does the Fund Invest Its Assets?.................3
When reading this What Are the Fund's Potential Risks?................11
prospectus, you
will see certain Who Manages the Fund?...............................16
terms beginning
with capital How Does the Fund Measure Performance?..............18
letters. This means
the term is How Is the Fund Organized?..........................20
explained in our
glossary section.
ABOUT YOUR ACCOUNT
How Do I Buy Shares?................................21
May I Exchange Shares for Shares of Another Fund....27
How Do I Sell Shares?...............................29
What Distributions Might I Receive From the Fund?...33
Transaction Procedures and Special Requirements.....34
Services to Help You Manage Your Account............39
What If I Have Questions About My Account?..........41
GLOSSARY
Useful Terms and Definitions.......................42
700 Central Avenue
P.O. Box 33030
St. Petersburg, FL 33733-8030
1-800/DIAL BEN
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ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Fund. It is based on the Fund's historical expenses, after fee waivers and
expense limitations, for the fiscal year ended March 31, 1997. The Fund's actual
expenses may vary.
A. SHAREHOLDER TRANSACTION EXPENSES+
Maximum Sales Charge Imposed on Purchases (as a percentage
of Offering Price) 5.75%++
Deferred Sales Charge NONE +++
Exchange Fee (per transaction) $ 5.00*
B. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after fee reduction) 0.00%**
Rule 12b-1 Fees 0.35%***
Other Expenses after fee waiver and expense reimbursement) 1.65%**
Total Fund Operating Expenses (after fee waiver and expense
reimbursement) 2.00%**
C. EXAMPLE
Assume the Fund's annual return is 5%, operating expenses are as described
above, and you sell your shares after the number of years shown. These are
the projected expenses for each $1,000 that you invest in the Fund.
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
$77**** $ 117 $ 159 $ 277
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Fund pays its operating expenses. The effects of these expenses are
reflected in its Net Asset Value or dividends and are not directly charged
to your account.
+IF YOUR TRANSACTION IS PROCESSED THROUGH YOUR SECURITIES DEALER, YOU MAY BE
CHARGED A FEE BY YOUR SECURITIES DEALER FOR THIS SERVICE.
++THERE IS NO FRONT-END SALES CHARGE IF YOU INVEST $1 MILLION OR MORE.
+++A CONTINGENT DEFERRED SALES CHARGE OF 1% MAY APPLY TO PURCHASES OF $1 MILLION
OR MORE IF YOU SELL THE SHARES WITHIN ONE YEAR. A CONTINGENT DEFERRED SALES
CHARGE MAY ALSO APPLY TO PURCHASES BY CERTAIN RETIREMENTPLANS THAT QUALIFY TO
BUY SHARES WITHOUT A FRONT-END SALES CHARGE. SEE "HOW DO I SELL SHARES? --
CONTINGENT DEFERRED SALES CHARGE" FOR DETAILS.
*$5.00 FEE IS ONLY FOR MARKET TIMERS. WE PROCESS ALL OTHER EXCHANGES WITHOUT A
FEE.
**FOR THE PERIOD SHOWN, INVESTMENT COUNSEL AND FT SERVICES HAD AGREED IN ADVANCE
TO WAIVE THEIR RESPECTIVE MANAGEMENT AND ADMINISTRATION FEES AND TO MAKE CERTAIN
PAYMENTS TO REDUCE THE FUND'S EXPENSES. WITHOUT THIS REDUCTION, MANAGEMENT FEES
WOULD HAVE BEEN 0.75%, OTHER EXPENSES WOULD HAVE BEEN 1.95% AND TOTAL FUND
OPERATING EXPENSES WOULD HAVE BEEN 3.05%. AFTER JULY 31, 1998, THIS ARRANGEMENT
MAY END AT ANY TIME UPON NOTICE TO THE BOARD.
***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 CHARGE PERMITTED UNDER THE NASD'S RULES.
****ASSUMES A CONTINGENT DEFERRED SALES CHARGE WILL NOT APPLY.
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FINANCIAL HIGHLIGHTS
This table summarizes the Fund's financial history. The information has been
audited by McGladrey & Pullen, LLP, the Fund's independent auditors. Their audit
report covering each of the three years since the Fund's commencement of
operations on July 28, 1994, appears in the financial statements in the Fund's
Annual Report to Shareholders for the fiscal year ended March 31, 1997. The
Annual Report to Shareholders also includes more information about the Fund's
performance. For a free copy, please call Fund Information.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 1997 1996 1995 /1/
<S> <C> <C> <C>
------------------------------------ --------- ---------- --------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout
the period)
Net asset value, beginning of period $ 10.35 $ 9.93 $ 10.00
-------- -------- --------
Income from investment operations:
Net investment income (loss) (.05) (.02) .10
Net realized and unrealized gain(loss) (2.69) .47 (.12)
--------- -------- ---------
Total from investment operations (2.74) .45 (.02)
Distributions:
Dividends from net investment income -- (.03) (.05)
Distributions from net realized gain (.17) -- --
Total distributions (.17) (.03) (.05)
-------- -------- --------
Change in net asset value (2.91) .42 (.07)
-------- -------- --------
Net asset value, end of period $ 7.44 $ 10.35 $ 9.93
======== ======== ========
TOTAL RETURN /2/ (26.93)% 4.55% (0.19)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 7,128 $ 6,232 $ 1,444
Ratio of expenses to average net assets 3.05% 4.90% 12.05% /3/
Ratio of expenses, net of reimbursement,
to average net assets 2.00% 1.99% 1.25% /3/
Ratio of net investment income (loss) to
average net assets (.77)% (.05)% 1.92% /3/
Portfolio turnover rate 23.43% 54.97% --
Average commission rate paid (per share) $ .0603 $ .0552
</TABLE>
1 FOR THE PERIOD JULY 28, 1994 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1995.
2 TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
3 ANNUALIZED.
HOW DOES THE FUND INVEST ITS ASSETS?
THE FUND'S INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital growth, which it seeks
to achieve through investing its assets primarily in securities of companies
domiciled in Japan and traded in the Japanese securities markets. A company is
considered domiciled in Japan if it is organized under the laws of Japan, at
least half of its assets are located in Japan and it normally derives at least
half of its income from operations or sales in Japan, or if its principal
activities are in Japan. The Fund's investment objective and the investment
restrictions set forth under "Investment Restrictions" in the SAI are
fundamental and may not be changed without shareholder approval. All other
investment policies and practices described in this prospectus are not
fundamental and may be changed by the Board without shareholder approval. Of
course, there can be no assurance that the Fund's investment objective will be
achieved.
