TEMPLETON GLOBAL INVESTMENT TRUST
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED NOVEMBER 8, 1995,
IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUSES
OF TEMPLETON GROWTH AND INCOME FUND,
TEMPLETON GLOBAL INFRASTRUCTURE FUND, AND TEMPLETON AMERICAS
GOVERNMENT SECURITIES FUND, EACH DATED JULY 10, 1995,
AND TEMPLETON GREATER EUROPEAN FUND AND
TEMPLETON LATIN AMERICA FUND, DATED MAY 8, 1995,
EACH AS AMENDED FROM TIME TO TIME, WHICH MAY BE OBTAINED
WITHOUT CHARGE UPON REQUEST TO THE PRINCIPAL UNDERWRITER,
FRANKLIN TEMPLETON DISTRIBUTORS, INC.,
700 CENTRAL AVENUE, P.O. BOX 33030
ST. PETERSBURG, FLORIDA 33733-8030
TOLL FREE TELEPHONE: 800/DIAL BEN
TABLE OF CONTENTS
General Information and History...................... 1
Investment Objectives and Policies................... 2
-Investment Policies............................... 2
-Repurchase Agreements............................. 2
-Debt Securities................................... 2
-Convertible Securities............................ 4
-Futures Contracts................................. 5
-Options on Securities, Indices
and Futures...................................... 5
-Foreign Currency Hedging Transactions............. 8
-Investment Restrictions........................... 9
-Additional Restrictions...........................11
-Risk Factors......................................12
-Trading Policies..................................18
-Personal Securities Transactions..................18
Management of the Trust..............................19
Trustee Compensation.................................25
Principal Shareholders...............................26
Investment Management and Other
Services...........................................28
-Investment Management Agreements..................28
-Management Fees...................................30
-The Investment Managers...........................30
-Sub-Advisory Agreement............................31
-Business Manager..................................31
-Custodian and Transfer Agent......................33
-Legal Counsel.....................................34
-Independent Accountants...........................34
-Reports to Shareholders...........................34
Brokerage Allocation.................................34
Purchase, Redemption and Pricing of
Shares.............................................37
-Ownership and Authority Disputes..................38
-Tax-Deferred Retirement Plans.....................38
-Letter of Intent..................................40
-Special Net Asset Value
Purchases......................................41
Tax Status...........................................42
Principal Underwriter................................50
Description of Shares................................52
Performance Information..............................53
Financial Statements.................................57
GENERAL INFORMATION AND HISTORY
Templeton Global Investment Trust (the "Trust") was organized as a
Delaware business trust on December 21, 1993, and is registered under the
Investment Company Act of 1940 (the "1940 Act") as an open-end management
investment company with four diversified series of Shares, Templeton Growth and
Income Fund ("Growth and Income Fund") (formerly Templeton Global Rising
Dividends Fund), Templeton Global Infrastructure Fund ("Infrastructure Fund"),
Templeton Greater European Fund ("Greater European Fund") and Templeton Latin
America Fund ("Latin America Fund"), and one non-diversified series of Shares,
Templeton Americas Government Securities Fund ("Americas Government Securities
Fund") (collectively, the "Funds").
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INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT POLICIES. The investment objective and policies
of each Fund are described in each Fund's Prospectus under the
heading "Investment Objective and Policies."
REPURCHASE AGREEMENTS. Repurchase agreements are contracts under which
the buyer of a security simultaneously commits to resell the security to the
seller at an agreed-upon price and date. Under a repurchase agreement, the
seller is required to maintain the value of the securities subject to the
repurchase agreement at not less than their repurchase price. The investment
manager of each Fund (Templeton, Galbraith & Hansberger Ltd. ("TGH") in the case
of Growth and Income Fund, Greater European Fund and Latin America Fund,
Templeton Investment Counsel, Inc. ("TICI") in the case of Infrastructure Fund,
and TICI, through its Templeton Global Bond Managers division, in the case of
Americas Government Securities Fund (collectively, the "Investment Managers"))
will monitor the value of such securities daily to determine that the value
equals or exceeds the repurchase price. Repurchase agreements may involve risks
in the event of default or insolvency of the seller, including possible delays
or restrictions upon a Fund's ability to dispose of the underlying securities. A
Fund will enter into repurchase agreements only with parties who meet
creditworthiness standards approved by the Board of Trustees, I.E., banks or
broker-dealers which have been determined by a Fund's Investment Manager to
present no serious risk of becoming involved in bankruptcy proceedings within
the time frame contemplated by the repurchase transaction.
DEBT SECURITIES. The Funds may invest in debt securities that are rated
in any rating category by Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's") or that are unrated by any rating agency. As
an operating policy, which may be changed by the Board of Trustees without
Shareholder approval, neither Growth and Income Fund, Infrastructure Fund,
Greater European Fund, nor Latin America Fund will invest more than 5% of its
assets in debt securities rated lower than Baa by Moody's or BBB by S&P. The
market value of debt securities generally varies in response to changes in
interest rates and the financial condition of each issuer. During periods of
declining interest rates, the value of debt securities generally increases.
Conversely, during periods of rising interest rates, the value of such
securities generally declines. These changes in market value will be reflected
in a Fund's net asset value.
Bonds which are rated Baa by Moody's are considered as medium grade
obligations, I.E., they are neither highly protected
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nor poorly secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Bonds which are rated C by Moody's are the lowest rated
class of bonds, and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Bonds rated BBB by S&P are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category than in higher rated categories. Bonds rated D by S&P
are the lowest rated class of bonds, and generally are in payment default. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Although they may offer higher yields than do higher rated securities,
high-risk, low rated debt securities (commonly referred to as "junk bonds") and
unrated debt securities generally involve greater volatility of price and risk
of principal and income, including the possibility of default by, or bankruptcy
of, the issuers of the securities. In addition, the markets in which low rated
and unrated debt securities are traded are more limited than those in which
higher rated securities are traded. The existence of limited markets for
particular securities may diminish a Fund's ability to sell the securities at
fair value either to meet redemption requests or to respond to a specific
economic event such as a deterioration in the creditworthiness of the issuer.
Reduced secondary market liquidity for certain low rated or unrated debt
securities may also make it more difficult for a Fund to obtain accurate market
quotations for the purposes of valuing the Fund's portfolio. Market quotations
are generally available on many low rated or unrated securities only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of a Fund to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such
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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, a Fund may incur additional expenses seeking
recovery.
A Fund may accrue and report interest income on high yield bonds, such
as zero coupon bonds or pay-in-kind securities, even though it receives no cash
interest until the security's maturity or payment date. In order to qualify for
beneficial tax treatment afforded regulated investment companies, and to
generally be relieved of federal tax liabilities, a Fund must distribute all of
its net income and gains to Shareholders (see "Tax Status") generally on an
annual basis. A 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.
Recent legislation, which requires federally insured savings and loan
associations to divest their investments in low rated debt securities, may have
a material adverse effect on a Fund's net asset value and investment practices.
CONVERTIBLE SECURITIES. The Funds may invest in convertible securities,
including convertible debt and convertible preferred stock. Convertible
securities are fixed-income securities which may be converted at a stated price
within a specific amount of time into a specified number of shares of common
stock. These securities are usually senior to common stock in a corporation's
capital structure, but usually are subordinated to non-convertible debt
securities. In general, the value of a convertible security is the higher of its
investment value (its value as a fixed-income security) and its conversion value
(the value of the underlying shares of common stock if the security is
converted). The investment value of a convertible security generally increases
when interest rates decline and generally decreases when interest rates rise.
The conversion value of a convertible security is influenced by the value of the
underlying common stock.
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FUTURES CONTRACTS. Each Fund may purchase and sell financial futures
contracts. Although some financial futures contracts call for making or taking
delivery of the underlying securities, in most cases these obligations are
closed out before the settlement date. The closing of a contractual obligation
is accomplished by purchasing or selling an identical offsetting futures
contract. Other financial futures contracts by their terms call for cash
settlements.
Each Fund may also buy and sell index futures contracts with respect to
any stock or bond index traded on a recognized stock exchange or board of trade.
An index futures contract is a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the contract is made. The
index futures contract specifies that no delivery of the actual securities
making up the index will take place. Instead, settlement in cash must occur upon
the termination of the contract, with the settlement being the difference
between the contract price and the actual level of the index at the expiration
of the contract.
At the time a Fund purchases a futures contract, an amount of cash,
U.S. Government securities, or other highly liquid debt securities equal to the
market value of the contract will be deposited in a segregated account with the
Fund's custodian. When writing a futures contract, a Fund will maintain with its
custodian liquid assets that, when added to the amounts deposited with a futures
commission merchant or broker as margin, are equal to the market value of the
instruments underlying the contract. Alternatively, a Fund may "cover" its
position by owning the instruments underlying the contract or, in the case of an
index futures contract, owning a portfolio with a volatility substantially
similar to that of the index on which the futures contract is based, or holding
a call option permitting the Fund to purchase the same futures contract at a
price no higher than the price of the contract written by the Fund (or at a
higher price if the difference is maintained in liquid assets with the Fund's
custodian).
OPTIONS ON SECURITIES, INDICES AND FUTURES. Each Fund may write covered
put and call options and purchase put and call options on securities, securities
indices and futures contracts that are traded on United States and foreign
exchanges and in the over-the-counter markets.
An option on a security or a futures contract is a contract that gives
the purchaser of the option, in return for the premium paid, the right to buy a
specified security or futures contract (in the case of a call option) or to sell
a specified security or futures contract (in the case of a put option) from or
to the
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writer of the option at a designated price during the term of the option. An
option on a securities index gives the purchaser of the option, in return for
the premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of the
option.
Each Fund may write a call or put option only if the option is
"covered." A call option on a security or futures contract written by a Fund is
"covered" if the Fund owns the underlying security or futures contract covered
by the call or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio. A call option on a security or futures
contract is also covered if a Fund holds a call on the same security or futures
contract and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference is maintained by the Fund in cash or high grade U.S. Government
securities in a segregated account with its custodian. A put option on a
security or futures contract written by a Fund is "covered" if the Fund
maintains cash or fixed-income securities with a value equal to the exercise
price in a segregated account with its custodian, or else holds a put on the
same security or futures contract and in the same principal amount as the put
written where the exercise price of the put held is equal to or greater than the
exercise price of the put written.
A Fund will cover call options on securities indices that it writes by
owning securities whose price changes, in the opinion of the Fund's Investment
Manager, are expected to be similar to those of the index, or in such other
manner as may be in accordance with the rules of the exchange on which the
option is traded and applicable laws and regulations. Nevertheless, where a Fund
covers a call option on a securities index through ownership of securities, such
securities may not match the composition of the index. In that event, a Fund
will not be fully covered and could be subject to risk of loss in the event of
adverse changes in the value of the index. A Fund will cover put options on
securities indices that it writes by segregating assets equal to the option's
exercise price, or in such other manner as may be in accordance with the rules
of the exchange on which the option is traded and applicable laws and
regulations.
A Fund will receive a premium from writing a put or call option, which
increases its gross income in the event the option expires unexercised or is
closed out at a profit. If the value of a security, index or futures contract on
which a Fund has
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written a call option falls or remains the same, the Fund will realize a profit
in the form of the premium received (less transaction costs) that could offset
all or a portion of any decline in the value of the portfolio securities being
hedged. If the value of the underlying security, index or futures contract
rises, however, a Fund will realize a loss in its call option position, which
will reduce the benefit of any unrealized appreciation in its investments. By
writing a put option, a Fund assumes the risk of a decline in the underlying
security, index or futures contract. To the extent that the price changes of the
portfolio securities being hedged correlate with changes in the value of the
underlying security, index or futures contract, writing covered put options will
increase a Fund's losses in the event of a market decline, although such losses
will be offset in part by the premium received for writing the option.
Each Fund may also purchase put options to hedge its investments
against a decline in value. By purchasing a put option, a Fund will seek to
offset a decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of a Fund's investments does not
decline as anticipated, or if the value of the option does not increase, its
loss will be limited to the premium paid for the option plus related transaction
costs. The success of this strategy will depend, in part, on the accuracy of the
correlation between the changes in value of the underlying security, index or
futures contract and the changes in value of a Fund's security holdings being
hedged.
A Fund may purchase call options on individual securities or futures
contracts to hedge against an increase in the price of securities or futures
contracts that it anticipates purchasing in the future. Similarly, a Fund may
purchase call options on a securities index to attempt to reduce the risk of
missing a broad market advance, or an advance in an industry or market segment,
at a time when the Fund holds uninvested cash or short-term debt securities
awaiting investment. When purchasing call options, a Fund will bear the risk of
losing all or a portion of the premium paid if the value of the underlying
security, index or futures contract does not rise.
There can be no assurance that a liquid market will exist when a Fund
seeks to close out an option position. Trading could be interrupted, for
example, because of supply and demand imbalances arising from a lack of either
buyers or sellers, or the options exchange could suspend trading after the price
has risen or fallen more than the maximum specified by the exchange. Although a
Fund may be able to offset to some extent any adverse effects of being unable to
liquidate an option position, it may experience losses in some cases as a result
of such inability.
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The value of over-the-counter options purchased by a Fund, as
well as the cover for options written by a Fund, are considered
not readily marketable and are subject to the Trust's limitation
on investments in securities that are not readily marketable.
See "Investment Objectives and Policies -- Investment
Restrictions."
FOREIGN CURRENCY HEDGING TRANSACTIONS. In order to hedge against
foreign currency exchange rate risks, each Fund may enter into forward foreign
currency exchange contracts and foreign currency futures contracts, as well as
purchase put or call options on foreign currencies, as described below. Each
Fund may also conduct its foreign currency exchange transactions on a spot
(I.E., cash) basis at the spot rate prevailing in the foreign currency exchange
market.
A Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund from adverse
changes in the relationship between the U.S. dollar and foreign currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. A Fund may enter into a forward
contract, for example, when it enters into a contract for the purchase or sale
of a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of the security. In addition, for example, when a Fund believes
that a foreign currency may suffer or enjoy a substantial movement against
another currency, it may enter into a forward contract to sell an amount of the
former foreign currency approximating the value of some or all of its portfolio
securities denominated in such foreign currency. This second investment practice
is generally referred to as "cross-hedging." Because in connection with a Fund's
forward foreign currency transactions, an amount of its assets equal to the
amount of the purchase will be held aside or segregated to be used to pay for
the commitment, a Fund will always have cash, cash equivalents or high quality
debt securities available in an amount sufficient to cover any commitments under
these contracts or to limit any potential risk. The segregated account will be
marked-to-market on a daily basis. While these contracts are not presently
regulated by the Commodity Futures Trading Commission ("CFTC"), the CFTC may in
the future assert authority to regulate forward contracts. In such event, the
Funds' ability to utilize forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a positive change in
the relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for a Fund
than if it had not engaged in such contracts.
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A Fund may purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the dollar value of
foreign portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge up to the amount of the premium received, and a Fund could be required to
purchase or sell foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on foreign currency may constitute
an effective hedge against fluctuation in exchange rates, although, in the event
of rate movements adverse to its position, a Fund may forfeit the entire amount
of the premium plus related transaction costs. Options on foreign currencies to
be written or purchased by a Fund will be traded on U.S. and foreign exchanges
or over-the-counter.
A Fund may enter into exchange-traded contracts for the purchase or
sale for future delivery of foreign currencies ("foreign currency futures").
This investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of a
Fund's portfolio securities or adversely affect the prices of securities that a
Fund intends to purchase at a later date. The successful use of foreign currency
futures will usually depend on the ability of a Fund's Investment Manager to
forecast currency exchange rate movements correctly. Should exchange rates move
in an unexpected manner, a Fund may not achieve the anticipated benefits of
foreign currency futures or may realize losses.
INVESTMENT RESTRICTIONS. The Funds have imposed upon themselves certain
investment restrictions which, together with their investment objectives, are
fundamental policies except as otherwise indicated. No changes in a Fund's
investment objective or these investment restrictions can be made without the
approval of the Shareholders of that Fund. For this purpose, the provisions of
the 1940 Act require the affirmative vote of the lesser of either (i) 67% or
more of that Fund's Shares present at a Shareholders' meeting at which more than
50% of the outstanding Shares are present or represented by proxy or (ii) more
than 50% of the outstanding Shares of that Fund.
