<PAGE>
TEMPLETON AMERICAS GOVERNMENT SECURITIES FUND PROSPECTUS -- JULY 10, 1995
- --------------------------------------------------------------------------------
INVESTMENT The primary investment objective of Templeton Americas
OBJECTIVES Government Securities Fund (the "Fund") is a high level of
AND POLICIES current income. Total return is a secondary objective. The Fund
seeks to achieve its objectives by investing at least 65% of
its total assets in debt securities issued or guaranteed by
governments, government agencies, political subdivisions, and
other government entities of countries located in the Western
Hemisphere (i.e., North, South and Central America and the
surrounding waters). The Fund is a series of Templeton Global
Investment Trust. THE FUND MAY ENGAGE IN VARIOUS INVESTMENT
TECHNIQUES (SUCH AS BORROWING MONEY FOR INVESTMENT PURPOSES AND
INVESTING UP TO 15% OF ITS ASSETS IN ILLIQUID SECURITIES,
INCLUDING UP TO 10% OF ITS ASSETS IN RESTRICTED SECURITIES)
WHICH MAY INVOLVE SIGNIFICANT RISKS AND INCREASED FUND
EXPENSES. SEE "RISK FACTORS." INVESTORS SHOULD CAREFULLY
CONSIDER THESE RISKS BEFORE INVESTING.
SUBSTANTIALLY ALL THE FUND'S ASSETS AT ANY ONE TIME MAY BE
INVESTED IN NON-INVESTMENT GRADE DEBT INSTRUMENTS (I.E., JUNK
BONDS) THAT INVOLVE GREATER RISKS, INCLUDING THE RISK OF
DEFAULT, AND THAT ARE PREDOMINANTLY SPECULATIVE. INVESTORS
SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING. THE
FUND MAY NOT BE SUITABLE FOR ALL INVESTORS. SEE "RISK FACTORS."
- --------------------------------------------------------------------------------
PURCHASE OF Please complete and return the Shareholder Application. If you
SHARES need assistance in completing this form, please call our
Shareholder Services Department. The Fund's Shares may be
purchased at a price equal to their net asset value plus a
sales charge not exceeding 4.25% of the Offering Price. The
minimum initial investment is $100 ($25 minimum for subsequent
investments).
- --------------------------------------------------------------------------------
PROSPECTUS This Prospectus sets forth concisely information about the Fund
INFORMATION that a prospective investor ought to know before investing.
Investors are advised to read and retain this Prospectus for
future reference. A Statement of Additional Information ("SAI")
dated July 10, 1995, has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated in its
entirety by reference in and made a part of this Prospectus.
The SAI is available without charge upon request to Franklin
Templeton Distributors, Inc., P.O. Box 33030, St. Petersburg,
Florida 33733-8030 or by calling the Fund Information
Department.
- --------------------------------------------------------------------------------
FUND INFORMATION DEPARTMENT--1-800/DIAL BEN
- --------------------------------------------------------------------------------
TEMPLETON "STAR" SERVICE (24 hours, seven days a week access to current prices,
shareholder account balances/values, last transaction and duplicate account
statements) -- 1-800-654-0123
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE TABLE........ 2
FINANCIAL HIGHLIGHTS
.................... 3
GENERAL DESCRIPTION . 4
Investment Objective
and Policies........ 4
Brady Bonds.......... 5
Other Debt Securities
of Government
Entities............ 6
Structured
Investments......... 6
Mortgage-Backed and
Asset-Backed
Securities.......... 7
Derivative Mortgage-
Backed Securities... 8
INVESTMENT
TECHNIQUES.......... 9
Temporary
Investments......... 9
Borrowing............ 10
Loans of Portfolio
Securities.......... 10
Options on Securities
or Indices.......... 10
Forward Foreign
Currency Contracts
and Options on
Foreign Currencies.. 10
Futures Contracts.... 11
Repurchase
Agreements.......... 11
Illiquid and
Restricted
Securities.......... 11
Investment Companies. 12
RISK FACTORS......... 12
Foreign Currency
Exchange............ 12
Sovereign Debt....... 12
Foreign Investments.. 13
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
High-Risk Debt
Securities.......... 14
Tax Considerations... 14
Leverage............. 15
Futures Contracts and
Related Options..... 15
Non-Diversified
Status.............. 15
HOW TO BUY SHARES OF
THE FUND............ 16
Offering Price....... 16
Net Asset Value
Purchases........... 18
Description of
Special Net Asset
Value Purchases..... 19
Additional Dealer
Compensation........ 19
Purchasing Funds
Shares.............. 20
Automatic Investment
Plan................ 20
Institutional
Accounts............ 20
Account Statements... 20
Templeton STAR
Service............. 20
Retirement Plans..... 20
Net Asset Value...... 21
EXCHANGE PRIVILEGE... 21
Transfers............ 22
Exchanges by Timing
Accounts............ 22
HOW TO SELL SHARES OF
THE FUND............ 23
Reinstatement
Privilege........... 24
Systematic Withdrawal
Plan................ 25
Redemptions by
Telephone........... 25
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Contingent Deferred
Sales Charge........ 26
TELEPHONE
TRANSACTIONS........ 26
Verification
Procedures.......... 27
Restricted Accounts.. 27
General.............. 27
MANAGEMENT OF THE
FUND................ 27
Investment Manager
and Sub-Adviser..... 27
Business Manager..... 28
Transfer Agent....... 28
Custodian............ 28
Plan of Distribution. 28
Brokerage
Commissions......... 29
GENERAL INFORMATION.. 29
Description of
Shares/Share
Certificates........ 29
Meetings of
Shareholders........ 29
Dividends and
Distributions....... 29
Federal Tax
Information......... 30
Inquiries............ 30
Performance
Information......... 30
Statements and
Reports............. 30
APPENDIX -- BOND
RATINGS............. 31
WITHHOLDING
INFORMATION......... 32
CORPORATE RESOLUTION. 33
AUTHORIZATION
AGREEMENT........... 34
THE FRANKLIN
TEMPLETON GROUP..... 35
</TABLE>
- --------------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder will bear directly or indirectly
in connection with an investment in the Fund. The figures are estimates of the
Fund's expenses for the current fiscal year.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of Offering
Price)............................................................... 4.25%
Deferred Sales Charge................................................. None/1/
Exchange Fee (per transaction)........................................ $5.00/2/
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees....................................................... 0.60%
Rule 12b-1 Fees/3/.................................................... 0.35%
Other Expenses (audit, legal, business management, transfer agent and
custodian) (after expense reimbursement)............................. 0.30%
Total Fund Operating Expenses (after expense reimbursement)........... 1.25%
</TABLE>
- -------
/1/Investments of $1 million or more are not subject to a front-end sales
charge; however, a contingent deferred sales charge of 1%, is generally
imposed on certain redemptions within a "contingency period" of 12 months of
the calendar month following such investments. See "How to Sell Shares of
the Fund--Contingent Deferred Sales Charge."
/2/$5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.
/3/Annual Rule 12b-1 fees may not exceed 0.35% of the Fund's average net assets
attributable to Shares. Consistent with the National Association of
Securities Dealers, Inc.'s rules, it is possible that the combination of
front-end sales charges and Rule 12b-1 fees could cause long-term
Shareholders to pay more than the economic equivalent of the maximum front-
end sales charges permitted under those same rules.
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. The information in this table does not reflect the charge of up to
$15 per transaction if a Shareholder requests that redemption proceeds be sent
by express mail or wired to a commercial bank account. For a more detailed
discussion of these matters, investors should refer to the appropriate
sections of this Prospectus.
EXAMPLE
As required by SEC regulations, the following example illustrates the
expenses, including the maximum front-end sales charge and applicable
contingent deferred sales charge, that apply to a $1,000 investment in the
Fund over various time periods assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C>
$55 $80 $108 $187
</TABLE>
For purposes of this example, it is assumed that a contingent deferred sales
charge will not apply.
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES, INCLUDING
FEES SET BY CONTRACT, SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN
THOSE SHOWN. The operating expenses are borne by the Fund and only indirectly
by Shareholders as a result of their investment in the Fund. In addition,
federal securities regulations require the example to assume an annual return
of 5%, but the Fund's actual return may be more or less than 5%.
The Fund's investment manager, Templeton Global Bond Managers, a division of
Templeton Investment Counsel, Inc. (the "Investment Manager"), has voluntarily
agreed to reduce its investment management fee to the extent necessary to
limit total expenses
2
<PAGE>
(excluding interest, taxes, brokerage commissions and extraordinary expenses)
to 1.25% of the Fund's average daily net assets. If such fee reduction is
insufficient to so limit the Fund's total expenses, the Fund's Business
Manager, Templeton Global Investors, Inc., has voluntarily agreed to reduce
its fee and, to the extent necessary, assume other Fund expenses, so as to so
limit the Fund's total expenses. If this policy were not in effect, the Fund's
"Other Expenses" and "Total Fund Operating Expenses" would be 5.54% and 6.49%,
respectively, and you would pay the following expenses on a $1,000 investment,
assuming 5% annual return and redemption at the end of each time period: $104
for one year, $225 for three years, $342 for five years and $620 for ten
years. As long as this temporary expense limitation continues, it may lower
the Fund's expenses and increase its yield. After December 31, 1995, the
expense limitation may be terminated or revised at any time, at which time the
Fund's expenses may increase and its yield may be reduced, depending on the
total assets of the Fund.
FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
McGladrey & Pullen, LLP, independent certified public accountants, for the
periods indicated in their report which is incorporated by reference and which
appears in the Fund's 1995 Annual Report to Shareholders. This statement
should be read in conjunction with the other financial statements and notes
thereto included in the Fund's 1995 Annual Report to Shareholders which
contains further information about the Fund's performance, and which is
available to Shareholders upon request and without charge.
<TABLE>
<CAPTION>
JUNE 27, 1994
(COMMENCEMENT OF
OPERATIONS) TO
PER SHARE OPERATING PERFORMANCE MARCH 31, 1995
(for a Share outstanding throughout the period) ----------------
<S> <C>
Net asset value, beginning of period.......................... $10.00
------
Income from investment operations:
Net investment income....................................... .30
Net realized and unrealized loss............................ (.43)
------
Total from investment operations.......................... (.13)
------
Distribution:
Dividend from net investment income......................... (.28)
------
Change in net asset value..................................... (.41)
------
Net asset value, end of period................................ $ 9.59
======
TOTAL RETURN* (1.33)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)............................... $2,826
Ratio of expenses to average net assets....................... 6.49%**
Ratio of expenses, net of reimbursement, to average net
assets....................................................... 1.25%**
Ratio of net investment income to average net assets.......... 5.07%**
Portfolio turnover rate....................................... --
</TABLE>
- -------
* Total Return does not reflect sales charge. Not annualized.
** Annualized.
3
<PAGE>
GENERAL DESCRIPTION
Templeton Global Investment Trust (the "Trust") was organized as a business
trust under the laws of Delaware on December 21, 1993, and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end
management investment company. It has three series of shares, each of which is
a separate mutual fund: Templeton Americas Government Securities Fund (the
"Fund"), a non-diversified fund, and Templeton Growth and Income Fund
(formerly Templeton Global Rising Dividends Fund), Templeton Greater European
Fund, Templeton Latin America Fund, Templeton Americas Government Securities
Fund and Templeton Global Infrastructure Fund, all diversified funds.
Prospectuses for Templeton Growth and Income Fund, Templeton Greater European
Fund, Templeton Latin America Fund, Templeton Americas Government Securities
Fund and Templeton Global Infrastructure Fund are available upon request and
without charge from the Principal Underwriter.
INVESTMENT OBJECTIVE AND POLICIES. The primary investment objective of the
Fund is a high level of current income. Total return is a secondary objective.
The Fund seeks to achieve its objectives by investing at least 65% of its
total assets in debt securities issued or guaranteed by governments,
government agencies, political subdivisions, and other government entities
("Government Entities") of countries located in the Western Hemisphere (i.e.,
North, South and Central America and the surrounding waters). The Fund's
investment objective and the investment restrictions set forth under
"Investment Objectives and Policies -- 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 of Trustees without Shareholder
approval. There can be no assurance that the Fund's investment objectives will
be achieved.
The Fund's investment manager, Templeton Investment Counsel, Inc., acting
through its Templeton Global Bond Managers division (the "Investment
Manager"), and the Fund's sub-adviser, Franklin Advisers, Inc. (the "Sub-
Adviser"), will actively manage the Fund's assets in response to market,
political and general economic conditions, and will seek to adjust the Fund's
investments based on their perception of which investments would best enable
the Fund to achieve its investment objectives. In their analysis, the
Investment Manager and the Sub-Adviser will consider various factors,
including their views regarding interest and currency exchange rate changes
and credit risks. Such professional investment management may be attractive to
investors, particularly individuals, who lack the time, information,
capability or inclination to effect such an investment strategy directly.
The Fund's investments in debt obligations of Government Entities will
consist of (i) fixed income or floating rate bonds, notes, bills and
debentures issued or guaranteed by governments, governmental agencies or
instrumentalities, or government owned, controlled or sponsored entities
(including central banks located in the Western Hemisphere), including
warrants for any such obligations, and (ii) debt obligations issued by
entities organized and operated for the purpose of restructuring the
investment characteristics of securities issued by any of the entities
described above, including indexed or currency-linked securities. Such
obligations may be issued in either registered or bearer form. Many of these
securities are trading at substantial discounts to their par value and it is
expected that initially a significant portion of the Fund's assets will be
invested in securities purchased at a discount to par value. Such securities
involve special tax considerations which may adversely affect the Fund. See
"Risk Factors -- Tax Considerations."
The Fund may invest up to 35% of its total assets in securities of
corporations and financial institutions in countries located in the Western
Hemisphere, including corporate and commercial obligations such as medium-term
notes and commercial paper, which may be indexed to foreign currency exchange
rates. Indexed notes and commercial paper typically provide that the principal
amount is adjusted upwards or downwards (but not below zero) at maturity to
reflect fluctuations in the exchange rate between two currencies during the
period the obligation is outstanding, depending on the terms of the specific
security. In selecting the two currencies, the Investment Manager will
consider the correlation and relative yields of various currencies. The Fund
will purchase an indexed obligation using the currency in which it is
denominated and, at maturity, will receive interest and principal payments
thereon in that currency. The amount of principal payable by the issuer at
maturity, however, will vary (i.e., increase or decrease) in response to the
change (if any) in the exchange rate between the two specified currencies
during the period from the date the instrument is issued to its maturity date.
The potential for realizing gains as a result of changes in foreign currency
exchange rates may enable the Fund to hedge the currency
4
<PAGE>
in which the obligation is denominated (or to effect cross-hedges against
other currencies) against a decline in the U.S. Dollar value of investments
denominated in foreign currencies while generating interest income on the
obligation. However, indexed notes involve the risk of loss (i.e., reduced
principal payable on the note) in the event that exchange rate movements are
not accurately predicted. Such obligations may be deemed liquid investments if
they can be disposed of promptly in the ordinary course of business at a value
reasonably close to that used in the calculation of the Fund's net asset value
per Share; otherwise, they will be deemed illiquid investments subject to the
restrictions set forth in the SAI under "Investment Restrictions."
The Fund may invest in securities denominated in or indexed to the currency
of one country in the Western Hemisphere although issued by a governmental
entity, corporation or financial institution of another such country. For
example, the Fund may invest in a Mexican peso denominated obligation issued
by a U.S. corporation. Such investments involve credit risks associated with
the issuer and currency risks associated with the currency in which the
obligation is denominated.
The Fund also may invest in participations in, or bonds and notes backed by,
pools of mortgage, credit card, automobile or other types of receivables.
These investments are described more fully below under "Mortgage-Backed and
Asset-Backed Securities." Because of liquidity and valuation concerns relating
to investments in certain derivative mortgage-backed securities, investments
in such securities will be restricted as discussed below under "Derivative
Mortgage-Backed Securities."