TYPES OF SECURITIES IN WHICH THE FUND MAY INVEST
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, European Depositary Receipts and Global Depositary
Receipts. See "Depositary Receipts" below. 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 and supranational organizations (such as the World Bank,
the European Investment Bank and the Asian Development Bank). 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 or 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
"What Are the Fund's Potential Risks? -- High-Risk Debt Securities." As an
operating policy, which may be changed by the Board, the Fund will not invest
more than 5% of its total assets in debt securities rated lower than Baa by
Moody's or BBB by S&P. Debt securities are subject to certain market and credit
risks. See "How Does the Fund Invest Its Assets -- Debt Securities" in the SAI
for descriptions of debt securities rated Baa by Moody's and 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
U.S. 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.
Government securities in which the Fund may invest consist of debt securities
issued by the U.S. Treasury which are direct obligations of the U.S. government,
including bills (maturity of one year or less), notes (maturities of one to 10
years) and bonds (generally maturities of greater than 10 years), and debt
securities issued or guaranteed by U.S. government-sponsored instrumentalities
and federal agencies, including the Federal National Mortgage Association
("FNMA"), Federal Home Loan Banks and the Federal Housing Administration.
Mortgage-backed U.S. government securities, such as FNMA certificates, are
highly sensitive to prepayment and interest rates. Prepayments on a pool of
mortgage loans are influenced by a variety of economic, geographic, social and
other factors. Generally, however, prepayments on fixed rate mortgage loans will
increase during a period of falling interest rates and decrease 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.
When Investment Counsel believes that unusual market conditions warrant, the
Fund may adopt a temporary defensive position and 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, ssued by entities organized
in the U.S. 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 Investment Counsel. When deemed
appropriate by Investment Counsel, 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.
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%.
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 U.S. Depositary receipts may not
necessarily be denominated in the same currency as the underlying securities
into which they may be converted. Depositary receipts may be issued pursuant to
sponsored or unsponsored programs. In sponsored programs, an issuer has made
arrangements to have its securities traded in the form of depositary receipts.
In unsponsored programs, the issuer may not be directly involved in the creation
of the program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the depositary receipts. Depositary receipts also involve the risks of other
investments in foreign securities, as discussed below. For purposes of the
Fund's investment policies, the Fund's investments in depositary receipts will
be deemed to be investments in the underlying securities.
OTHER INVESTMENT POLICIES OF THE FUND
The Fund is also authorized to use the various securities and investment
techniques described below. Although these strategies are regularly used by some
investment companies and other institutional investors in various markets, some
of these strategies cannot at the present time be used to a significant extent
by the Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
BORROWING. The Fund may borrow up to one-third of the value of its total assets
from banks to increase its holdings of portfolio securities. Under the 1940 Act,
the Fund is required to maintain continuous asset coverage of 300% with respect
to such borrowings and to sell (within three days) sufficient portfolio holdings
to restore such coverage if it should decline to less than 300% due to market
fluctuations or otherwise, even if such liquidations of the Fund's holdings may
be disadvantageous from an investment standpoint. Leveraging by means of
borrowing may exaggerate the effect of any increase or decrease in the value of
portfolio securities on the Fund's Net Asset Value, and money borrowed will be
subject to interest and other costs (which may include commitment fees and/or
the cost of maintaining minimum average balances) which may or may not exceed
the income received from the securities purchased with borrowed funds.
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.
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.
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 1933 Act. 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 to be liquid, are considered to be
illiquid and are subject to the Fund's limitation on investment in illiquid
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 U.S. and foreign exchanges or in the
over-the-counter markets. An option on a security is a contract that permits the
purchaser of the option, in return for the premium paid, the right to buy a
specified security (in the case of a call option) or to sell a specified
security (in the case of a put option) from or to the writer of the option at a
designated price during the term of the option. An option on a securities index
permits the purchaser of the option, in return for the premium paid, the right
to receive from the seller cash equal to the difference between the closing
price of the index and the exercise price of the option. The Fund may write a
call or put option 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 Investment Counsel believes that the currency of a particular
foreign country may suffer or enjoy a substantial movement against another
currency, it may enter into a forward contract to sell or buy the amount of the
former foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. The second investment
practice is generally referred to as "cross-hedging." The Fund has no specific
limitation on the percentage of assets it may commit to forward contracts,
subject to its stated investment objective and policies, except that the Fund
will not enter into a forward contract if the amount of assets set aside to
cover forward contracts would impede portfolio management or the Fund's ability
to meet redemption requests. Although forward contracts will be used primarily
to protect the Fund from adverse currency movements, they also involve the risk
that anticipated currency movements will not be accurately predicted.
The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency-denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may 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
"How Does the Fund Invest Its Assets -- 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.
WHAT ARE THE FUND'S POTENTIAL RISKS?
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, you may anticipate that the value of
Fund shares will fluctuate with movements in the broader equity and bond
markets. A decline in the stock market of any country in which the Fund is
invested may also be reflected in declines in the price of the shares of the
Fund. History reflects both decreases and increases in worldwide stock markets
and currency valuations, and these may recur unpredictably in the future.
INVESTMENT IN JAPANESE ISSUERS. Because the Fund will, under normal conditions,
invest at least 80% of its assets in equity securities of Japanese issuers, the
Fund's performance is expected to be closely tied to economic and political
conditions in Japan, and its performance is expected to be more volatile than
more geographically diversified funds. Changes in regulatory, tax or economic
policy in Japan could significantly affect the Japanese securities markets and
therefore the Fund's performance.
Japan's economic growth has declined significantly since 1990. The general
government position has deteriorated as a result of weakening economic growth
and stimulative measures taken to support economic activity and to restore
financial stability. Although the decline in interest rates and fiscal
stimulation packages have helped to contain recessionary forces, uncertainties
remain. Japan is also heavily dependent upon international trade, so its economy
is especially sensitive to trade barriers and disputes. In addition, Japan's
banking industry is undergoing problems related to bad loans and declining
values in real estate.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially the U.S. 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 U.S.
FOREIGN INVESTMENTS. Up to 20% of the Fund's total assets may be invested in
securities of non-Japanese issuers, including issuers in developing countries.
You 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. These risks are often heightened for investments in developing
markets, including certain Eastern European countries. See "What Are the Fund's
Potential Risks?" in the SAI. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations (including, for example, withholding taxes on interest and dividends) or
other taxes imposed with respect to investments in foreign nations, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country), foreign investment controls on daily stock
market movements, default in foreign government securities, political or social
instability or diplomatic developments which could affect investment in
securities of issuers in foreign nations. 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 U.S. Foreign companies are not generally subject to
uniform accounting, auditing and financial reporting standards, and auditing
practices and requirements may not be comparable to those applicable to U.S.
companies. 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 U.S. Brokerage
commissions in Japan are fixed. See "How Does the Fund Buy Securities for Its
Portfolio?" in the SAI. 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 U.S. There is an increased risk, therefore, of uninsured loss due to
lost, stolen, or counterfeit stock certificates. In addition, the foreign
securities markets of many of the countries in which the Fund may invest may
also be smaller, less liquid, and subject to greater price volatility than those
in the U.S. As an open-end investment company, the Fund is limited in the extent
to which it may invest in illiquid securities. See "What Are the Fund's
Potential Risks?" in the SAI. The Tokyo Stock Exchange, however, has a large
volume of trading and Investment Counsel 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.