In accordance with these restrictions, each Fund will not:
1. Invest in real estate or mortgages on real estate (although
the Funds may invest in marketable securities secured by real
estate or interests therein); invest in other open-end
investment companies (except in connection with a merger,
consolidation, acquisition or reorganization); invest in
interests (other than
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publicly issued debentures or equity stock interests) in oil,
gas or other mineral exploration or development programs; or
purchase or sell commodity contracts (except futures contracts
as described in the Fund's Prospectus).
2. Purchase any security (other than obligations of the
U.S. Government, its agencies or instrumentalities) if,
as a result, as to 75% of a Fund's total assets (a)
more than 5% of the Fund's total assets would then be
invested in securities of any single issuer, or (b) the
Fund would then own more than 10% of the voting
securities of any single issuer; provided, however,
that this restriction does not apply to Americas
Government Securities Fund.
3. Act as an underwriter; issue senior securities except as set
forth in investment restriction 6 below; or purchase on margin
or sell short, except that each Fund may make margin payments
in connection with futures, options and currency transactions.
4. Loan money, except that a Fund may (a) purchase a portion of
an issue of publicly distributed bonds, debentures, notes and
other evidences of indebtedness, (b) enter into repurchase
agreements and (c) lend its portfolio securities.
5. Borrow money, except that a Fund may borrow money from banks
in an amount not exceeding 33-1/3% of the value of its total
assets (including the amount borrowed).
6. Mortgage, pledge or hypothecate its assets (except as may be
necessary in connection with permitted borrowings); provided,
however, this does not prohibit escrow, collateral or margin
arrangements in connection with its use of options, futures
contracts and options on future contracts.
7. Invest more than 25% of its total assets in a single
industry.
8. Participate on a joint or a joint and several basis in any
trading account in securities. (See "Investment Objectives and
Policies -- Trading Policies" as to transactions in the same
securities for the Funds and/or other mutual funds and clients
with the same or affiliated advisers.)
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If a Fund receives from an issuer of securities held by the Fund
subscription rights to purchase securities of that issuer, and if the Fund
exercises such subscription rights at a time when the Fund's portfolio holdings
of securities of that issuer would otherwise exceed the limits set forth in
Investment Restrictions 2 or 7 above, it will not constitute a violation if,
prior to receipt of securities upon exercise of such rights, and after
announcement of such rights, the Fund has sold at least as many securities of
the same class and value as it would receive on exercise of such rights.
ADDITIONAL RESTRICTIONS. Each Fund has adopted the following additional
restrictions which are not fundamental and which may be changed without
Shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy.
Under these restrictions, a Fund may not:
1. Purchase or retain securities of any company in which Trustees
or officers of the Trust or of a Fund's Investment Manager,
individually owning more than 1/2 of 1% of the securities of
such company, in the aggregate own more than 5% of the
securities of such company.
2. Invest more than 5% of the value of its total assets in
securities of issuers which have been in continuous operation
less than three years.
3. Invest more than 5% of its net assets in warrants whether or
not listed on the New York or American Stock Exchanges, and
more than 2% of its net assets in warrants that are not listed
on those exchanges. Warrants acquired in units or attached to
securities are not included in this restriction.
4. Purchase or sell real estate limited partnership
interests.
5. Purchase or sell interests in oil, gas and mineral
leases (other than securities of companies that invest
in or sponsor such programs).
6. Invest for the purpose of exercising control over
management of any company.
7. Purchase more than 10% of a company's outstanding
voting securities.
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8. Invest more than 15% of the Fund's total assets in
securities that are not readily marketable (including
repurchase agreements maturing in more than seven days
and over-the-counter options purchased by the Fund),
including no more than 10% of its total assets in
restricted securities. Rule 144A securities are not
subject to the 10% limitation on restricted securities,
although a Fund will limit its investment in all
restricted securities, including Rule 144A securities,
to 15% of its total assets.
Whenever any investment restriction states a maximum percentage of a
Fund's assets which may be invested in any security or other property, it is
intended that such maximum percentage limitation be determined immediately after
and as a result of the Fund's acquisition of such security or property. Assets
are calculated as described in each Fund's Prospectus under the heading "How to
Buy Shares of the Fund."
RISK FACTORS. Each Fund has the right to purchase securities in any
foreign country, developed or developing. Investors should consider carefully
the substantial risks involved in securities of companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments.
There may be less publicly available information about foreign
companies comparable to the reports and ratings published about companies in the
United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to United States
companies. Foreign markets have substantially less volume than the New York
Stock Exchange ("NYSE") and securities of some foreign companies are less liquid
and more volatile than securities of comparable United States companies.
Commission rates in foreign countries, which are generally fixed rather than
subject to negotiation as in the United States, are likely to be higher. In many
foreign countries there is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the United States.
Investments in companies domiciled in developing countries may be
subject to potentially higher risks than investments in developed countries.
These risks include (i) less social, political and economic stability; (ii) the
small current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict a
Fund's investment opportunities,
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including restrictions on investment in issuers or industries deemed sensitive
to national interests; (iv) foreign taxation; (v) the absence of developed
structures governing private or foreign investment or allowing for judicial
redress for injury to private property; (vi) the absence, until recently in
certain Eastern European countries, of a capital market structure or
market-oriented economy; and (vii) the possibility that recent favorable
economic developments in Eastern Europe may be slowed or reversed by
unanticipated political or social events in such countries.
To the extent of the Communist Party's influence, investments in such
countries may involve risks of nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern European countries
expropriated large amounts of private property in the past, in many cases
without adequate compensation, and there can be no assurance that such
expropriation will not occur in the future. In the event of such expropriation,
a Fund could lose a substantial portion of any investments it has made in the
affected countries. Further, no accounting standards exist in Eastern European
countries. Finally, even though certain Eastern European currencies may be
convertible into U.S. dollars, the conversion rates may be artificial to the
actual market values and may be adverse to Fund Shareholders.
Certain Eastern European countries, which do not have market economies,
are characterized by an absence of developed legal structures governing private
and foreign investments and private property. Certain countries require
governmental approval prior to investments by foreign persons, or limit the
amount of investment by foreign persons in a particular company, or limit the
investment of foreign persons to only a specific class of securities of a
company that may have less advantageous terms than securities of the company
available for purchase by nationals.
Governments in certain Eastern European countries may require that a
governmental or quasi-governmental authority act as custodian of a Fund's assets
invested in such country. To the extent such governmental or quasi-governmental
authorities do not satisfy the requirements of the 1940 Act to act as foreign
custodians of a Fund's cash and securities, the Fund's investment in such
countries may be limited or may be required to be effected through
intermediaries. The risk of loss through governmental confiscation may be
increased in such countries.
The Infrastructure Fund, Growth and Income Fund, and Greater European
Fund may each invest a portion of its assets in Russian securities, subject to
the availability of an eligible foreign
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subcustodian approved by the Board of Trustees in accordance with Rule 17f-5
under the 1940 Act. There can be no assurance that appropriate sub-custody
arrangements will be available to the Funds if and when one or more of the Funds
seeks to invest a portion of its assets in Russian securities. As a
non-fundamental policy, none of the Funds will invest more than 5% of its total
assets in Russian securities.
Investing in Russian companies involves a high degree of risk and
special considerations not typically associated with investing in the United
States securities markets, and should be considered highly speculative. Such
risks include: (i) delays in settling portfolio transactions and risk of loss
arising out of Russia's system of share registration and custody; (ii) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgment; (iii) pervasiveness of corruption and crime in the
Russian economic system; (iv) currency exchange rate volatility and the lack of
available currency hedging instruments; (v) higher rates of inflation (including
the risk of social unrest associated with periods of hyper-inflation); (vi)
controls on foreign investment and local practices disfavoring foreign investors
and limitations on repatriation of invested capital, profits and dividends, and
on a Fund's ability to exchange local currencies for U.S. dollars; (vii) the
risk that the government of Russia or other executive or legislative bodies may
decide not to continue to support the economic reform programs implemented since
the dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the dissolution of the Soviet Union; (viii) the
financial condition of Russian companies, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (ix)
dependency on exports and the corresponding importance of international trade;
(x) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (xi) possible
difficulty in identifying a purchaser of securities held by a Fund due to the
underdeveloped nature of the securities markets.
There is little historical data on Russian securities markets because
they are relatively new and a substantial proportion of securities transactions
in Russia are privately negotiated outside of stock exchanges. Because of the
recent formation of the securities markets as well as the underdeveloped state
of the banking and telecommunications systems, settlement, clearing and
registration of securities transactions are subject to significant risks.
Ownership of shares (except where shares
- 14 -
<PAGE>
are held through depositories that meet the requirements of the 1940 Act) is
defined according to entries in the company's share register and normally
evidenced by extracts from the register or by formal share certificates.
However, there is no central registration system for shareholders and these
services are carried out by the companies themselves or by registrars located
throughout Russia. These registrars are not necessarily subject to effective
state supervision and it is possible for a Fund to lose its registration through
fraud, negligence or even mere oversight. While each Fund will endeavor to
ensure that its interest continues to be appropriately recorded either itself or
through a custodian or other agent inspecting the share register and by
obtaining extracts of share registers through regular confirmations, these
extracts have no legal enforceability and it is possible that subsequent illegal
amendment or other fraudulent act may deprive a Fund of its ownership rights or
improperly dilute its interests. In addition, while applicable Russian
regulations impose liability on registrars for losses resulting from their
errors, it may be difficult for a Fund to enforce any rights it may have against
the registrar or issuer of the securities in the event of loss of share
registration. Furthermore, although a Russian public enterprise with more than
1,000 shareholders is required by law to contract out the maintenance of its
shareholder register to an independent entity that meets certain criteria, in
practice this regulation has not always been strictly enforced. Because of this
lack of independence, management of a company may be able to exert considerable
influence over who can purchase and sell the company's shares by illegally
instructing the registrar to refuse to record transactions in the share
register. This practice may prevent a Fund from investing in the securities of
certain Russian companies deemed suitable by its Investment Manager. Further,
this also could cause a delay in the sale of Russian company securities by a
Fund if a potential purchaser is deemed unsuitable, which may expose the Fund to
potential loss on the investment.
Investing in Latin American issuers involves a high degree of risk and
special considerations not typically associated with investing in the United
States and other more developed securities markets, and should be considered
highly speculative. Such risks include: (i) restrictions or controls on foreign
investment and limitations on repatriation of invested capital and Latin America
Fund's ability to exchange local currencies for U.S. dollars; (ii) higher and
sometimes volatile rates of inflation (including the risk of social unrest
associated with periods of hyper-inflation); (iii) the risk that certain Latin
American countries, which are among the largest debtors to commercial banks and
foreign governments and which have experienced difficulty in servicing sovereign
debt obligations in
- 15 -
<PAGE>
the past, may negotiate to restructure sovereign debt obligations; (iv) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgment; (v) currency exchange rate fluctuations and the lack
of available currency hedging instruments; (vi) more substantial government
involvement in and control over the local economies; and (vii) dependency on
exports and the corresponding importance of international trade.
Latin American countries may be subject to a greater degree of
economic, political, and social instability than is the case in the United
States, Japan, or Western European countries. Such instability may result from,
among other things, the following: (i) authoritarian governments or military
involvement in political and economic decision-making, including changes in
governmental control through extra-constitutional means; (ii) popular unrest
associated with demands for improved political, economic, and social conditions;
(iii) internal insurgencies and terrorist activities; (iv) hostile relations
with neighboring countries; (v) ethnic, religious and racial disaffection; and
(vi) drug trafficking.
Each Fund endeavors to buy and sell foreign currencies on as favorable
a basis as practicable. Some price spread on currency exchange (to cover service
charges) may be incurred, particularly when a Fund changes investments from one
country to another or when proceeds of the sale of Shares in U.S. dollars are
used for the purchase of securities in foreign countries. Also, some countries
may adopt policies which would prevent a Fund from transferring cash out of the
country or withhold portions of interest and dividends at the source. There is
the possibility of expropriation, nationalization or confiscatory taxation,
withholding and other foreign taxes on income or other amounts, foreign exchange
controls (which may include suspension of the ability to transfer currency from
a given country), default in foreign government securities, political or social
instability, or diplomatic developments which could affect investments in
securities of issuers in foreign nations.
The Funds may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments. Through the flexible policy of the Funds, the
Investment Managers endeavor to avoid unfavorable consequences and to take
advantage of favorable developments in particular nations where from time to
time they place the Funds' investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and
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<PAGE>
other decisions such as changing the emphasis on investments from one nation to
another and from one type of security to another. Some of these decisions may
later prove profitable and others may not. No assurance can be given that
profits, if any, will exceed losses.
The Trustees consider at least annually the likelihood of the
imposition by any foreign government of exchange control restrictions which
would affect the liquidity of the Funds' assets maintained with custodians in
foreign countries, as well as the degree of risk from political acts of foreign
governments to which such assets may be exposed. The Trustees also consider the
degree of risk involved through the holding of portfolio securities in domestic
and foreign securities depositories (see "Investment Management and Other
Services -- Custodian and "Transfer Agent"). However, in the absence of willful
misfeasance, bad faith or gross negligence on the part of a Fund's Investment
Manager, any losses resulting from the holding of portfolio securities in
foreign countries and/or with securities depositories will be at the risk of the
Shareholders. No assurance can be given that the Trustees' appraisal of the
risks will always be correct or that such exchange control restrictions or
political acts of foreign governments will not occur.
A Fund's ability to reduce or eliminate its futures and related options
positions will depend upon the liquidity of the secondary markets for such
futures and options. The Funds intend to purchase or sell futures and related
options only on exchanges or boards of trade where there appears to be an active
secondary market, but there is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. Use of futures and
options for hedging may involve risks because of imperfect correlations between
movements in the prices of the futures or options and movements in the prices of
the securities being hedged. Successful use of futures and related options by a
Fund for hedging purposes also depends upon that Fund's Investment Manager's
ability to predict correctly movements in the direction of the market, as to
which no assurance can be given.
The Greater European Fund and Latin America Fund are permitted to
invest in entities organized and operated solely for the purpose of
restructuring the investment characteristics of various securities ("Structured
Investments"). As Structured Investments are backed by, or represent interests
in, underlying instruments, they may be considered derivative instruments and
involve special risks that are discussed in the Funds' Prospectus under the
heading "Investment Techniques -- Structured Investments."
- 17 -
<PAGE>
Additional risks may be involved with the Funds' special investment
techniques, including loans of portfolio securities and borrowing for investment
purposes. These risks are described under the heading "Investment Techniques" in
the Prospectus.
TRADING POLICIES. The Investment Managers and their affiliated
companies serve as investment advisers to other investment companies and private
clients. Accordingly, the respective portfolios of certain of these funds and
clients may contain many or some of the same securities. When certain funds or
clients are engaged simultaneously in the purchase or sale of the same security,
the trades may be aggregated for execution and then allocated in a manner
designed to be equitable to each party. The larger size of the transaction may
affect the price of the security and/or the quantity which may be bought or sold
for each party. If the transaction is large enough, brokerage commissions in
certain countries may be negotiated below those otherwise chargeable.
Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other remuneration in
connection therewith, may be effected between any of these funds, or between
funds and private clients, under procedures adopted pursuant to Rule 17a-7 under
the 1940 Act.
PERSONAL SECURITIES TRANSACTIONS. Access persons of the Franklin Templeton
Group, as defined in SEC Rule 17(j) under the 1940 Act, who are employees of
Franklin Resources, Inc. or their subsidiaries, are permitted to engage in
personal securities transactions subject to the following general restrictions
and procedures: (i) The trade must receive advance clearance from a compliance
officer and must be completed within 24 hours after this clearance; (ii) Copies
of all brokerage confirmations must be sent to the compliance officer and within
10 days after the end of each calendar quarter, a report of all securities
transactions must be provided to the compliance officer; (iii) In addition to
items (i) and (ii), access persons involved in preparing and making investment
decisions must file annual reports of their securities holdings each January and
also inform the compliance officer (or other designated personnel) if they own a
security that is being considered for a fund or other client transaction or if
they are recommending a security in which they have an ownership interest for
purchase or sale by a fund or other client.