The Fund has established no rating criteria for the debt securities in which
it may invest and such securities may not be rated at all for
creditworthiness. Investments in debt securities rated in the medium to lower
rating categories of nationally recognized statistical rating organizations
such as Standard & Poor's Corporation ("S&P") and Moody's Investors Service,
Inc. ("Moody's") or in unrated securities of comparable quality involve
special risks which are described more fully below under "Risk Factors." See
the Appendix for a description of the various bond rating categories.
The Fund may invest a portion of its assets in debt instruments issued by
Western Hemisphere companies engaged in the financial services industry,
including banks, thrift institutions, insurance companies, securities firms
and holding companies of any of the foregoing. Such investments may include
certificates of deposit, time deposits, bankers' acceptances, and other
obligations issued by such entities, as well as repurchase agreements entered
into with such entities.
The Fund may also lend its portfolio securities and borrow money for
investment purposes (i.e., "leverage" its portfolio). In addition, the Fund
may enter into transactions in options on securities, securities indices and
foreign currencies, forward foreign currency contracts, and futures contracts
and related options. These are generally referred to as derivative
instruments, and involve special risk factors, which are described below. When
deemed appropriate by the Investment Manager or the Sub-Adviser, the Fund may
invest cash balances in repurchase agreements and other money market
investments to maintain liquidity in an amount to meet expenses or for day-to-
day operating purposes. These investment techniques are described below and
under the heading "Investment Objectives and Policies" in the SAI.
When the Investment Manager believes that market conditions warrant, the
Fund may adopt a temporary defensive position and may invest without limit in
money market securities denominated in U.S. dollars or in the currency of any
foreign country. See "Investment Techniques -- Temporary Investments."
The Fund does not emphasize short-term trading profits and usually expects
to have an annual portfolio turnover rate generally not exceeding 200%. A high
turnover rate (e.g., a rate in excess of 100%) increases transaction costs and
may increase the amount of the Fund's short-term capital gain, which is taxed
as ordinary income when distributed to Shareholders. The U.S. Federal tax
requirement that the Fund derive less than 30% of its gross income from the
sale or disposition of securities and certain other assets held for less than
three months may limit the Fund's ability to dispose of its securities. See
"Tax Status" in the SAI.
BRADY BONDS. The Fund may invest without limit in certain debt obligations
customarily referred to as "Brady Bonds," which are created through the
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt
5
<PAGE>
restructuring under a plan introduced by former U.S. Secretary of the
Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Bonds are not considered
U.S. Government securities and are considered speculative. Brady Plan debt
restructurings have been implemented to date in several countries, including
Argentina, Brazil, Bulgaria, Costa Rica, the Dominican Republic, Ecuador,
Jordan, Mexico, Nigeria, the Philippines, Uruguay and Venezuela (collectively,
the "Brady Countries"). It is expected that other countries will undertake a
Brady Plan debt restructuring in the future, including Peru, Poland and
Panama.
Brady Bonds have been issued only recently, and, accordingly, do not have a
long payment history. They may be collateralized or uncollateralized and
issued in various currencies (although most are U.S. dollar-denominated) and
they are actively traded in the over-the-counter secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate
par bonds or floating rate discount bonds, are generally collateralized in
full as to principal by U.S. Treasury zero coupon bonds which have the same
maturity as the Brady Bonds. Interest payments on these Brady Bonds generally
are collateralized on a one-year or longer rolling-forward basis by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of interest payments or, in the case of floating rate bonds,
initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest
payments but generally are not collateralized. Brady Bonds are often viewed as
having three or four valuation components: (i) the collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii)
the uncollateralized interest payments; and (iv) any uncollateralized
repayment of principal at maturity (these uncollateralized amounts constitute
the "residual risk").
Most Mexican Brady Bonds issued to date have principal repayments at final
maturity fully collateralized by U.S. Treasury zero coupon bonds (or
comparable collateral denominated in other currencies) and interest coupon
payments collateralized on an 18-month rolling-forward basis by funds held in
escrow by an agent for the bondholders. A significant portion of the
Venezuelan Brady Bonds and the Argentine Brady Bonds issued to date have
principal repayments at final maturity collateralized by U.S. Treasury zero
coupon bonds (or comparable collateral denominated in other currencies) and/or
interest coupon payments collateralized on a 14-month (for Venezuela) or 12-
month (for Argentina) rolling-forward basis by securities held by the Federal
Reserve Bank of New York as collateral agent.
Brady Bonds involve various risk factors including residual risk and the
history of defaults with respect to commercial bank loans by public and
private entities of countries issuing Brady Bonds. There can be no assurance
that Brady Bonds in which the Fund may invest will not be subject to
restructuring arrangements or to requests for new credit, which may cause the
Fund to suffer a loss of interest or principal on any of its holdings.
OTHER DEBT SECURITIES OF GOVERNMENT ENTITIES. In addition to Brady Bonds,
the Fund may invest in debt obligations of Government Entities, including, but
not limited to, restructured external debt that has not undergone a Brady-
style debt exchange, and internal government debt such as Mexican Treasury
Bills known as Certificados de Tesoreria ("CETES"), Argentine Bonos del Tesoro
("BOTE") and Bonos de Inversion y Crecimiento-Quinta Serie ("BIC V"), and
Venezuelan zero coupon notes.
STRUCTURED INVESTMENTS. Included among the issuers of Western Hemisphere
debt securities in which the Fund may invest are entities organized and
operated solely for the purpose of restructuring the investment
characteristics of various securities. These entities are typically organized
by investment banking firms which receive fees in connection with establishing
each entity and arranging for the placement of its securities. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, of specified instruments (such as Brady Bonds) and the
issuance by that entity of one or more classes of securities ("Structured
Investments") backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued Structured Investments to create securities with
different investment characteristics such as varying
6
<PAGE>
maturities, payment priorities or interest rate provisions. The extent of the
payments made with respect to Structured Investments is dependent on the
extent of the cash flow on the underlying instruments. Because Structured
Investments of the type in which the Fund anticipates investing typically
involve no credit enhancement, their credit risk will generally be equivalent
to that of the underlying instruments.
The Fund is permitted to invest in a class of Structured Investments that is
either subordinated or unsubordinated to the right of payment of another
class. Subordinated Structured Investments typically have higher yields and
present greater risks than unsubordinated Structured Investments. Although the
Fund's purchase of subordinated Structured Investments would have a similar
economic effect to that of borrowing against the underlying securities, the
purchase will not be deemed to be leverage for purposes of the limitations
placed on the extent of the Fund's assets that may be used for borrowing
activities. See "Investment Techniques -- Borrowing."
Certain issuers of Structured Investments may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, the Fund's investment in
these Structured Investments may be limited by the restrictions contained in
the 1940 Act described below under "Investment Techniques -- Investment
Companies." Structured Investments are typically sold in private placement
transactions, and there currently is no active trading market for Structured
Investments. To the extent such investments are illiquid, they will be subject
to the restrictions set forth in the SAI under "Investment Objectives and
Policies -- Investment Restrictions."
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Fund may invest without
limit in mortgage-backed securities issued or guaranteed by Government
Entities, and may invest up to 35% of its total assets in privately issued
mortgage-backed and asset-backed securities. Mortgage-backed securities are
securities that directly or indirectly represent an interest in, or are backed
by and payable from, mortgage loans secured by real property. Asset-backed
securities generally consist of structures similar to mortgage-backed
securities, except that the underlying asset pools are comprised of other
types of financial assets such as credit card, automobile or other types of
receivables and commercial loans. Mortgage-backed and asset-backed securities
are issued in structured financing wherein the sponsor securitizes the
underlying mortgage loans or financial assets in order to liquify the
underlying assets or to achieve certain other financial goals. The special
considerations and risks inherent in investments in mortgage-backed and asset-
backed securities are discussed more fully below.
The mortgage-backed securities in which the Fund may invest will primarily
be guaranteed by the Government National Mortgage Association ("GNMA") or
issued by the Federal National Mortgage Association ("FNMA") or the Federal
Home Loan Mortgage Corporation ("FHLMC"). Certain of the asset-backed
securities in which the Fund will invest may be guaranteed by the Small
Business Administration ("SBA") or issued in programs originated by the
Resolution Trust Corporation ("RTC"). GNMA, FNMA, FHLMC, SBA and RTC are
agencies or instrumentalities of the United States.
Certain of the mortgage-backed and asset-backed securities in which the Fund
may invest will be issued by private issuers. Private issuers include
originators of or investors in mortgage loans and receivables such as savings
and loan associations, mortgage bankers, commercial banks, investment banks,
finance companies and special purpose finance subsidiaries of any of the
above. Securities issued by private issuers may be subject to certain types of
credit enhancements issued in respect of those securities. Such credit
enhancements may include insurance policies, bank letters of credit,
guarantees by third parties or protections afforded by the structure of a
particular transaction (e.g., the use of reserve funds, over-collateralization
or the issuance of subordinated securities as protection for more senior
securities being purchased by the Fund). In purchasing securities for the
Fund, the Investment Manager and the Sub-Adviser will take into account not
only the creditworthiness of the issuer of the securities but also the
creditworthiness of the provider of any external credit enhancement of the
securities.
The Fund may invest in pass-through mortgage-backed securities that
represent ownership interests in a pool of mortgages on single-family or
multi-family residences. Such securities represent interests in pools of
residential mortgage loans originated by U.S. governmental or private lenders
and guaranteed, to the extent provided in such securities, by the U.S.
Government, one of its agencies or instrumentalities or by private guarantors.
Such securities, which are ownership interests in the underlying mortgage
loans, differ from conventional debt securities, which provide for periodic
payment of interest in fixed amounts (usually semiannually) and principal
7
<PAGE>
payments at maturity or on specified call dates. Mortgage pass-through
securities provide for monthly payments that "pass-through" the monthly
interest and principal payments (including any prepayments) made by the
individual borrowers on the pooled mortgage loans, net of any fees paid to the
guarantor of such securities and the servicer of the underlying mortgage
loans. The Fund may also invest in collateralized mortgage obligations
("CMOs") which are debt obligations collateralized by mortgage loans or
mortgage pass-through securities.
The yield characteristics of mortgage-backed and asset-backed securities
differ from traditional corporate debt securities. Among the major differences
are that interest and principal payments are made more frequently, usually
monthly, and that principal may be prepaid at any time because the underlying
mortgage loans or other assets generally may be prepaid at any time. As a
result, if the Fund purchases such a security at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a prepayment
rate that is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if the Fund purchases these securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity. The Fund may invest a
portion of its assets in derivative mortgage-backed securities, such as
stripped mortgage-backed securities, which are highly sensitive to changes in
prepayment and interest rates. The Investment Manager and the Sub-Adviser will
seek to manage these risks (and potential benefits) by investing in a variety
of such securities and may seek to hedge such investments with the use of
financial futures contracts. See "Investment Techniques -- Futures Contracts."
Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in
mortgagors' housing needs, job transfers, unemployment, mortgagors' net equity
in the mortgaged properties and servicing decisions. 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, amounts available for reinvestment by the Fund are likely to be
greater during a period of declining interest rates and, as a result, likely
to be reinvested at lower interest rates than during a period of rising
interest rates. Although asset-backed securities generally are less likely to
experience substantial prepayments than are mortgage-backed securities,
certain of the factors that affect the rate of prepayments on mortgage-backed
securities also affect the rate of prepayments on asset-backed securities.
However, during any particular period, the predominant factors affecting
prepayment rates on mortgage-backed and asset-backed securities may be
different. Mortgage-backed and asset-backed securities may decrease in value
as a result of increases in interest rates and may benefit less than other
fixed income securities from declining interest rates because of the risk of
prepayment.
The Fund's yield will also be affected by the yields on instruments in which
the Fund is able to reinvest the proceeds of payments and prepayments.
Accelerated prepayments on securities purchased by the Fund at a premium also
impose a risk of loss of principal because the premium may not have been fully
amortized at the time the principal is repaid in full.
DERIVATIVE MORTGAGE-BACKED SECURITIES. The Fund may invest up to 25% of its
total assets in various derivative mortgage-backed securities, which are
synthetic securities designed to be highly sensitive to certain types of
interest rate and principal prepayment scenarios. Derivative instruments
primarily consist of some form of stripped mortgage-backed securities ("SMBS")
that commonly involve different classes of securities that receive
disproportionate amounts of the interest and principal distributions on a pool
of mortgage assets.
SMBSs are typically issued by the same types of issuers as are mortgage-
backed securities. The structure of SMBSs, however, is different. A common
variety of SMBS involves a class (the principal-only or PO class) that
receives some of the interest and most of the principal from the underlying
assets, while the other class (the interest-only or IO class) receives most of
the interest and the remainder of the principal. In the most extreme case, the
IO class receives only interest, while the PO class receives only principal.
The yield to maturity on an IO class is extremely sensitive to the rate of
principal payments (including prepayments) on the related underlying assets,
and a rapid rate of principal payments in excess of that considered in pricing
the securities will have a material adverse effect on an IO security's yield
to maturity. If the underlying mortgage assets experience greater than
anticipated payments of principal, the Fund may fail to recoup fully its
initial investment in IOs. In addition, there are certain types of IOs which
represent the interest portion of a particular
8
<PAGE>
class as opposed to the interest portion of the entire pool. The sensitivity
of these types of IOs to interest rate fluctuations may be increased because
of the characteristics of the principal portion to which they relate. The
impact of IOs on the Fund's portfolio may be offset to some degree by
investments in mortgage-backed securities and inverse floaters (floating rate
securities the interest rate of which is adjusted up or down inversely to
changes in a specified index). As interest rates fall, presenting a greater
risk of unanticipated prepayments of principal, the negative effect on the
Fund because of its holdings of IOs should be diminished somewhat because of
the increased yield on the inverse floating rate CMOs or the increased
appreciation on the fixed rate securities. Under certain interest rate
scenarios, the Fund may decide to retain investments in IOs or inverse
floaters yielding less than prevailing interest rates in order to avoid
capital losses on the sale of such investments.
The Fund may also combine IOs and IO-related derivative mortgage products
with LIBOR-based inverse floaters (LIBOR being the London interbank offered
rate). A LIBOR-based inverse floater is a floating rate security the interest
rate of which is adjusted up or down inversely to changes in LIBOR; as LIBOR
decreases, the interest rate paid by the inverse floater would increase, and
vice versa. Depending on the amount of leverage built into the inverse
floater, the yield could vary in excess of the change in LIBOR because of the
leverage built into the inverse floater formula. The yield on an inverse
floater varies inversely with interest rates because as LIBOR decreases, the
interest payable on the inverse floater increases. The converse is true, of
course, when LIBOR increases. When an inverse floater is combined with an IO
or IO-type derivative product, the result is a synthetic security that tends
to provide a somewhat less volatile yield over a wide range of interest rate
and prepayment rate scenarios.
New types of mortgage-backed and asset-backed securities, derivative
securities and hedging instruments are developed and marketed from time to
time. Consistent with its investment objectives, policies and restrictions,
the Fund may, upon disclosure to Shareholders, invest in such new types of
securities and instruments that the Investment Manager and/or the Sub-Adviser
believe may assist the Fund in achieving its investment objectives.
The staff of the SEC has taken the position (which has been adopted as an
investment policy of the Fund) that the determination of whether a particular
U.S. Government issued IO or PO that is backed by fixed-rate mortgages is
liquid may be made by the Investment Manager or the Sub-Adviser under
guidelines and standards established by the Trust's Board of Trustees. Such a
security may be deemed liquid if it can be disposed of promptly in the
ordinary course of business at a value reasonably close to that used in the
calculation of the Fund's net asset value per share. The SEC's staff also has
taken the position that all other IOs and POs are illiquid securities which
are subject to the Fund's limitation on investments in illiquid securities, as
set forth in the SAI under "Investment Objectives and Policies -- Investment
Restrictions."