As a non-fundamental policy, the Fund will limit its investment in Russian
securities to 5% of its total assets. Russian securities involve additional
significant risks, including political and social uncertainty (for example,
regional conflicts and risk of war), currency exchange rate volatility,
pervasiveness of corruption and crime in the Russian economic system, delays in
settling portfolio transactions and risk of loss arising out of Russia's system
of share registration and custody. For more information on these risks and other
risks associated with Russian securities, please see "What Are the Fund's
Potential Risks?" in the SAI.
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. Although the Fund's current investment policy is that
it will not invest more than 5% of its total assets in debt securities rated
lower than BBB by S&P or Baa by Moody's, the Board may consider a change in this
operating policy if, in its judgment, economic conditions change such that a
higher level of investment in high-risk, lower quality debt securities would be
consistent with the interests of the Fund and its shareholders. 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 Investment Counsel 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 Investment Counsel, the issuer may resume
interest payments in the near future.
LEVERAGE. Leveraging by means of borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities on the Fund's Net
Asset Value, and money borrowed will be subject to interest and other costs
(which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the income received from the
securities purchased with borrowed funds.
FUTURES CONTRACTS AND RELATED OPTIONS. Option and foreign currency exchange
transactions and future contracts are commonly referred to as derivative
instruments. 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 Investment Counsel'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.
WHO MANAGES THE FUND?
THE BOARD. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations. The
Board also monitors the Fund to ensure no material conflicts exist between the
Fund's classes of shares. While none is expected, the Board will act
appropriately to resolve any material conflict that may arise.
INVESTMENT MANAGER. Investment Counsel manages the Fund's assets and makes its
investment decisions. Investment Counsel also performs similar services for
other funds. It is wholly owned by Resources, a publicly owned company engaged
in the financial services industry through its subsidiaries. Charles B. Johnson
and Rupert H. Johnson, Jr. are the principal shareholders of Resources.
Together, Investment Counsel and its affiliates manage over $199 billion in
assets. The Templeton organization has been investing globally since 1940.
Investment Counsel and its affiliates have offices in Argentina, Australia,
Bahamas, Canada, France, Germany, Hong Kong, India, Italy, Japan, Korea,
Luxembourg, Poland, Russia, Singapore, South Africa, Taiwan, United Kingdom,
U.S., and Vietnam. Please see "Investment Management and Other Services" and
"Miscellaneous Information" in the SAI for information on securities
transactions and a summary of the Fund's Code of Ethics.
PORTFOLIO MANAGEMENT. The lead portfolio manager of the Fund since its inception
is William T. Howard, Jr. Mr. Howard is a senior vice president of Investment
Counsel. He holds a BA in international studies from Rhodes College and an MBA
in finance from Emory University. He is a Chartered Financial Analyst and a
member of the Financial Analysts Society. Before joining the Templeton
organization in 1993, Mr. Howard was a portfolio manager and analyst with the
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. As a portfolio manager and
research analyst with Templeton, Mr. Howard's research responsibilities include
the shipping, engineering and U.S. forest products and paper industries. He is
also responsible for country coverage of Japan and New Zealand.
Gary P. Motyl and Gary R. Clemons exercise secondary portfolio management
responsibilities for the Fund. Mr. Motyl is an executive vice president of
Investment Counsel. He holds a BS in finance from Lehigh University and an MBA
in finance from Pace University. He is a Chartered Financial Analyst. Prior to
joining the Templeton organization in 1981, Mr. Motyl worked from 1974 to 1979
as a security analyst with S&P, and 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. His
research responsibilities with Templeton include the automobile industry, the
U.S. utility industry and country coverage of Germany. Mr. Clemons is a senior
vice president of Investment Counsel. He holds a BS from the University of
Nevada -- Reno and an MBA with emphases in finance and investment banking from
the University of Wisconsin -- Madison. He joined Investment Counsel 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. As a portfolio manager and research analyst with Templeton,
Mr. Clemons has responsibility for the telecommunications industry and country
coverage of Colombia, Peru, Norway, and Sweden.
MANAGEMENT FEES. During the fiscal year ended March 31, 1997, management fees,
before any advance waiver, totaled 0.75% of the average daily net assets of the
Fund. Total operating expenses, before any advance waiver, were 3.05% of the
average daily net assets of the Fund. Under an agreement by Investment Counsel
to waive its fees, the Fund paid no (0.00%) management fees and the Fund paid
total operating expenses of 2.00%. After July 31, 1998, this agreement may end
at any time upon notice to the Board.
PORTFOLIO TRANSACTIONS. Investment Counsel tries to obtain the best execution on
all transactions. If Investment Counsel believes more than one broker or dealer
can provide the best execution, it may consider research and related services
and the sale of Fund shares, as well as shares of other funds in the Franklin
Templeton Group of Funds, when selecting a broker or dealer. Please see "How
Does the Fund Buy Securities for its Portfolio?" in the SAI for more
information.
ADMINISTRATIVE SERVICES. Since October 1, 1996, FT Services has provided certain
administrative services and facilities for the Fund. Prior to that date,
Templeton Global Investors, Inc. provided the same services to the Fund. During
the fiscal year ended March 31, 1997, administration fees, before any advance
waiver, totaled 0.15% of the average daily net assets of the Fund. Under an
agreement by the administrators to waive their fees, the Fund paid no (0.00%)
administration fees. Please see "Investment Management and Other Services" in
the SAI for more information.
THE RULE 12B-1 PLAN
The Fund has a distribution plan or "Rule 12b-1 Plan" for its Class I shares
under which it may reimburse Distributors or others for the expenses of
activities that are primarily intended to sell shares of the class. These
expenses may include, among others, distribution or service fees paid to
Securities Dealers or others who have executed a servicing agreement with the
Fund, Distributors or its affiliates; a prorated portion of Distributors'
overhead expenses; and the expenses of printing prospectuses and reports used
for sales purposes, and preparing and distributing sales literature and
advertisements.
Payments by the Fund under the plan may not exceed 0.35% per year of Class I's
average daily net assets. Expenses not reimbursed in any quarter may be
reimbursed in future quarters or years. This includes expenses not reimbursed
because they exceeded the applicable limit under the plan. As of March 31, 1997,
expenses under the plan that may be reimbursable in future quarters or years
totaled $13,668, or 0.19% of Class I's net assets. During the first year after
certain purchases made without a sales charge, Distributors may keep the Rule
12b-1 fees associated with the purchase. For more information, please see "The
Fund's Underwriter" in the SAI.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, the Fund advertises its performance. The more commonly used
measure of performance is total return. Performance figures are usually
calculated using the maximum sales charge, but certain figures may not include
the sales charge.
Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested.
The Fund's investment results will vary. Performance figures are always based on
past performance and do not guarantee future results. For a more detailed
description of how the Fund calculates its performance figures, please see "How
Does the Fund Measure Performance?" in the SAI.
The Fund also offers another share class and, from time to time, will advertise
its performance in a manner described in the prospectus for that class.
<PAGE>
HOW TAXATION AFFECTS THE FUND AND ITS SHAREHOLDERS
FEDERAL TAX INFORMATION
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
The Fund intends to elect to be treated and to qualify each year as a regulated
investment company under Subchapter M of the Code. A regulated investment
company generally is not subject to Federal income tax on income and gains
distributed in a timely manner to its shareholders. The Fund intends to
distribute to shareholders substantially all of its net investment income and
net realized capital gains, which generally will be taxable income or capital
gains in 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.
JAPAN TAXES
Pursuant to the tax convention between the U.S. 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.
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.
HOW IS THE FUND ORGANIZED?
The Fund is a diversified open-end management investment company, commonly
called a mutual fund. It was organized as a Delaware business trust on October
29, 1991, and is registered with the SEC. As of January 1, 1997, the Fund began
offering a new class of shares designated Franklin Templeton Japan Fund --
Advisor Class. All shares outstanding before the offering of Advisor Class
shares have been designated Franklin Templeton Japan Fund -- Class I. Additional
classes of shares may be offered in the future.
Shares of each class represent proportionate interests in the assets of the Fund
and have the same voting and other rights and preferences as any other class of
the Fund for matters that affect the Fund as a whole. For matters that only
affect one class, however, only shareholders of that class may vote. Each class
will vote separately on matters affecting only that class, or expressly required
to be voted on separately by state or federal law.
The Fund has noncumulative voting rights. This gives holders of more than 50% of
the shares voting the ability to elect all of the members of the Board. If this
happens, holders of the remaining shares voting will not be able to elect anyone
to the Board.
The Fund does not intend to hold annual shareholder meetings. It may hold
special meetings, however, for matters requiring shareholder approval. A meeting
may also be called by the Board in its discretion or for the purpose of
considering the removal of a Board member if requested in writing to do so by
shareholders holding at least 10% of the outstanding shares. In certain
circumstances, we are required to help you communicate with other shareholders
about the removal of a Board member.
As of July 2, 1997, Resources owned of record and beneficially more than 25% of
the outstanding Advisor
Class shares of the Fund.
<PAGE>
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check.
MINIMUM
INVESTMENTS*
----------------------------- ------------------------
To Open Your Account..... $100
To Add to Your Account... $ 25
*We may waive these minimums for retirement plans. We may also refuse any order
to buy shares.
SALES CHARGE REDUCTIONS AND WAIVERS
If you qualify to buy shares under one of the sales charge reduction or waiver
categories described below, please include a written statement with each
purchase order explaining which privilege applies. If you don't include this
statement, we cannot guarantee that you will receive the sales charge reduction
or waiver.
QUANTITY DISCOUNTS. The sales charge you pay depends on the dollar amount you
invest, as shown in the table below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE AMOUNT PAID
AS A PERCENTAGE OF TO DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
----------------------------------- ---------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Under $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 None
</TABLE>
*If you invest $1 million or more, a Contingent Deferred Sales Charge may be
imposed on an early redemption. Please see "How Do I Sell Shares? --
Contingent Deferred Sales Charge." Please also see "Other Payments to
Securities Dealers" below for a discussion of payments Distributors may make
out of its own resources to Securities Dealers for certain purchases.
CUMULATIVE QUANTITY DISCOUNTS. To determine if you may pay a reduced sales
charge, the amount of your current purchase is added to the cost or current
value, whichever is higher, of your existing shares in the Franklin
Templeton Funds, as well as those of your spouse, children under the age of
21 and grandchildren under the age of 21. If you are the sole owner of a
company, you may also add any company accounts, including retirement plan
accounts. Companies with one or more retirement plans may add together the
total plan assets invested in the Franklin Templeton Funds to determine the
sales charge that applies.
LETTER OF INTENT. You may buy shares at a reduced sales charge by completing
the Letter of Intent section of the shareholder application. A Letter of
Intent is a commitment by you to invest a specified dollar amount during a
13 month period. The amount you agree to invest determines the sales charge
you pay.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
o You authorize Distributors to reserve 5% of your total intended purchase
in Fund shares registered in your name until you fulfill your Letter.
o You give Distributors a security interest in the reserved shares and
appoint Distributors as attorney-in-fact.
o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
o Although you may exchange your shares, you may not sell reserved shares
until you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total
shares you own. We will pay or reinvest dividend and capital gain
distributions on the reserved shares as you direct. Our policy of reserving
shares does not apply to certain retirement plans.
If you would like more information about the Letter of Intent privilege,
please see "How Do I Buy, Sell and Exchange Shares? -- Letter of Intent" in
the SAI or call
Shareholder Services.
GROUP PURCHASES. If you are a member of a qualified group, you may buy Fund
shares at a reduced sales charge that applies to the group as a whole. The
sales charge is based on the combined dollar value of the group members'
existing investments, plus the amount of the current purchase.
A qualified group is one that:
o Was formed at least six months ago,
o Has a purpose other than buying Fund shares at a discount,
o Has more than 10 members,
o Can arrange for meetings between our representatives and group members,
o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to Distributors,
o Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and
o Meets other uniform criteria that allow Distributors to achieve cost
savings in distributing shares.
SALES CHARGE WAIVERS. The Fund's front-end sales charge and Contingent
Deferred Sales Charge do not apply to certain purchases. For waiver
categories 1, 2 or 3 below: (i) the distributions or payments must be
reinvested within 365 days of their payment date, and (ii) the distributions
may be from either Class I or Class II shares of a fund.
The Fund's sales charges do not apply if you are buying shares with money
from the following sources:
1. Dividend and capital gain distributions from any Franklin Templeton Fund or a
real estate investment trust (REIT) sponsored or advised by Franklin
Properties, Inc.
2. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds
3. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment option
the Franklin Valuemark Funds, the Templeton Variable Annuity Fund, the Templeton
Variable Products Series Fund, or the Franklin Government Securities Trust. You
should contact your tax advisor for information on any tax consequences that may
apply.
4. Redemptions from any Franklin Templeton Fund if you:
o Originally paid a sales charge on the shares,
o Reinvest the money within 365 days of the redemption date, and
o Reinvest the money in the SAME CLASS of shares.
An exchange is not considered a redemption for this privilege. The Contingent
Deferred Sales Charge will not be waived if the shares were subject to a
Contingent Deferred Sales Charge when sold. We will credit your account in
shares, at the current value, in proportion to the amount reinvested for any
Contingent Deferred Sales Charge paid in connection with the earlier redemption,
but a new Contingency Period will begin.