- 18 -
<PAGE>
MANAGEMENT OF THE TRUST
The name, address, principal occupation during the past five years and
other information with respect to each of the Trustees and Principal Executive
Officers of the Trust are as follows:
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
HARRIS J. ASHTON
Metro Center
1 Station Place
Stamford, Connecticut
Trustee
Chairman of the Board,
president, and chief executive
officer of General Host
Corporation (nursery and craft
centers); and a director of RBC
Holdings (U.S.A.) Inc. (a bank
holding company) and Bar-S
Foods. Age 63.
NICHOLAS F. BRADY*
102 East Dover Street
Easton, Maryland
Trustee
Chairman of Templeton Emerging Markets Investment Trust PLC; chairman of
Templeton Latin America Investment Trust PLC; chairman of Darby Overseas
Investments, Ltd. (an investment firm) (1994-present); director of the Amerada
Hess Corporation, Capital Cities/ABC, Inc., Christiana Companies, and the H.J.
Heinz Company; Secretary of the United States Department of the Treasury
(1988-January 1993); and chairman of the board of Dillon, Read & Co. Inc.
(investment banking) prior thereto. Age 65.
F. BRUCE CLARKE
19 Vista View Blvd.
Thornhill, Ontario
Trustee
Retired; formerly, credit
adviser, National Bank of
Canada, Toronto. Age 85.
- 19 -
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
MARTIN L. FLANAGAN*
777 Mariners Island Blvd.
San Mateo, California
Trustee and Vice President
Senior vice president, treasurer, and chief
financial officer of Franklin Resources, Inc.; director, and executive vice
president of Templeton Investment Counsel, Inc.; director, president and chief
executive officer of Templeton Global Investors, Inc.; president or vice
president of various Templeton Funds; director or trustee of six Templeton
Funds; accountant, Arthur Andersen & Company (1982- 1983); and a member of the
International Society of Financial Analysts and the American Institute of
Certified Public Accountants. Age 35.
HASSO-G VON DIERGARDT-NAGLO
R.R. 3
Stouffville, Ontario
Trustee
Farmer; and president of
Clairhaven Investments, Ltd. and
other private investment
companies. Age 79.
S. JOSEPH FORTUNATO
200 Campus Drive
Florham Park, New Jersey
Trustee
Member of the law firm of Pitney, Hardin, Kipp & Szuch; and a director
of General Host Corporation. Age 63.
- 20 -
<PAGE>
JOHN Wm. GALBRAITH
360 Central Avenue
Suite 1300
St. Petersburg, Florida
Trustee
President of Galbraith
Properties, Inc. (personal
investment company); director of
Gulfwest Banks, Inc. (bank
holding company) (1995-present)
and Mercantile Bank (1991-
present); vice chairman of
Templeton, Galbraith &
Hansberger Ltd. (1986-1992); and
chairman of Templeton Funds
Management, Inc. (1974-1991).
Age 74.
ANDREW H. HINES, JR.
150 2nd Avenue N.
St. Petersburg, Florida
Trustee
Consultant for the Triangle Consulting Group; chairman of the board
and chief executive officer of Florida Progress Corporation (1982-February 1990)
and director of various of its subsidiaries; chairman and director of Precise
Power Corporation; executive-in-residence of Eckerd College (1991-present); and
a director of Checkers Drive-In Restaurants, Inc. Age 72.
CHARLES B. JOHNSON*
777 Mariners Island Blvd.
San Mateo, California
Chairman of the Board
and Vice President
President, chief executive officer, and director of Franklin Resources, Inc.;
chairman of the board and director of Franklin Advisers, Inc. and Franklin
Templeton Distributors, Inc.; director of General Host Corporation and Templeton
Global Investors, Inc.; and officer and director, trustee or managing general
partner, as the case may be, of most other subsidiaries of Franklin Resources,
Inc. and of 55 of the investment companies in the Franklin Templeton Group.
Age 62.
BETTY P. KRAHMER
2201 Kentmere Parkway
Wilmington, Delaware
Trustee
Director or trustee of various civic associations; formerly, economic analyst,
U.S.
Government. Age 66.
GORDON S. MACKLIN
8212 Burning Tree Road
Bethesda, Maryland
Trustee
Chairman of White River
Corporation (information
services); director of Fund
America Enterprises Holdings,
Inc., Lockheed Martin
Corporation, MCI Communications
Corporation, Fusion Systems
Corporation, Infovest
Corporation, and Medimmune,
Inc.; formerly, chairman of
Hambrecht and Quist Group;
director of H&Q Healthcare
Investors; and president of the
National Association of
Securities Dealers, Inc. Age
67.
FRED R. MILLSAPS
2665 N.E. 37th Drive
Fort Lauderdale, Florida
Trustee
Manager of personal investments
(1978-present); chairman and
chief executive officer of
Landmark Banking Corporation (1969-1978); financial vice president of Florida
Power and Light (1965-1969); vice president of The Federal Reserve Bank of
Atlanta (1958-1965); and a director of various other business and nonprofit
organizations. Age 66.
MARK G. HOLOWESKO
Lyford Cay
Nassau, Bahamas
President
President and director of Templeton, Galbraith & Hansberger Ltd.;
director of global equity research for Templeton Worldwide, Inc.; president or
vice president of the Templeton Funds; formerly, investment administrator with
Roy West Trust Corporation (Bahamas) Limited (1984-1985).
Age 35.
- 21 -
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
DORIAN FOYIL
Lyford Cay
Nassau, Bahamas
Vice President
Vice president, Portfolio Management/Research, of Templeton,
Galbraith & Hansberger Ltd.; formerly, research analyst, UBS Phillips & Drew
(London). Age 37.
SAMUEL J. FORESTER, JR.
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President
President of the Templeton Global Bond Managers Division of
Templeton Investment Counsel, Inc.; president or vice president of other
Templeton Funds; founder and partner of Forester, Hairston Investment Management
(1989-1990); managing director (Mid-East Region) of Merrill Lynch, Pierce,
Fenner & Smith Inc. (1987-1988); and an advisor for Saudi Arabian Monetary
Agency (1982-1987).
Age 47.
JOHN R. KAY
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President
Vice president of the Templeton Funds; vice president and
treasurer of Templeton Global Investors, Inc. and Templeton Worldwide, Inc.;
assistant vice president of Franklin Templeton Distributors, Inc.; formerly,
vice president and controller of the Keystone Group, Inc. Age 55.
GARY CLEMONS
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President
Research analyst for Templeton
Investment Counsel, Inc. (1993-
present); formerly, research
analyst for Templeton
Quantitative Advisors, Inc. Age
38.
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<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
DOUGLAS R. LEMPEREUR
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President
Senior vice president of the Templeton Global Bond Managers
Division of Templeton Investment Counsel, Inc.; formerly, securities analyst for
Colonial Management Associates (1985- 1988), Standish, Ayer & Wood (1977-1985),
and The First National Bank of Chicago (1974- 1977). Age 46.
NEIL S. DEVLIN
500 East Broward Blvd.
Fort Lauderdale, Florida
Vice President
Senior vice president, Portfolio Management/Research, of the
Templeton Global Bond Managers division of Templeton Investment Counsel, Inc.;
formerly, portfolio manager and bond analyst for Constitutional Capital
Management (1985-1987); and a bond trader and research analyst for Bank of New
England (1982-1985). Age 38.
JAMES R. BAIO
500 East Broward Blvd.
Fort Lauderdale, Florida
Treasurer
Certified public accountant; treasurer of the Templeton Funds;
senior vice president of Templeton Worldwide, Inc., Templeton Global Investors,
Inc., and Templeton Funds Trust Company; formerly, senior tax manager for Ernst
& Young (certified public accountants) (1977-1989). Age 41.
THOMAS M. MISTELE
700 Central Avenue
St. Petersburg, Florida
Secretary
Senior vice president of
Templeton Global Investors,
Inc.; vice president of Franklin Templeton Distributors, Inc.; secretary of the
Templeton Funds; formerly, attorney, Dechert Price & Rhoads (1985- 1988) and
Freehill, Hollingdale & Page (1988); and judicial clerk, U.S. District Court
(Eastern District of Virginia) (1984-1985). Age 42.
- 23 -
<PAGE>
JACK L. COLLINS
700 Central Avenue
St. Petersburg, Florida
Assistant Treasurer
Assistant treasurer of the Templeton Funds; assistant vice
president of Franklin Templeton Investor Services, Inc.; formerly, partner with
Grant Thornton, independent public accountants. Age 66.
JEFFREY L. STEELE
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
Partner, Dechert Price & Rhoads.
Age 50.
- --------------------------
* These are Trustees who are "interested persons" of the Trust
as that term is defined in the 1940 Act. Mr. Brady and
Franklin Resources, Inc. are limited partners of Darby
Overseas Partners, L.P. ("Darby Overseas"). Mr. Brady
established Darby Overseas in February, 1994, and is
Chairman and a shareholder of the corporate general partner
of Darby Overseas. In addition, Darby Overseas and
Templeton, Galbraith & Hansberger Ltd. are limited partners
of Darby Emerging Markets Fund, L.P.
There are no family relationships between any of the Trustees.
TRUSTEE COMPENSATION
All of the Trust's Officers and Trustees also hold positions with other
investment companies in the Franklin Templeton Group. No compensation is paid by
the Trust to any officer of Trustee who is an officer, trustee or employee of
the Investment Manager or its affiliates. Each Templeton Fund pays its
independent directors and trustees and Mr. Brady an annual retainer and/or fees
for attendance at Board and Committee meetings, the amount of which is based on
the level of assets in each fund. Accordingly, the Trust currently pays the
independent Trustees and Mr. Brady an annual retainer of $100. The independent
Trustees and Mr. Brady are reimbursed for any expenses incurred in attending
meetings, paid pro rata by each Franklin Templeton Fund in which they serve. No
pension or retirement benefits are accrued as part of Trust expenses.
- 24 -
<PAGE>
The following table shows the total compensation paid to the Trustees
by the Trust and by all investment companies in the Franklin Templeton Group:
<TABLE>
<CAPTION>
Number of Total Compensation
Aggregate Franklin Templeton from All Funds in
Name of Compensation from Fund Boards on which Franklin Templeton
TRUSTEE THE TRUST* TRUSTEE SERVES GROUP**
<S> <C> <C> <C>
Harris J. Ashton $2,050 54 $319,925
Nicholas F. Brady 2,050 23 86,125
F. Bruce Clarke 3,050 19 95,275
Hasso-G von Diergardt-Naglo 2,050 19 75,275
S. Joseph Fortunato 2,050 56 336,065
John Wm. Galbraith 0 22 0
Andrew H. Hines, Jr. 3,050 23 106,125
Betty P. Krahmer 2,050 23 75,275
Gordon S. Macklin 2,050 51 303,685
Fred R. Millsaps 3,050 23 106,125
</TABLE>
* For the fiscal year ended March 31, 1995.
** For the calendar year ended December 31, 1994.
PRINCIPAL SHAREHOLDERS
As of October 20, 1995, there were 760,504 Shares of Growth and Income
Fund outstanding, of which 241 Shares (0.03%) were owned beneficially, directly
or indirectly, by all the Trustees and Officers of the Trust as a group. As of
October 20, 1995, there were 2,074,445 Shares of Infrastructure Fund
outstanding, of which 214Shares (0.02%) were owned beneficially, directly or
indirectly, by all the Trustees and Officers of the Trust as a group. As of
October 20, 1995, there were 309,082 Shares of Americas Government Securities
Fund outstanding, of which 70Shares (less than 0.02%) were owned beneficially,
directly or
indirectly, by all the Trustees and Officers of the Trust as a group. As of
October 20, 1995, there were 423,264 Shares of Greater European Fund
outstanding, of which no Shares were owned beneficially, directly or indirectly,
by all the Trustees and Officers of the Trust as a group. As of October 20,
1995, there were 424,476 Shares of Latin America Fund outstanding, of which no
Shares were owned beneficially, directly or indirectly, by all
- 25 -
<PAGE>
the Trustees and Officers of the Trust as a group. As of October 20, 1995, to
the knowledge of management, no person owned beneficially 5% or more of the
outstanding Shares of Growth and Income Fund-Class I, except Templeton Global
Investors, Inc., 500 E. Broward Blvd., Suite 2100, Fort Lauderdale, Florida
33394 owned 103,614 Shares (14% of the outstanding Shares), and no person owned
beneficially 5% or more of the outstanding Shares of Growth and Income
Fund-Class II, except Lewco Securities Corp., 2 Broadway, New York, New York
10004 owned 7,214 (13% of the outstanding Shares), Prudential Securities, FBO
Christine T. Marks, 4002 Marlane Drive, Pensacola, Florida 32526-2149 owned
9,335 (17% of the outstanding Shares) and Dain Bosworth, Inc., FBO Polytank,
Inc., Attn: Dick Johannek, 62824 250th Street, Litchfield, Minnesota 55355 owned
3,541 (6% of the outstanding Shares). As of October 20, 1995, to the knowledge
of management, no person owned beneficially 5% or more of the outstanding Shares
of Infrastructure Fund-Class I except Templeton Global Investors, Inc., 500 E.
Broward Blvd., Suite 2100, Fort Lauderdale, Florida 33394 owned 100,569 Shares
(5% of the outstanding Shares), and no person owned beneficially 5% or more of
the outstanding Shares of Infrastructure Fund-Class II, except Donna Mickelson
TTEE, Andrew Hopkins Trust, 19480 Ward, Detroit, Michigan 48235-1246 owned 4,651
(6% of the outstanding Shares) and John J. Whitehouse TTEE, John J. Whitehouse
Living Trust, 8037 Pebble Creek Lane W, Ponte Vedra Beach, Florida 32082 owned
9,363 (12% of the outstanding Shares). As of October 20, 1995, to the knowledge
of management, no person owned beneficially 5% or more of the outstanding Shares
of Americas Government Securities Fund, except Templeton Global Investors owned
262,010 Shares (84% of the outstanding Shares). As of October 20, 1995, to the
knowledge of management, no person owned beneficially 5% or more of the
outstanding Shares of Greater European Fund-Class I, except Templeton Global
Investors, Inc., 500 E. Broward Blvd., Suite 2100, Fort Lauderdale, Florida
33394 owned 49,955 Shares (16% of the outstanding Shares) and PaineWebber for
the Benefit of American Guaranty & Trust Co., TTEE Sara Brianne Kiner Trust, PO
Box 15627, Wilmington, Delaware 19850-5627 owned 49,652 Shares (16% of the
outstanding Shares), and no person owned beneficially 5% or more of the
outstanding Shares of Greater European Fund-Class II, except, Templeton Global
Investors, Inc., 500 E. Broward Blvd., Suite 2100, Fort Lauderdale, Florida
33394 owned 49,955 Shares (41% of the outstanding Shares) and Prudential
Securities, FBO J. P. Barger, 600 W Cummings Park, Ste 3500, Woburn, Maryland
01801-6350 owned 49,504 (41% of the outstanding Shares). As of October 20, 1995,
to the knowledge of management, no person owned beneficially 5% or more of the
outstanding Shares of Latin America Fund-Class I except Templeton Global
Investors, Inc., 500 E. Broward Blvd., Suite 2100, Fort Lauderdale, Florida
33394 owned 49,955 Shares (14% of the outstanding Shares), Robert W. Baird &
Co., Inc., PO Box 672, Milwaukee, Wisconsin 53201
- 26 -
<PAGE>
owned 18,843 (5% of the outstanding Shares) and The Northern Trust Company as
Cust FBO Morton/Donnelley 1993 Tr., PO Box 92956, Chicago, Illinois 60675 owned
19,940 Shares (5% of the outstanding Shares), and no person owned beneficially
5% or more of the outstanding Shares of Latin America Fund-Class II, except
Templeton Global Investors, Inc., 500 E. Broward Blvd., Suite 2100, Fort
Lauderdale, Florida 33394 owned 50,000 Shares (55% of the outstanding Shares)
and Geoffrey C. Garth Commingled Asset Account, 32 57th Place, Long Beach,
California 90803 owned 14,711 (16% of the outstanding Shares).