INVESTMENT TECHNIQUES
The Fund is authorized to use the various investment techniques described
below. Although these strategies are regularly used by some investment
companies and other institutional investors in various markets, some of these
strategies cannot at the present time be used to a significant extent by the
Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
TEMPORARY INVESTMENTS. For temporary defensive purposes, the Fund may invest
up to 100% of its total assets in the following money market securities,
denominated in U.S. dollars or in the currency of any foreign country, issued
by entities organized in the United States or any foreign country: short-term
(less than twelve months to maturity) and medium-term (not greater than five
years to maturity) obligations issued or guaranteed by the U.S. Government or
the governments of foreign countries, their agencies or instrumentalities;
finance company and corporate commercial paper, and other short-term corporate
obligations, in each case rated Prime-1 by Moody's or A or better by S&P or,
if unrated, of comparable quality as determined by the Investment Manager;
obligations (including certificates of deposit, time deposits and bankers'
acceptances) of banks; and repurchase agreements with banks and broker-dealers
with respect to such securities.
9
<PAGE>
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 the Fund's
total assets to generate income for the purpose of offsetting operating
expenses. Such loans must be secured by collateral (consisting of any
combination of cash, U.S. Government securities or irrevocable letters of
credit) in an amount at least equal (on a daily marked-to-market basis) to the
current market value of the securities loaned. The Fund may terminate the
loans at any time and obtain the return of the securities loaned within five
business days. The Fund will continue to receive any interest or dividends
paid on the loaned securities and will continue to retain any voting rights
with respect to the securities. In the event that the borrower defaults on its
obligation to return borrowed securities, because of insolvency or otherwise,
the Fund could experience delays and costs in gaining access to the collateral
and could suffer a loss to the extent that the value of the collateral falls
below the market value of the borrowed securities.
OPTIONS ON SECURITIES OR INDICES. The Fund may write (i.e., sell) covered
put and call options and purchase put and call options on securities or
securities indices that are traded on United States and foreign exchanges or
in the over-the-counter markets. An option on a security is a contract that
permits the purchaser of the option, in return for the premium paid, the right
to buy a specified security (in the case of a call option) or to sell a
specified security (in the case of a put option) from or to the writer of the
option at a designated price during the term of the option. An option on a
securities index permits the purchaser of the option, in return for the
premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of
the option. The Fund may write a call or put option only if the option is
"covered." This means that so long as the Fund is obligated as the writer of a
call option, it will own the underlying securities subject to the call, or
hold a call at the same or lower exercise price, for the same exercise period,
and on the same securities as the written call. A put is covered if the Fund
maintains liquid assets with a value equal to the exercise price in a
segregated account, or holds a put on the same underlying securities at an
equal or greater exercise price. The value of the underlying securities on
which options may be written at any one time will not exceed 15% of the total
assets of the Fund. The Fund will not purchase put or call options if the
aggregate premium paid for such options would exceed 5% of its total assets at
the time of purchase.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. The
Fund will normally conduct its foreign currency exchange transactions either
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through entering into forward contracts to
purchase or sell foreign currencies. The Fund will generally not enter into a
forward contract with a term of greater than one year. A forward contract is
an obligation to purchase or sell a specific currency for an agreed price at a
future date which is individually negotiated and privately traded by currency
traders and their customers.
The Fund will generally enter into forward contracts only under two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed
to settle the transaction. Second, when the Investment Manager believes that
the currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, it may enter into a forward contract to
sell or buy the former foreign currency (or another currency which acts as a
proxy for that currency) approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." The Fund has
no specific limitation on the percentage of assets it may commit to forward
contracts, subject to its stated investment objectives and policies, except
that the
10
<PAGE>
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, it may forfeit the entire
amount of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by the Fund are traded on U.S. and
foreign exchanges or over-the-counter.
FUTURES CONTRACTS. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock and bond index futures contracts, foreign
currency futures contracts and options on any of the foregoing. A financial
futures contract is an agreement between two parties to buy or sell a
specified debt security at a set price on a future date. An index futures
contract is an agreement to take or make delivery of an amount of cash based
on the difference between the value of the index at the beginning and at the
end of the contract period. A futures contract on a foreign currency is an
agreement to buy or sell a specified amount of a currency for a set price on a
future date.
When the Fund enters into a futures contract, it must make an initial
deposit, known as "initial margin," as a partial guarantee of its performance
under the contract. As the value of the security, index or currency
fluctuates, either party to the contract is required to make additional margin
payments, known as "variation margin," to cover any additional obligation it
may have under the contract. In addition, when the Fund enters into a futures
contract, it will segregate assets or "cover" its position in accordance with
the 1940 Act. See "Investment Objectives and Policies -- Futures Contracts" in
the SAI.
REPURCHASE AGREEMENTS. For temporary defensive purposes and for cash
management purposes, the Fund may enter into repurchase agreements with U.S.
banks and broker-dealers. Under a repurchase agreement, the Fund acquires a
security from a U.S. bank or a registered broker-dealer 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 original purchase
price paid by the Fund by an amount which reflects an agreed-upon rate of
return and which is not tied to any 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 bank or broker-dealer should default on its
obligation to repurchase the underlying security, the Fund may experience a
delay or difficulties 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 U.S. Securities
Act of 1933, as amended (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
11
<PAGE>
privately placed or Rule 144A securities held by the Fund are required to be
registered under the securities laws of one or more jurisdictions before being
resold, the Fund may be required to bear the expenses of registration. The
Fund will limit its investment in restricted securities other than Rule 144A
securities to 10% of its total assets, and will limit its investment in all
restricted securities, including Rule 144A securities, to 15% of its total
assets. Restricted securities, other than Rule 144A securities determined by
the Board of Trustees to be liquid, are considered to be illiquid and are
subject to the Fund's limitation on investment in illiquid securities.
INVESTMENT COMPANIES. The Fund may invest in other investment companies,
other than those for which the Investment Manager or its affiliates serve as
investment adviser or sponsor, which invest principally in securities in which
the Fund is authorized to invest. Under the 1940 Act, the Fund may invest a
maximum of 10% of its total assets in the securities of other investment
companies and not more than 5% of its total assets in the securities of any
one investment company, provided the investment does not represent more than
3% of the voting stock of the acquired investment company at the time such
shares are purchased. To the extent the Fund invests in other investment
companies, the Fund's Shareholders will incur certain duplicative fees and
expenses, including investment advisory fees. The Fund's investment in certain
investment companies will result in special U.S. federal income tax
consequences described under "Tax Status" in the SAI.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund, nor
can there be any assurance that the Fund's investment objectives will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Fund can decrease as well as increase, depending on a
variety of factors, which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions and market
factors. In addition to the factors which affect the value of individual
securities, a Shareholder may anticipate that the value of the Shares of the
Fund will fluctuate with movements in the broader equity and bond markets.
Changes in the prevailing rates of interest in any of the countries in which
the Fund is invested will likely affect the value of the Fund's holdings and
thus the value of the Shares of the Fund. Increased rates of interest which
frequently accompany inflation and/or a growing economy are likely to have a
negative effect on the value of Fund Shares. In addition, changes in currency
valuations will impact the price of the Shares of the Fund. History reflects
both increases and decreases in interest rates in individual countries and
throughout the world, and in currency valuations, and these may reoccur
unpredictably in the future. Additionally, investment decisions made by the
Investment Manager will not always be profitable or prove to have been
correct. The Fund is not intended as a complete investment program.
FOREIGN CURRENCY EXCHANGE. Since the Fund is authorized to invest in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates relative to the U.S. dollar will
affect the value of securities in the portfolio and the unrealized
appreciation or depreciation of investments insofar as U.S. investors are
concerned. Changes in foreign currency exchange rates relative to the U.S.
dollar will also affect the Fund's yield on assets denominated in currencies
other than the U.S. dollar.
SOVEREIGN DEBT. The debt obligations ("sovereign debt") issued or guaranteed
by Latin American governmental entities in which the Fund may invest involve
great risk and are deemed to be the equivalent in terms of quality to high
risk, low rated securities (i.e., junk bonds, as discussed below) and are
subject to many of the same risks as such securities. Similarly, the Fund may
have difficulty disposing of certain sovereign debt obligations because there
may be a thin trading market for such securities.
Certain Latin American countries are among the largest debtors to commercial
banks and foreign governments. The issuer or governmental authority that
controls the repayment of sovereign debt may not be willing or able to repay
the principal and/or pay interest when due in accordance with the terms of
such obligations. A Government Entity's willingness or ability to repay
principal and pay interest due in a timely manner may be affected by, among
other factors, its cash flow situation, and, in the case of a government
debtor, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the Government Entity's dependence
on expected disbursements from third parties, the Government Entity's policy
toward the International Monetary Fund and the political constraints to which
a Government Entity may
12
<PAGE>
be subject. Government Entities may default on their sovereign debt and may
also be dependent on expected disbursements from foreign governments,
multilateral agencies and others abroad to reduce principal and interest
arrearages on their debt. The commitment on the part of these governments,
agencies and others to make such disbursements may be conditioned on a
debtor's implementation of economic reforms or economic performance and the
timely service of such debtor's obligations. Failure to implement such
reforms, achieve such levels of economic performance or repay principal or
interest when due may result in the cancellation of such third parties'
commitments to lend funds to the government debtor, which may further impair
such debtor's ability or willingness to timely service its debts. Holders of
sovereign debt (including the Fund) may be requested to participate in the
rescheduling of such debt and to extend further loans to Government Entities.
As a result of the foregoing, a government obligor may default on its
obligations. If such an event occurs, the Fund may have limited legal recourse
against the issuer and guarantor. Remedies must, in some cases, be pursued in
the courts of the defaulting party itself, and the ability of the holder of
foreign government debt securities to obtain recourse may be subject to the
political climate in the relevant country. In addition, no assurance can be
given that the holders of commercial bank debt will not contest payments to
the holders of other foreign government debt obligations in the event of
default under their commercial bank loan agreements.
Government obligors in developing and emerging market countries are among
the world's largest debtors to commercial banks, other governments,
international financial organizations and other financial institutions. The
issuers of the government debt securities in which the Fund expects to invest
have in the past experienced substantial difficulties in servicing their
external debt obligations, which led to defaults on certain obligations and
the restructuring of certain indebtedness. Restructuring arrangements have
included, among other things, reducing and rescheduling interest and principal
payments by negotiating new or amended credit agreements or converting
outstanding principal and unpaid interest to Brady Bonds, and obtaining new
credit to finance interest payments. Holders of certain foreign government
debt securities may be requested to participate in the restructuring of such
obligations and to extend further loans to their issuers. There can be no
assurance that the Brady Bonds and other foreign government debt securities in
which the Fund may invest will not be subject to similar restructuring
arrangements or to requests for new credit which may adversely affect the
Fund's holdings. Furthermore, certain participants in the secondary market for
such debt may be directly involved in negotiating the terms of these
arrangements and may therefore have access to information not available to
other market participants.
FOREIGN INVESTMENTS. The Fund has the right to purchase securities in any
foreign country, developed or developing. Investors should consider carefully
the substantial risks involved in investing in securities issued by companies
and governments of foreign nations, which are in addition to the usual risks
inherent in domestic investments. 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, political or social instability or diplomatic developments
which could affect investment in securities of issuers in foreign nations.
Some countries may withhold portions of interest and dividends at the source.
In addition, in many countries there is less publicly available information
about issuers than is available in reports about companies in the United
States. Foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to United States
companies. Further, the Fund may encounter difficulties or be unable to vote
proxies, exercise shareholder rights, pursue legal remedies, and obtain
judgments in foreign courts. Commission rates in foreign countries, which are
sometimes fixed rather than subject to negotiation as in the United States,
are likely to be higher. Foreign securities markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when assets of the Fund
are uninvested and no return is earned thereon. The inability of the Fund to
make intended security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result either in losses
to the Fund due to subsequent declines in value of the portfolio security or,
if the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. In many foreign countries
13
<PAGE>
there is less government supervision and regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the United
States. There is an increased risk, therefore, of uninsured loss due to lost,
stolen, or counterfeit stock certificates. In addition, the foreign securities
markets of many of the countries in which the Fund may invest may also be
smaller, less liquid, and subject to greater price volatility than those in
the United States. As an open-end investment company, the Fund is limited in
the extent to which it may invest in illiquid securities. See "Investment
Objectives and Policies -- Investment Restrictions" in the SAI.
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 limitation 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.
HIGH-RISK DEBT SECURITIES. The Fund has established no rating criteria for
the debt securities in which it may invest, and such securities may not be
rated at all for creditworthiness. Although they may offer higher yields than
do higher rated securities, high-risk, low rated debt securities (commonly
referred to as "junk bonds") and unrated debt securities generally involve
greater volatility of price and risk of principal and income, including the
possibility of default by, or bankruptcy of, the issuers of the securities. In
addition, the markets in which low rated and unrated debt securities are
traded are more limited than those in which higher rated securities are
traded. The existence of limited markets for particular securities may
diminish the Fund's ability to sell the securities at fair value either to
meet redemption requests or to respond to a specific economic event such as a
deterioration in the creditworthiness of the issuer. Reduced secondary market
liquidity for certain low rated or unrated debt securities also may make it
more difficult for the Fund to obtain accurate market quotations for purposes
of valuing the Fund's portfolio. Market quotations are generally available on
many low rated or unrated securities only from a limited number of dealers and
may not necessarily represent firm bids of such dealers or prices for actual
sales.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Fund to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such creditworthiness analysis than
would be the case if the Fund were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic downturns or individual corporate developments.
A projection of an economic downturn or of a period of rising interest rates,
for example, could cause a decline in low rated debt securities prices because
the advent of a recession could lessen the ability of a highly leveraged
company to make principal and interest payments on its debt securities. If the
issuer of low rated debt securities defaults, the Fund may incur additional
expenses seeking recovery.
TAX CONSIDERATIONS. The Fund may accrue and report interest income on debt
securities, such as zero coupon bonds, pay-in-kind securities or debt
securities issued or acquired at a discount, even though it receives no cash
interest until the security's maturity or payment date. In order to qualify
for beneficial tax treatment afforded regulated investment companies, and to
generally be relieved of
14
<PAGE>
federal tax liabilities, the Fund must distribute all of its net income and
gains to Shareholders (see "General Information--Federal Tax Information")
generally on an annual basis. The Fund may have to dispose of portfolio
securities under disadvantageous circumstances to generate cash or leverage
itself by borrowing cash in order to satisfy the distribution requirement.
If, as a result of exchange controls or other foreign laws or restrictions
regarding repatriation of capital, the Fund were unable to distribute an
amount equal to substantially all of its investment company taxable income (as
determined for U.S. tax purposes) within applicable time periods, the Fund
would not qualify for the favorable federal income tax treatment afforded
regulated investment companies, or, even if it did so qualify, it might become
liable for federal taxes on undistributed income. In addition, the ability of
the Fund to obtain timely and accurate information relating to its investments
is a significant factor in complying with the requirements applicable to
regulated investment companies and in making tax-related computations. Thus,
if the Fund were unable to obtain accurate information on a timely basis, it
might be unable to qualify as a regulated investment company or its tax
computations might be subject to revisions (which could result in the
imposition of taxes, interest and penalties). See "Tax Status" in the SAI.
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. The use of leverage will
significantly increase the Fund's investment risk.
FUTURES CONTRACTS AND RELATED OPTIONS. Successful use of futures contracts
and related options is subject to special risk considerations. A liquid
secondary market for any futures or options contract may not be available when
a futures or options position is sought to be closed. In addition, there may
be an imperfect correlation between movements in the securities or foreign
currency on which the futures or options contract is based and movements in
the securities or currency in the Fund's portfolio. Successful use of futures
or options contracts is further dependent on the Investment Manager's ability
to correctly predict movements in the securities or foreign currency markets,
and no assurance can be given that its judgment will be correct. Successful
use of options on securities or indices is subject to similar risk
considerations. In addition, by writing covered call options, the Fund gives
up the opportunity, while the option is in effect, to profit from any price
increase in the underlying security above the option exercise price.
