s filed with the Securities and Exchange Commission on July 7, 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ___
Post-Effective Amendment No. 7 X
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 9 X
TEMPLETON GLOBAL INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
700 Central Avenue, P.O. Box 33030,
St. Petersburg, Florida 33733-8030
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (813) 823-8712
Jeffrey L. Steele, Esq. Thomas M. Mistele, Esq.
Dechert Price & Rhoads Templeton Global Investors, Inc.
1500 K Street, N.W. 500 East Broward Blvd.
Washington, D.C. 20005 Fort Lauderdale, FL 33394
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
X on July 8, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) 75 days after
filing pursuant to paragraph (a)(2) on (date) pursuant to
paragraph (a) of Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Registrant has elected to register an indefinite number of shares of
beneficial interest, $0.01 par value per share, pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrant filed the Notice required by Rule
24f-2 with respect to its fiscal year ended March 31, 1995 on May 26, 1995.
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
CROSS-REFERENCE SHEET
Part A - Templeton Growth and Income Fund
Part A - Templeton Global Infrastructure Fund
Part A - Templeton Americas Government Securities Fund
1 Cover Page
2 Expense Table
3 Financial Highlights
4 General Description;
Investment Techniques
5 Management of the Fund
5A Not Applicable
6 General Information
7 How to Buy Shares of the Fund
8 How to Sell Shares of the Fund
9 Not Applicable
Part A - Templeton Region Funds
This Post-Effective Amendment No. 7 to the Registration Statement
(File No. 33-73244) on Form N-1A for Templeton Global Investment
Trust incorporates by reference the prospectus for Templeton
Region Funds,(Templeton Greater European Fund and Templeton Latin
America Fund) which was contained in Templeton Global Investment
Trust's Post-Effective Amendment No. 4, which was filed on
February 21, 1995.
<PAGE>
TEMPLETON PROSPECTUS -- JULY 10, 1995
GROWTH AND INCOME FUND
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INVESTMENT The investment objective of Templeton Growth and Income Fund
OBJECTIVE (the "Fund") is high total return. The Fund seeks to achieve
AND POLICIES its objective through a flexible policy of investing primarily
in equity and debt securities of domestic and foreign
companies. THE FUND MAY BORROW MONEY FOR INVESTMENT PURPOSES,
WHICH MAY INVOLVE GREATER RISK AND ADDITIONAL COSTS TO THE
FUND. IN ADDITION, THE FUND MAY INVEST UP TO 15% OF ITS ASSETS
IN ILLIQUID SECURITIES, INCLUDING UP TO 10% OF ITS ASSETS IN
RESTRICTED SECURITIES, WHICH MAY INVOLVE GREATER RISK AND
INCREASED FUND EXPENSES. SEE "RISK FACTORS." The Fund is a
series of Templeton Global Investment Trust.
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PURCHASE OF Please complete and return the Shareholder Application. If you
SHARES need assistance in completing this form, please call our
Account Services Department. The Fund offers two classes to
its investors: Templeton Growth and Income Fund--Class I
("Class I") and Templeton Growth and Income Fund--Class II
("Class II"). Investors can choose between Class I Shares,
which generally bear a higher front-end sales charge and lower
ongoing Rule 12b-1 distribution fees ("Rule 12b-1 fees"), and
Class II Shares, which generally have a lower front-end sales
charge and higher ongoing Rule 12b-1 fees. Investors should
consider the differences between the two classes, including
the impact of sales charges and distribution fees, in choosing
the more suitable class given their anticipated investment
amount and time horizon. See "How to Buy Shares of the Fund--
Differences Between Class I and Class II." The minimum initial
investment is $100 ($25 minimum for subsequent investments).
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PROSPECTUS This Prospectus sets forth concisely information about the
INFORMATION Fund that a prospective investor ought to know before
investing. Investors are advised to read and retain this
Prospectus for future reference. A Statement of Additional
Information ("SAI") dated July 10, 1995 has been filed with
the Securities and Exchange Commission (the "SEC") and is
incorporated in its entirety by reference in and made a part
of this Prospectus. The SAI is available without charge upon
request to Franklin Templeton Distributors, Inc., P.O. Box
33030, St. Petersburg, Florida 33733-8030 or by calling the
Fund Information Department.