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT MANAGEMENT AGREEMENTS. The Investment Manager of Growth and
Income Fund, Greater European Fund, and Latin America Fund is TGH, a Bahamian
corporation with offices in Nassau, Bahamas. The Investment Manager of
Infrastructure Fund is Templeton Investment Counsel, Inc., a Florida corporation
with offices located at Broward Financial Centre, Fort Lauderdale, Florida
33394-3091. The Investment Manager of Americas Government Securities Fund is
TICI, through the Templeton Global Bond Managers division. The Investment
Management Agreements, dated March 14, 1994, amended May 25, 1995, relating
to Growth and Income Fund and Infrastructure Fund were approved by the
Board of Trustees, including a majority of the Trustees who were not
parties to the Agreements or interested persons of any such party, at a
meeting on May 25, 1995, and by Templeton Global Investors, Inc., as sole
Shareholder of Growth and Income Fund and Infrastructure Fund, on March
11, 1994 and will run through July 31, 1996. The Investment Management
Agreement, dated June 27, 1994, amended May 25, 1995, relating to Americas
Government Securities Fund was approved by the Board of Trustees, including a
majority of the Trustees who were not interested parties to the Agreement or
interested persons of any such party, at a meeting held on May 25, 1995, and
by Templeton Global Investors, Inc., as sole Shareholder of Americas Government
Securities Fund, on June 27, 1994, and will run through July 31, 1996. The
Investment Management Agreements, dated May 7, 1995, amended May 25,
1995 relating to Greater European Fund and Latin America Fund were
approved by the Board of Trustees, including a majority of the Trustees who
were not parties to the Agreements or interested persons of any such
party, at a meeting on May 25, 1995, and by Templeton Global Investors,
Inc., as sole Shareholder of Greater European Fund and Latin America Fund, on
May 7, 1995, and will run through July 31, 1996. The Investment Management
Agreements will continue from year to year thereafter, subject to approval
annually by the Board of Trustees or by vote of a majority of the outstanding
Shares of each Fund (as defined in the 1940 Act) and also, in either event,
with the approval of a majority of those Trustees who are not parties to the
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Agreements or interested persons of any such party in person at a meeting called
for the purpose of voting on such approval.
Each Investment Management Agreement requires a Fund's Investment
Manager to manage the investment and reinvestment of the Fund's assets. The
Investment Managers are not required to furnish any personnel, overhead items or
facilities for the Funds, including daily pricing or trading desk facilities,
although such expenses are paid by investment advisers of some other investment
companies.
Each Investment Management Agreement provides that a Fund's Investment
Manager will select brokers and dealers for execution of a Fund's portfolio
transactions consistent with the Trust's brokerage policies (see "Brokerage
Allocation"). Although the services provided by broker-dealers in accordance
with the brokerage policies incidentally may help reduce the expenses of or
otherwise benefit the Investment Managers and other investment advisory clients
of the Investment Managers and of their affiliates, as well as the Funds, the
value of such services is indeterminable and the Investment Managers' fees are
not reduced by any offset arrangement by reason thereof.
When the Investment Manager of a Fund determines to buy or sell the
same security for a Fund that the Investment Manager or certain of its
affiliates have selected for one or more of the Investment Manager's other
clients or for clients of its affiliates, the orders for all such securities
trades may be placed for execution by methods determined by the Investment
Manager, with approval by the Board of Trustees, to be impartial and fair, in
order to seek good results for all parties. See "Investment Objectives and
Policies -- Trading Policies." Records of securities transactions of persons who
know when orders are placed by a Fund are available for inspection at least four
times annually by the compliance officer of the Trust so that the non-interested
Trustees (as defined in the 1940 Act) can be satisfied that the procedures are
generally fair and equitable to all parties.
Each Investment Management Agreement provides that a Fund's Investment
Manager shall have no liability to the Trust, a Fund or any Shareholder of a
Fund for any error of judgment, mistake of law, or any loss arising out of any
investment or other act or omission in the performance by the Investment Manager
of its duties under the Agreement, except liability resulting from willful
misfeasance, bad faith or gross negligence on the Investment Manager's part or
reckless disregard of its duties under the Agreement. Each Investment Management
Agreement will terminate automatically in the event of its assignment, and may
be terminated by the Trust on behalf of a Fund at any time
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without payment of any penalty on 60 days' written notice, with the approval of
a majority of the Trustees in office at the time or by vote of a majority of the
outstanding voting securities of that Fund (as defined in the 1940 Act).
MANAGEMENT FEES. For its services, Growth and Income Fund pays TGH a
monthly fee equal on an annual basis to 0.75% of its average daily net assets.
Infrastructure Fund pays TICI a monthly fee equal on an annual basis to 0.75% of
its average daily net assets. Americas Government Securities Fund pays TICI a
monthly fee equal on an annual basis to 0.60% of its average daily net assets.
Greater European Fund pays TGH a monthly fee equal on an annual basis to 0.75%
of its average daily net assets. Latin America Fund pays TGH a monthly fee equal
on an annual basis to 1.25% of its average daily net assets. The fees of the
Growth and Income Fund, Infrastructure Fund, Greater European Fund and Latin
America Fund are higher than those paid by most other U.S. investment companies.
Each class of Shares of each Fund pays a portion of the fee, determined by the
proportion of a Fund that it represents.
Each Fund's Investment Manager will comply with any applicable state
regulations which may require it to make reimbursements to a Fund in the event
that the Fund's aggregate operating expenses, including the advisory fee, but
generally excluding interest, taxes, brokerage commissions and extraordinary
expenses, are in excess of specific applicable limitations. The strictest rule
currently applicable to a Fund is 2.5% of the first $30,000,000 of net assets,
2% of the next $70,000,000 of net assets and 1.5% of the remainder.
During the fiscal year ended March 31, 1995, TGH received from Growth
and Income Fund fees of $25,969, and TICI received from Infrastructure Fund fees
of $75,663. During the period from June 27, 1994 (commencement of operations)
through March 31, 1995, TICI received from Americas Government Securities Fund
fees of $7,036.
THE INVESTMENT MANAGERS. The Investment Managers are
indirect wholly owned subsidiaries of Franklin Resources, Inc.
("Franklin"), a publicly traded company whose shares are listed
on the NYSE. Charles B. Johnson (a Trustee and officer of the
Trust) and Rupert H. Johnson, Jr. are principal shareholders of
Franklin and own, respectively, approximately 24% and 16% of its
outstanding shares. Messrs. Charles B. Johnson and Rupert H.
Johnson, Jr. are brothers.
SUB-ADVISORY AGREEMENT. Under a Sub-Advisory Agreement
between TICI and Franklin Advisers, Inc. ("Franklin Advisers"),
Franklin Advisers provides TICI with investment advisory
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assistance and portfolio management advice with respect to Americas Government
Securities Fund's portfolio. Franklin Advisers provides TICI on an ongoing basis
with research services, including information, analytical reports, computer
screening studies, statistical data and factual resumes pertaining to
securities. For its services, TICI pays to Franklin Advisers a fee in U.S.
dollars at an annual rate of 0.25% of Americas Government Securities Fund's
average daily net assets. During the fiscal year ended March 31, 1995, Franklin
Advisers received sub-advisory fees of $2,932.
The Sub-Advisory Agreement provides that it will terminate
automatically in the event of its assignment and that it may be terminated by
the Trust on 60 days' written notice to TICI and to Franklin Advisers, without
penalty, provided that such termination by the Trust is approved by the vote of
a majority of the Trust's Board of Trustees or by vote of a majority of Americas
Government Securities Fund's outstanding Shares. The Sub-Advisory Agreement also
provides that it may be terminated by either TICI or Franklin Advisers upon not
less than 60 days' written notice to the other party. The Sub-Advisory Agreement
dated June 27, 1994 was approved by the Board of Trustees at a meeting held on
March 18, 1994, was approved by Templeton Global Investors, Inc. as sole
Shareholder of Americas Government Securities Fund on June 27, 1994, and will
run through July 31, 1995. The Sub-Advisory Agreement will continue from year to
year thereafter, subject to approval annually by the Board of Trustees or by
vote of a majority of the outstanding Shares of Americas Government Securities
Fund (as defined in the 1940 Act) and also, in either event, with the approval
of a majority of those Trustees who are not parties to the Sub-Advisory
Agreement or interested persons of any such party in person at a meeting called
for the purpose of voting on such approval. Franklin Advisers is relieved of
liability to the Trust for any act or omission in the course of its performance
under the Sub-Advisory Agreement, in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations under the
Agreement.
BUSINESS MANAGER. Templeton Global Investors, Inc. performs
certain administrative functions as Business Manager for the
Funds, including:
o providing office space, telephone, office equipment and
supplies for the Trust;
o paying compensation of the Trust's officers for
services rendered as such;
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o authorizing expenditures and approving bills for
payment on behalf of the Funds;
o supervising preparation of annual and semiannual reports to
Shareholders, notices of dividends, capital gain distributions
and tax credits, and attending to correspondence and other
special communications with individual Shareholders;
o daily pricing of each Fund's investment portfolio and
preparing and supervising publication of daily quotations of
the bid and asked prices of each Fund's Shares, earnings
reports and other financial data;
o monitoring relationships with organizations serving the
Funds, including the custodian and printers;
o providing trading desk facilities for the Funds;
o supervising compliance by the Funds with recordkeeping
requirements under the 1940 Act and regulations thereunder,
with state regulatory requirements, maintaining books and
records for the Funds (other than those maintained by the
custodian and transfer agent), and preparing and filing tax
reports other than the Funds' income tax returns;
o monitoring the qualifications of tax-deferred
retirement plans providing for investment in Shares of
the Funds; and
o providing executive, clerical and secretarial help
needed to carry out these responsibilities.
For its services, the Business Manager receives a monthly fee equal on
an annual basis to 0.15% of the first $200,000,000 of the Trust's aggregate
average daily net assets (I.E., total of the Funds), reduced to 0.135% annually
of the Trust's aggregate net assets in excess of $200,000,000, further reduced
to 0.1% annually of such net assets in excess of $700,000,000, and further
reduced to 0.075% annually of such net assets in excess of $1,200,000,000. The
fee is allocated between the Funds according to their respective average daily
net assets. Each class of Shares of each Fund pays a portion of the fee,
determined by the proportion of the Fund that it represents. Since the Business
Manager's fee covers services often provided by investment advisers to other
funds, each Fund's combined expenses for advisory and administrative services
together may be higher than those of some other investment companies. During the
Fiscal year ended March 31, 1995, the Business Manager received
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from Growth and Income Fund and Infrastructure Fund business management fees of
$5,188 and $15,126, respectively. During the period from June 27, 1994
(commencement of operation) through March 31, 1995, the Business Manager
received from Americas Government Securities Fund business management fees of
$1,752.
The Business Manager is relieved of liability to the Trust for any act
or omission in the course of its performance under the Business Management
Agreement, in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties and obligations under the Agreement. The
Business Management Agreement may be terminated by the Trust on behalf of a Fund
at any time on 60 days' written notice without payment of penalty, provided that
such termination by the Trust shall be directed or approved by vote of a
majority of the Trustees of the Trust in office at the time or by vote of a
majority of the outstanding voting securities of that Fund, and shall terminate
automatically and immediately in the event of its assignment.
Templeton Global Investors, Inc. is a wholly owned
subsidiary of Franklin.
CUSTODIAN AND TRANSFER AGENT. The Chase Manhattan Bank, N.A. serves as
Custodian of the Trust's assets, which are maintained at the Custodian's
principal office, MetroTech Center, Brooklyn, New York 11245, and at the offices
of its branches and agencies throughout the world. The Custodian has entered
into agreements with foreign sub-custodians approved by the Trustees pursuant to
Rule 17f-5 under the 1940 Act. The Custodian, its branches and sub-custodians
generally domestically, and frequently abroad, do not actually hold certificates
for the securities in their custody, but instead have book records with domestic
and foreign securities depositories, which in turn have book records with the
transfer agents of the issuers of the securities. Compensation for the services
of the Custodian is based on a schedule of charges agreed on from time to time.
Franklin Templeton Investor Services, Inc. serves as the Funds'
Transfer Agent. Services performed by the Transfer Agent include processing
purchase, transfer and redemption orders; making dividend payments, capital gain
distributions and reinvestments; and handling routine communications with
Shareholders. The Transfer Agent receives an annual fee of $13.74 per
Shareholder account plus out-of-pocket expenses from Growth and Income Fund,
Infrastructure Fund, Greater European Fund and Latin America Fund and an annual
fee of $14.77 per Shareholder account plus out-of-pocket expenses from Americas
Government Securities Fund. These fees are adjusted each year to reflect changes
in the Department of Labor Consumer Price Index.
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LEGAL COUNSEL. Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, D.C. 20005, is legal counsel for the Trust.
INDEPENDENT ACCOUNTANTS. The firm of McGladrey & Pullen, LLP, 555 Fifth
Avenue, New York, New York 10017, serves as independent accountants for the
Trust. Its audit services comprise examination of the Funds' financial
statements and review of the Funds' filings with the Securities and Exchange
Commission ("SEC") and the Internal Revenue Service ("IRS").
REPORTS TO SHAREHOLDERS. The Funds' fiscal years end on March 31.
Shareholders are provided at least semiannually with reports showing the Funds'
portfolios and other information, including an annual report with financial
statements audited by the independent accountants. Shareholders who would like
to receive an interim quarterly report may phone the Fund Information Department
at 1-800/DIAL BEN.
BROKERAGE ALLOCATION
The Investment Management Agreements provide that each Fund's
Investment Manager is responsible for selecting members of securities exchanges,
brokers and dealers (such members, brokers and dealers being hereinafter
referred to as "brokers") for the execution of the Fund's portfolio transactions
and, when applicable, the negotiation of commissions in connection therewith.
All decisions and placements are made in accordance with the following
principles:
1. Purchase and sale orders are usually placed with
brokers who are selected by a Fund's Investment Manager
as able to achieve "best execution" of such orders.
"Best execution" means prompt and reliable execution at
the most favorable securities price, taking into
account the other provisions hereinafter set forth.
The determination of what may constitute best execution
and price in the execution of a securities transaction
by a broker involves a number of considerations,
including, without limitation, the overall direct net
economic result to a Fund (involving both price paid or
received and any commissions and other costs paid), the
efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large
block is involved, availability of the broker to stand
ready to execute possibly difficult transactions in the
future, and the financial strength and stability of the
broker. Such considerations are judgmental and are
weighed by the Investment Managers in determining the
overall reasonableness of brokerage commissions.
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2. In selecting brokers for portfolio transactions, each Fund's
Investment Manager takes into account its past experience as
to brokers qualified to achieve "best execution," including
brokers who specialize in any foreign securities held by the
Fund.