NON-DIVERSIFIED STATUS. The Fund is a "non-diversified" investment company,
which means the Fund is not limited in the proportion of its assets that may
be invested in the securities of a single issuer. However, the Fund intends to
conduct its operations so as to qualify as a "regulated investment company"
for purposes of the Internal Revenue Code of 1986, as amended (the "Code"),
which generally will relieve the Fund of any liability for Federal income tax
to the extent its earnings are distributed to Shareholders. See "General
Information -- Federal Tax Information." To so qualify, among other
requirements, the Fund will limit its investments so that, in general, at the
close of each quarter of the taxable year, (i) not more than 25% of the market
value of the Fund's total assets will be invested in the securities of a
single issuer, and (ii) with respect to 50% of the market value of its total
assets, not more than 5% of the market value of its total assets will be
invested in the securities of a single issuer and the Fund will not own more
than 10% of the outstanding voting securities of a single issuer. The Fund's
investments in U.S. Government securities and other regulated investment
companies are not subject to these limitations. Because the Fund, as a non-
diversified investment company, may invest in a smaller number of individual
issuers than a diversified investment company, and may be more susceptible to
any single economic, political or regulatory occurrence, an investment in the
Fund may present greater risk to an investor than an investment in a
diversified company.
There are further risk factors, including risks associated with mortgage-
backed securities (particularly derivative mortgage-backed securities) and
illiquid and restricted securities, which are described under "General
Description -- Investment Objectives and Policies" in this Prospectus, and
possible losses through the holding of securities in domestic and foreign
custodian banks and depositories, described under "Risk Factors" in the SAI.
15
<PAGE>
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased at the Offering Price through any broker
which has a dealer agreement with Franklin Templeton Distributors, Inc.
("FTD"), the Principal Underwriter for Shares of the Fund, or directly from
FTD upon receipt by FTD of a completed Shareholder Application and check. The
minimum initial investment is $100 and subsequent investments must be $25 or
more. These minimums may be waived when the Shares are being purchased through
retirement plans providing for regular periodic investments, as described
below under "Retirement Plans."
OFFERING PRICE. Shares of the Fund are offered at their public Offering
Price, which is determined by adding the net asset value per Share plus a
front-end sales charge, next computed (i) after the Shareholder's securities
dealer receives the order which is promptly transmitted to the Fund or (ii)
after receipt of an order by mail from the Shareholder directly in proper form
(which generally means a completed Shareholder Application accompanied by a
negotiable check).
The price to the public on purchases of the Fund's Shares made by a single
purchaser, by an individual, his or her spouse and their children under age
21, or by a single trust or fiduciary account, other than an employee benefit
plan holding Shares of the Fund on or before February 1, 1995, is the net
asset value per Share plus a sales charge not exceeding 4.25% of the Offering
Price (equivalent to 4.44% of the net asset value), which is reduced on larger
sales as shown below:
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE OF THE NET ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS/1/,/3/
----------------- --------------------- ---------------------- --------------------------
<S> <C> <C> <C>
Less than $100,000...... 4.25% 4.44% 4.00%
$100,000 but less than
$250,000............... 3.50% 3.63% 3.25%
$250,000 but less than
$500,000............... 2.75% 2.83% 2.50%
$500,000 but less than
$1,000,000............. 2.15% 2.20% 2.00%
$1,000,000 or more...... none none (see below)/2/
</TABLE>
- -------
/1/Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
/2/The following commissions will be paid by FTD, from its own resources, to
securities dealers who initiate and are responsible for purchases of $1
million or more: 1% on sales of $1 million but less than $2 million, plus
0.80% on sales of $2 million but less than $3 million, plus 0.50% on sales
of $3 million but less than $50 million, plus 0.25% on sales of $50 million
but less than $100 million, plus 0.15% on sales of $100 million or more.
Dealer concession breakpoints are reset every 12 months for purposes of
additional purchases.
/3/At the discretion of FTD, all sales charges may at times be reallowed to the
securities dealer. If 90% or more of the sales commission is reallowed, such
securities dealer may be deemed to be an underwriter as that term is defined
in the Securities Act of 1933.
No front-end sales charge applies on investments of $1 million or more, but
a contingent deferred sales charge of 1% is imposed on certain redemptions of
all or a portion of investments of $1 million or more within 12 months of the
calendar month following such investments ("contingency period"). See "How to
Sell Shares of the Fund--Contingent Deferred Sales Charge."
The size of a transaction which determines the applicable sales charge on
the purchase of Fund Shares is determined by adding the amount of the
Shareholder's current purchase plus the cost or current value (whichever is
higher) of a Shareholder's existing investment in one or more of the funds in
the Franklin Group of Funds (R) and the Templeton Family of Funds. Included
for these aggregation purposes are (i) the mutual funds in the Franklin Group
of Funds (R) except Franklin Valuemark Funds and Franklin Government
Securities Trust (the "Franklin Funds"); (ii) other investment products
underwritten by FTD or its affiliates (although certain investments may not
have the same schedule of sales charges and/or may not be subject to
reduction); and (iii) the U.S.-registered mutual funds in the Templeton Family
of Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund and Templeton Variable Products Series Fund (the "Templeton
Funds"). (Franklin Funds and Templeton Funds are collectively referred to as
the "Franklin Templeton Funds.") Sales charge reductions based upon aggregate
holdings of (i), (ii) and (iii) above ("Franklin Templeton Investments") may
be effective only after notification to FTD that the investment qualifies for
a discount.
16
<PAGE>
Other Payments to Securities Dealers. FTD, or one of its affiliates, may
make payments, from its own resources, of up to 1% of the amount purchased to
securities dealers who initiate and are responsible for purchases made at net
asset value by certain designated retirement plans (as defined below)
(excluding IRA and IRA rollovers), certain non-designated plans (as defined
below), certain trust companies and trust departments of banks and certain
retirement plans of organizations with collective retirement plan assets of
$10 million or more. See definitions under "Description of Special Net Asset
Value Purchases" below and as set forth in the SAI.
A sales charge of 4% of the Offering Price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan account which is a Shareholder in the Fund on or before
February 1, 1995. Of the 4% sales commission applicable to such purchases,
3.20% of the Offering Price will be retained by dealers.
Cumulative Quantity Discount. The schedule of reduced sales charges also may
be applied to qualifying sales on a cumulative basis. For this purpose, the
dollar amount of the sale is added to the higher of (i) the value (calculated
at the applicable Offering Price) or (ii) the purchase price, of Franklin
Templeton Investments. The cumulative quantity discount applies to Franklin
Templeton Investments owned at the time of purchase by the purchaser, his or
her spouse, and their children under age 21. In addition, the aggregate
investments of a trustee or other fiduciary account (for an account under
exclusive investment authority) may be considered in determining whether a
reduced sales charge is available, even though there may be a number of
beneficiaries of the account. For example, if the investor held Shares valued
at $90,000 (or, if valued at less than $90,000, had been purchased for
$90,000) and purchased an additional $20,000 of the Fund's Shares, the sales
charge for the $20,000 purchase would be at the rate of 3.50%. It is FTD's
policy to give investors the best sales charge rate possible; however, there
can be no assurance that an investor will receive the appropriate discount
unless, at the time of placing the purchase order, the investor or the dealer
makes a request for the discount and gives FTD sufficient information to
determine whether the purchase will qualify for the discount. On telephone
orders from dealers for the purchase of Shares to be registered in "Street
name," FTD will accept the dealer's instructions with respect to the
applicable sales charge rate to be applied. The cumulative quantity discount
may be amended or terminated at any time.
Letter of Intent. Investors may also reduce sales charges on all investments
by means of a Letter of Intent ("LOI") which expresses the investor's
intention to invest a certain amount within a 13-month period in Shares of the
Fund or any other Franklin Templeton Fund. See the Shareholder Application.
Except for certain employee benefit plans, the minimum initial investment
under an LOI is 5% of the total LOI amount. Except for Shares purchased by
certain employee benefit plans, Shares purchased with the first 5% of such
amount will be held in escrow to secure payment of the higher sales charge
applicable to the Shares actually purchased if the full amount indicated is
not purchased, and such escrowed Shares will be involuntarily redeemed to pay
the additional sales charge, if necessary. A purchase not originally made
pursuant to an LOI may be included under a subsequent LOI executed within 90
days of the purchase. Any redemptions made by Shareholders, other than by
certain employee benefit plans, during the 13-month period will be subtracted
from the amount of the purchases for purposes of determining whether the terms
of the LOI have been completed. For a further description of the LOI, see
"Purchase, Redemption and Pricing of Shares--Letter of Intent" in the SAI.
Group Purchases. An individual who is a member of a qualified group may also
purchase Shares of the Fund at the reduced sales charge applicable to the
group as a whole. The sales charge is based upon the aggregate dollar value of
Shares previously purchased and still owned by the group, plus the amount of
the current purchase. For example, if members of the group had previously
invested and still held $90,000 of Fund Shares and now were investing $10,000,
the sales charge would be 3.50%. Information concerning the current sales
charge applicable to a group may be obtained by contacting FTD.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares at a discount, and
(iii) satisfies uniform criteria which enable FTD to realize economies of
scale in its costs of distributing Shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or FTD and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to FTD, and must seek to arrange for payroll
deduction or other bulk transmission of investments to the Fund.
17
<PAGE>
If an investor selects a payroll deduction plan, subsequent investments will
be automatic and will continue until such time as the investor notifies the
Fund and the investor's employer to discontinue further investments. Due to
the varying procedures to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and the time the money reaches the Fund. The investment in the Fund
will be made at the Offering Price per Share determined on the day that both
the check and payroll deduction data are received in required form by the
Fund.
NET ASSET VALUE PURCHASES. Shares may be purchased without the imposition of
a front-end sales charge ("net asset value") or a contingent deferred sales
charge by (i) officers, trustees, directors, and full-time employees of the
Fund, any of the Franklin Templeton Funds, or of Franklin Resources, Inc. and
its subsidiaries (the "Franklin Templeton Group"), and their spouses and
family members, including any subsequent payments made by such parties after
cessation of employment; (ii) companies exchanging Shares with or selling
assets pursuant to a merger, acquisition or exchange offer; (iii) insurance
company separate accounts for pension plan contracts; (iv) accounts managed by
the Franklin Templeton Group; (v) Shareholders of Templeton Institutional
Funds, Inc. reinvesting redemption proceeds from that fund under an employee
benefit plan qualified under Section 401 of the Internal Revenue Code of 1986,
as amended (the "Code"), in Shares of the Fund; (vi) certain unit investment
trusts and unit holders of such trusts reinvesting their distributions from
the trusts in the Fund; (vii) registered securities dealers and their
affiliates, for their investment account only; and (viii) registered personnel
and employees of securities dealers, and their spouses and family members, in
accordance with the internal policies and procedures of the employing
securities dealers.
Shares of the Fund may be purchased at net asset value with the proceeds
from (i) a redemption of Shares of the Fund or Class I shares of any other
Franklin Templeton Fund which were purchased with an initial sales charge or
assessed a contingent deferred sales charge on redemption, or (ii) a dividend
or distribution paid by any of the Franklin Templeton Funds, within 365 days
after the date of the redemption or dividend or distribution. See "How to Sell
Shares of the Fund--Reinstatement Privilege."
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by investors who have, within the past 60
days, redeemed an investment in a mutual fund which is not part of the
Franklin Templeton Funds and which charged the investor a contingent deferred
sales charge upon redemption, and which has investment objectives similar to
those of the Fund.
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by broker-dealers who have entered into a
supplemental agreement with FTD, or by registered investment advisers
affiliated with such broker-dealers, on behalf of their clients who are
participating in a comprehensive fee program (also known as a wrap fee
program).
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by anyone who has taken a distribution from
an existing retirement plan already invested in the Franklin Templeton Funds
(including former participants of the Franklin Templeton Profit Sharing 401(k)
plan), to the extent of such distribution. In order to exercise this
privilege, a written order for the purchase of Shares of the Fund must be
received by Franklin Templeton Trust Company ("FTTC"), the Funds, or Franklin
Templeton Investor Services, Inc. (the "Transfer Agent") within 365 days after
the plan distribution.
Shares may also be purchased at net asset value and without the imposition
of a contingent deferred sales charge by any state, county or city, or any
instrumentality, department, authority or agency thereof which has determined
that the Fund is a legally permissible investment and which is prohibited by
applicable investment laws from paying a sales charge or commission in
connection with the purchase of shares of any registered management investment
company (an "eligible governmental authority"). SUCH INVESTORS SHOULD CONSULT
THEIR OWN LEGAL ADVISERS TO DETERMINE WHETHER AND TO WHAT EXTENT THE SHARES OF
THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM. Municipal investors
considering investment of proceeds of bond offerings into the Fund should
consult with expert counsel to determine the effect, if any, of various
payments made by the Fund or its investment manager on arbitrage rebate
calculations. If an investment by an eligible governmental authority at net
asset value is made through a
18
<PAGE>
securities dealer who has executed a dealer agreement with FTD, FTD or one of
its affiliates may make a payment, out of its own resources, to such
securities dealer in an amount not to exceed 0.25% of the amount invested.
Contact Franklin Templeton Institutional Services for additional information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES. Shares may also be
purchased at net asset value and without the imposition of a contingent
deferred sales charge by certain designated retirement plans, including
profit-sharing, pension, 401(k) and simplified employee pension plans
("designated plans"), subject to minimum requirements with respect to number
of employees or amount of purchase, which may be established by FTD.
Currently, those criteria require that the employer establishing the plan have
200 or more employees or that the amount invested or to be invested during the
subsequent 13-month period in the Fund or in any of the Franklin Templeton
Investments totals at least $1 million. Employee benefit plans not designated
above or qualified under Section 401 of the Code ("non-designated plans") may
be afforded the same privilege if they meet the above requirements as well as
the uniform criteria for qualified groups previously described under "Group
Purchases," which enable FTD to realize economies of scale in its sales
efforts and sales-related expenses.
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by trust companies and bank trust departments
for funds over which they exercise exclusive discretionary investment
authority and which are held in a fiduciary, agency, advisory, custodial or
similar capacity. Such purchases are subject to minimum requirements with
respect to amount of purchase, which may be established by FTD. Currently,
those criteria require that the amount invested or to be invested during the
subsequent 13-month period in the Fund or any of the Franklin Templeton
Investments must total at least $1 million. Orders for such accounts will be
accepted by mail accompanied by a check, or by telephone or other means of
electronic data transfer directly from the bank or trust company, with payment
by federal funds received by the close of business on the next business day
following such order.
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by trustees or other fiduciaries purchasing
securities for certain retirement plans of organizations with collective
retirement plan assets of $10 million or more, without regard to where such
assets are currently invested.
Refer to the SAI for further information regarding net asset value purchases
of Shares.
ADDITIONAL DEALER COMPENSATION. FTD, or one of its affiliates, from its own
resources, may also provide additional compensation to securities dealers in
connection with sales of Shares of the Franklin Templeton Funds. Compensation
may include financial assistance to securities dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising, sales campaigns and/or Shareholder services and programs
regarding one or more of the Franklin Templeton Funds and other dealer-
sponsored programs or events. In some instances, this compensation may be made
available only to certain securities dealers whose representatives have sold
or are expected to sell significant amounts of shares of the Franklin
Templeton Funds. Compensation may include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited
registered representatives and members of their families to locations within
or outside of the United States for meetings or seminars of a business nature.
Securities dealers may not use sales of the Fund's Shares to qualify for this
compensation to the extent such may be prohibited by the laws of any state or
any self-regulatory agency, such as the National Association of Securities
Dealers, Inc. In addition, FTD or its affiliates may make ongoing payments to
brokerage firms, financial institutions (including banks) and others to
facilitate the administration and servicing of Shareholder accounts. None of
the aforementioned additional compensation is paid for by the Fund or its
Shareholders.
Ongoing payments will be made to qualifying dealers at the annual rate of
0.25% of the average daily net asset value of Shares registered in the name of
that broker-dealer as nominee or held in a Shareholder account that designates
that broker-dealer as dealer of record. These payments are made in order to
promote selling efforts and to compensate dealers for providing certain
services, including processing purchase and redemption transactions,
establishing Shareholder accounts and providing certain information and
assistance with respect to the Fund. For purchases of Shares that are subject
to a contingent deferred sales charge, the dealer will receive ongoing
payments beginning in the thirteenth month after the date of purchase.