If you immediately placed your redemption proceeds in a Franklin Bank CD, you
may reinvest them as described above. The proceeds must be reinvested within 365
days from the date the CD matures, including any rollover.
The Fund's sales charges also do not apply to purchases by:
5. Trust companies and bank trust departments agreeing to invest in Franklin
Templeton Funds over a 13 month period at least $1 million of assets held in a
fiduciary, agency, advisory, custodial or similar capacity and over which the
trust companies and bank trust departments or other plan fiduciaries or
participants, in the case of certain retirement plans, have full or shared
investment discretion. We will accept orders for these accounts by mail
accompanied by a check or by telephone or other means of electronic data
transfer directly from the bank or trust company, with payment by federal funds
received by the close of business on the next business day following the order.
6. Group annuity separate accounts offered to retirement plans
7. Chilean retirement plans that meet the requirements described under
"Retirement Plans" below
8. An Eligible Governmental Authority. Please consult your legal and investment
advisors to determine if an investment in the Fund is permissible and suitable
for you and the effect, if any, of payments by the Fund on arbitrage rebate
calculations.
9. Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs
10. Registered Securities Dealers and their affiliates, for their investment
accounts only
11. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer
12. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies
13. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer
14. Accounts managed by the Franklin Templeton Group
15. Certain unit investment trusts and their holders reinvesting distributions
from the trusts
RETIREMENT PLANS. Retirement plans that (i) are sponsored by an employer with at
least 100 employees, or (ii) have plan assets of $1 million or more, or (iii)
agree to invest at least $500,000 in the Franklin Templeton Funds over a 13
month period may buy shares without a front-end sales charge. Retirement plans
that are not Qualified Retirement Plans or SEPs, such as 403(b) or 457 plans,
must also meet the requirements described under "Group Purchases" above. For
retirement plan accounts opened on or after May 1, 1997, a Contingent Deferred
Sales Charge may apply if the account is closed within 365 days of the
retirement plan account's initial purchase in the Franklin Templeton Funds.
Please see "How Do I Sell Shares? -- Contingent Deferred Sales Charge" for
details.
Any retirement plan that does not meet the requirements to buy shares without a
front-end sales charge and that was a shareholder of the Fund on or before
February 1, 1995, may buy shares of the Fund subject to a maximum sales charge
of 4% of the Offering Price, 3.2% of which will be retained by Securities
Dealers.
HOW DO I BUY SHARES IN CONNECTION WITH RETIREMENT PLANS?
Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need an
application other than the one included in this prospectus. For a retirement
plan brochure or application, call Retirement Plan Services.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
OTHER PAYMENTS TO SECURITIES DEALERS
The payments described below may be made to Securities Dealers who initiate and
are responsible for certain purchases made without a sales charge. The payments
are subject to the sole discretion of Distributors, and are paid by Distributors
or one of its affiliates and not by the Fund or its shareholders.
1. Purchases of $1 million or more -- up to 1% of the amount invested.
2. Purchases made without a front-end sales charge by certain retirement plans
described under "Sales Charge Reductions and Waivers -- Retirement Plans" above
- -- up to 1% of the amount invested. For retirement plan accounts opened on or
after May 1, 1997, a Contingent Deferred Sales Charge will not apply to the
account if the Securities Dealer chooses to receive a payment of 0.25% or less
or if no payment is made.
3. Purchases by trust companies and bank trust departments, Eligible
Governmental Authorities, and broker-dealers or others on behalf of clients
participating in comprehensive fee programs -- up to 0.25% of the amount
invested.
4. Purchases by Chilean retirement plans -- up to 1% of the amount invested.
A Securities Dealer may receive only one of these payments for each qualifying
purchase. Securities Dealers who receive payments in connection with investments
described in paragraphs 1 or 4 above or a payment of up to 1% for investments
described in paragraph 2 will be eligible to receive the Rule 12b-1 fee
associated with the purchase starting in the thirteenth calendar month after the
purchase.
FOR BREAKPOINTS THAT MAY APPLY AND INFORMATION ON ADDITIONAL COMPENSATION
PAYABLE TO SECURITIES DEALERS IN CONNECTION WITH THE SALE OF FUND SHARES, PLEASE
SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES? -- OTHER PAYMENTS TO SECURITIES
DEALERS" IN THE SAI.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale
and a purchase of shares, an exchange is a taxable transaction.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment
objective and policies, and its rules and requirements for exchanges. For
example, some Franklin Templeton Funds do not accept exchanges and others
may have different investment minimums.
METHOD STEPS TO FOLLOW
---------------------- ---------------------------------------
BY MAIL 1. Send us written instructions
signed by all account owners
2. Include any outstanding share
certificates for the shares you're
exchanging
---------------------- ---------------------------------------
BY PHONE Call Shareholder Services orTeleFACTS(R)
If you do not want the ability to
exchange by phone to apply to your
account, please let us know.
--------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
--------------------------------------------------------------
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable sales
charge of the new fund. If you have never paid a sales charge on your shares
because, for example, they have always been held in a money fund, you will pay
the Fund's applicable sales charge no matter how long you have held your shares.
These charges may not apply if you qualify to buy shares without a sales charge.
CONTINGENT DEFERRED SALES CHARGE. We will not impose a Contingent Deferred Sales
Charge when you exchange shares. Any shares subject to a Contingent Deferred
Sales Charge at the time of exchange, however, will remain so in the new fund.
For accounts with shares subject to a Contingent Deferred Sales Charge, we will
first exchange any shares in your account that are not subject to the charge. If
there are not enough of these to meet your exchange request, we will exchange
shares subject to the charge in the order they were purchased. If you exchange
shares into one of our money funds, the time your shares are held in that fund
will not count towards the completion of any Contingency Period. For more
information about the Contingent Deferred Sales Charge, please see that section
under "How Do I Sell Shares?"
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
oYou may only exchange shares within the SAME CLASS, except as noted below.
o The accounts must be identically registered. You may, however, exchange
shares from a Fund account requiring two or more signatures into an
identically registered money fund account requiring only one signature for
all transactions. PLEASE NOTIFY US IN WRITING IF YOU DO NOT WANT THIS OPTION
TO BE AVAILABLE ON YOUR ACCOUNT. Additional procedures may apply. Please see
"Transaction Procedures and Special Requirements."
o Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact Retirement Plan Services for information on exchanges within
these plans.
o The fund you are exchanging into must be eligible for sale in your state.
o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
oYour exchange may be restricted or refused if you have: (i) requested an
exchange out of the Fund within two weeks of an earlier exchange request, (ii)
exchanged shares out of the Fund more than twice in a calendar quarter, or
(iii) exchanged shares equal to at least $5 million, or more than 1% of the
Fund's net assets. Shares under common ownership or control are combined for
these limits. If you have exchanged shares as described in this paragraph, you
will be considered a Market Timer. Each exchange by a Market Timer, if
accepted, will be charged $5.00. Some of our funds do not allow investments by
Market Timers.