3. The Investment Managers are authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services are
defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "1934 Act"), for a Fund and/or other
accounts, if any, for which the Investment Managers
exercise investment discretion (as defined in Section
3(a)(35) of the 1934 Act) and, as to transactions to
which fixed minimum commission rates are not
applicable, to cause a Fund to pay a commission for
effecting a securities transaction in excess of the
amount another broker would have charged for effecting
that transaction, if the Investment Manager for that
Fund in making the selection in question determines in
good faith that such amount of commission is reasonable
in relation to the value of the brokerage and research
services provided by such broker, viewed in terms of
either that particular transaction or the Investment
Manager's overall responsibilities with respect to that
Fund and the other accounts, if any, as to which it
exercises investment discretion. In reaching such
determination, the Investment Managers are not required
to place or attempt to place a specific dollar value on
the research or execution services of a broker or on
the portion of any commission reflecting either of said
services. In demonstrating that such determinations
were made in good faith, the Investment Managers shall
be prepared to show that all commissions were allocated
and paid for purposes contemplated by the Trust's
brokerage policy; that the research services provide
lawful and appropriate assistance to the Investment
Managers in the performance of their investment
decision-making responsibilities; and that the
commissions paid were within a reasonable range. The
determination that commissions were within a reasonable
range shall be based on any available information as to
the level of commissions known to be charged by other
brokers on comparable transactions, but there shall be
taken into account the Trust's policies that (a)
obtaining a low commission is deemed secondary to
obtaining a favorable securities price, since it is
recognized that usually it is more beneficial to a Fund
to obtain a favorable price than to pay the lowest
commission; and (b) the quality, comprehensiveness and
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frequency of research studies which are provided for the
Investment Managers are useful to the Investment Managers in
performing their advisory services under their Investment
Management Agreements with the Trust. Research services
provided by brokers to the Investment Managers are considered
to be in addition to, and not in lieu of, services required to
be performed by the Investment Managers under its Investment
Management Agreements with the Trust. Research furnished by
brokers through whom a Fund effects securities transactions
may be used by the Investment Managers for any of their
accounts, and not all such research may be used by the
Investment Managers for the Funds. When execution of portfolio
transactions is allocated to brokers trading on exchanges with
fixed brokerage commission rates, account may be taken of
various services provided by the broker, including quotations
outside the United States for daily pricing of foreign
securities held in a Fund's portfolio.
4. Purchases and sales of portfolio securities within the United
States other than on a securities exchange are executed with
primary market makers acting as principal, except where, in
the judgment of a Fund's Investment Manager, better prices and
execution may be obtained on a commission basis or from other
sources.
5. Sales of the Funds' Shares (which shall be deemed to
include also shares of other companies registered under
the 1940 Act which have either the same investment
adviser or an investment adviser affiliated with either
Fund's Investment Manager) made by a broker are one
factor among others to be taken into account in
deciding to allocate portfolio transactions (including
agency transactions, principal transactions, purchases
in underwritings or tenders in response to tender
offers) for the account of a Fund to that broker;
provided that the broker shall furnish "best
execution," as defined in paragraph 1 above, and that
such allocation shall be within the scope of that
Fund's other policies as stated above; and provided
further, that in every allocation made to a broker in
which the sale of Shares is taken into account there
shall be no increase in the amount of the commissions
or other compensation paid to such broker beyond a
reasonable commission or other compensation determined,
as set forth in paragraph 3 above, on the basis of best
execution alone or best execution plus research
services, without taking account of or placing any
value upon such sale of Shares.
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Insofar as known to management, no Trustee or officer of the Trust, nor
the Investment Managers or Principal Underwriter or any person affiliated with
either of them, has any material direct or indirect interest in any broker
employed by or on behalf of the Trust. Franklin Templeton Distributors, Inc.,
the Trust's Principal Underwriter, is a registered broker-dealer, but it does
not intend to execute any purchase or sale transactions for the Funds'
portfolios or to participate in any commissions on any such transactions. The
total brokerage commissions on the portfolio transactions for Growth and Income
Fund and Infrastructure Fund during the year ended March 31, 1995 (not including
any spreads or concessions on principal transactions) were $11,237 and $63,970,
respectively. The total brokerage commissions on the portfolio transactions for
Americas Government Securities Fund during the period from June 27, 1994
(commencement of operations) through March 31, 1995 (not including any spreads
or concessions on principal transactions) were $ -0- . All portfolio
transactions are allocated to broker-dealers only when their prices and
execution, in the judgment of the Investment Managers, are equal to the best
available within the scope of the Trust's policies. There is no fixed method
used in determining which broker-dealers receive which order or how many orders.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Each Fund's Prospectus describes the manner in which a
Fund's Shares may be purchased and redeemed. See "How to Buy
Shares of the Fund" and "How to Sell Shares of the Fund."
Net asset value per Share is calculated separately for each Fund. Net
asset value per Share is determined as of the scheduled closing of the NYSE
(generally 4:00 p.m., New York time), every Monday through Friday (exclusive of
national business holidays). The Trust's offices will be closed, and net asset
value will not be calculated, on those days on which the NYSE is closed, which
currently are: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close of
business in New York on each day on which the NYSE is open. Trading of European
or Far Eastern securities generally, or in a particular country or countries,
may not take place on every New York business day. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and on which each Fund's net asset value is not calculated. Each Fund calculates
net asset value per Share, and therefore effects sales, redemptions and
repurchases of its
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Shares, as of the close of the NYSE once on each day on which that Exchange is
open. Such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and if events occur which materially affect the value of those
foreign securities, they will be valued at fair market value as determined by
the management and approved in good faith by the Board of Trustees.
The Board of Trustees may establish procedures under which a Fund may
suspend the determination of net asset value for the whole or any part of any
period during which (i) the NYSE is closed other than for customary weekend and
holiday closings, (ii) trading on the NYSE is restricted, (iii) an emergency
exists as a result of which disposal of securities owned by a Fund is not
reasonably practicable or it is not reasonably practicable for a Fund fairly to
determine the value of its net assets, or (iv) for such other period as the SEC
may by order permit for the protection of the holders of a Fund's Shares.
OWNERSHIP AND AUTHORITY DISPUTES. In the event of disputes involving
multiple claims of ownership or authority to control a Shareholder's account,
each Fund has the right (but has no obligation) to: (i) freeze the account and
require the written agreement of all persons deemed by the Fund to have a
potential property interest in the account, prior to executing instructions
regarding the account; or (ii) interplead disputed funds or accounts with a
court of competent jurisdiction. Moreover, the Fund may surrender ownership of
all or a portion of the account to the IRS in response to a Notice of Levy.
In addition to the special purchase plans described in the Prospectus,
the following special purchase plans also are available:
TAX-DEFERRED RETIREMENT PLANS. The Trust offers its
Shareholders the opportunity to participate in the following
types of retirement plans:
o For individuals whether or not covered by other
qualified plans;
o For simplified employee pensions;
o For employees of tax-exempt organizations; and
o For corporations, self-employed individuals and
partnerships.
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Capital gains and income received by the foregoing plans generally are
exempt from taxation until distribution from the plans. Investors considering
participation in any such plan should review specific tax laws relating thereto
and should consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan. Additional information,
including the fees and charges with respect to all of these plans, is available
upon request to the Principal Underwriter. No distribution under a retirement
plan will be made until Franklin Templeton Trust Company ("FTTC") receives the
participant's election on IRS Form W-4P (available on request from FTTC, and
such other documentation as it deems necessary, as to whether or not U.S.
federal income tax is to be withheld from such distribution.
INDIVIDUAL RETIREMENT ACCOUNT (IRA). All individuals (whether or not
covered by qualified private or governmental retirement plans) may purchase
Shares of a Fund pursuant to an IRA. However, contributions to an IRA by an
individual who is covered by a qualified private or governmental plan may not be
tax-deductible depending on the individual's income. Custodial services for IRAs
are available through FTTC. Disclosure statements summarizing certain aspects of
IRAs are furnished to all persons investing in such accounts, in accordance with
IRS regulations.
SIMPLIFIED EMPLOYEE PENSIONS (SEP-IRA). For employers who wish to
establish a simplified form of employee retirement program investing in Shares
of a Fund, there are available Simplified Employee Pensions invested in IRA
Plans. Details and materials relating to these plans will be furnished upon
request to the Principal Underwriter.
RETIREMENT PLAN FOR EMPLOYEES OF TAX-EXEMPT ORGANIZATIONS (403(B)).
Employees of public school systems and certain types of charitable organizations
may enter into a deferred compensation arrangement for the purchase of Shares of
a Fund without being taxed currently on the investment. Contributions which are
made by the employer through salary reduction are excludable from the gross
income of the employee. Such deferred compensation plans, which are intended to
qualify under Section 403(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), are available through the Principal Underwriter.
Custodial services are provided by FTTC.
QUALIFIED PLAN FOR CORPORATIONS, SELF-EMPLOYED INDIVIDUALS AND
PARTNERSHIPS. For employers who wish to purchase Shares of a Fund in conjunction
with employee retirement plans, there is a prototype master plan which has been
approved by the IRS. A "Section 401(k) plan" is also available. FTTC furnishes
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custodial services for these plans. For further details, including custodian
fees and plan administration services, see the master plan and related material
which is available from the Principal Underwriter.
LETTER OF INTENT. Purchasers who intend to invest $100,000 or more in
Shares of Templeton Americas Government Securities Fund, or $50,000 or more in
Class I Shares of Growth and Income Fund, Infrastructure Fund, Greater European
Fund, Latin America Fund or any other fund in the Franklin Group of Funds and
the Templeton Family of Funds, except Templeton Capital Accumulator Fund, Inc.,
Templeton Variable Annuity Fund, Templeton Variable Products Series Fund,
Franklin Valuemark Funds and Franklin Government Securities Trust (the "Franklin
Templeton Funds"), within 13 months (whether in one lump sum or in installments,
the first of which may not be less than 5% of the total intended amount and each
subsequent installment not less than $25 unless the investor is a qualifying
employee benefit plan (the "Benefit Plan"), including automatic investment and
payroll deduction plans), and to beneficially hold the total amount of such
Class I Shares fully paid for and outstanding simultaneously for at least one
full business day before the expiration of that period, should execute a Letter
of Intent ("LOI") on the form provided in the Shareholder Application in the
Prospectus. Payment for not less than 5% of the total intended amount must
accompany the executed LOI unless the investor is a Benefit Plan. Except for
purchases of Shares by a Benefit Plan, those Class I Shares purchased with the
first 5% of the intended amount stated in the LOI will be held as "Escrowed
Shares" for as long as the LOI remains unfulfilled. Although the Escrowed Shares
are registered in the investor's name, his full ownership of them is conditional
upon fulfillment of the LOI. No Escrowed Shares can be redeemed by the investor
for any purpose until the LOI is fulfilled or terminated. If the LOI is
terminated for any reason other than fulfillment, the Transfer Agent will redeem
that portion of the Escrowed Shares required and apply the proceeds to pay any
adjustment that may be appropriate to the sales commission on all Class I Shares
(including the Escrowed Shares) already purchased under the LOI and apply any
unused balance to the investor's account. The LOI is not a binding obligation to
purchase any amount of Shares, but its execution will result in the purchaser
paying a lower sales charge at the appropriate quantity purchase level. A
purchase not originally made pursuant to an LOI may be included under a
subsequent LOI executed within 90 days of such purchase. In this case, an
adjustment will be made at the end of 13 months from the effective date of the
LOI at the net asset value per Share then in effect, unless the investor makes
an earlier written request to the Principal Underwriter upon fulfilling the
purchase of Shares under the LOI. In addition, the aggregate value of any
Shares, including Class II Shares,
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purchased prior to the 90-day period referred to above may be applied to
purchases under a current LOI in fulfilling the total intended purchases under
the LOI. However, no adjustment of sales charges previously paid on purchases
prior to the 90-day period will be made.
If an LOI is executed on behalf of a benefit plan (such plans are
described under "How to Buy Shares of the Fund -- Net Asset Value Purchases
(Both Classes)" in the Prospectus), the level and any reduction in sales charge
for these employee benefit plans will be based on actual plan participation and
the projected investments in the Franklin Templeton Funds under the LOI. Benefit
Plans are not subject to the requirement to reserve 5% of the total intended
purchase, or to any penalty as a result of the early termination of a plan, nor
are Benefit Plans entitled to receive retroactive adjustments in price for
investments made before executing LOIs.
SPECIAL NET ASSET VALUE PURCHASES. As discussed in the Prospectus under
"How to Buy Shares of the Fund -- Description of Special Net Asset Value
Purchases," certain categories of investors may purchase Class I Shares of a
Fund at net asset value (without a front-end or contingent deferred sales
charge). Franklin Templeton Distributors, Inc. ("FTD") or one of its affiliates
may make payments, out of its own resources, to securities dealers who initiate
and are responsible for such purchases, as indicated below. FTD may make these
payments in the form of contingent advance payments, which may require
reimbursement from the securities dealers with respect to certain redemptions
made within 12 months of the calendar month following purchase, as well as other
conditions, all of which may be imposed by an agreement between FTD, or its
affiliates, and the securities dealer.
The following amounts will be paid by FTD or one of its affiliates, out
of its own resources, to securities dealers who initiate and are responsible for
(i) purchases of most equity and fixed-income Franklin Templeton Funds made at
net asset value by certain designated retirement plans (excluding IRA and IRA
rollovers): 1.00% on sales of $1 million but less than $2 million, plus 0.80% on
sales of $2 million but less than $3 million, plus 0.50% on sales of $3 million
but less than $50 million, plus 0.25% on sales of $50 million but less than $100
million, plus 0.15% on sales of $100 million or more; and (ii) purchases of most
fixed-income Franklin Templeton Funds made at net asset value by non-designated
retirement plans: 0.75% on sales of $1 million but less than $2 million, plus
0.60% on sales of $2 million but less than $3 million, plus 0.50% on sales of $3
million but less than $50 million, plus 0.25% on sales of $50 million but less
than $100 million, plus 0.15% on sales of $100
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million or more. These payment breakpoints are reset every 12 months for
purposes of additional purchases. With respect to purchases made at net asset
value by certain trust companies and trust departments of banks and certain
retirement plans of organizations with collective retirement plan assets of $10
million or more, FTD, or one of its affiliates, out of its own resources, may
pay up to 1% of the amount invested.
Under agreements with certain banks in Taiwan, Republic of China, the
Funds' Shares are available to such banks' discretionary trust funds at net
asset value. The banks may charge service fees to their customers who
participate in the discretionary trusts. Pursuant to agreements, a portion of
such service fees may be paid to FTD, or an affiliate of FTD to help defray
expenses of maintaining a service office in Taiwan, including expenses related
to local literature fulfillment and communication facilities.
TAX STATUS
The following discussion summarizes certain U.S. Federal tax
considerations incident to an investment in a Fund.
Each Fund intends to qualify as a regulated investment company under
the Code. To so qualify, each Fund must, among other things: (a) derive at least
90% of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities and gains from the sale or other disposition of foreign currencies,
or other income (including gains from options, futures contracts and forward
contracts) derived with respect to the Fund's business of investing in stocks,
securities or currencies; (b) derive less than 30% of its gross income from the
sale or other disposition of the following assets held for less than three
months: (i) stock and securities, (ii) options, futures and forward contracts
(other than options, futures and forward contracts on foreign currencies), and
(iii) foreign currencies (and options, futures and forward contracts on foreign
currencies) which are not directly related to the Fund's principal business of
investing in stocks and securities (or options and futures with respect to stock
or securities); (c) diversify its holdings so that, at the end of each quarter,
(i) at least 50% of the value of the Fund's total assets is represented by cash
and cash items, U.S. Government securities, securities of other regulated
investment companies, and other securities, with such other securities limited
in respect of any one issuer to an amount not greater in value than 5% of the
Fund's total assets and to not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of the Fund's
total assets is invested in the
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securities (other than U.S. Government securities or securities of other
regulated investment companies) of any one issuer or of any two or more issuers
that the Fund controls and that are determined to be engaged in the same
business or similar or related businesses; and (d) distribute at least 90% of
its investment company taxable income (which includes, among other items,
dividends, interest and net short-term capital gains in excess of net long-term
capital losses) each taxable year.
The Treasury Department is authorized to issue regulations providing
that foreign currency gains that are not directly related to a Fund's principal
business of investing in stock or securities (or options and futures with
respect to stock or securities) will be excluded from the income which qualifies
for purposes of the 90% gross income requirement described above. To date,
however, no such regulations have been issued.
The status of the Funds as regulated investment companies does not
involve government supervision of management or of their investment practices or
policies. As a regulated investment company, a Fund generally will be relieved
of liability for U.S. Federal income tax on that portion of its net investment
income and net realized capital gains which it distributes to its Shareholders.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement also are subject to a nondeductible 4% excise tax. To
prevent application of the excise tax, each Fund intends to make distributions
in accordance with the calendar year distribution requirement.