19
<PAGE>
PURCHASING FUND SHARES. As to telephone orders placed with FTD by dealers,
the dealer must receive the investor's order before the close of the New York
Stock Exchange ("NYSE") and transmit it to FTD by 5:00 p.m., New York time,
for the investor to receive that day's Offering Price. Payment for such orders
must be by check in U.S. currency and must be promptly submitted to FTD.
Orders mailed to FTD by dealers or individual investors are effected at the
net asset value of the Fund's Shares next computed after the purchase order
accompanied by payment has been received by FTD. Such payment must be by check
in U.S. currency drawn on a commercial bank in the U.S. and, if over $100,000,
may not be deemed to have been received until the proceeds have been collected
unless the check is certified or issued by such bank. Any subscription may be
rejected by FTD or by the Fund.
The Fund may impose a $10 charge against a Shareholder account in the event
that a check or draft submitted for the purchase of Fund Shares is returned
unpaid to the Fund.
Investors should promptly check the confirmation advice that is mailed after
each purchase (or redemption) in order to ensure that it has been accurately
recorded in the investor's account.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received at least 10 days prior to the collection date,
or by FTD upon written notice to the investor at least 30 days prior to the
collection date.
INSTITUTIONAL ACCOUNTS. Institutional investors will likely be required to
complete an institutional account application. There may be additional methods
of opening accounts, purchasing, redeeming or exchanging Shares of the Fund
available for institutional accounts. To obtain an institutional account
application or additional information regarding institutional accounts,
contact Franklin Templeton Institutional Services at 1-800-321-8563.
ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on
regular confirmation statements from the Transfer Agent.
TEMPLETON STAR SERVICE. From a touch-tone phone, Templeton and Franklin
shareholders may access an automated system (day or night) which offers the
following features:
By calling the Templeton STAR Service, shareholders may obtain current price
and yield information specific to a Templeton Fund, regardless of class, or
Franklin Class II shares; obtain account information; and request duplicate
confirmation or year-end statements and money fund checks, if applicable.
By calling the Franklin TeleFACTS System, Class I shareholders may obtain
current price, yield or other performance information specific to a Franklin
Fund; process an exchange into an identically registered Franklin account;
obtain account information; and request duplicate confirmation or year-end
statements, money fund checks, if applicable, and deposit slips.
Share prices and account information specific to Templeton Class I or II
shares and Franklin Class II shares may also be accessed on TeleFACTS by
Franklin Class I and Class II shareholders.
The Templeton STAR Service is accessible by calling 1-800-654-0123. The
TeleFACTS system is accessible by calling 1-800-247-1753. The code for the
Fund, which will be needed to access system information is 416. The system's
automated operator will prompt the caller with easy to follow step-by-step
instructions from the main menu. Other features may be added in the future.
RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which FTTC or its affiliate
acts as trustee or custodian: IRAs, Simplified Employee Pensions, 403(b)
plans, qualified plans for corporations, self-employed individuals and
partnerships, and 401(k) plans. A plan document must be adopted in order for a
retirement plan to be in
20
<PAGE>
existence. For further information about any of the plans, agreements,
applications and annual fees, contact Franklin Templeton Distributors, Inc. To
determine which retirement plan is appropriate, an investor should contact his
or her tax adviser.
NET ASSET VALUE. The net asset value per Share is determined as of the
scheduled closing time of the NYSE (generally 4:00 p.m., New York time) each
day the NYSE is open for trading, by dividing the value of the Fund's
securities plus any cash and other assets (including accrued interest and
dividends receivable) less all liabilities (including accrued expenses) by the
number of Shares outstanding, adjusted to the nearest whole cent. A security
listed or traded on a recognized stock exchange or NASDAQ is valued at its
last sale price on the principal exchange on which the security is traded. The
value of a foreign security is determined in its national currency as of the
close of trading on the foreign exchange on which it is traded or as of the
scheduled closing time of the NYSE (generally 4:00 p.m., New York time), if
that is earlier, and that value is then converted into its U.S. dollar
equivalent at the foreign exchange rate in effect at noon, New York time, on
the day the value of the foreign security is determined. If no sale is
reported at that time, the mean between the current bid and asked price is
used. Occasionally, events which affect the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the NYSE, and will therefore not be reflected in the computation
of the Fund's net asset value. If events materially affecting the value of
such securities occur during such period, then these securities will be valued
at fair value as determined by the management and approved in good faith by
the Board of Trustees. All other securities for which over-the-counter market
quotations are readily available are valued at the mean between the current
bid and asked price. Securities for which market quotations are not readily
available and other assets are valued at fair value as determined by the
management and approved in good faith by the Board of Trustees.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares for Class I shares of other Franklin
Templeton Funds which are eligible for sale in the Shareholder's state of
residence and in conformity with such fund's stated eligibility requirements
and investment minimums. Shares may not be exchanged for Class II shares of
any Franklin Templeton Funds. A contingent deferred sales charge will not be
imposed on exchanges. If the exchanged Shares were subject to a contingent
deferred sales charge in the original fund purchased, and Shares are
subsequently redeemed within 12 months following the calendar month following
the original purchase date, a contingent deferred sales charge will be
imposed. See also "How to Sell Shares of the Fund--Contingent Deferred Sales
Charge."
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. Exchanges are made on
the basis of the net asset values of the Shares involved, except as set forth
below. Exchanges of Shares which were originally purchased without a sales
charge will be charged a sales charge in accordance with the terms of the
prospectus of the fund being purchased, unless the original investment on
which no sales charge was paid was transferred in from a fund on which the
investor paid a sales charge. Exchanges of shares from the Franklin Templeton
Money Funds are subject to applicable sales charges on the funds being
purchased, unless the Franklin Templeton Money Fund shares were acquired by an
exchange from a fund having a sales charge, or by reinvestment of dividends or
capital gain distributions. Exchanges of Shares of the Fund which were
purchased with a lower sales charge to a fund which has a higher sales charge
will be charged the difference, unless
the Shares were held in the original fund for at least six months prior to
executing the exchange. All exchanges are permitted only after at least 15
days have elapsed from the date of the purchase of the Shares to be exchanged.
A Shareholder may exchange Shares by writing to the Transfer Agent (see "How
to Sell Shares of the Fund"), by contacting his or her investment dealer or--
if the Shareholder Application indicates that the Shareholder has not declined
the option--by telephoning 1-800-632-2301. Telephone exchange instructions
must be received by FTD by the scheduled closing time of the NYSE (generally
4:00 p.m., New York time). Telephonic exchanges can involve only Shares in
non-certificated form. Shares held in certificate form are not eligible, but
may be returned and qualify for these services. All accounts involved in a
telephonic exchange must have the same registration and dividend option as the
account from which the Shares are being exchanged. The Trust and the Transfer
Agent will
21
<PAGE>
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Please refer to "Telephone Transactions--Verification
Procedures." Forms for declining the telephone exchange privilege and
prospectuses of the other funds in the Franklin Templeton Group may be
obtained from FTD. Exchange redemptions and purchases are processed
simultaneously at the Share prices next determined after the exchange order is
received. (See "How to Buy Shares of the Fund--Offering Price.") A gain or
loss for tax purposes generally will be realized upon the exchange, depending
on the tax basis of the Shares redeemed.
This exchange privilege is available only in states where Shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon 60 days' written notice. A Shareholder who wishes
to make an exchange should first obtain and review a current prospectus of the
fund into which he or she wishes to exchange. Broker-dealers who process
exchange orders on behalf of their customers may charge a fee for their
services. Such fee may be avoided by making requests for exchange directly to
the Transfer Agent.
If a substantial portion of the Fund's Shareholders should, within a short
period, elect to redeem their Shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Fund to initially invest this money in short-term, interest-bearing money
market instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objective exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
The contingency period of Shares will be tolled (or stopped) for the period
such Shares are exchange into and held in a Franklin or Templeton Class I
money market fund. If an account has Shares subject to a contingent deferred
sales charge, Shares will be exchanged into the new account on a "first-in,
first-out" basis. See also "How to Sell Shares of the Fund--Contingent
Deferred Sales Charge."
TRANSFERS. Transfer between identically registered accounts in the same fund
and class are treated as non-monetary and non-taxable events, and are not
subject to a contingent deferred sales charge. The transferred Shares will
continue to age from the date of original purchase.
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ("Timing Accounts"), FTD will deduct an administrative service fee of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase Shares based upon certain predetermined market
indicators. In accordance with the terms of their respective prospectuses,
certain funds in the Franklin Templeton Group do not accept or may place
differing limitations than those described below on exchanges by Timing
Accounts.
The Fund reserve the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern
who: (i) makes an exchange request out of the Fund within two weeks of an
earlier exchange request out of the Fund; (ii) makes more than two exchanges
out of the Fund per calendar quarter; or (iii) exchanges Shares equal in value
to at least $5 million, or more than 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase Shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
In addition, the Fund reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to the Fund and therefore may be refused.
Finally, as indicated above, the Fund and FTD reserve the right to refuse
any order for the purchases of Shares.
22
<PAGE>
HOW TO SELL SHARES OF THE FUND
Shares will be redeemed, without charge, on request of the Shareholder in
"Proper Order" to the Transfer Agent. "PROPER ORDER" MEANS THAT THE REQUEST TO
REDEEM MUST MEET ALL OF THE FOLLOWING REQUIREMENTS:
1. It must be in writing, signed by the Shareholder(s) exactly in the manner
as the Shares are registered, and must specify either the number of Shares, or
the dollar amount of Shares, to be redeemed and sent to Franklin Templeton
Investor Services, Inc., P.O. Box 33030, St. Petersburg, Florida 33733-8030;
2. The signature(s) of the redeeming Shareholder(s) must be guaranteed by an
"eligible guarantor," including (a) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (b) national securities
exchanges, registered securities associations and clearing agencies; (c)
securities broker-dealers which are members of a national securities exchange
or a clearing agency or which have minimum net capital of $100,000; or (d)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature medallion program. A notarized
signature will not be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature of each of the
redeeming Shareholders must be guaranteed. A signature guarantee is not
required for redemptions of $50,000 or less, requested by and payable to all
Shareholders of record, to be sent to the address of record for that account.
However, the Fund reserves the right to require signature guarantees on all
redemptions. A signature guarantee is required in connection with any written
request for transfer of Shares. Also, a signature guarantee is required if the
Fund or the Transfer Agent believes that a signature guarantee would protect
against potential claims based on the transfer instructions, including, for
example, when (i) the current address of one or more joint owners of an
account cannot be confirmed; (ii) multiple owners have a dispute or give
inconsistent instructions to the Fund; (iii) the Fund has been notified of an
adverse claim; (iv) the instructions received by the Fund are given by an
agent, not the actual registered owner; (v) the Fund determines that joint
owners who are married to each other are separated or may be the subject of
divorce proceedings; or (vi) the authority of a representative of a
corporation, partnership, association, or other entity has not been
established to the satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
. Corporation -- (i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
. Partnership -- (i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
. Trust -- (i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust
document listing the trustee(s) or a certificate of incumbency if the
trustee(s) are not listed on the account registration;
. Custodial (other than a retirement account) -- Signature guaranteed
letter of instruction from the custodian;
. Accounts under court jurisdiction -- Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence; and
5. Redemption of Shares held in a retirement plan for which FTTC or its
affiliate acts as trustee or custodian must conform to the distribution
requirements of the plan and the Fund's redemption requirements above.
Distributions from such plans are subject to additional requirements under the
Code, and certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. For example, distributions from
retirement plans are subject to withholding requirements under the Code, and
the IRS Form W-4P (available from the Transfer Agent) may be required to be
submitted to the Transfer Agent with the distribution request, or the
distribution will be delayed. Franklin Templeton Investor Services, Inc. and
its affiliates assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws and will not be responsible
for any penalties assessed.
23
<PAGE>
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Shareholder Services Department by
calling 1-800-632-2301 or 813-823-8712.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer
Agent. A gain or loss for tax purposes generally will be realized upon the
redemption, depending on the tax basis of the Shares redeemed. Payment of the
redemption price ordinarily will be made by check (or by wire at the sole
discretion of the Transfer Agent if wire transfer is requested, including name
and address of the bank and the Shareholder's account number to which payment
of the redemption proceeds is to be wired) within seven days after receipt of
the redemption request in Proper Order. However, if Shares have been purchased
by check, the Fund will make redemption proceeds available when a
Shareholder's check received for the Shares purchased has been cleared for
payment by the Shareholder's bank, which, depending upon the location of the
Shareholder's bank, could take up to 15 days or more. The check will be mailed
by first-class mail to the Shareholder's registered address (or as otherwise
directed). Remittance by wire (to a commercial bank account in the same
name(s) as the Shares are registered) or express mail, if requested, are
subject to a handling charge of up to $15, which will be deducted from the
redemption proceeds.
The Fund, through FTD, also repurchases Shares (whether in certificate or
book-entry form) through securities dealers. The Fund normally will accept
orders to repurchase such Shares by wire or telephone from dealers for their
customers at the net asset value next computed after the dealer has received
the Shareholder's request for repurchase, if the dealer received such request
before the scheduled closing time of the NYSE (generally 4:00 p.m., New York
time) on that day. Dealers have the responsibility of submitting such
repurchase requests by calling not later than 5:00 p.m., New York time, on
such day in order to obtain that day's applicable redemption price. Repurchase
of Shares is for the convenience of Shareholders and does not involve a charge
by the Fund; however, securities dealers may impose a charge on the
Shareholder for transmitting the notice of repurchase to the Fund. The Fund
reserves the right to reject any order for repurchase, which right of
rejection might adversely affect Shareholders seeking redemption through the
repurchase procedure. Ordinarily, payment will be made to the securities
dealer within seven days after receipt of a repurchase order and Share
certificate (if any) in "Proper Order" as set forth above. The Fund also will
accept, from member firms of the NYSE, orders to repurchase Shares for which
no certificates have been issued by wire or telephone without a redemption
request signed by the Shareholder, provided the member firm indemnifies the
Fund and FTD from any liability resulting from the absence of the
Shareholder's signature. Forms for such indemnity agreement can be obtained
from FTD.
The Fund may involuntarily redeem an investor's Shares if the net asset
value of such Shares is less than $100, except that involuntary redemptions
will not result from fluctuations in the value of an investor's Shares. In
addition, the Fund may involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
such other tax-related certifications as the Fund may require. A notice of
redemption, sent by first-class mail to the investor's address of record, will
fix a date not less than 30 days after the mailing date, and Shares will be
redeemed at net asset value at the close of business on that date, unless
sufficient additional Shares are purchased to bring the aggregate account
value up to $100 or more, or unless a certified taxpayer identification number
(or such other information as the Fund has requested) has been provided, as
the case may be. A check for the redemption proceeds will be mailed to the
investor at the address of record.
REINSTATEMENT PRIVILEGE. Shares of the Fund may be purchased at net asset
value with the proceeds from (i) a redemption of Shares of the Fund or Class I
shares of any other Franklin Templeton Fund which were purchased with an
initial sales charge or assessed a contingent deferred sales charge on
redemption, or (ii) a dividend or distribution paid by any of the Franklin
Templeton Funds, within 365 days after the date of the redemption or dividend
or distribution. However, if a Shareholder's original investment was in a fund
with a lower sales charge, or no sales charge, the Shareholder must pay the
difference. An investor may reinvest an amount not exceeding the proceeds of
the redemption or the dividend or distribution. While credit will be given for
any contingent deferred sales charge paid on the Shares redeemed, a new
contingency period will begin. Matured Shares will be reinvested at net asset
value and will not be subject to a new contingent deferred sales charge.
Shares of the Fund redeemed in connection with an exchange into another fund
(see "Exchange Privilege") are not considered "redeemed" for this privilege.