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FUND INFORMATION DEPARTMENT -- 1-800/DIAL BEN
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TEMPLETON "STAR" SERVICE (24 hours, seven days a week access to current
prices, shareholder account balances/values, last transaction and duplicate
account statements) -- 1-800-654-0123
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
EXPENSE TABLE........ 2
FINANCIAL HIGHLIGHTS. 3
GENERAL DESCRIPTION.. 4
Investment Objective
and Policies........ 4
INVESTMENT
TECHNIQUES.......... 5
Temporary
Investments......... 5
Borrowing............ 5
Loans of Portfolio
Securities.......... 6
Options on Securities
or Indices.......... 6
Forward Foreign
Currency Contracts
and Options on
Foreign Currencies.. 6
Futures Contracts.... 7
Repurchase
Agreements.......... 7
Depositary Receipts.. 7
Illiquid and
Restricted
Securities.......... 8
RISK FACTORS......... 8
HOW TO BUY SHARES OF
THE FUND............ 10
Differences Between
Class I and Class
II.................. 10
Deciding Which Class
to Purchase......... 11
Offering Price--Class
I................... 11
Offering Price--Class
II.................. 13
Net Asset Value
Purchases
(Both Classes)...... 14
Description of
Special Net Asset
Value Purchases..... 15
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Additional Dealer
Compensation (Both
Classes)............ 15
Purchasing Class I
and Class II Shares. 16
Automatic Investment
Plan................ 16
Institutional
Accounts............ 17
Account Statements... 17
Templeton STAR
Service............. 17
Retirement Plans..... 17
Net Asset Value...... 17
EXCHANGE PRIVILEGE... 18
Exchanges of Class I
Shares.............. 19
Exchanges of Class II
Shares.............. 19
Transfers............ 20
Conversion Rights.... 20
Exchanges by Timing
Accounts............ 20
HOW TO SELL SHARES OF
THE FUND............ 20
Reinstatement
Privilege........... 22
Systematic Withdrawal
Plan................ 22
Redemptions by
Telephone........... 23
Contingent Deferred
Sales Charge........ 24
TELEPHONE
TRANSACTIONS........ 24
Verification
Procedures.......... 24
Restricted Accounts.. 25
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
General.............. 25
MANAGEMENT OF THE
FUND................ 25
Investment Manager... 25
Business Manager..... 26
Transfer Agent....... 26
Custodian............ 26
Plans of
Distributions....... 26
Expenses............. 27
Brokerage
Commissions......... 27
GENERAL INFORMATION.. 27
Description of
Shares/Share
Certificates........ 27
Voting Rights........ 28
Meetings of
Shareholders........ 28
Dividends and
Distributions....... 28
Federal Tax
Information......... 28
Inquiries............ 29
Performance
Information......... 29
Statements and
Reports............. 29
WITHHOLDING
INFORMATION......... 30
CORPORATE RESOLUTION. 31
AUTHORIZATION
AGREEMENT........... 32
THE FRANKLIN
TEMPLETON GROUP..... 33
</TABLE>
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SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder will bear directly or indirectly
in connection with an investment in the Fund. The figures are estimates of the
Fund's expenses for the current fiscal year, restated to reflect current sales
charges and Rule 12b-1 fees for each class.
<TABLE>
<S> <C> <C>
CLASS I CLASS II
------- --------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a
percentage of Offering Price)......................... 5.75% 1.00%/1/
Deferred Sales Charge.................................. None/2/ 1.00%/3/
Exchange Fee (per transaction)......................... $5.00/4/ $5.00/4/
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................ 0.75% 0.75%
Rule 12b-1 Fees/5/..................................... 0.35% 1.00%
Other Expenses (audit, legal, business management,
transfer agent and custodian) (after expense
reimbursement)........................................ 0.15% 0.15%
Total Fund Operating Expenses (after expense reimburse-
ment)................................................. 1.25% 1.90%
</TABLE>
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/1/ Although Class II has a lower front-end sales charge than Class I, over time
the higher Rule 12b-1 fee for Class II may cause Shareholders to pay more
for Class II Shares than for Class I Shares. Given the maximum front-end
sales charge and the rate of Rule 12b-1 fees for each class, it is estimated
that this would take less than six years for Shareholders who maintain total
Shares valued at less than $50,000 in the Franklin Templeton Funds.