Dividends of net investment income and net short-term capital gains are
taxable to Shareholders as ordinary income. Distributions of net investment
income may be eligible for the corporate dividends-received deduction to the
extent attributable to a Fund's qualifying dividend income. However, the
alternative minimum tax applicable to corporations may reduce the benefit of the
dividends-received deduction. Distributions of net capital gains (the excess of
net long-term capital gains over net short-term capital losses) designated by a
Fund as capital gain dividends are taxable to Shareholders as long-term capital
gains, regardless of the length of time the Fund's Shares have been held by a
Shareholder, and are not eligible for the dividends-received deduction.
Generally, dividends and distributions are taxable to Shareholders, whether
received in cash or reinvested in Shares of a Fund. Any distributions that are
not from a Fund's net investment income or net capital realized gain may be
characterized as a return of capital to Shareholders or, in some cases, as
capital gain. Shareholders will be notified annually as to the Federal tax
status of dividends and distributions they receive and any tax withheld thereon.
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Distributions by a Fund reduce the net asset value of the Fund Shares.
Should a distribution reduce the net asset value below a Shareholder's cost
basis, the distribution nevertheless would be taxable to the Shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implication of
buying Shares just prior to a distribution by a Fund. The price of Shares
purchased at that time includes the amount of the forthcoming distribution, but
the distribution will generally be taxable to them.
Certain of the debt securities acquired by the Funds may be treated as
debt securities that were originally issued at a discount. Original issue
discount can generally be defined as the difference between the price at which a
security was issued and its stated redemption price at maturity. Although no
cash income is actually received by the Funds, original issue discount that
accrues on a debt security in a given year generally is treated for Federal
income tax purposes as interest and, therefore, such income would be subject to
the distribution requirements of the Code.
Some of the debt securities may be purchased by the Funds at a discount
which exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for Federal income tax purposes.
The gain realized on the disposition of any taxable debt security having market
discount generally will be treated as ordinary income to the extent it does not
exceed the accrued market discount on such debt security. Generally, market
discount accrues on a daily basis for each day the debt security is held by a
Fund at a constant rate over the time remaining to the debt security's maturity
or, at the election of a Fund, at a constant yield to maturity which takes into
account the semiannual compounding of interest.
A Fund may invest in debt securities issued in bearer form. Special
rules applicable to bearer debt may in some cases result in (i) treatment of
gain realized with respect to such a debt security as ordinary income and (ii)
disallowance of deductions for losses realized on dispositions of such debt
securities. If these special rules apply, the amount that must be distributed to
Fund Shareholders may be increased as compared to a fund that did not invest in
debt securities issued in bearer form.
A Fund may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC if at least one-half of its assets
constitute investment-type
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assets or 75% or more of its gross income is investment-type income. Under the
PFIC rules, an "excess distribution" received with respect to PFIC stock is
treated as having been realized ratably over the period during which a Fund held
the PFIC stock. A Fund itself will be subject to tax on the portion, if any, of
the excess distribution that is allocated to that Fund's holding period in prior
taxable years (and an interest factor will be added to the tax, as if the tax
had actually been payable in such prior taxable years) even though the Fund
distributes the corresponding income to Shareholders. Excess distributions
include any gain from the sale of PFIC stock as well as certain distributions
from a PFIC. All excess distributions are taxable as ordinary income.
A Fund may be able to elect alternative tax treatment with respect to
PFIC stock. Under an election that currently may be available, a Fund generally
would be required to include in its gross income its share of the earnings of a
PFIC on a current basis, regardless of whether any distributions are received
from the PFIC. If this election is made, the special rules, discussed above,
relating to the taxation of excess distributions, would not apply. In addition,
another election may be available that would involve marking to market the
Funds' PFIC shares at the end of each taxable year (and on certain other dates
prescribed in the Code), with the result that unrealized gains are treated as
though they were realized. If this election were made, tax at the Fund level
under the PFIC rules would generally be eliminated, but the Funds could, in
limited circumstances, incur nondeductible interest charges. Each Fund's
intention to qualify annually as a regulated investment company may limit its
elections with respect to PFIC shares.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject a Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to Share-holders, and which will be taxed to Shareholders as
ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not invest in PFIC stock.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other income or similar taxes imposed by such
countries. If more than 50% of the value of a Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, that Fund
will be eligible and intends to elect to "pass through" to the Fund's
Shareholders the amount of foreign taxes paid by that Fund. Pursuant to this
election, a Shareholder will be required to
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include in gross income (in addition to taxable dividends actually received) his
pro rata share of the foreign taxes paid by a Fund, and will be entitled either
to deduct (as an itemized deduction) his pro rata share of foreign income and
similar taxes in computing his taxable income or to use it as a foreign tax
credit against his U.S. Federal income tax liability, subject to limitations. No
deduction for foreign taxes may be claimed by a Shareholder who does not itemize
deductions, but such a Shareholder may be eligible to claim the foreign tax
credit (see below). Each Shareholder will be notified within 60 days after the
close of the relevant Fund's taxable year whether the foreign taxes paid by the
Fund will "pass through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the Shareholder's U.S. tax attributable to his foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of a Fund's income flows through to its Shareholders. With respect to a
Fund, gains from the sale of securities will be treated as derived from U.S.
sources and certain currency fluctuation gains, including fluctuation gains from
foreign currency-denominated debt securities, receivables and payables, will be
treated as ordinary income derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income (as
defined for purposes of the foreign tax credit), including the foreign source
passive income passed through by a Fund. Shareholders may be unable to claim a
credit for the full amount of their proportionate share of the foreign taxes
paid by a Fund. Foreign taxes may not be deducted in computing alternative
minimum taxable income and the foreign tax credit can be used to offset only 90%
of the alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If a Fund is not eligible
to make the election to "pass through" to its Shareholders its foreign taxes,
the foreign income taxes it pays generally will reduce investment company
taxable income and the distributions by a Fund will be treated as United States
source income.
Certain options, futures, and foreign currency forward contracts in
which the Funds may invest are "section 1256 contracts." Gains or losses on
section 1256 contracts generally are considered 60% long-term and 40% short-term
capital gains or losses ("60/40"); however, foreign currency gains or losses (as
discussed below) arising from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts held by a Fund at the end
of each taxable year (and on certain other dates as prescribed under the Code)
are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized.
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Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for U.S. Federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by a Fund. In addition, losses
realized by a Fund on positions that are part of the straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to a Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by a Fund which is taxed as ordinary income when
distributed to Shareholders.
A Fund may make one or more of the elections available under the Code
which are applicable to straddles. If a Fund makes any of the elections, the
amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to Shareholders and which will be taxed to Shareholders as ordinary
income or long-term capital gain may be increased or decreased as compared to a
fund that did not engage in such hedging transactions.
Requirements relating to each Fund's tax status as a regulated
investment company may limit the extent to which a Fund will be able to engage
in transactions in options, futures, and foreign currency forward contracts.
If a Fund invests in another investment company, it is possible that
the Fund would not receive information or distributions from the underlying
investment company in a time frame that permits the Fund to meet its tax-related
requirements in an optimal manner. However, it is anticipated that the Fund
would seek to minimize these risks. The diversification and distribution
requirements applicable to each Fund may limit the extent to which each Fund
will be able to invest in other investment companies.
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Fund accrues income or
other receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time
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a Fund actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition of debt
securities denominated in a foreign currency and on disposition of certain
financial contracts and options, gains or losses attributable to fluctuations in
the value of foreign currency between the date of acquisition of the security or
contract and the date of disposition also are treated as ordinary gain or loss.
These gains and losses, referred to under the Code as "section 988" gains and
losses, may increase or decrease the amount of a Fund's net investment income to
be distributed to its Shareholders as ordinary income. For example, fluctuations
in exchange rates may increase the amount of income that a Fund must distribute
in order to qualify for treatment as a regulated investment company and to
prevent application of an excise tax on undistributed income. Alternatively,
fluctuations in exchange rates may decrease or eliminate income available for
distribution. If section 988 losses exceed other net investment income during a
taxable year, a Fund would not be able to make ordinary dividend distributions,
or distributions made before the losses were realized would be recharacterized
as return of capital to Shareholders for Federal income tax purposes, rather
than as an ordinary dividend, reducing each Shareholder's basis in his Fund
Shares, or as a capital gain.
Upon the sale or exchange of his Shares, a Shareholder will realize a
taxable gain or loss depending upon his basis in the Shares. Such gain or loss
will be treated as capital gain or loss if the Shares are capital assets in the
Shareholder's hands, and generally will be long-term if the Shareholder's
holding period for the Shares is more than one year and generally otherwise will
be short-term. Any loss realized on a sale or exchange will be disallowed to the
extent that the Shares disposed of are replaced (including replacement through
the reinvesting of dividends and capital gain distributions in a Fund) within a
period of 61 days beginning 30 days before and ending 30 days after the
disposition of the Shares. In such a case, the basis of the Shares acquired will
be adjusted to reflect the disallowed loss. Any loss realized by a Shareholder
on the sale of a Fund's Shares held by the Shareholder for six months or less
will be treated for Federal income tax purposes as a long-term capital loss to
the extent of any distributions of long-term capital gains received by the
Shareholder with respect to such Shares.
In some cases, Shareholders will not be permitted to take sales charges
into account for purposes of determining the amount of gain or loss realized on
the disposition of their Shares. This prohibition generally applies where (i)
the Shareholder incurs a sales charge in acquiring the stock of a regulated
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investment company, (ii) the stock is disposed of before the 91st day after the
date on which it was acquired, and (iii) the Shareholder subsequently acquires
shares of the same or another regulated investment company and the otherwise
applicable sales charge is reduced or eliminated under a "reinvestment right"
received upon the initial purchase of shares of stock. In that case, the gain or
loss recognized will be determined by excluding from the tax basis of the Shares
exchanged all or a portion of the sales charge incurred in acquiring those
Shares. This exclusion applies to the extent that the otherwise applicable sales
charge with respect to the newly acquired Shares is reduced as a result of
having incurred a sales charge initially. Sales charges affected by this rule
are treated as if they were incurred with respect to the stock acquired under
the reinvestment right. This provision may be applied to successive acquisitions
of stock.
Each Fund generally will be required to withhold Federal income tax at
a rate of 31% ("backup withholding") from dividends paid, capital gain
distributions, and redemption proceeds to Shareholders if (i) the Shareholder
fails to furnish a Fund with the Shareholder's correct taxpayer identification
number or social security number and to make such certifications as a Fund may
require, (ii) the IRS notifies the Shareholder or a Fund that the Shareholder
has failed to report properly certain interest and dividend income to the IRS
and to respond to notices to that effect, or (iii) when required to do so, the
Shareholder fails to certify that he is not subject to backup withholding. Any
amounts withheld may be credited against the Shareholder's Federal income tax
liability.
Dividends, including capital gain dividends, declared in October,
November, or December with a record date in such month and paid during the
following January will be treated as having been paid by a Fund and received by
Shareholders on December 31 of the calendar year in which declared, rather than
the calendar year in which the dividends are actually received.
Distributions also may be subject to state, local and foreign taxes.
U.S. tax rules applicable to foreign investors may differ significantly from
those outlined above. This discussion does not purport to deal with all of the
tax consequences applicable to Shareholders. Shareholders are advised to consult
their own tax advisers for details with respect to the particular tax
consequences to them of an investment in a Fund.
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PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc. ("FTD" or the
"Principal Underwriter"), 700 Central Avenue, P.O. Box 33030, St.
Petersburg, Florida 33733-8030, toll free telephone (800) 237-
0738, is the Principal Underwriter of each Fund's Shares. FTD is
a wholly owned subsidiary of Franklin.
Each Fund, pursuant to Rule 12b-1 under the 1940 Act, has adopted a
Distribution Plan with respect to each class of Shares (the "Plans"). Under the
Plans adopted with respect to Class I Shares (including all Shares issued by
Americas Government Securities Fund), each Fund may reimburse FTD or others
quarterly (subject to a limit of 0.35% per annum of each Fund's average daily
net assets attributable to Class I Shares) for costs and expenses incurred by
FTD or others in connection with any activity which is primarily intended to
result in the sale of the Funds' Shares. Growth and Income Fund, Infrastructure
Fund, Greater European Fund and Latin America Fund also have a second class of
Shares, designated Class II Shares. Under the Plans adopted with respect to
Class II Shares, each Fund will pay FTD or others quarterly (subject to a limit
of 1.00% per annum of each Fund's average daily assets attributable to Class II
Shares of which up to 0.25% of such net assets may be paid to dealers for
personal service and/or maintenance of Shareholder accounts) for costs and
expenses incurred by FTD or others in connection with any activity which is
primarily intended to result in the sale of the Funds' Shares. Payments to FTD
or others could be for various types of activities, including (i) payments to
broker-dealers who provide certain services of value to each Fund's Shareholders
(sometimes referred to as a "trail fee"); (ii) reimbursement of expenses
relating to selling and servicing efforts or of organizing and conducting sales
seminars; (iii) payments to employees or agents of the Principal Underwriter who
engage in or support distribution of Shares; (iv) payments of the costs of
preparing, printing and distributing Prospectuses and reports to prospective
investors and of printing and advertising expenses; (v) payment of dealer
commissions and wholesaler compensation in connection with sales of the Funds'
Shares and interest or carrying charges in connection therewith; and (vi) such
other similar services as the Trust's Board of Trustees determines to be
reasonably calculated to result in the sale of Shares. Under the Plans adopted
with respect to Class I Shares, the costs and expenses not reimbursed in any one
given quarter (including costs and expenses not reimbursed because they exceed
0.35% of a Fund's average daily net assets attributable to Class I Shares) may
be reimbursed in subsequent quarters or years.
During the fiscal year ended March 31, 1995, FTD incurred costs and
expenses (including advanced commissions) of $12,120 in
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connection with distribution of Growth and Income Fund's Class I Shares, and
$35,373 in connection with the distribution of Infrastructure Fund's Class I
Shares, which amounts were reimbursed by the Funds pursuant to the Plans (Class
II Shares were not offered during this period). During the period from June 27,
1994 (commencement of operations) through March 31, 1995, FTD incurred costs and
expenses (including advanced commissions) of $4,630 in connection with
distribution of Americas Government Securities Fund's Class I Shares (Class II
Shares were not offered during this period), which amounts were reimbursed by
the Fund pursuant to the Plan. FTD had informed the Funds that it had no
unreimbursed expenses under the Plans at March 31, 1995. In the event that any
Plan is terminated, the Trust will not be liable to FTD for any unreimbursed
expense that have been carried forward from previous months or years. During the
fiscal year ended March 31, 1995, FTD spent, with respect to Growth and Income
Fund, the following amounts on: compensation to dealers $6,148; sales promotion
$130,769; sales materials $-0-; printing $95,785; advertising $429,842; and
wholesaler commissions $665; and with respect to Infrastructure Fund, the
following amounts on: compensation to dealer $22,699; sales promotion $142,589;
sales materials $ -0-; printing $98,041; advertising $700,934; and wholesaler
commission $2,637. During the period from June 27, 1994 (commencement of
operation) through March 31, 1995, FTD spent, with respect to Americas
Government Securities Fund, the following amounts on: compensation to dealers
$393; sales promotion $ -0-; sales materials $ -0-; printing $7,766; advertising
$ -0-; and wholesaler commissions $310.
The Distribution Agreement provides that the Principal Underwriter will
use its best efforts to maintain a broad and continuous distribution of each
Fund's Shares among bona fide investors and may sign selling agreements with
responsible dealers, as well as sell to individual investors. The Shares are
sold only at the Offering Price in effect at the time of sale, and each Fund
receives not less than the full net asset value of the Shares sold. The discount
between the Offering Price and the net asset value of a Fund's Shares may be
retained by the Principal Underwriter or it may reallow all or any part of such
discount to dealers. During the fiscal year ended March 31, 1995, FTD retained
of such discount $22,379 or approximately 10.99% of the gross commissions on
sales of Growth and Income Fund and $52,041 or approximately 7.13% of the gross
commission on sales of Infrastructure Fund. During the period from June 27, 1994
(commencement of operations) through March 31, 1995, FTD retained $963 or
approximately 11.83% of the gross commissions on sales of Americas Government
Securities Fund.