In order to exercise this privilege, a written order for
24
<PAGE>
the purchase of Shares of the Fund must be received by the Fund or the Fund's
Transfer Agent within 365 days after the redemption or the payment date of the
distribution. The 365 days, however, do not begin to run on redemption
proceeds placed immediately after redemption in a Franklin Bank Certificate of
Deposit ("CD") until the CD (including any rollover) matures. Reinvestment at
net asset value may also be handled by a securities dealer or other financial
institution, who may charge the Shareholder a fee for this service. The
redemption is a taxable transaction but reinvestment without a sales charge
may affect the tax basis of the Shares reinvested, and the amount of gain or
loss resulting from a redemption may be affected by exercise of the
reinstatement privilege if the Shares redeemed were held for 90 days or less,
or if a Shareholder reinvests in the same fund within 30 days. Reinvestment
will be at the next calculated net asset value after receipt.
SYSTEMATIC WITHDRAWAL PLAN. A Shareholder may establish a Systematic
Withdrawal Plan ("Plan") and receive regular periodic payments from the
account provided that the net asset value of the Shares held by the
Shareholder is at least $5,000. There are no service charges for establishing
or maintaining a Plan. The minimum amount which the Shareholder may withdraw
is $50 per withdrawal transaction although this is merely the minimum amount
allowed under the Plan and should not be mistaken for a recommended amount.
Retirement plans subject to mandatory distribution requirements are not
subject to the $50 minimum. The Plan may be established on a monthly,
quarterly, semiannual or annual basis. If the Shareholder establishes a Plan,
any capital gain distributions and income dividends paid by the Fund to the
Shareholder's account must be reinvested for the Shareholder's account in
additional Shares at net asset value. Payments are then made from the
liquidation of Shares at net asset value on the day of the liquidation (which
is generally on or about the 25th of the month) to meet the specified
withdrawals. Payments are generally received three to five days after the date
of liquidation. By completing the "Special Payment Instructions for
Distributions" section of the Shareholder Application included with this
Prospectus, a Shareholder may direct the selected withdrawals to another of
the Franklin Templeton Funds, to another person, or directly to a checking
account. Liquidation of Shares may reduce or possibly exhaust the Shares in
the Shareholder's account, to the extent withdrawals exceed Shares earned
through dividends and distributions, particularly in the event of a market
decline. If the withdrawal amount exceeds the total Plan balance, the account
will be closed and the remaining balance will be sent to the Shareholder. As
with other redemptions, a liquidation to make a withdrawal payment is a sale
for federal income tax purposes. Because the amount withdrawn under the Plan
may be more than the Shareholder's actual yield or income, part of such a Plan
payment may be a return of the Shareholder's investment.
Maintaining a Plan concurrently with purchases of additional Shares of a
Fund would be disadvantageous because of the sales charge on the additional
purchases. Also, redemptions of Shares may be subject to a contingent deferred
sales charge if the Shares are redeemed within 12 months of the calendar month
of the original purchase date. The Shareholder should ordinarily not make
additional investments of less than $5,000 or three times the annual
withdrawals under the Plan during the time such a Plan is in effect.
With respect to Systematic Withdrawal Plans, the applicable contingent
deferred sales charge is waived for Share redemptions of up to 1% monthly of
an account's net asset value (12% annually, 6% semiannually, 3% quarterly).
For example, if an account maintained an annual balance of $1,000,000, only
$120,000 could be withdrawn through a once-yearly Systematic Withdrawal Plan
free of charge; any amount over that $120,000 would be assessed a 1% (or
applicable) contingent deferred sales charge.
A Plan may be terminated on written notice by the Shareholder or the Fund,
and it will terminate automatically if all Shares are liquidated or withdrawn
from the account, or upon the Fund's receipt of notification of the death or
incapacity of the Shareholder. Shareholders may change the amount (but not
below $50) and schedule of withdrawal payments or suspend one such payment by
giving written notice to the Transfer Agent at least seven business days prior
to the end of the month preceding a scheduled payment. Share certificates may
not be issued while a Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions -- Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions -- Verification Procedures."
25
<PAGE>
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before the scheduled closing
time of the NYSE (generally 4:00 p.m., New York time), on any business day
will be processed that same day. The redemption check will be sent within
seven days, made payable to all the registered owners on the account, and will
be sent only to the address of record. Redemption requests by telephone will
not be accepted within 30 days following an address change by telephone. In
that case, a Shareholder should follow the other redemption procedures set
forth in this Prospectus. Institutional accounts which wish to execute
redemptions in excess of $50,000 must complete an Institutional Telephone
Privileges Agreement which is available from Franklin Templeton Institutional
Services by telephoning 1-800-321-8563.
CONTINGENT DEFERRED SALES CHARGE. In order to recover commissions paid to
securities dealers on qualified investments of $1 million or more, a
contingent deferred sales charge of 1% applies to redemptions of those
investments within the contingency period of 12 months following the calendar
month of their purchase, unless one of the exceptions described below applies.
The charge is 1% of the lesser of the net asset value of the Shares redeemed
(exclusive of reinvested dividends and capital gain distributions) or the net
asset value of such Shares at the time of purchase, and is retained by FTD.
The contingent deferred sales charge is waived in certain instances.
In determining if a contingent deferred sales charge applies, Shares not
subject to a contingent deferred sales charge are deemed to be redeemed first,
in the following order: (i) a calculated number of Shares representing amounts
attributable to capital appreciation of those Shares held less than the
contingency period of 12 months; (ii) Shares purchased with reinvested
dividends and capital gain distributions; and (iii) other Shares held longer
than the contingency period, and followed by any Shares held less than the
contingency period, on a "first in, first out" basis. For tax purposes, a
contingent deferred sales charge is treated as either a reduction in
redemption proceeds or an adjustment to the cost basis of the Shares redeemed.
The contingent deferred sales charge is waived, as applicable, for:
exchanges; any account fees; distributions to participants or beneficiaries in
FTTC individual retirement plan accounts due to death, disability or
attainment of age 59 1/2; tax-free returns of excess contributions from
employee benefit plans; distributions from employee benefit plans, including
those due to plan termination or plan transfer; redemptions through a
Systematic Withdrawal Plan of up to 1% monthly of an account's net asset value
(3% quarterly, 6% semiannually or 12% annually); redemptions initiated by the
Fund due to a Shareholder's account falling below the minimum specified
account size; and redemptions following the death of the Shareholder or the
beneficial owner.
All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Requests for redemptions for a SPECIFIED DOLLAR amount, unless otherwise
specified, will result in additional Shares being redeemed to cover any
applicable contingent deferred sales charge, while requests for redemption of
a SPECIFIC NUMBER of Shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their investment representative of record, if
any, may be able to execute various transactions by calling Shareholder
Services at 1-800-632-2301.
All Shareholders will be able to: (i) effect a change in address,
(ii) change a dividend option (see "Restricted Accounts" below),
(iii) transfer Fund Shares in one account to another identically registered
account in the Fund, (iv) request the issuance of certificates (to be sent to
the address of record only) and (v) exchange Fund Shares by telephone as
described in this Prospectus. In addition, Shareholders who complete and file
an Agreement as described under "How to Sell Shares of the Fund--Redemptions
by Telephone" will be able to redeem Shares of the Fund.
26
<PAGE>
VERIFICATION PROCEDURES. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent
at the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So
long as the Fund and the Transfer Agent follow instructions communicated by
telephone which were reasonably believed to be genuine at the time of their
receipt, neither they nor their affiliates will be liable for any loss to the
Shareholder caused by an unauthorized transaction. The Fund and the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions in the event such reasonable procedures are not followed.
Shareholders are, of course, under no obligation to apply for or accept
telephone transaction privileges. In any instance where the Fund or the
Transfer Agent is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed, and
neither the Fund, the Transfer Agent, nor their affiliates will be liable for
any losses which may occur because of a delay in implementing a transaction.
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on Franklin Templeton retirement accounts. To assure
compliance with all applicable regulations, special forms are required for any
distribution, redemption, or dividend payment. While the telephone exchange
privilege is extended to Franklin Templeton IRA and 403(b) retirement
accounts, certain restrictions may apply to other types of retirement plans.
Changes to dividend options must also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, retirement account shareholders may call to
speak to a Retirement Plan Specialist at 1-800/527-2020 for Franklin accounts,
or 1-800/354-9191 (press "2" when prompted to do so) for Templeton accounts.
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be difficult to
execute because of heavy telephone volume. In such situations, Shareholders
may wish to contact their registered dealer for assistance, or to send written
instructions to the Fund as detailed elsewhere in this Prospectus.
Neither the Fund nor the Transfer Agent will be liable for any losses
resulting from the inability of a Shareholder to execute a telephone
transaction. The telephone transaction privilege may be modified or
discontinued by the Fund at any time upon 60 days' written notice to
Shareholders.
MANAGEMENT OF THE FUND
The Trust is managed by its Board of Trustees and all powers of the Trust
are exercised by or under authority of the Board. Information relating to the
Trustees and executive officers is set forth under the heading "Management of
the Trust" in the SAI.
INVESTMENT MANAGER AND SUB-ADVISER. The Investment Manager of the Fund is
Templeton Global Bond Managers, a division of Templeton Investment Counsel,
Inc., a Florida corporation with offices at Broward Financial Centre, Ft.
Lauderdale, Florida 33394-3091. The Investment Manager manages the investment
and reinvestment of the Fund's assets. The Investment Manager does not furnish
any other services or facilities for the Fund, although such expenses are paid
by some investment advisers of other investment companies. As compensation for
its services, the Fund pays the Investment Manager a monthly fee, equal on an
annual basis to 0.60% of its average daily net assets during the year. The
Fund also pays its own operating expenses, including: (1) its pro rata portion
of the fees and expenses of the Trust's disinterested Trustees; (2) interest
expenses; (3) taxes and governmental fees; (4) brokerage commissions and other
expenses incurred in acquiring or disposing of portfolio securities; (5) the
expenses of registering and qualifying its Shares for sale with the SEC and
with various state securities commissions; (6) expenses of its independent
public accountants and legal counsel; (7) insurance premiums; (8) fees and
expenses of the Custodian and Transfer Agent and any related services; (9)
expenses of obtaining quotations of portfolio securities and of pricing
Shares; (10) its pro rata portion of the expenses of maintaining the Trust's
legal existence and of Shareholders' meetings; (11) expenses of preparation
and distribution to existing Shareholders of periodic reports, proxy materials
and prospectuses; (12) payments made pursuant to the Fund's Distribution Plan
(see "Plan of Distribution"); and (13) fees and expenses of membership in
industry organizations.
27
<PAGE>
The Investment Manager has entered into a sub-advisory agreement with
Franklin Advisers, Inc. (the "Sub-Adviser"), a California corporation with
offices at 777 Mariners Island Boulevard, San Mateo, California 94403-7777,
pursuant to which the Sub-Adviser provides the Investment Manager with
investment advisory assistance and portfolio management advice with regard to
the Fund's investments in securities of U.S. issuers. For its services, the
Investment Manager pays the Sub-Adviser a monthly fee at an annual rate of
0.25% of the Fund's average daily net assets.
The Investment Manager and the Sub-Adviser are indirect wholly owned
subsidiaries of Franklin Resources, Inc. ("Franklin"). Through its
subsidiaries, Franklin is engaged in various aspects of the financial services
industry. The Investment Manager, the Sub-Adviser and their affiliates serve
as advisers for a wide variety of public investment mutual funds and private
clients in many nations. The Templeton organization has been investing
globally over the past 52 years and, with its affiliates, provides investment
management and advisory services to a worldwide client base, including over
4.3 million mutual fund shareholders, foundations, endowments, employee
benefit plans and individuals. The Investment Manager and its affiliates have
approximately 4,100 employees in the United States, Australia, Scotland,
Germany, Hong Kong, Luxembourg, Bahamas, Singapore, Canada and Russia.
The Investment Manager uses a disciplined, long-term approach to global and
international investing. It has an extensive global network of investment
research sources. Securities are selected for the Fund's portfolio on the
basis of fundamental company-by-company analysis. Many different selection
methods are used for different funds and clients and these methods are changed
and improved by the Investment Manager's research on superior selection
methods.
The lead portfolio manager for the Fund is Thomas W. Wilkinson, a Vice
President of the Investment Manager. Prior to joining the Templeton
organization in 1985 as Director of Information Services and later as a
securities analyst, Mr. Wilkinson helped optimize network utilization for Bell
Laboratories. Douglas R. Lempereur exercises secondary portfolio management
responsibilities with respect to the Fund. Mr. Lempereur, senior Vice
president of the Investment Manager, joined the Templeton organization in
1988. Prior to joining the Templeton organization he was a securities analyst
for Colonial Management Association.
BUSINESS MANAGER. Templeton Global Investors, Inc. provides certain
administrative facilities and services for the Fund, including payment of
salaries of officers, preparation and maintenance of books and records,
preparation of tax returns and financial reports, monitoring compliance with
regulatory requirements and monitoring tax-deferred retirement plans. For its
services, the Fund pays the Business Manager a fee equivalent on an annual
basis to 0.15% of the combined average daily net assets of the funds included
in the Trust (the Fund, Templeton Growth and Income Fund, Templeton Greater
European Fund, Templeton Latin America Fund, and Templeton Global
Infrastructure Fund) reduced to 0.135% of such combined assets in excess of
$200 million, to 0.10% of such assets in excess of $700 million, and to 0.075%
of such assets in excess of $1,200 million.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
PLAN OF DISTRIBUTION. A Plan of Distribution has been approved for the Fund
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Any portion of Rule
12b-1 fees remaining from the Plan after distribution to securities dealers of
up to the maximum amount permitted under the Plan may be used by the Fund to
reimburse FTD for routine ongoing promotion and distribution expenses incurred
with respect to the Fund. Such expenses may include, but are not limited to,
the printing of prospectuses and reports used for sales purposes, expenses of
preparing and distributing sales literature and related expenses,
advertisements, and other distribution-related expenses, including a prorated
portion of FTD's overhead expenses attributable to the distribution of Fund
Shares, as well as any distribution or service fees paid to securities dealers
or their firms or others who have executed a servicing agreement with the
Fund, FTD or its affiliates.
28
<PAGE>
The maximum amount which the Fund may pay to FTD or others under the Plan
for such distribution expenses is 0.35% per annum of average daily net assets,
payable on a quarterly basis. All expenses of distribution and marketing in
excess of 0.35% per annum will be borne by FTD, or others who have incurred
them, without reimbursement from the Fund. Under the Plan, costs and expenses
not reimbursed in any one given quarter (including costs and expenses not
reimbursed because they exceed the applicable limit under the Plan) may be
reimbursed in subsequent quarters or years, subject to applicable law. FTD has
informed the Fund that the costs and expenses that may be reimbursable in
future quarters or years were $3,617 (0.12% of its net assets) at March 31,
1995.
The Plan also covers any payments to or by the Fund, the Investment Manager,
FTD, or other parties on behalf of the Fund, the Investment Manager or FTD, to
the extent such payments are deemed to be for the financing of any activity
primarily intended to result in the sale of Shares issued by the Fund within
the context of Rule 12b-1. The payments under the Plan are included in the
maximum operating expenses which may be borne by the Fund. For more
information, including a discussion of the Board's policies with regard to the
amount of the Plan's fees, please see the SAI.
BROKERAGE COMMISSIONS. The Fund's brokerage policies are described under the
heading "Brokerage Allocation" in the SAI. The Fund's brokerage policies
provide that the receipt of research services from a broker and the sale of
Shares by a broker are factors which may be taken into account in allocating
securities transactions, so long as the prices and execution provided by the
broker equal the best available within the scope of the Fund's brokerage
policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The capitalization of the Trust
consists of an unlimited number of Shares of beneficial interest, par value
$0.01 per Share. The Board of Trustees is authorized, in its discretion, to
classify and allocate the unissued Shares of the Trust in an unlimited number
of separate series and may in the future divide existing series into two or
more classes. Each Share entitles the holder to one vote.
Shares for an initial investment, as well as subsequent investments,
including the reinvestment of dividends and capital gain distributions, are
generally credited to an account in the name of an investor on the books of
the Fund, without the issuance of a share certificate. Maintaining Shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss
or theft of a share certificate. No charge is made for the issuance of one
certificate for all or some of the Shares purchased in a single order. A lost,
stolen or destroyed certificate cannot be replaced without obtaining a
sufficient indemnity bond. The cost of such a bond, which is generally borne
by the Shareholder, can be 2% or more of the value of the lost, stolen or
destroyed certificate. A certificate will be issued if requested by the
Shareholder or by the securities dealer.