Shareholders with larger investments in the Franklin Templeton Funds will
reach the cross-over point more quickly. (See "How to Buy Shares of the
Fund.")
/2/ Class I investments of $1 million or more are not subject to a front-end
sales charge; however, a contingent deferred sales charge of 1% is generally
imposed on certain redemptions within a "contingency period" of 12 months of
the calendar month following such investments. See "How to Sell Shares of
the Fund--Contingent Deferred Sales Charge."
/3/ Class II Shares redeemed within a "contingency period" of 18 months of the
calendar month following such investments are subject to a 1% contingent
deferred sales charge. See "How to Sell Shares of the Fund--Contingent
Deferred Sales Charge."
/4/ $5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.
/5/ Annual Rule 12b-1 fees may not exceed 0.35% of the Fund's average net assets
attributable to Class I Shares and 1% of the Fund's average net assets
attributable to Class II Shares. Consistent with the National Association of
Securities Dealers, Inc.'s rules, it is possible that the combination of
front-end sales charges and Rule 12b-1 fees could cause long-term
Shareholders to pay more than the economic equivalent of the maximum front-
end sales charges permitted under those same rules.
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. The information in this table does not reflect the charge of up to
$15 per transaction if a Shareholder requests that redemption proceeds be sent
by express mail or wired to a commercial bank account. For a more detailed
discussion of these matters, investors should refer to the appropriate
sections of this Prospectus.
EXAMPLE
As required by SEC regulations, the following example illustrates the
expenses, including the maximum front-end sales charge and applicable
contingent deferred sales charge, that apply to a $1,000 investment in the
Fund over various time periods assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class I........................ $69 $95 $122 $200
Class II....................... $39 $69 $112 $230
You would pay the following
expenses on the same
investment in Class II Shares,
assuming no redemption........ $29 $69 $112 $230
</TABLE>
For the purposes of this example, it is assumed that a contingent deferred
sales charge will not apply to Class I Shares.
2
<PAGE>
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES, INCLUDING
FEES SET BY CONTRACT, SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN
THOSE SHOWN. The operating expenses are borne by the Fund and only indirectly
by Shareholders as a result of their investment in the Fund. In addition,
federal securities regulations require the example to assume an annual return
of 5%, but the Fund's actual return may be more or less than 5%.
The Fund's investment manager, Templeton, Galbraith & Hansberger Ltd. (the
"Investment Manager"), has voluntarily agreed to reduce its investment
management fee to the extent necessary to limit the Fund's total expenses
(excluding interest, taxes, brokerage commissions and extraordinary expenses)
to 1.25% for Class I and 1.90% for Class II, of the Fund's average daily net
assets until December 31, 1995. If such fee reduction is insufficient to so
limit the Fund's total expenses, the Fund's Business Manager, Templeton Global
Investors, Inc., has agreed to reduce its fee and, to the extent necessary,
assume other Fund expenses, so as to so limit the Fund's total expenses. If
this policy were not in effect, the Fund's "Other Expenses" would be 5.01% for
both classes and the "Total Fund Operating Expenses" would be 6.11% for Class
I and 6.76% for Class II. In this case, you would pay the following expenses
on a $1,000 investment, assuming 5% annual return and redemption at the end of
each time period: $115 for one year; $227 for three years; $338 for five years
and $602 for ten years for Class I; $86 for one year; $206 for three years;
$330 for five years and $623 for ten years for Class II. As long as this
temporary expense limitation continues, it may lower the Fund's expenses and
increase its total return. After December 31, 1995, the expense limitation may
be terminated or revised at any time, at which time the Fund's expenses may
increase and its total return may be reduced, depending on the total assets of
the Fund.
FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
McGladrey & Pullen, LLP, independent certified public accountants, for the
periods indicated in their report which is incorporated by reference and which
appears in the Fund's 1995 Annual Report to Shareholders. This statement
should be read in conjunction with the other financial statements and notes
thereto included in the Fund's 1995 Annual Report to Shareholders, which
contains further information about the Fund's performance, and which is
available to Shareholders upon request and without charge. Information
regarding Class II Shares will be included in this table after they have been
offered to the public for a reasonable period of time.
<TABLE>
<CAPTION>
MARCH 14, 1994
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
MARCH 31, 1995 MARCH 31, 1994
-------------- ----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a Share outstanding throughout the period)
Net asset value, beginning of period........... $10.01 $10.00
------ ------
Income from investment operations:
Net investment income......................... .16 .009
Net realized and unrealized gain.............. (.02) .001
------ ------
Total from investment operations............. .14 .01
------ ------
Distributions to Shareholders from net invest-
ment income................................... (.10) --
------ ------
Change in net asset value...................... .04 .01
------ ------
Net asset value, end of period................. $10.05 $10.01
====== ======
TOTAL RETURN*.................................. 1.43% 0.10%
RATIOS/SUPPLEMENT DATA
Net assets, end of period (000)................ $5,953 $ 100
Ratio of expenses to average net assets........ 6.11% 32.15%**
Ratio of expenses, net of reimbursement, to av-
erage net assets.............................. 1.25% 1.25%**
Ratio of net investment income to average net
assets........................................ 2.51% 1.89%**
Portfolio turnover rate........................ 19.33% --
</TABLE>
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* Total return does not reflect sales charges. Not annualized.
** Annualized.
3
<PAGE>
GENERAL DESCRIPTION
Templeton Global Investment Trust (the "Trust") was organized as a business
trust under the laws of Delaware on December 21, 1993, and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end
management investment company. It has five series of Shares, each of which is
a separate mutual fund: Templeton Growth and Income Fund (formerly Templeton
Global Rising Dividends Fund, the "Fund"), Templeton Global Infrastructure
Fund, Templeton Greater European Fund and Templeton Latin America Fund, all
diversified funds, and Templeton Americas Government Securities Fund, a non-
diversified fund. Prospectuses for Templeton Global Infrastructure Fund,
Templeton Americas Government Securities Fund, Templeton Greater European Fund
and Templeton Latin America Fund are available upon request and without charge
from the Principal Underwriter. The Fund has two classes of Shares of
beneficial interest with a par value of $.01: Templeton Growth and Income
Fund--Class I and Templeton Growth and Income Fund--Class II. All Fund Shares
outstanding before May 1, 1995 have been redesignated as Class I Shares, and
will retain their previous rights and privileges, except for legally required
modifications to Shareholder voting procedures, as discussed in "General
Information--Voting Rights."
Shares of the Fund may be purchased (minimum investment of $100 initially
and $25 thereafter) at the current public Offering Price. The current public
Offering Price of the Class I Shares is equal to the net asset value (see "How
to Buy Shares of the Fund--Net Asset Value"), plus a variable sales charge not
exceeding 5.75% of the Offering Price depending upon the amount invested. The
current public Offering Price of the Class II Shares is equal to the net asset
value, plus a sales charge of 1% of the amount invested. (See "How to Buy
Shares of the Fund.")
INVESTMENT OBJECTIVE AND POLICIES. The investment objective of the Fund is
high total return, comprising a combination of income and capital
appreciation. The Fund seeks to achieve its objective through a flexible
policy of investing primarily in equity and debt securities of domestic and
foreign companies. The Fund's investment objective and the investment
restrictions set forth under "Investment Objectives and Policies--Investment
Restrictions" in the SAI are fundamental and may not be changed without
Shareholder approval. All other investment policies and practices described in
this Prospectus are not fundamental, and may be changed by the Board of
Trustees without Shareholder approval. There can be no assurance that the
Fund's investment objective will be achieved.