Because excessive trading can hurt Fund performance, operations and
shareholders, we may refuse any exchange purchase if (i) we believe the Fund
would be harmed or unable to invest effectively, or (ii) the Fund receives or
anticipates simultaneous orders that may significantly affect the Fund.
<PAGE>
LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES
Certain funds in the Franklin Templeton Funds offer classes of shares not
offered by the Fund, such as "Class Z" shares. Certain shareholders of Class Z
shares of Franklin Mutual Series Fund Inc. may exchange their Class Z shares for
shares of the Fund at Net Asset Value.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
METHOD STEPS TO FOLLOW
---------------------- ----------------------------------------------
BY MAIL 1. Send us written instructions signed by
account, your instructions should include:
o The name, address and telephone number
of the bank where you want the proceeds
sent
o Your bank account number
o The Federal Reserve ABA routing number
o If you are using a savings and loan or
credit union, the name of the
corresponding bank and the account number
2. Include any outstanding share certificates
for the shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts
may need to send additional documents.
Accounts under court jurisdiction may have
other requirements.
---------------------- ----------------------------------------------
BY PHONE Call Shareholder Services. If you would like
your redemption proceeds wired to a bank
account, other than an escrow account, you
must first sign up for the wire feature. To
sign up, send us written instructions, with
a signature guarantee. To avoid any delay in
processing, the instructions should include
the items listed in "By Mail" above.
Telephone requests will be accepted:
o If the request is $50,000 or less.
Institutional accounts may exceed $50,000
by completing a separate agreement. Call
Institutional Services to receive a copy.
o If there are no share certificates
issued for the shares you want to sell or
you have already returned them to the Fund
o Unless you are selling shares in a Trust
Company retirement plan account
o Unless the address on your account was
changed by phone within the last 15 days
If you do not want the ability to
redeem by phone to apply to your
account, please let us know.
---------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
---------------------------------------------------------------------
We will send your redemption check within seven days after we receive your
request in proper form. If you would like the check sent to an address other
than the address of record or made payable to someone other than the registered
owners on the account, send us written instructions signed by all account
owners, with a signature guarantee. We are not able to receive or pay out cash
in the form of currency.
The wiring of redemption proceeds is a special service that we make available
whenever possible for redemption requests of $1,000 or more. If we receive your
request in proper form before 4:00 p.m. Eastern time, your wire payment will be
sent the next business day. For requests received in proper form after 4:00 p.m.
Eastern time, the payment will be sent the second business day. By offering this
service to you, the Fund is not bound to meet any redemption request in less
than the seven day period prescribed by law. Neither the Fund nor its agents
shall be liable to you or any other person if, for any reason, a redemption
request by wire is not processed as described in this section.
If you sell shares you recently purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call Retirement Plan Services.
CONTINGENT DEFERRED SALES CHARGE
If you did not pay a front-end sales charge because you invested $1 million or
more or agreed to invest $1 million or more under a Letter of Intent, a
Contingent Deferred Sales Charge may apply if you sell all or a part of your
investment within the Contingency Period. Once you have invested $1 million or
more, any additional investments you make without a sales charge may also be
subject to a Contingent Deferred Sales Charge if they are sold within the
Contingency Period. The charge is 1% of the value of the shares sold or the Net
Asset Value at the time of purchase, whichever is less.
Certain retirement plan accounts opened on or after May 1, 1997, and that
qualify to buy shares without a front-end sales charge may also be subject to a
Contingent Deferred Sales Charge if the retirement plan account is closed within
365 days of the account's initial purchase in the Franklin Templeton Funds.
We will first redeem any shares in your account that are not subject to the
charge. If there are not enough of these to meet your request, we will redeem
shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated dollar amount, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated number of shares, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.
WAIVERS. We waive the Contingent Deferred Sales Charge for:
o Exchanges
o Account fees
o Sales of shares purchased pursuant to a sales charge waiver
o Sales of shares purchased without a front-end sales charge by certain
retirement plan accounts if (i) the account was opened before May 1,
1997, or (ii) the Securities Dealer of record received a payment from
Distributors of 0.25% or less, or (iii) Distributors did not make any
payment in connection with the purchase, as described under "How Do I Buy
Shares? -- Other Payments to Securities Dealers"
o Redemptions by the Fund when an account falls below the minimum required
account size
o Redemptions following the death of the shareholder or beneficial owner
o Redemptions through a systematic withdrawal plan set up before
February 1, 1995
o Redemptions through a systematic withdrawal plan set up on or after
February 1, 1995, at a rate of up to 1% a month of an account's Net
Asset Value. For example, if you maintain an annual balance of $1
million, you can redeem up to $120,000 annually through a systematic
withdrawal plan free of charge.
o Distributions from individual retirement plan accounts due to death or
disability or upon periodic distributions based on life expectancy
o Tax-free returns
of excess contributions from employee benefit plans
o Redemptions by Trust Company employee benefit plans or employee benefit
plans serviced by ValuSelect(R)
o Participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee
benefit plans
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
The Fund intends to pay a dividend at least annually representing substantially
all of its net investment income and any net realized capital gains.
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution and you will then receive a portion of the price you paid back in
the form of a taxable distribution.
DISTRIBUTION OPTIONS
You may receive your distributions from the Fund in any of these ways:
1. BUY ADDITIONAL SHARES OF THE FUND -- You may buy additional shares of the
same class of the Fund (without a sales charge or imposition of a Contingent
Deferred Sales Charge) by reinvesting capital gain distributions, dividend
distributions, or both. This is a convenient way to accumulate additional shares
and maintain or increase your earnings base.
2. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS -- You may direct your
distributions to buy the same class of shares of another Franklin Templeton Fund
(without a sales charge or imposition of a Contingent Deferred Sales Charge).
Many shareholders find this a convenient way to diversify their investments.
3. RECEIVE DISTRIBUTIONS IN CASH -- You may receive capital gain distributions,
dividend distributions, or both in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee.
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE SECTIONS 6 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE SAME CLASS
OF THE FUND. You may change your distribution option at any time by notifying us
by mail or phone. Please allow at least seven days before the record date for us
to process the new option. For Trust Company retirement plans, special forms are
required to receive distributions in cash.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
SHARE PRICE
When you buy shares, you pay the Offering Price. This is the Net Asset Value per
share, plus any applicable sales charges. When you sell shares, you receive the
Net Asset Value per share.
The Net Asset Value we use when you buy or sell shares is the one next
calculated after we receive your transaction request in proper form. If you buy
or sell shares through your Securities Dealer, however, we will use the Net
Asset Value next calculated after your Securities Dealer receives your request,
which is promptly transmitted to the Fund. Your redemption proceeds will not
earn interest between the time we receive the order from your dealer and the
time we receive any required documents.