MEETINGS OF SHAREHOLDERS. The Trust is not required to hold annual meetings
of Shareholders and may elect not to do so. The Trust will call a special
meeting of Shareholders for the purpose of considering the removal of a person
serving as Trustee if requested in writing to do so by the holders of not less
than 10% of the Trust's outstanding Shares. The Trust is required to assist
Shareholder communications in connection with the calling of Shareholder
meetings to consider removal of a Trustee or Trustees.
DIVIDENDS AND DISTRIBUTIONS. The Fund intends normally to pay a monthly
dividend representing substantially all of its net investment income and to
distribute at least annually any net realized capital gains. Income dividends
and capital gain distributions paid by the Fund, other than on those Shares
whose owners keep them registered in the name of a broker-dealer, are
automatically reinvested on the payment date in whole or fractional Shares of
the Fund at net asset value as of the ex-dividend date, unless a Shareholder
makes a written or telephonic request for payments in cash. The processing
date for the reinvestment of dividends may vary from month to month, and does
not affect the amount or value of the Shares acquired. Income dividends and
capital gain distributions will be paid in cash on Shares during the time
their owners keep them registered in the name of a broker-dealer, unless the
broker-dealer has made arrangements with the Transfer Agent for reinvestment.
29
<PAGE>
Prior to purchasing Shares of the Fund, the impact of dividends or capital
gain distributions which have been declared but not yet paid should be
carefully considered. Any dividend or capital gain distribution paid shortly
after a purchase by a Shareholder prior to the record date will have the
effect of reducing the per Share net asset value of the Shares by the amount
of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, generally will be
subject to tax.
Checks are forwarded by first-class mail to the address of record. The
proceeds of any such checks which are not accepted by the addressee and
returned to the Fund will be reinvested in the Shareholder's account in whole
or fractional Shares at the net asset value next computed after the check has
been received by the Transfer Agent. Subsequent distributions automatically
will be reinvested at net asset value as of the ex-dividend date in additional
whole or fractional Shares.
FEDERAL TAX INFORMATION. The Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. See the SAI for a summary of requirements that must be satisfied to so
qualify. A regulated investment company generally is not subject to federal
income tax on income and gains distributed in a timely manner to its
shareholders. The Fund intends to distribute to Shareholders substantially all
of its net investment income and realized capital gains, which generally will
be taxable income or capital gains in their hands. Distributions declared in
October, November or December to Shareholders of record on a date in such
month and paid during the following January will be treated as having been
received by Shareholders on December 31 in the year such distributions were
declared. The Fund will inform Shareholders each year of the amount and nature
of such income or gains. Sales or other dispositions of Fund Shares generally
will give rise to taxable gain or loss. A more detailed description of tax
consequences to Shareholders is contained in the SAI under the heading "Tax
Status."
The Fund may be required to withhold Federal income tax at the rate of 31%
of all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholder's federal income tax liability.
INQUIRIES. Shareholders' inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., P.O. Box 33030, St.
Petersburg, Florida 33733-8030 -- telephone 1-800-632-2301 or 813-823-8712.
Transcripts of Shareholder accounts less than three-years old are provided on
request without charge; requests for transcripts going back more than three
years from the date the request is received by the Transfer Agent are subject
to a fee of up to $15 per account.
PERFORMANCE INFORMATION. The Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over
a period of 1, 5 and 10 years (or up to the life of the Fund), will reflect
the deduction of the maximum initial sales charge and deduction of a
proportional share of Fund expenses (on an annual basis), and will assume that
all dividends and distributions are reinvested when paid. Total return may be
expressed in terms of the cumulative value of an investment in the Fund at the
end of a defined period of time. For a description of the methods used to
determine total return for the Fund, see the SAI.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on March 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semiannual
reports (containing unaudited financial statements) are sent to Shareholders
each year. Additional copies may be obtained, without charge, upon request to
the Fund Information Department. The Fund also sends to each Shareholder a
confirmation statement after every transaction that affects the Shareholder's
account and a year-end historical confirmation statement.
30
<PAGE>
APPENDIX
BOND RATINGS
Bonds rated Aa by Moody's Investors Service, Inc. ("Moody's") are judged by
Moody's to be of high quality by all standards. Together with bonds rated Aaa
(Moody's highest rating), they comprise what are generally known as high-grade
bonds. Aa bonds are rated lower than Aaa bonds because margins of protection
may not be as large as those of Aaa bonds, or fluctuations of protective
elements may be of greater amplitude, or there may be other elements present
which make the long-term risks appear somewhat larger than those applicable to
Aaa securities. Bonds which are rated A by Moody's possess many favorable
investment attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Moody's Baa rated bonds are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payment and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements because
their future cannot be considered as well assured. Uncertainty of position
characterizes bonds in this class, because the protection of interest and
principal payments often may be very moderate and not well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period of time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds rated AAA by Standard & Poor's Corporation ("S&P") are considered by
S&P to be the highest grade obligations and possess the ultimate degree of
protection as to principal and interest. Bonds rated AA are judged by S&P to
be high-grade obligations and in the majority of instances differ only in
small degree from issues rated AAA (S&P's highest rating). Bonds rated A by
S&P have a strong capacity to pay principal and interest, although they are
somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions.
S&P's BBB rated bonds, or medium-grade category bonds, are between sound
obligations and those where the speculative elements begin to predominate.
Although these bonds have adequate asset coverage and normally are protected
by satisfactory earnings, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and principal.
Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and
principal in accordance with the terms of the obligation. While such bonds may
have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
31
<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service ("IRS").
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number ("SSN/TIN"), you must obtain Form SS-5 or Form SS-4 from
your local Social Security or IRS office and apply for one. If you have
checked the "Awaiting TIN" box and signed the certification, withholding will
apply to payments relating to your account unless you provide a certified TIN
within 60 days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- -----------------------------------------------------------------------------------
. Joint Actual owner of . Corporation, Corporation,
Individual account, or if Partnership, or Partnership, or other
combined funds, the other organization organization
first-named
individual
- -----------------------------------------------------------------------------------
. Unif. Minor . Broker nominee Broker nominee
Gift/Transfer
to Minor
- -----------------------------------------------------------------------------------
. Sole Owner of business
Proprietor
- -----------------------------------------------------------------------------------
. Legal Ward, Minor, or
Guardian Incompetent
- -----------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient"
box if you are an exempt recipient. Exempt recipients generally include:
A corporation A real estate investment trust
A financial institution A common trust fund operated by a bank
under section 584(a)
An organization exempt from tax An entity registered at all times
under section 501(a), or an under the Investment Company
individual retirement plan Act of 1940
A registered dealer in securities or
commodities registered in the U.S.
or a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith.
If you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
"Exempt Foreign Person" if you are not (1) a citizen or resident of the U.S.,
or (2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an "Exempt Foreign Person" is one who has been physically present
in the U.S. for less than 31 days during the current calendar year. An
individual who is physically present in the U.S. for at least 31 days during
the current calendar year will still be treated as an "Exempt Foreign Person,"
provided that the total number of days physically present in the current
calendar year and the two preceding calendar years does not equal or exceed
183 days (counting all of the days in the current calendar year, only one-
third of the days in the first preceding calendar year and only one-sixth of
the days in the second preceding calendar year). In addition, lawful permanent
residents or green card holders may not be treated as "Exempt Foreign
Persons." If you are an individual or an entity, you must not now be, or at
this time expect to be, engaged in a U.S. trade or business with respect to
which any gain derived from transactions effected by the Fund/Payer during the
calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that
(1) the taxpayer identification number you have given is correct, and (2) the
IRS has not notified you that you are subject to backup withholding because
you failed to report certain interest or dividend income. You may use Form W-
9, "Payer's Request for Taxpayer Identification Number and Certification," to
make these certifications. If an account is no longer active, you do not have
to notify a Fund/Payer or broker of your change in status unless you also have
another account with the same Fund/Payer that is still active. If you receive
interest from more than one Fund/Payer or have dealings with more than one
broker or barter exchange, file a certificate with each. If you have more than
one account with the same Fund/Payer, the Fund/Payer may require you to file a
separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated
as having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for
three calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
32
<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly
elected _________________________________ of __________________________________
TITLE CORPORATE NAME
a ______________________ organized under the laws of the State of ____________
TYPE OF ORGANIZATION STATE
and that the following is a true and correct copy of a resolution adopted by
the Board of Directors at a meeting duly called and held on __________________
DATE
RESOLVED, that the _________________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds(R) or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED, that any of the following _____ officers are authorized to
NUMBER
sign any share assignment on behalf of this Corporation or Association and to
take any other actions as may be necessary to sell or redeem its shares in
the Funds or to sign checks or drafts withdrawing funds from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary.)
- -------------------------------------- --------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- --------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- --------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- --------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- --------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes ________________________________________________________
NAME AND TITLE
CORPORATE SEAL (if appropriate)
33
<PAGE>
THE FRANKLIN TEMPLETON TELEPHONE REDEMPTION AUTHORIZATION AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
Shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Fund's Prospectus.
The telephone redemption privilege is available only to Shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges automatically available to Franklin
Templeton Fund shareholders, please sign and return this authorization to
Franklin Templeton Investor Services, Inc. ("Services"), transfer agent and
shareholder servicing agent for the Franklin Templeton Funds.
SHAREHOLDER AUTHORIZATION: I/We request the telephone redemption privilege
under the terms described below and in the prospectus for each investment
company in the Franklin Templeton Group of Funds (a "Franklin Templeton Fund"
or a "Fund"), now opened or opened at a later date, holding shares registered
as follows:
- ------------------------------------- ---------------------------------------
PRINT NAME(S) AS SHOWN IN YOUR
ACCOUNT REGISTRATION ("SHAREHOLDER")
- ------------------------------------- ---------------------------------------
ACCOUNT NUMBER(S)
I/We authorize each Fund and Services to honor and act upon telephone requests
given as provided in this agreement to redeem shares from any
Shareholder account:
- ------------------------------------- ---------------------------------------
SIGNATURE(S) AND DATE
- ------------------------------------- ---------------------------------------
PRINT NAME(S) (AND TITLE/CAPACITY,
IF APPLICABLE)
VERIFICATION PROCEDURES: I/We understand and agree that: (1) each Fund and
Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Services may be liable
for any losses due to unauthorized or fraudulent telephone instructions; (2)
the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the
time of the call for the purpose of establishing the caller's identification,
and the sending of confirmation statements to the address of record each time
a redemption is initiated by telephone; and (3) so long as the Fund and
Services follow the confirmation procedures in acting on instructions
communicated by telephone which were reasonably believed to be genuine at the
time of receipt, neither they, nor their parent or affiliates, will be liable
for any loss, damages or expenses caused by an unauthorized or fraudulent
redemption request.
JOINTLY OWNED/CO-TRUSTEE ACCOUNTS: Each of us signing this agreement as either
joint owners or co-trustees authorizes each Fund and Services to honor
telephone redemption requests given by ANY ONE of the signers, or our
investment representative of record, if any, ACTING ALONE.
APPOINTMENT OF ATTORNEY-IN-FACT: In order to issue telephone redemption
requests acting alone, each of us individually makes the following
appointment: I hereby appoint the other joint owner(s)/co-trustee(s) as my
agent(s) (attorney[s]-in-fact) with full power and authority to individually
act for me in any lawful way with respect to the issuance of instructions to a
Fund or Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it
is revoked by either written notice from any one of us delivered to a Fund or
Services by registered mail, return receipt requested or by a Fund or Services
upon receipt of any information that causes a Fund or Services to believe in
good faith that there is or that there may be a dispute among any of us with
respect to the Franklin Templeton Fund account(s) covered by this agreement.
Each of us agrees to notify the Fund or Services immediately upon the death of
any of the signers.
CORPORATE/PARTNERSHIP/TRUST/RETIREMENT ACCOUNTS: The Shareholder and each of
us signing this agreement on behalf of the Shareholder represent and warrant
to each Franklin Templeton Fund and Services that the Shareholder has the
authority to enter into this agreement and that each of us is duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Services may honor a telephone redemption request given by ANY
officer/partner/member/administrator/or agent of the Shareholder ACTING ALONE.
RESTRICTED ACCOUNTS: Telephone redemptions may not be accepted on Franklin
Templeton Trust Company or Templeton Funds Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin Templeton Investor Services, Inc., Attn.: Telephone Redemptions
Dept., P.O. Box 33030, St. Petersburg, Florida 33733-8030.
34
<PAGE>
The Franklin Templeton Group
Literature Request -- Call today for a free descriptive brochure and
prospectus on any of the funds listed below. The prospectus contains more
complete information, including fees, charges and expenses, and should be read
carefully before investing or sending money.
<TABLE>
<S> <C> <C>
TEMPLETON FUNDS Maryland FRANKLIN FUNDS SEEKING
American Trust Massachusetts*** HIGH CURRENT INCOME
Americas Government Securities Fund Michigan*** AGE High Income Fund
Developing Markets Trust Minnesota*** German Government Bond Fund
Foreign Fund Missouri Global Government Income Fund
Global Infrastructure Fund New Jersey Investment Grade Income Fund
Global Opportunities Trust New York* U.S. Government Securities Fund
Greater European Fund North Carolina
Growth Fund Ohio*** FRANKLIN FUNDS SEEKING HIGH CURRENT
Growth and Income Fund Oregon INCOME AND STABILITY OF PRINCIPAL
Income Fund Pennsylvania Adjustable Rate Securities Fund
Japan Fund Tennessee** Adjustable U.S. Government Securities Fund
Latin America Fund Texas Short-Intermediate U.S. Government Securities Fund
Money Fund Virginia
Real Estate Securities Fund Washington** FRANKLIN FUNDS FOR NON-U.S. INVESTORS
Smaller Companies Growth Fund Tax-Advantaged High Yield Securities Fund
World Fund FRANKLIN FUNDS Tax-Advantaged International Bond Fund
SEEKING CAPITAL GROWTH Tax-Advantaged U.S. Government Securities Fund
FRANKLIN FUNDS California Growth Fund
SEEKING TAX-FREE INCOME DynaTech Fund FRANKLIN TEMPLETON INTERNATIONAL
Federal Intermediate Term Equity Fund CURRENCY FUNDS
Tax-Free Income Fund Global Health Care Fund Global Currency Fund
Federal Tax-Free Income Fund Gold Fund Hard Currency Fund
High Yield Tax-Free Income Fund Growth Fund High Income Currency Fund
Insured Tax-Free Income Fund*** International Equity Fund
Puerto Rico Tax-Free Income Fund Pacific Growth Fund FRANKLIN MONEY MARKET FUNDS
Real Estate Securities Fund California Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS Small Cap Growth Fund Federal Money Fund
SEEKING TAX-FREE INCOME IFT U.S. Treasury Money Market Portfolio
Alabama FRANKLIN FUNDS SEEKING Money Fund
Arizona* GROWTH AND INCOME New York Tax-Exempt Money Fund
Arkansas** Balance Sheet Investment Fund Tax-Exempt Money Fund
California* Convertible Securities Fund
Colorado Equity Income Fund FRANKLIN FUND FOR CORPORATIONS
Connecticut Global Utilities Fund Corporate Qualified Dividend Fund
Florida* Income Fund
Georgia Premier Return Fund FRANKLIN TEMPLETON VARIABLE ANNUITIES
Hawaii** Rising Dividends Fund Franklin Valuemark
Indiana Strategic Income Fund Franklin Templeton Valuemark Income
Kentucky Utilities Fund Plus (an immediate annuity)
Louisiana
</TABLE>
Toll-free 1-800-DIAL BEN (1-800-342-5236)
* Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
35
<PAGE>
- ---------------------------
TEMPLETON AMERICAS
GOVERNMENT SECURITIES FUND
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Shareholder Services
1-800-632-2301
Fund Information
1-800/DIAL BEN
Institutional Services
1-800-321-8563
This Prospectus is not
an offering of the
securities herein
described in any state
in which the offering
is not authorized. No
sales representative,
dealer, or other person
is authorized to give
any information or make
any representations
other than those
contained in this
Prospectus. Further
information may be
obtained from the
Principal Underwriter.