The Fund will invest primarily in equity and debt securities, as defined
below, of domestic and foreign companies. As used in this Prospectus, "equity
securities" refers to common stock, preferred stock, securities convertible
into or exchangeable for such securities, warrants or rights to subscribe to
or purchase such securities, and sponsored or unsponsored American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary
Receipts ("GDRs") (collectively, "Depositary Receipts"). The Investment
Manager will select equity investments for the Fund on the basis of
fundamental company-by-company analysis (rather than broader analyses of
specific industries or sectors of the economy). Although the Investment
Manager will consider historical value measures, such as price/earnings
ratios, operating profit margins and liquidation values, the primary factor in
selecting equity securities will be the company's current price relative to
its long-term earnings potential, as determined by the Investment Manager.
As used herein, "debt securities" refers to bonds, notes, debentures,
commercial paper, time deposits and bankers' acceptances, which are rated in
any rating category by Moody's Investors Service, Inc. ("Moody's") or Standard
& Poor's Corporation ("S&P") or which are unrated by any rating agency. Such
securities may include high-risk, lower quality debt securities, commonly
referred to as "junk bonds." See "Risk Factors." As an operating policy, which
may be changed by the Board of Trustees, the Fund will not invest more than 5%
of its total assets in debt securities rated lower than Baa by Moody's or BBB
by S&P. Debt securities are subject to certain market and credit risks. See
"Investment Objectives and Policies--Debt Securities" in the SAI for
descriptions of debt securities rated BBB by S&P and Baa by Moody's.
Securities considered for purchase by the Fund may be listed or unlisted,
and may be issued by companies in various industries, with various levels of
market capitalization. Under normal circumstances, the Fund will invest at
least 65% of its total assets in issuers domiciled in at least three different
nations (one of which may be the United States). The percentage of the Fund's
assets to be invested
4
<PAGE>
in equity and debt securities will vary from time to time, based on the
Investment Manager's assessment of the relative total return potential of
various investment vehicles.
The Fund may also lend its portfolio securities and borrow money for
investment purposes (i.e., "leverage" its portfolio). In addition, the Fund
may enter into transactions in options on securities, securities indices and
foreign currencies, forward foreign currency contracts, and futures contracts
and related options. These are generally referred to as derivative instruments
and involve special risk factors, which are described below. When deemed
appropriate by the Investment Manager, the Fund may invest cash balances in
repurchase agreements and other money market investments to maintain liquidity
in an amount to meet expenses or for day-to-day operating purposes. These
investment techniques are described below and under the heading "Investment
Objectives and Policies" in the SAI.
When the Investment Manager believes that market conditions warrant, the
Fund may adopt a temporary defensive position and may invest without limit in
money market securities denominated in U.S. dollars or in the currency of any
foreign country. See "Investment Techniques--Temporary Investments."
The Fund does not emphasize short-term trading profits and usually expects
to have an annual portfolio turnover rate generally not exceeding 50% for the
equity portion of its portfolio. The Investment Manager may engage in short-
term trading in the fixed income portion of the Fund's portfolio when it
believes it is consistent with the Fund's investment objective. Also, a
security may be sold and another of comparable quality simultaneously
purchased to take advantage of what the Investment Manager believes to be a
temporary disparity in the normal yield relationship between the two
securities. As a result of the Fund's investment policies, under certain
market conditions, the portfolio turnover rate for the fixed income portion of
its portfolio may be higher than that of other investment companies, and may
be as high as 300%. A higher turnover rate increases transaction costs and may
increase the amount of the Fund's short-term capital gain, which is taxed as
ordinary income when distributed to Shareholders. The U.S. Federal tax
requirement that the Fund derive less than 30% of its gross income from the
sale or disposition of securities held for less than three months may limit
the Fund's ability to dispose of its securities. Accordingly, the Investment
Manager carefully weighs the anticipated benefits of short-term investment
against these consequences.