HOW AND WHEN SHARES ARE PRICED
The Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share as of the scheduled close of the NYSE, generally 4:00 p.m.
Eastern time. You can find the prior day's closing Net Asset Value and Offering
Price of the Fund in many newspapers.
The Net Asset Value of all outstanding shares of each class is calculated on a
pro rata basis. It is based on each class' proportionate participation in the
Fund, determined by the value of the shares of each class. Class I, however,
bears the Rule 12b-1 fees payable under its Rule 12b-1 plan. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. The Fund's assets are
valued as described under "How Are Fund Shares Valued?" in the SAI.
PROPER FORM
An order to buy shares is in proper form when we receive your signed shareholder
application and check. Written requests to sell or exchange shares are in proper
form when we receive written instructions signed by all registered owners, with
a signature guarantee if necessary. We must also receive any outstanding share
certificates for those shares.
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
o Your name,
o The Fund's name,
o The class of shares,
o A description of the request,
o For exchanges, the name of the fund you are exchanging into,
o Your account number,
o The dollar amount or number of shares, and
o A telephone number where we may reach you during the day, or in the evening if
preferred.
<PAGE>
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You should be
able to obtain a signature guarantee from a bank, broker, credit union, savings
association, clearing agency, or securities exchange or association. A NOTARIZED
SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed, you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form and to send the certificate and assignment form in separate
envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We may also record calls. We will not be
liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or not
implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send us written
instructions, as described elsewhere in this prospectus. If you are unable to
execute a transaction by phone, we will not be liable for any loss.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS. We cannot accept instructions to sell
shares or change distribution options on Trust Company retirement plans by
phone. While you may exchange shares of Trust Company IRA and 403(b) retirement
accounts by phone, certain restrictions may be imposed on other retirement
plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call Retirement Plan Services.
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, ALL owners must sign instructions to process transactions and changes to
the account. Even if the law in your state says otherwise, we cannot accept
instructions to change owners on the account unless all owners agree in writing.
If you would like another person or owner to sign for you, please send us a
current power of attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
TRUSTS. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- --------------------------------- ---------------------------------------------
CORPORATION Corporate Resolution
- --------------------------------- ---------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement
that identify the general partners, or
2. A certification for a partnership agreement
- --------------------------------- ---------------------------------------------
2. A certification for a partnership agreement
---------------------------- ----------------------------------------------
TRUST 1. The pages from the trust document that
identify the trustees, or
- --------------------------------- ---------------------------------------------
2. A certification for trust
- --------------------------------- ---------------------------------------------
STREET OR NOMINEE ACCOUNTS. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we cannot process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
IMPORTANT INFORMATION IF YOU HAVE AN INVESTMENT REPRESENTATIVE
If there is a Securities Dealer or other representative of record on your
account, we are authorized: (1) to provide confirmations, account statements and
other information about your account directly to your dealer and/or
representative; and (2) to accept telephone and electronic instructions directly
from your dealer or representative, including instructions to exchange or redeem
your shares. Electronic instructions may be processed through established
electronic trading systems and programs used by the Fund. Telephone instructions
directly from your representative will be accepted unless you have let us know
that you do not want telephone privileges to apply to your account.
TAX IDENTIFICATION NUMBER
The IRS requires us to have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the shareholder application included with this
prospectus or contact your investment representative. The market value of the
Fund's shares may fluctuate and a systematic investment plan such as this will
not assure a profit or protect against a loss. You may discontinue the program
at any time by notifying Investor Services by mail or phone.
SYSTEMATIC WITHDRAWAL PLAN
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum payment
amount for each withdrawal must be at least $50. For retirement plans subject to
mandatory distribution requirements, the $50 minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account. Once your plan is established, any
distributions paid by the Fund will be automatically reinvested in your account.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
To avoid paying sales charges on money you plan to withdraw within a short
period of time, you may not want to set up a systematic withdrawal plan if you
plan to buy shares on a regular basis. Shares sold under the plan may also be
subject to a Contingent Deferred Sales Charge. Please see "Contingent Deferred
Sales Charge" under "How Do I Sell Shares?"
You may discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us in writing at
least seven business days before the end of the month preceding a scheduled
payment. Please see "How Do I Buy, Sell and Exchange Shares? -- Systematic
Withdrawal Plan" in the SAI for more information.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS(R) system (day or night) at
1-800/247-1753 to:
o obtain information about your account;
o obtain price and performance information about any Franklin Templeton Fund;
o exchange shares between identically registered Franklin accounts; and
o request duplicate statements and deposit slips for Franklin accounts.
You will need the Fund's code number to use TeleFACTS(R). The Fund's code number
is 417.
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
o Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
o Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. Institutional investors may also be
required to complete an institutional account application. For more information,
call Institutional Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor
Services at 700 Central Avenue, P.O. Box 33030, St. Petersburg, Florida
33733-8030. The Fund and Distributors are also located at this address.
Investment Counsel is located at 500 East Broward Boulevard, Ft. Lauderdale,
Florida 33394-3091. You may also contact us by phone at one of the numbers
listed below.
<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
<S> <C> <C>
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
(1-800/342-5236) 9:30 a.m. to 5:30 p.m. (Saturday)
Retirement Plan Services 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
<PAGE>
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1933 ACT -- Securities Act of 1933, as amended.
1940 ACT -- Investment Company Act of 1940, as amended.
BOARD -- The Board of Trustees of the Fund
CD -- Certificate of deposit
CLASS I, CLASS II AND ADVISOR CLASS -- The Fund offers two classes of shares,
designated "Class I" and "Advisor Class." The two classes have proportionate
interests in the Fund's portfolio. They differ, however, primarily in their
sales charge and expense structures. Certain funds in the Franklin Templeton
Funds also offer a share class designated "Class II."
CODE -- Internal Revenue Code of 1986, as amended
CONTINGENCY PERIOD -- The 12 month period during which a Contingent Deferred
Sales Charge may apply. Regardless of when during the month you purchased
shares, they will age one month on the last day of that month and each following
month.
CONTINGENT DEFERRED SALES CHARGE (CDSC)-- A sales charge of 1% that may apply if
you sell your shares within the Contingency Period.
DISTRIBUTORS -- Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
ELIGIBLE GOVERNMENTAL AUTHORITY -- Any state or local government or any
instrumentality, department, authority or agency thereof that has determined the
Fund is a legally permissible investment and that can only buy shares of the
Fund without paying sales charges.