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The Distribution Agreement provides that each Fund shall pay the costs
and expenses incident to registering and qualifying its Shares for sale under
the Securities Act of 1933 and under the applicable blue sky laws of the
jurisdictions in which the Principal Underwriter desires to distribute such
Shares, and for preparing, printing and distributing prospectuses and reports to
Shareholders. The Principal Underwriter pays the cost of printing additional
copies of prospectuses and reports to Shareholders used for selling purposes.
(The Funds pay costs of preparation, set-up and initial supply of their
prospectuses for existing Shareholders.)
The Distribution Agreement is subject to renewal from year to year in
accordance with the provisions of the 1940 Act and terminates automatically in
the event of its assignment. The Distribution Agreement may be terminated
without penalty by either party upon 60 days' written notice to the other,
provided termination by the Trust shall be approved by the Board of Trustees or
a majority (as defined in the 1940 Act) of the Shareholders. The Principal
Underwriter is relieved of liability for any act or omission in the course of
its performance of the Distribution Agreement, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations.
FTD is the principal underwriter for the other Templeton Funds.
DESCRIPTION OF SHARES
The Shares of each Fund have the same preferences, conversion and other
rights, voting powers, restrictions and limitations as to dividends,
qualifications and terms and conditions of redemption, except as follows: all
consideration received from the sale of Shares of a Fund, together with all
income, earnings, profits and proceeds thereof, belongs to that Fund and is
charged with liabilities in respect to that Fund and of that Fund's part of
general liabilities of the Trust in the proportion that the total net assets of
the Fund bear to the total net assets of both Funds. The net asset value of a
Share of a Fund is based on the assets belonging to that Fund less the
liabilities charged to that Fund, and dividends are paid on Shares of a Fund
only out of lawfully available assets belonging to that Fund. In the event of
liquidation or dissolution of the Trust, the Shareholders of each Fund will be
entitled, out of assets of the Trust available for distribution, to the assets
belonging to that particular Fund.
The Trust Instrument provides that the holders of not less than
two-thirds of the outstanding Shares of the Funds may remove
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a person serving as Trustee either by declaration in writing or at a meeting
called for such purpose. The Trustees are required to call a meeting for the
purpose of considering the removal of a person serving as Trustee if requested
in writing to do so by the holders of not less than 10% of the outstanding
Shares of the Trust.
The Shares have non-cumulative voting rights so that the holders of a
plurality of the Shares voting for the election of Trustees at a meeting at
which 50% of the outstanding Shares are present can elect all the Trustees and
in such event, the holders of the remaining Shares voting for the election of
Trustees will not be able to elect any person or persons to the Board of
Trustees.
PERFORMANCE INFORMATION
The Funds may, from time to time, include their total return, and
Americas Government Securities Fund may include its yield, in advertisements or
reports to Shareholders or prospective investors. Quotations of average annual
total return for the Funds will be expressed in terms of the average annual
compounded rate of return for periods in excess of one year or the total return
for periods less than one year of a hypothetical investment in the Funds over
periods of one, five, or ten years (up to the life of a Fund) calculated
pursuant to the following formula: P(1 + T)n = ERV (where P = a hypothetical
initial payment of $1,000, T = the average annual total return for periods of
one year or more or the total return for periods of less than one year, n = the
number of years, and ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period). All total return figures reflect
the deduction of the maximum initial sales charge and deduction of a
proportional share of Fund expenses on an annual basis, and assume that all
dividends and distributions are reinvested when paid. The average annual total
return for the one-year period ended March 31, 1995 and for the period from
March 14, 1994 (commencement of operations) through March 31, 1995 was 1.43% and
- -4.40% for Growth and Income Fund and -5.41 and -10.84% for Infrastructure Fund.
The total return for the period from June 27, 1994 (commencement of operations)
through March 31, 1995, on an annualized basis, was -5.49% for Americas
Government Securities Fund. The total return for the period from May 8, 1995
(commencement of operations) through September 30, 1995 on an annualized basis
was -1.20% for Greater European Fund and 2.20% for Latin America Fund.
Quotation of yield for Americas Government Securities Fund will be
based on all investment income per share earned during a particular 30-day
period (including dividends and interest and
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calculated in accordance with a standardized yield formula adopted by the SEC,
less expenses accrued during the period ("net investment income"), and are
computed by dividing net investment income by the maximum offering price per
share on the last day of the period, according to the following formula:
YIELD = 2 [(A-B +1)6 - 1]
cd
where,
a = dividends and interest earned during the period,
b = expenses accrued for the period (net of
reimbursements),
c = the average daily number of Shares outstanding
during the period that were entitled to receive
dividends, and
d = the maximum offering price per Share on the last
day of the period.
Americas Government Securities Fund's yield for the 30-day period ended
March 31, 1995 was 6.60%.
Performance information for each Fund may be compared, in reports and
promotional literature, to: (i) unmanaged indices so that investors may compare
the Fund's results with those of a group of unmanaged securities widely regarded
by investors as representative of the securities market in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in a Fund. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for a Fund reflects only the performance of a
hypothetical investment in a Fund during the particular time period on which the
calculations are based. Performance information should be considered in light of
a Fund's investment objective and policies, characteristics and quality of the
portfolio and the market conditions during the given time period, and should not
be considered as a representation of what may be achieved in the future.
From time to time, each Fund and its Investment Manager may also refer
to the following information:
- 53 -
<PAGE>
(1) The Investment Manager's and its affiliates' market share of
international equities managed in mutual funds prepared or published by
Strategic Insight or a similar statistical organization.
(2) The performance of U.S. equity and debt markets relative to
foreign markets prepared or published by Morgan Stanley
Capital International or a similar financial organization.
(3) The capitalization of U.S. and foreign stock markets as
prepared or published by the International Finance
Corporation, Morgan Stanley Capital International or a similar
financial organization.
(4) The geographic distribution of the Fund's portfolio.
(5) The gross national product and populations, including age
characteristics, literacy rates, foreign investment improvements due to
a liberalization of securities laws and a reduction of foreign exchange
controls, and improving communication technology, of various countries
as published by various statistical organizations.
(6) To assist investors in understanding the different returns
and risk characteristics of various investments, the Fund
may show historical returns of various investments and
published indices (E.G., Ibbotson Associates, Inc. Charts
and Morgan Stanley EAFE - Index).
(7) The major industries located in various jurisdictions as
published by the Morgan Stanley Index.
(8) Rankings by DALBAR Surveys, Inc. with respect to mutual fund
shareholder services.
(9) Allegorical stories illustrating the importance of
persistent long-term investing.
(10) The Fund's portfolio turnover rate and its ranking relative
to industry standards as published by Lipper Analytical
Services, Inc. or Morningstar, Inc.
(11) A description of the Templeton organization's investment management
philosophy and approach, including its worldwide search for undervalued
or "bargain" securities and its diversification by industry, nation and
type of stocks or other securities.
- 54 -
<PAGE>
(12) Quotations from the Templeton organization's founder, Sir John
Templeton,* advocating the virtues of diversification and long-term
investing, including the following:
o "Never follow the crowd. Superior performance is
possible only if you invest differently from the
crowd."
o "Diversify by company, by industry and by country."
o "Always maintain a long-term perspective."
o "Invest for maximum total real return."
o "Invest - don't trade or speculate."
o "Remain flexible and open-minded about types of
investment."
o "Buy low."
o "When buying stocks, search for bargains among quality
stocks."
o "Buy value, not market trends or the economic outlook."
o "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."
o "Do your homework or hire wise experts to help you."
o "Aggressively monitor your investments."
o "Don't panic."
o "Learn from your mistakes."
o "Outperforming the market is a difficult task."
o "An investor who has all the answers doesn't even
understand all the questions."
o "There's no free lunch."
- --------
* Sir John Templeton sold the Templeton organization to Franklin
Resources, Inc. in October, 1992 and resigned from the Trust's
Board on April 16, 1995. He is no longer involved with the
investment management process.
- 55 -
<PAGE>
o "And now the last principle: Do not be fearful or
negative too often."
In addition, each Fund and the Investment Managers may also refer to
the number of Shareholders in the Fund or the aggregate number of shareholders
of the Franklin Templeton Funds or the dollar amount of fund and private account
assets under management in advertising materials.
FINANCIAL STATEMENTS
The financial statements contained in the Annual Report to Shareholders
of Growth and Income Fund, Infrastructure Fund and Americas Government
Securities Fund, each dated March 31, 1995, are incorporated herein by
reference. The financial statements (unaudited) dated September 30, 1995 for
Greater European Fund
and Latin America Fund are included herewith.
- 56 -
<PAGE>
<PAGE>
TEMPLETON GREATER EUROPEAN FUND
Financial Highlights
Per share operating performance
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Class I
May 8, 1995
(commencement of operations)
to
September 30, 1995 (unaudited)
<S> <C> <C>
Net asset value, beginning of period $ 10.00
Income for investment operations:
Net investment income .06
Net realized and unrealized gain (.18)
Total from investment operations (.12)
Change in net asset value (.12)
Net asset value, end of period $ 9.88
Total Return* (1.20)%
Ratios/supplemental data
Net assets, end of period (000) $ 2,946
Ratio of expenses to average net assets 4.58% **
Ratio of expenses, net of reimbursement, to
average net assets 1.85% **
Ratio of net investment income to average net assets 3.22% **
*Total return does not reflect sales commissions. Not annualized.
**Annualized.
</TABLE>
See Notes to Financial Statements
<PAGE>
TEMPLETON GREATER EUROPEAN FUND
FINANCIAL HIGHLIGHTS
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Class II
-----------------------------
May 8, 1995
(commencement of operations)
to
September 30, 1995
(unaudited)
------------------------
Net asset value, beginning of period $ 10.00
-----------------------
Income for investment operations:
Net investment income .08
Net realized and unrealized gain (.22)
Total from investment operations (.14)
------------------------
Change in net asset value (.14)
------------------------
Net asset value, end of period $ 9.86
========================
TOTAL RETURN* (1.40)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 1,136
Ratio of expenses to average net assets 5.23% **
Ratio of expenses, net of reimbursement, to
average net assets 2.50% **
Ratio of net investment income to average net assets 2.77% **
*TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS OR THE DEFERRED CONTINGENT
SALES CHARGE. NOT ANNUALIZED.
**ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
TEMPLETON GREATER EUROPEAN FUND
Investment Portfolio, September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
Industry Issue Country Shares Value
COMMON STOCKS: 40.6%
<S> <C> <C> <C>
Automobiles: 3.6%
Peugeot SA Fr. 560 $ 76,555
Volkswagen AG Ger. 222 71,929
148,484
Banking: 1.9%
Deutsche Bank AG Ger. 1,589 75,703
Building Materials & Components: 1.6%
Anglian Group PLC U.K. 32,500 63,141
Business & Public Services: 4.7%
Ecco SA Fr. 440 76,506
Lex Service PLC U.K. 20,700 115,089
191,595
Construction & Housing: 3.9%
European Techniki Gr. 7,100 71,396
Raine PLC U.K. 257,900 89,618
161,014
Electronic Components & Instruments: 2.6%
BICC U.K. 22,610 107,852
Energy Sources: 3.6%
Societe Elf Aquitane SA Fr. 1,020 68,849
Total SA, B Fr. 1,280 77,481
146,330
Insurance: 1.8%
Muenchener Rueckversicherungs-
Gesellschaft Ger. 41 74,081
Merchandising: 2.9%
Karstadt AG Ger. 165 73,205
W.H. Smith Group U.K. 7,400 43,048
116,253
Metals & Mining: 3.6%
Bohler Uddeholm AG, 144a Aut. 488 34,873
Pechiney SA, invt. ctf. Fr. 634 40,567
Vallourec Fr. 1,600 69,226
144,666
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Telecommunications: 4.3%
Alcatel Cable SA Fr. 1,220 $ 67,406
Tele Danmark AS, B Den. 2,050 105,948
173,354
Textiles & Apparel: 2.6%
Dawson International PLC U.K. 55,500 107,825
Utilities-Electrical & Gar: 1.7%
VEBA AG Ger. 1,794 71,120
Wholesale & International Trade: 1.8%
Computer 2000 AG Ger. 210 73,698
Total Common Stocks (cost $1,717,868) 1,655,116
PREFERRED STOCKS: 3.4%
Baumax AG, pfd. Aut. 1,860 72,752
Krones AG Herman Kronseder
Maschinen Fabrik, pfd. Ger. 174 66,970
Total Preferred Stocks (cost $151,403) 139,722
</TABLE>
<TABLE>
<CAPTION>
Principal in
Local
Currenty*
<S> <C> <C> <C>
SHORT TERM OBLIGATIONS: 68.1% (cost $2,778,817)
U.S. Treasury Bills, 5.16% to 5.37% with U.S. 2,791,000 2,779,589
maturities to 11/16/95
Total Investments: 112.1% (cost $4,648,088) 4,574,427
Other Assets, less liabilities: (12.1%) (492,312)
Total net Assets: 100.0% $ 4,082,115
</TABLE>
*Currency of country indicated.
Notes to Financial Statements.
<PAGE>
TEMPLETON GREATER EUROPEAN FUND
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities Statement of Operations
September 30,1995 (unaudited) for the period May 8,1995
(commencement of operations)
to September 30,1995(unaudited)
<S> <C> <C> <C> <C>
Assets: Investment income:
(nvestments in securities, at value (net of $520 foreign taxes withheld)
(identified cost $4,648,088) $ 4,574,427 Dividends $ 2,945
Receivables: Interest 43,868
Fund shares sold 51,722 Total income $ 46,813
Dividends and interest 607
Expense reimbursement 10,520 Expenses:
Unamortized organization costs 59,150 Management fees (Note 3) 6,819
Total assets 4,696,426 Administrative fees (Note 3) 1,364
Distribution fees (Note 3)
Liabilities: Class I 2,016
Payables: Class II 3,372
Investment securities purchased 582,002 Transfer agent fees (Note 3) 625
Fund shares redeemed 1,012 Custodian fees 500
Accrued expenses 31,297 Reports to shareholders 13,250
Total liabilities 614,311 Audit fees 4,000
Net assets, at value $ 4,082,115 Legal fees (Note 3) 500
Registration and filing fees 4,665
Net assets consist of: Trustees' fees and expenses 1,500
Undistributed net investment income $ 27,805 Amortization of organization costs 5,075
Net unrealized depreciation (73,661) Other 275
Accumulated net realized loss (18.835) Total expenses 43,961
Net capital paid in on shares of Less expenses reimbursed (Note 3) (24,953)
beneficial interest 4,146,806 Total expenses less reimbursement 19,008
Net assets, at value $ 4,082,115
Net investment income 27,805
Class I:
Net asset value per share Realized and unrealized gain (loss):
($2,945,590/298,127 Net realized gain (loss) on:
shares outstanding) $ 9.88 Investments 46
Foreign currency transactions (18,881)
Maximum offering price (18,835)
($9.88/94.25%) $ 10.48 Net unrealized depreciation
on investments (73,661)
Class II: Net realized and unrealized loss (92,496)
Net asset value per share
($1,136,525/115,311 Net decrease in net assets
shares outstanding) $ 9.86 resulting from operations $ (64,691)
Maximum offering price
($9.86/99.00%) $ 9.96
</TABLE>
See Notes to Financial Statements.
<PAGE>
TEMPLETON GREATER EUROPEAN FUND
Financial Statements (cont.)