INVESTMENT TECHNIQUES
The Fund is authorized to use the various investment techniques described
below. Although these strategies are regularly used by some investment
companies and other institutional investors in various markets, some of these
strategies cannot at the present time be used to a significant extent by the
Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
TEMPORARY INVESTMENTS. For temporary defensive purposes, the Fund may invest
up to 100% of its total assets in the following money market securities,
denominated in U.S. dollars or in the currency of any foreign country, issued
by entities organized in the United States or any foreign country: short-term
(less than twelve months to maturity) and medium-term (not greater than five
years to maturity) obligations issued or guaranteed by the U.S. Government or
the governments of foreign countries, their agencies or instrumentalities;
finance company and corporate commercial paper, and other short-term corporate
obligations, in each case rated Prime-1 by Moody's or A or better by S&P or,
if unrated, of comparable quality as determined by the Investment Manager;
obligations (including certificates of deposit, time deposits and bankers'
acceptances) of banks; and repurchase agreements with banks and broker-dealers
with respect to such securities.
BORROWING. The Fund may borrow up to one-third of the value of its total
assets from banks to increase its holdings of portfolio securities. Under the
1940 Act, the Fund is required to maintain continuous asset coverage of 300%
with respect to such borrowings and to sell (within three days) sufficient
portfolio holdings to restore such coverage if it should decline to less than
300% due to market fluctuations or otherwise, even if such liquidations of the
Fund's holdings may be disadvantageous from an investment standpoint.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of portfolio securities on the
5
<PAGE>
Fund's net asset value, and money borrowed will be subject to interest and
other costs (which may include commitment fees and/or the cost of maintaining
minimum average balances) which may or may not exceed the income received from
the securities purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of the Fund's
total assets to generate income for the purpose of offsetting operating
expenses. Such loans must be secured by collateral (consisting of any
combination of cash, U.S. Government securities or irrevocable letters of
credit) in an amount at least equal (on a daily marked-to-market basis) to the
current market value of the securities loaned. The Fund may terminate the
loans at any time and obtain the return of the securities loaned within five
business days. The Fund will continue to receive any interest or dividends
paid on the loaned securities and will continue to retain any voting rights
with respect to the securities. In the event that the borrower defaults on its
obligation to return borrowed securities, because of insolvency or otherwise,
the Fund could experience delays and costs in gaining access to the collateral
and could suffer a loss to the extent that the value of the collateral falls
below the market value of the borrowed securities.
OPTIONS ON SECURITIES OR INDICES. The Fund may write (i.e., sell) covered
put and call options and purchase put and call options on securities or
securities indices that are traded on United States and foreign exchanges or
in the over-the-counter markets. An option on a security is a contract that
permits the purchaser of the option, in return for the premium paid, the right
to buy a specified security (in the case of a call option) or to sell a
specified security (in the case of a put option) from or to the writer of the
option at a designated price during the term of the option. An option on a
securities index permits the purchaser of the option, in return for the
premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of
the option. The Fund may write a call or put option only if the option is
"covered." This means that so long as the Fund is obligated as the writer of a
call option, it will own the underlying securities subject to the call, or
hold a call at the same or lower exercise price, for the same exercise period,
and on the same securities as the written call. A put is covered if the Fund
maintains liquid assets with a value equal to the exercise price in a
segregated account, or holds a put on the same underlying securities at an
equal or greater exercise price. The value of the underlying securities on
which options may be written at any one time will not exceed 15% of the total
assets of the Fund. The Fund will not purchase put or call options if the
aggregate premium paid for such options would exceed 5% of its total assets at
the time of purchase.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. The
Fund will normally conduct its foreign currency exchange transactions either
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through entering into forward contracts to
purchase or sell foreign currencies. The Fund will generally not enter into a
forward contract with a term of greater than one year. A forward contract is
an obligation to purchase or sell a specific currency for an agreed price at a
future date which is individually negotiated and privately traded by currency
traders and their customers.