FRANKLIN TEMPLETON FUNDS -- The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Franklin Government Securities Trust, Templeton Capital Accumulator Fund,
Inc., Templeton Variable Annuity Fund, and Templeton Variable Products Series
Fund
FRANKLIN TEMPLETON GROUP -- Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS -- All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds
FT SERVICES -- Franklin Templeton Services, Inc., the Fund's administrator
INVESTMENT COUNSEL -- Templeton Investment Counsel, Inc., the Fund's investment
manager
INVESTOR SERVICES -- Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS -- Internal Revenue Service
LETTER -- Letter of Intent
MARKET TIMERS -- Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange shares
based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.
MOODY'S -- Moody's Investors Service, Inc.
NASD -- National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) -- The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NSCC -- National Securities Clearing Corporation
NYSE -- New York Stock Exchange
OFFERING PRICE -- The public offering price is based on the Net Asset Value per
share and includes the front-end sales charge. The maximum front-end sales
charge is 5.75%.
QUALIFIED RETIREMENT PLANS -- An employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
RESOURCES -- Franklin Resources, Inc.
SAI -- Statement of Additional Information
S&P -- Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc.
SEC -- U.S. Securities and Exchange Commission
SECURITIES DEALER -- A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
SEP -- An employer sponsored simplified employee pension plan established under
section 408(k) of the Code
TELEFACTS(R) -- FRANKLIN TEMPLETON'S AUTOMATED CUSTOMER SERVICING SYSTEM
TRUST COMPANY -- Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. -- United States
WE/OUR/US -- Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
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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 IRS.
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number or you do not know your 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 EMPLOYER ID # OF
- --------------------- ------------------ -------------------- --------------------------
<S> <C> <C> <C>
o Individual Individual o Trust, Estate, Trust, Estate, or
or Pension Plan Pension Plan Trust
Trust
- --------------------- ------------------ ---------------------- --------------------------
o Joint Individual Owner who o Corporation, Corporation,
will be Partnership, or Partnership, or
paying tax or other organization other organization
first-named
individual
- --------------------- ------------------ ---------------------- --------------------------
o Unif. Gift/ Minor o Broker nominee Broker nominee
Transfer to Minor
- --------------------- ------------------ ---------------------- --------------------------
o Sole Proprietor Owner of
business
- --------------------- ------------------ ---------------------- --------------------------
o 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 include:
A corporation An organization exempt from
tax under section 501(a), or an
A financial institution individual retirement plan
A registered dealer in securities An exempt charitable remainder
or commodities registered in trust or a non-exempt trust
the U.S. or a U.S. possession described in section 4947(a)(1)
A real estate investment trust An entity registered at all times
under the Investment Company
A common trust fund operated Act of 1940
by a bank under section 584(a)
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%. 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 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. (or
your transactions are exempt from U.S. taxes under a tax treaty).
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 Internal
Revenue Service 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.
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.
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RESOLUTION SUPPORTING AUTHORITY OF
CORPORATE /ASSOCIATION SHAREHOLDER
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INSTRUCTION:
It will be necessary for corporate/association shareholders to provide a
certified copy of a resolution or other certificate of authority supporting the
authority of designated officers of the corporation/association to issue oral
and written instruction on behalf of the corporation/association for the
purchase, sale (redemption), transfer and/or exchange of Franklin Templeton Fund
shares. You may use the following form of resolution or you may prefer to use
your own.
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
___________________ and that the following is a true and Type of Organization
State correct copy of a resolution adopted by the Board of Directors by
unanimous written consent (a copy of which is attached) or at a meeting duly
called and held on ________________________, 19 ___.
"RESOLVED, that__________________________________________________________
Name of Corporation/Association
(the "Company") is authorized to invest the Company's assets in one or
more investment companies (mutual funds) whose shares are distributed by
Franklin/Templeton Distributors, Inc. ("Distributors"). Each such
investment company, or series thereof, is referred to as a "Franklin
Templeton Fund" or "Fund."
FURTHER RESOLVED, that any (enter number) ____________________of the
following officers of this Company (acting alone, if one, or acting
together, if more than one) is/are authorized to issue oral or written
instructions (including the signing of drafts in the case of draft accessed
money fund accounts) on behalf of the Company for the purchase, sale
(redemption), transfer and/or exchange of Fund shares and to execute any
Fund application(s) and agreements pertaining to Fund shares registered or
to be registered to the Company (referred to as a "Company Instruction");
and, that this authority shall continue until Franklin/Templeton Investor
Services, Inc. ("Investor Services") receives written notice of revocation
or amendment delivered by registered mail. The Company's officers authorized
to act on behalf of the Company under this resolution are (enter officer
titles
only):_____________________________________________________________________
(referred to as the "Authorized Officers").
FURTHER RESOLVED, that Investor Services may rely on the most recently
provided incumbency certificate delivered by the Company to Investor
Services to identify those individuals who are the incumbent Authorized
Officers and that Investor Services shall have no independent duty to
determine if there has been any change in the individuals serving as
incumbent Authorized Officers.
FURTHER RESOLVED, that the Company ("Indemnitor") undertakes and agrees to
indemnify and hold harmless Distributors, each affiliate of Distributors,
each Franklin Templeton Fund and their officers, employees and agents
(referred to hereafter collectively as the "Indemnitees") from and against
any and all liability, loss, suits, claims, costs, damages and expenses of
whatever amount and whatever nature (including without limitation reasonable
attorneys' fees, whether for consultation and advice or representation in
litigation at both the trial and appellate level) any indemnitee may sustain
or incur by reason of, in consequence of, or arising from or in connection
with any action taken or not taken by an Indemnitee in good faith reliance
on a Company Instruction given as authorized under this resolution."
The undersigned further certifies that the below named persons, whose signatures
appear opposite their names, are the incumbent Authorized Officers (as that term
is defined in the above resolution) who have been duly elected to the office
identified beside their name(s) (attach additional list if necessary).
X
Name/title (please print or type) Signature
X
Name/title (please print or type) Signature
X
Name/title (please print or type) Signature
X
Name/title (please print or type) Signature
Certified from minutes
X
Signature
Name/title (please print or type)
CORPORATE SEAL (if appropriate)
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FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST E CALL 1-800/DIAL BEN (1-800/342-5236) 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.
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GLOBAL GROWTH
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Franklin Global Health Care Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller
Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton
Global Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High
Income Currency Fund
Templeton Americas
Government Securities Fund
GROWTH
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap
Growth Fund
Franklin Small Cap Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural
Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends
Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American
Trust, Inc.
FUND ALLOCATOR SERIES
Franklin Templeton
Conservative Target Fund
Franklin Templeton
Moderate Target Fund
Franklin Templeton
Growth Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment
Grade Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR CORPORATIONS
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES+
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
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*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY). **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.
+Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC.
FGF02/97 [PRINTED ON RECYCLED PAPER LOGO]
TL417 P 08/97
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FRANKLIN TEMPLETON
JAPAN FUND
P.O. Box 33031
St. Petersburg, FL 33733-8031
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TL417 P 08/97 [PRINTED ON RECYCLED PAPER LOGO]