Statement of Changes In Net Assets
<TABLE>
<CAPTION>
May 8, 1995
(commencement of operations)
to
September 30, 1995 (unaudited)
<S> <C>
Increase(decrease) in net assets:
Operations:
Net investment income $ 27,805
Net realized loss on investment and foreign currency
transactions (18,835)
Net unrealized depreciation (73,661)
Net decrease in net assets resulting from operations (64,691)
Fund share transactions (Note 2)
Class I 2,993,213
Class II 1,153,593
Net increase in net assets 4,082,115
Net assets:
Beginning of period
End of period $ 4,082,115
</TABLE>
See Notes to Financial Statements
<PAGE>
TEMPLETON GREATER EUROPEAN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Greater European Fund (the Fund) is a separate series of Templeton
Global Investment Trust (the Trust), a Delaware business trust, which is an
open-end diversified management investment company registered under the
Investment Company Act of 1940. The following summarizes the Fund's significant
accounting policies.
A. SECURITIES VALUATIONS:
Securities listed or traded on a recognized national or foreign stock exchange
or NASDAQ are valued at the last reported sales prices on the principal exchange
on which the securities are traded. Over-the-counter securities and listed
securities for which no sale is reported are valued at the mean between the last
current bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by management and
approved in good faith by the Board of Trustees.
B. FOREIGN CURRENCY TRANSACTIONS:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
enters into foreign exchange contracts to minimize foreign exchange risk between
the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at the end of the
fiscal period, resulting from changes in the exchange rates.
C. INCOME TAXES:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
D. UNAMORTIZED ORGANIZATION COSTS:
Organization costs are being amortized on a straight line basis over five years.
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS, AND EXPENSES:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income from foreign
securities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
<PAGE>
2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Fund offers two classes of shares: Class I shares and Class II shares.
Shares of each class are identical except for their initial sales load, a
contingent deferred sales charge on Class II shares, distribution fees, and
voting rights on matters affecting a single class. At September 30, 1995, there
was an unlimited number of shares of beneficial interest authorized ($.01 par
value).
Transactions in the Fund's shares were as follows:
CLASS I
FOR THE PERIOD MAY 8, 1995
(COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1995
SHARES AMOUNT
SHARES SOLD 318,661 $3,199,580
SHARES REDEEMED (20,534) (206,367)
-------- ---------
NET INCREASE 298,127 $2,993,213
======= ==========
CLASS II
FOR THE PERIOD MAY 8, 1995
(COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1995
SHARES AMOUNT
SHARES SOLD 115,311 $1,153,593
SHARES REDEEMED -- --
------- ----------
NET INCREASE 115,311 $1,153,593
======= ==========
Templeton Global Investors, Inc., the Fund's administrative manager, is the
record owner of 49,955 Class I shares and 49,955 Class II shares as of
September 30, 1995.
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton
Galbraith & Hansberger Ltd. (TGH), Templeton Global Investors, Inc.
(TGII), Franklin Templeton Distributors, Inc. (FTD), and Franklin Templeton
Investor Services, Inc. (FTIS), the Fund's investment manager, administrative
manager, principal underwriter, and transfer agent, respectively.
The Fund pays monthly an investment management fee to TGH equal, on an annual
basis, to 0.75% of the Fund's average daily net assets. The Fund pays TGII
monthly its allocated share of an administrative fee of 0.15% per annum on the
first $200 million of the Trust's aggregate average daily net assets, 0.135% of
the next $500 million, 0.10% of the next $500 million, and 0.075% per annum of
average net assets in excess of $1.2 billion. TGH and TGII have voluntarily
agreed to reduce their respective fees to the extent necessary to limit total
expenses to an annual rate of 1.85% and 2.50% of average net assets of Class I
and II shares, respectively through December 31, 1995. The amount of the
reimbursement for the period ended September 30, 1995 is set forth in the
Statement of Operations. For the period ended September 30, 1995, FTD paid net
commissions of $3,817 from the sale of the Fund's shares and FTIS received fees
of $625.
Under the distribution plans for Class I and Class II shares, the Fund
reimburses FTD quarterly for FTD's costs and expenses in connection with any
activity that is primarily intended to result in a sale of Fund shares, subject
to a maximum of 0.35% and 1.00% per annum of the average daily net assets of
Class I and Class II shares, respectively. Under the Class I distribution plan,
costs and expenses exceeding the maximum may be reimbursed in subsequent
periods. At September 30, 1995, these unreimbursed expenses were $39,055. Class
II shares redeemed within 18 months are subject to a contingent deferred sales
charge. There were no contingent deferred sales charges paid to FTD for the
period ended September 30, 1995.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel
for the Fund, which firm received fees of $500 for the period ended
September 30, 1995.
<PAGE>
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
period ended September 30, 1995 aggregated $1,869,270 and $0, respectively. The
cost of securities for federal income tax purposes is the same as that shown in
the Statement of Assets and Liabilities. Realized gains and losses are reported
on an identified cost basis.
At September 30, 1995, the aggregate gross unrealized appreciation and
depreciation of portfolio securities based on cost for federal income tax
purposes, was as follows:
Unrealized appreciation $ 6,560
Unrealized depreciation (80,221)
--------
Net unrealized depreciation $(73,661)
=========
<PAGE>
TEMPLETON LATIN AMERICA FUND
FINANCIAL HIGHLIGHTS
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Class I
------------------------
May 8, 1995
(commencement of operations)
to
September 30, 1995
(unaudited)
-------------------------
Net asset value, beginning of period $ 10.00
--------------
Income for investment operations:
Net investment income .06
Net realized and unrealized gain .16
Total from investment operations .22
-------------
Change in net asset value .22
-------------
Net asset value, end of period $ 10.22
=============
TOTAL RETURN* 2.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 3,308
Ratio of expenses to average net assets 4.98% **
Ratio of expenses, net of reimbursement, to
average net assets 2.35% **
Ratio of net investment income to average net assets 2.63% **
*TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED.
**ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TEMPLETON LATIN AMERICA FUND
Financial Highlights
Per share operating performance
(For a share outstanding throughout the period)
Class II
---------------------------
May 8, 1995
(commencement of operations)
to
September 30, 1995
(unaudited)
----------------------------
Net asset value, beginning of period $ 10.00
-----------------------------
Income for investment operations:
Net investment income .05
Net realized and unrealized gain .14
----------------------------
Total from investment operations .19
----------------------------
Change in net asset value .19
----------------------------
Net asset value, end of period $ 10.19
============================
TOTAL RETURN* 1.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 871
Ratio of expenses to average net assets 5.63% **
Ratio of expenses, net of reimbursement, to
average net assets 3.00% **
Ratio of net investment income to average net assets 1.99% **
*TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS OR THE DEFERRED CONTINGENT
SALES CHARGE. NOT ANNUALIZED.
**ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
TEMPLETON LATIN AMERICA FUND
Investment Portfolio, September 30, 1995(unaudited)
<TABLE>
<CAPTION>
Industry Issue Country Shares Value
<S> <C> <C> <C>
COMMON STOCKS:12.5%
Beverages & obacco: 1.2%
Cristalerias de Chile SA, ADR Chil. 2,000 $ 49,500
Building Materials & Components: 2.9%
Corcemar Corp. Arg. 9,200 40,022
Mirgor Comercial Industrial Financiera Inmobiliari
Agropecuaria, ADR,144a Arg. 34,000 80,750
120,772
Construction & Housing:1.8%
Empresas ICA Sociedad Controladora SA, ADR Mex. 6,700 77,050
Energy Sources:1.2%
Transportadora de Gas del Sur SA, ADR B Arg. 4,800 50,400
Food & Household Products: 2.9%
Grupo Embotellador de Mexico SA, B Mex. 14,500 84,091
Herdez SA de CV, A Mex. 150,000 38,558
122,649
Metals & Mining: 1.3%
Companhia Siderurgica Nacional Braz. 2,000,000 52,883
Utilities-Electrical & Gas:1.2%
Cia Energetica de Minas Gerais, ADR Braz. 2,200 49,168
Total Common Stocks (cost $509,094) 522,422
PREFERRED STOCKS: 5.3%
Banco Bradesco SA, pfd. Braz. 5,000,000 47,741
Petrobras-Petroleo Brasileiro SA, pfd. Braz. 480,000 50,621
Telebras-Telecomunicacoes Brasileiras SA,pfd.,ADR Braz. 1,300 61,669
Telesp-Telecomunicoes de Sao Paulo SA, pfd. Braz. 380,000 62,320
Total Preferred Stocks (costs $204,051) 222,351
Principal in
Local Currency*
SHORT TERM OBLIGATIONS: 82.6% (cost $3,451,375)
U.S. Treasury Bills, 5.16% to 5.41 % with
maturities to 11/24/95 U.S. 3,467,000 3,452,343
Total Investments:100.4% (cost:$4,164,520) 4,197,116
Other Assets, less liabilities: (0.4)% (18,586)
Total Net Assets:100.0% $ 4,178,530
</TABLE>
*Currency of country indicated.
See Notes to Financial Statements.
<PAGE>
TEMPLETON LATIN AMERICA FUND
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities Statement of Operations
September 30,1995(unaudited) for the period May 8,1995
(commencement of operations)
to September 30,1995(unaudited)
<S> <C> <C> <C> <C>
Assets: Investment income:
Investments in securities, at value (net of $94 foreign taxes withheld)
(identified cost $4,164,520) $ 4,197,116 Dividends $ 6,121
Cash 444 Interest 42,410
Receivables: Total income $ 48,531
Fund shares sold 65,612
Dividends and interest 174 Expenses:
Expense reimbursement 11,185 Management fees (Note 3) 12,136
Unamortized organization costs 66,502 Administrative fees (Note 3) 1,457
Total assets 4,341,033 Distribution fees (Note 3)
Class I 2,562
Liabilities: Class II 2,431
Payables: Transfer agent fees (Note 3) 1,600
Investment securities purchased 124,225 Custodian fees 250
Fund shares redeemed 21,482 Reports to shareholders 14,650
Accrued expenses 16,796 Audit fees 2,250
Total liabilities 162,503 Legal fees (Note 3) 1,500
Net assets, at value $ 4,178,530 Registration and fling fees 2,728
Trustees' fees and expenses 2,600
Net assets consist of: Amortization of organization costs 5,725
Undistributed net investment income $ 24,046 Other 203
Net unrealized appreciation 32,596 Total expenses 50,092
Accumulated net realized loss (922) Less expenses reimbursed (Note 3) (25,607)
Net capital paid in on shares of Total expenses less reimbursement 24,485
benefcial interest 4,122,810
Net assets, at value $ 4,178,530 Net investment income 24,046
Class I: Realized and unrealized gain (loss):
Net asset value per share Net realized gain (loss) on:
($3,307,397\323,647 Investments 70
shares outstanding) $ 10.22 Foreign currency transactions (992)
(922)
Maximum offering price Net unrealized appreciation
($10.22\94.25%) $ 10.84 on investments 32,596
Net realized and unrealized gain 31,674
Class II:
Net asset value per share Net increase in net assets
($871,133\85,524 resulting from operations $ 55,720
shares outstanding) $ 10.19
Maximum offering price
($10.19\99.00%) $ 10.29
</TABLE>
See Notes to Financial Statements.
<PAGE>
TEMPLETON LATIN AMERICA FUND
Financial Statements (cont.)
Statement of Changes In Net Assets
<TABLE>
<CAPTION>
May 8, 1995
(commencement of operations)
to
September 30, 1995 (unaudited)
<S> <C>
Increase(decrease) in net assets:
Operations:
Net Investment Income $ 24,046
Net realized loss on investment and foreign currency
transactions (922)
Net unrealized appreciation 32,596
Net increase in net assets resulting from operations 55,720
Fund share transactions (Note 2)
Class I 3,263,310
Class II 859,500
Net increase in net assets 4,178,530
Net assets:
Beginning of period
End of period $ 4,178,530
</TABLE>
See Notes to Financial Statements.
PAGE>
TEMPLETON LATIN AMERICA FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Latin America Fund (the Fund) is a separate series of Templeton Global
Investment Trust (the Trust), a Delaware business trust, which is an open-end
diversified management investment company registered under the Investment
Company Act of 1940. The following summarizes the Fund's significant accounting
policies.
A. SECURITIES VALUATIONS:
Securities listed or traded on a recognized national or foreign stock exchange
or NASDAQ are valued at the last reported sales prices on the principal exchange
on which the securities are traded. Over-the-counter securities and listed
securities for which no sale is reported are valued at the mean between the last
current bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by management and
approved in good faith by the Board of Trustees.
B. FOREIGN CURRENCY TRANSACTIONS:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
enters into foreign exchange contracts to minimize foreign exchange risk between
the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at the end of the
fiscal period, resulting from changes in the exchange rates.
C. INCOME TAXES:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
D. UNAMORTIZED ORGANIZATION COSTS:
Organization costs are being amortized on a straight line basis over five years.
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS, AND EXPENSES:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income from foreign
securities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
<PAGE>
2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Fund offers two classes of shares: Class I shares and Class II shares.
Shares of each class are identical except for their initial sales load, a
contingent deferred sales charge on Class II shares, distribution fees, and
voting rights on matters affecting a single class. At September 30, 1995, there
was an unlimited number of shares of beneficial interest authorized ($.01 par
value).
Transactions in the Fund's shares were as follows:
CLASS I
FOR THE PERIOD MAY 8, 1995
(COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1995
SHARES AMOUNT
SHARES SOLD 352,750 $3,560,321
SHARES REDEEMED (29,103) (297,011)
-------- ---------
NET INCREASE 323,647 $3,263,310
======= ==========
CLASS II
FOR THE PERIOD MAY 8, 1995
(COMMENCEMENT OF OPERATIONS) THROUGH
SEPTEMBER 30, 1995
SHARES AMOUNT
SHARES SOLD 85,633 $860,611
SHARES REDEEMED (109) (1,111)
----- -------
NET INCREASE 85,524 $859,500
====== ========
Templeton Global Investors, Inc., the Fund's administrative manager,
is the record owner of 49,955 Class I shares and 50,000 Class
II shares as of September 30, 1995.
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton
Galbraith & Hansberger Ltd., (TGH), Templeton Global Investors, Inc. (TGII),
Franklin Templeton Distributors, Inc. (FTD), and Franklin Templeton Investor
Services, Inc. (FTIS), the Fund's investment manager, administrative manager,
principal underwriter, and transfer agent, respectively.
The Fund pays monthly an investment management fee to TGH equal, on an annual
basis, to 0.75% of the Fund's average daily net assets. The Fund pays TGII
monthly its allocated share of an administrative fee of 0.15% per annum on the
first $200 million of the Trust's aggregate average daily net assets, 0.135% of
the next $500 million, 0.10% of the next $500 million, and 0.075% per annum of
average net assets in excess of $1.2 billion. TGH and TGII have voluntarily
agreed to reduce their respective fees to the extent necessary to limit total
expenses to an annual rate of 2.35% and 3.00% of average net assets of Class I
and II shares, respectively through December 31, 1995. The amount of the
reimbursement for the period ended September 30, 1995 is set forth in the
Statement of Operations. For the period ended September 30, 1995, FTD paid net
commissions of $213 from the sale of the Fund's shares and FTIS received fees of
$1,600.
Under the distribution plans for Class I and Class II shares, the Fund
reimburses FTD quarterly for FTD's costs and expenses in connection with any
activity that is primarily intended to result in a sale of Fund shares, subject
to a maximum of 0.35% and 1.00% per annum of the average daily net assets of
Class I and Class II shares, respectively. Under the Class I distribution plan,
costs and expenses exceeding the maximum may be reimbursed in subsequent
periods. At September 30, 1995, these unreimbursed expenses were $56,239. Class
II shares redeemed within 18 months are subject to a contingent deferred sales
charge. There were no contingent deferred sales charges paid to FTD for the
period ended September 30, 1995.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel
for the Fund, which firm received fees of $1,500 for the period ended
September 30, 1995.
<PAGE>
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
period ended September 30, 1995 aggregated $713,145 and $0, respectively. The
cost of securities for federal income tax purposes is the same as that shown in
the Statement of Assets and Liabilities. Realized gains and losses are reported
on an identified cost basis.
At September 30, 1995, the aggregate gross unrealized appreciation and
depreciation of portfolio securities based on cost for federal income tax
purposes, was as follows:
Unrealized appreciation $ 62,800
Unrealized depreciation (30,204)
-------
Net unrealized appreciation $ 32,596
=========