The Fund will generally enter into forward contracts only under two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed
to settle the transaction. Second, when the Investment Manager believes that
the currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, it may enter into a forward contract to
sell or buy the former foreign currency (or another currency which acts as a
proxy for that currency) approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." The Fund has
no specific limitation on the percentage of assets it may commit to forward
contracts, subject to its stated investment objective and policies, except
that the Fund will not enter into a forward contract if the amount of assets
set aside to cover forward contracts would impede portfolio management or the
Fund's ability to meet redemption requests. Although forward contracts will be
used primarily to protect the Fund from adverse currency movements, they also
involve the risk that anticipated currency movements will not be accurately
predicted.
The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines
in the U.S. dollar value of foreign currency-denominated portfolio securities
and against increases in the
6
<PAGE>
U.S. dollar cost of such securities to be acquired. As in the case of other
kinds of options, however, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium received,
and the Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the
premium plus related transaction costs. Options on foreign currencies to be
written or purchased by the Fund are traded on U.S. and foreign exchanges or
over-the-counter.
FUTURES CONTRACTS. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock and bond index futures contracts, foreign
currency futures contracts and options on any of the foregoing. A financial
futures contract is an agreement between two parties to buy or sell a
specified debt security at a set price on a future date. An index futures
contract is an agreement to take or make delivery of an amount of cash based
on the difference between the value of the index at the beginning and at the
end of the contract period. A futures contract on a foreign currency is an
agreement to buy or sell a specified amount of a currency for a set price on a
future date.
When the Fund enters into a futures contract, it must make an initial
deposit, known as "initial margin," as a partial guarantee of its performance
under the contract. As the value of the security, index or currency
fluctuates, either party to the contract is required to make additional margin
payments, known as "variation margin," to cover any additional obligation it
may have under the contract. In addition, when the Fund enters into a futures
contract, it will segregate assets or "cover" its position in accordance with
the 1940 Act. See "Investment Objectives and Policies--Futures Contracts" in
the SAI. With respect to positions in futures and related options that do not
constitute "bona fide hedging" positions, the Fund will not enter into a
futures contract or related option contract if, immediately thereafter, the
aggregate initial margin deposits relating to such positions plus premiums
paid by it for open futures option positions, less the amount by which any
such options are "in-the-money," would exceed 5% of the Fund's total assets.
REPURCHASE AGREEMENTS. For temporary defensive purposes and for cash
management purposes, the Fund may, without limit, enter into repurchase
agreements with U.S. banks and broker-dealers. Under a repurchase agreement,
the Fund acquires a security from a U.S. bank or a registered broker-dealer
and simultaneously agrees to resell the security back to the bank or broker-
dealer at a specified time and price. The repurchase price is in excess of the
original purchase price paid by the Fund by an amount which reflects an
agreed-upon rate of return and which is not tied to any coupon rate on the
underlying security. Under the 1940 Act, repurchase agreements are considered
to be loans collateralized by the underlying security and therefore will be
fully collateralized. However, if the bank or broker-dealer should default on
its obligation to repurchase the underlying security, the Fund may experience
a delay or difficulties in exercising its rights to realize upon the security
and might incur a loss if the value of the security declines, as well as incur
disposition costs in liquidating the security.
DEPOSITARY RECEIPTS. ADRs are Depositary Receipts typically used by a U.S.
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. EDRs and GDRs are typically issued by foreign banks
or trust companies, although they also may be issued by U.S. banks or trust
companies, and evidence ownership of underlying securities issued by either a
foreign or a United States corporation. Generally, Depositary Receipts in
registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements
to have its securities traded in the form of Depositary Receipts. In
unsponsored programs, the issuer may not be directly involved in the creation
of the program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may
7
<PAGE>
not be a correlation between such information and the market value of the
Depositary Receipts. Depositary Receipts also involve the risks of other
investments in foreign securities, as discussed below. For purposes of the
Fund's investment policies, the Fund's investments in Depositary Receipts will
be deemed to be investments in the underlying securities.