- ---------------------------
[RECYCLED
PAPER LOGO TL416 P 07/95
APPEARS
HERE]
TEMPLETON
AMERICAS
GOVERNMENT
SECURITIES
FUND
Prospectus
July 10, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
<PAGE>
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
Mail to: FRANKLIN TEMPLETON DISTRIBUTORS, INC.
P.O. Box 33031 St. Petersburg, Florida 33733-8031 (800) 393-3001
Please do not use this form for any Retirement Plan for which Franklin Templeton
Trust Company serves as custodian or trustee, or for Templeton Money Fund,
Templeton Institutional Funds or Templeton Capital Accumulator Fund. Request
separate Applications and/or Prospectuses.
- --------------------------------------------------------------------------------
SHAREHOLDER APPLICATION OR REVISION
[_] Please check the box if this is a revision and see Section 8
- --------------------------------------------------------------------------------
Please check Class I or Class II, if applicable, next to your Fund selection.
Class I and Class II shares have different sales charges and operating expenses,
among other differences, as described in each Fund's prospectus.
Date __________________
<TABLE>
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C> <C>
[_] [_]$______ AMERICAN TRUST [_] [_]$______ GLOBAL OPPORTUNITIES TRUST
[_] ______ AMERICAS GOVERNMENT SECURITIES FUND [_] [_] ______ GREATER EUROPEAN FUND
[_] [_] ______ DEVELOPING MARKETS TRUST [_] [_] ______ GROWTH FUND
[_] [_] ______ FOREIGN FUND [_] [_] ______ GROWTH AND INCOME FUND
[_] [_] ______ GLOBAL INFRASTRUCTURE FUND [_] [_] ______ INCOME FUND
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C>
[_] $______ JAPAN FUND [_] [_] OTHER: $___________
[_] [_] ______ LATIN AMERICA FUND (Except for Class II Money Fund)
[_] [_] ______ REAL ESTATE SECURITIES FUND _______________________________
[_] [_] ______ SMALLER COMPANIES GROWTH FUND _______________________________
[_] [_] ______ WORLD FUND _______________________________
</TABLE>
- --------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION (PLEASE PRINT)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
__________________________________________________ ________-________-__________
First Name Middle Initial Last Name Social Security Number (SSN)
__________________________________________________ ________-________-__________
Joint Owner(s) (Joint ownership means "Joint Social Security Number (SSN)
Tenants With Rights of Survivorship" unless
otherwise specified) All owners must sign Section 4.
- --------------------------------------------------------------------------------
[_] GIFT/TRANSFER TO A MINOR
_______________________________ As Custodian For________________________________
Name of Custodian (one only) Minor's Name (one only)
_____________Uniform Gifts/Transfers to Minors Act________-________-____________
State of Residence Minor's Social Security Number
Please Note: Custodian's Signature, not Minor's, is required in Section 4.
- --------------------------------------------------------------------------------
[_] TRUST, CORPORATION, PARTNERSHIP, RETIREMENT PLAN, OR OTHER ENTITY
__________________________________________ ____________-_______________________
Name Taxpayer Identification Number (TIN)
__________________________________________ ____________________________________
Name of Beneficiary (if to be included in Date of Trust Document (must be
the Registration) completed for registration)
________________________________________________________________________________
Name of Each Trustee (if to be included in the Registration)
- --------------------------------------------------------------------------------
2 ADDRESS
- --------------------------------------------------------------------------------
___________________________________________ Daytime Phone (___)________________
Street Address Area Code
____________________________________-______ Evening Phone (___)________________
City State Zip Code Area Code
I am a Citizen of: [_] U.S. or [_]______________________________
Country of Residence
- --------------------------------------------------------------------------------
3 INITIAL INVESTMENT ($100 minimum initial investment)
- --------------------------------------------------------------------------------
Check(s) enclosed for $___________________ . (Payable to Franklin Templeton
Distributors, Inc. or the Fund(s)
indicated above.)
- --------------------------------------------------------------------------------
4 SIGNATURE AND TAX CERTIFICATIONS
(All registered owners must sign application)
- --------------------------------------------------------------------------------
See "Important Notice Regarding Taxpayer IRS Certifications" in back of
prospectus. The Fund reserves the right to refuse to open an account without
either a certified Taxpayer Identification Number ("TIN") or a certification of
foreign status. Failure to provide tax certifications in this section may result
in backup withholding on payments relating to your account and/or in your
inability to qualify for treaty withholding rates.
I am(We are) not subject to backup withholding because I(we) have not been
notified by the IRS that I am(we are) subject to backup withholding as a result
of a failure to report all interest or dividends or because the IRS has notified
me(us) that I am(we are) no longer subject to backup withholding. (If you are
currently subject to backup withholding as a result of a failure to report all
interest or dividends, please cross out the preceding statement.)
[_] The number shown above is my(our) correct TIN, or that of the Minor named in
Section 1.
[_] AWAITING TIN. I am(We are) waiting for a number to be issued to me(us).
I(We) understand that if I(we) do not provide a TIN to the Fund within 60
days, the Fund is required to commence 31% backup withholding until I(we)
provide a certified TIN.
[_] EXEMPT RECIPIENT. Individuals cannot be exempt. Check this box only after
reading the instructions to see whether you qualify as an exempt recipient.
(You should still provide a TIN.)
[_] EXEMPT FOREIGN PERSON. Check this box only if the following statement
applies: "I am(we are) neither a citizen nor a resident of the United
States. I(we) certify to the best of my(our) knowledge and belief, I(we)
qualify as an exempt foreign person and/or entity as described in the
instructions."
Permanent address for tax purposes:
________________________________________________________________________________
Street Address City State Country Postal Code
PLEASE NOTE: The IRS only allows one TIN to be listed on an account. On joint
accounts, it is preferred that the primary account owner (or person listed first
on the account) list his/her number as requested above.
CERTIFICATION - Under the penalties of perjury, I(we) certify that (1) the
information provided on this application is true, correct and complete, (2)
I(we) have read the prospectus(es) for the Fund(s) in which I am(we are)
investing and agree to the terms thereof, and (3) I am(we are) of legal age or
an emancipated minor. I (we) acknowledge that Shares of the Fund(s) are not
insured or guaranteed by any agency or institution and that an investment in the
Shares involves risks, including the possible loss of principal.
X X
- ---------------------------------------- ---------------------------------------
Signature Signature
X X
- ---------------------------------------- ---------------------------------------
- --------------------------------------------------------------------------------
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
- --------------------------------------------------------------------------------
-----------------------
We hereby submit this application for the purchase of Templeton Dealer Number
shares of the Fund indicated above in accordance with
the terms of our selling agreement with Franklin -----------------------
Templeton Distributors, Inc. ("FTD"), and with the
Prospectus for the Fund. We agree to notify FTD of any
purchases of Class I shares which may be eligible for
reduced or eliminated sales charges.
-----------------------------------------------------------------------------
WIRE ORDER ONLY: The attached check for $_______ should be applied against
Wire Order
Confirmation Number ___________ Dated___________ For__________ Shares
-----------------------------------------------------------------------------
Securities Dealer Name__________________________________________________________
Main Office Address________________ Main Office Telephone Number (___)__________
Branch Number________ Representative Number ________ Representative Name________
Branch Address_________________________ Branch Telephone Number (___)___________
Authorized Signature, Securities Dealer______________________ Title_____________
- --------------------------------------------------------------------------------
ACCEPTED: Franklin Templeton Distributors, Inc. By___________ Date______________
- --------------------------------------------------------------------------------
Please see reverse side for Shareholder Account Privileges:
[_] Distribution Options [_] Special Instructions for Distributions
[_] Systematic Withdrawal Plan [_] Automatic Investment Plan
[_] Telephone Exchange Service [_] Letter of Intent
[_] Cumulative Quantity Discount
This application must be preceded or accompanied by a prospectus for
the Fund(s) being purchased.
<PAGE>
- --------------------------------------------------------------------------------
6 DISTRIBUTION OPTIONS (Check one)
- --------------------------------------------------------------------------------
Check one - if no box is checked, all dividends and capital gains will be
reinvested in additional shares of the Fund.
[_] Reinvest all dividends [_] Pay all dividends in cash
and capital gains. and reinvest capital gains.
[_] Pay capital gains in cash [_] Pay all dividends and
and reinvest dividends. capital gains in cash.
- --------------------------------------------------------------------------------
7 OPTIONAL SHAREHOLDER PRIVILEGES
- --------------------------------------------------------------------------------
A. SPECIAL PAYMENT INSTRUCTIONS FOR DISTRIBUTIONS (Check one box)
[_] Pay Distributions, as noted in Section 6, or [_] withdrawals, as noted in
section 7(B), to purchase shares of another Franklin or Templeton Fund.
Restrictions may apply to purchases of shares of a different class. See
the prospectus for details.
Fund Name______________________ Existing Account Number___________________
[_] Send my Distributions to the person, named below, instead of as registered
in Section 1.
Name___________________________ Street Address____________________________
City___________________________ State____________________Zip Code_________
- --------------------------------------------------------------------------------
B. SYSTEMATIC WITHDRAWAL PLAN
Please withdraw from my Franklin Templeton account $_____($50 minimum)
[_]Monthly [_]Quarterly [_]Semi-Annually or [_]Annually as set forth in the
Prospectus, starting in ______________(Month). The net asset value of the
shares held must be at least $5,000 at the time the plan is established.
Additional restrictions may apply to Class II or other shares subject to
contingent deferred sales charge, as described in the prospectus. Send the
proceeds to: [_]Address of Record OR [_]the Franklin Templeton Fund or person
specified in Section 7(A) - Special Payment Instructions for Distributions.
- --------------------------------------------------------------------------------
C. TELEPHONE TRANSACTIONS
TELEPHONE EXCHANGE PRIVILEGE: If the Fund does not receive specific
instructions from the shareholder, either in writing or by telephone, the
Telephone Exchange Privilege (see the prospectus) is automatically extended
to each account. The shareholder should understand, however, that the Fund
and Franklin Templeton Investor Services, Inc. ("FTI") or Franklin Templeton
Trust Company and their agents will not be liable for any loss, injury,
damage or expense as a result of acting upon instructions communicated by
telephone reasonably believed to be genuine. The shareholder agrees to hold
the Fund and its agents harmless from any loss, claims, or liability arising
from its or their compliance with such instructions. The shareholder
understands that this option is subject to the terms and conditions set forth
in the prospectus of the fund to be acquired.
[_]No, I do NOT wish to participate in the Telephone Exchange Privilege or
authorize the Fund or its agents, including FTI or Templeton Funds Trust
Company, to act upon instructions received by telephone to exchange shares
for shares of any other account(s) within the Franklin Templeton Group of
Funds.
Telephone Redemption Privilege: This is available to shareholders who
specifically request it and who complete the Franklin Templeton Telephone
Redemption Authorization Agreement in the back of the Fund's prospectus.
- --------------------------------------------------------------------------------
D. AUTOMATIC INVESTMENT PLAN
IMPORTANT: ATTACH AN UNSIGNED, VOIDED CHECK (FOR CHECKING ACCOUNTS) OR A
SAVINGS ACCOUNT DEPOSIT SLIP HERE, AND COMPLETE THE INFORMATION BELOW. I(We)
would like to establish an Automatic Investment Plan (the "Plan") as
described in the Prospectus. I(We) agree to reimburse FTI and/or FTD for any
expenses or losses that they may incur in connection with my(our) plan,
including any caused by my(our) bank's failure to act in accordance with
my(our) request. If my(our) bank makes any erroneous payment or fails to make
a payment after shares are purchased on my(our) behalf, any such purchase may
be cancelled and I(we) hereby authorize redemptions and/or deductions from
my(our) account for that purpose.
Debit my (circle one) savings, checking, other ________ account monthly for
$__________($25 minimum) on or about the [_]1st [_]5th [_]15th or [_]20th day
starting_______(month), to be invested in (name of
Fund)___________________Account Number (if known)_______
INSTRUCTIONS TO BANK - AUTOMATIC INVESTMENT PLAN AUTHORIZATION
To:__________________________________ ______________________________________
Name of Your Bank ABA Number
___________________________ _________________ ____________ ______________
Street Address City State Zip Code
I(We) authorize you to charge my(our) Checking/Savings Account and to make
payment to FTD, upon instructions from FTD. I(We) agree that in making payment
for such charges your rights shall be the same as if each were a charge made and
signed personally by me(us). This authority shall remain in effect until you
receive written notice from me(us) changing its terms or revoking it. Until you
actually receive such notice, I(we) agree that you shall be fully protected in
paying any charge under this authority. I(we) further agree that if any such
charge is not made, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever.
X_________________________________________________ ___________________________
Signature(s) EXACTLY as shown on your bank records Date
______________________________________ _______________________________________
Print Name(s) Account Number
______________________________ _________________ ____________ ______________
Your Street Address City State Zip Code
- --------------------------------------------------------------------------------
E. LETTER OF INTENT (LOI)
[_]I(We) agree to the terms of the LOI and provisions for reservations of
Class I shares and grant FTD the security interest set forth in the
Prospectus. Although I am(we are) not obligated to do so, it is my(our)
intention to invest over a 13 month period in Class I and/or Class II shares
of one or more Franklin or Templeton Funds (including all money market funds
in the Franklin Templeton Group) an aggregate amount at least equal to that
which is checked below. I understand that reduced sales charges will apply
only to purchases of Class I shares.
<TABLE>
<S> <C> <C> <C> <C>
[_]$50,000-99,999 (except for Income Fund [_]$100,000-249,999 [_]$250,000-499,999 [_]$500,000-999,999 [_]$1,000,0000 or more
and Americas Government Securities Fund)
</TABLE>
Purchases of Class I Shares under LOI of $1,000,000 or more are made at net
asset value and may be subject to a contingent deferred sales charge as
described in the prospectus.
Purchases made within the last 90 days will be included as part of your LOI.
Please write in your Account Number(s)____________ ____________ ____________
- --------------------------------------------------------------------------------
F. CUMULATIVE QUANTITY DISCOUNT -- APPLICABLE TO CLASS I SHARES ONLY
Class I shares may be purchased at the offering price applicable to the total
of (a) the dollar amount then being purchased plus (b) the amount equal to
the cost or current value (whichever is higher) of the combined holdings of
the purchaser, his or her spouse, and their children under age 21, of Class I
and Class II shares of funds in the Franklin Templeton Group as stated in the
prospectus. In order for this cumulative quantity discount to be made
available, the shareholder or his or her securities dealer must notify FTI or
FTD of the total holdings in the Franklin Templeton Group each time an order
is placed. I understand that reduced sales charges will apply only to
purchases of Class I shares.
[_]I(We) own shares of more than one Fund in the Franklin Templeton Group and
qualify for the Cumulative Quantity Discount described above and in the
Prospectus.
My(Our) other Account Number(s) are ___________ ___________ _______________
- --------------------------------------------------------------------------------
8 ACCOUNT REVISION (If Applicable)
- --------------------------------------------------------------------------------
If you are using this application to revise your Account Registration, or wish
to have Distributions sent to an address other than the address on your existing
Account's Registration, a Signature Guarantee is required. Signatures of all
registered owners must be guaranteed by an "eligible guarantor" as defined in
the "How to Sell Shares of the Fund" section in the Fund's Prospectus. A Notary
Public is not an acceptable guarantor.
X________________________________________ ____________________________________
Signature(s) of Registered Account Owners Account Number(s)
X________________________________________ ____________________________________
X________________________________________
X________________________________________ ____________________________________
Signature Guarantee Stamp
NOTE: For any change in registration, please send us any outstanding
Certificates by Registered Mail.
- --------------------------------------------------------------------------------
TLGOF APP 07/95