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest up to 15% of its
total assets in illiquid securities, for which there is a limited trading
market and for which a low trading volume of a particular security may result
in abrupt and erratic price movements. The Fund may be unable to dispose of
its holdings in illiquid securities at then-current market prices and may have
to dispose of such securities over extended periods of time. The Fund may also
invest in securities that are sold (i) in private placement transactions
between their issuers and their purchasers and that are neither listed on an
exchange nor traded over-the-counter, or (ii) in transactions between
qualified institutional buyers pursuant to Rule 144A under the U.S. Securities
Act of 1933, as amended. Such restricted securities are subject to contractual
or legal restrictions on subsequent transfer. As a result of the absence of a
public trading market, such restricted securities may in turn be less liquid
and more difficult to value than publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized from the sales could, due to illiquidity, be less than those
originally paid by the Fund or less than their fair value. In addition,
issuers whose securities are not publicly traded may not be subject to the
disclosure and other investor protection requirements that may be applicable
if their securities were publicly traded. If any privately placed or Rule 144A
securities held by the Fund are required to be registered under the securities
laws of one or more jurisdictions before being resold, the Fund may be
required to bear the expenses of registration. The Fund will limit its
investment in restricted securities to 10% of its total assets, except that
Rule 144A securities determined by the Board of Trustees to be liquid are not
subject to this limitation.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund, nor
can there be any assurance that the Fund's investment objective will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Fund can decrease as well as increase, depending on a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions and market
factors. In addition to the factors which affect the value of individual
securities, a Shareholder may anticipate that the value of the Shares of the
Fund will fluctuate with movements in the broader equity and bond markets. A
decline in the stock market of any country in which the Fund is invested in
equity securities may also be reflected in declines in the price of Shares of
the Fund. Changes in the prevailing rates of interest in any of the countries
in which the Fund is invested in fixed income securities will likely affect
the value of such holdings and thus the value of Fund Shares. Increased rates
of interest, which frequently accompany inflation and/or a growing economy are
likely to have a negative effect on the value of Fund Shares. In addition
changes in currency valuations will affect the price of Shares of the Fund.
History reflects both decreases and increases in stock markets and interest
rates in individual countries and throughout the world, and in currency
valuations, and these may reoccur unpredictably in the future. Additionally,
investment decisions made by the Investment Manager will not always be
profitable or prove to have been correct. The Fund is not intended as a
complete investment program.
The Fund has the right to purchase securities in any foreign country,
developed or developing. Investors should consider carefully the substantial
risks involved in investing in securities issued by companies and governments
of foreign nations, which are in addition to the usual risks inherent in
domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations (including, for example, withholding taxes on interest and dividends)
or other taxes imposed with respect to investments in foreign nations, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country), foreign investment controls on daily stock
market movements, default in foreign government securities, political or
social instability, or diplomatic developments which could affect investment
in securities of issuers in foreign nations. Some countries may withhold
portions of interest and dividends at the source. In addition, in many
countries there is less publicly available information about issuers than is
available in reports about companies in the United States. Foreign companies
are not generally subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may not be
comparable to those
8
<PAGE>
applicable to United States companies. Further, the Fund may encounter
difficulties or be unable to vote proxies, exercise shareholder rights, pursue
legal remedies, and obtain judgments in foreign courts. Commission rates in
foreign countries, which are sometimes fixed rather than subject to
negotiation as in the United States, are likely to be higher. Foreign
securities markets also have different clearance and settlement procedures,
and in certain markets there have been times when settlements have been unable
to keep pace with the volume of securities transactions, making it difficult
to conduct such transactions. Delays in settlement could result in temporary
periods when assets of the Fund are uninvested and no return is earned
thereon. The inability of the Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to subsequent declines
in value of the portfolio security or, if the Fund has entered into a contract
to sell the security, could result in possible liability to the purchaser. In
many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States. There is an increased risk, therefore, of uninsured
loss due to lost, stolen, or counterfeit stock certificates. In addition, the
foreign securities markets of many of the countries in which the Fund may
invest may also be smaller, less liquid, and subject to greater price
volatility than those in the United States. As an open-end investment company,
the Fund is limited in the extent to which it may invest in illiquid
securities. See "Investment Objectives and Policies--Risk Factors" in the SAI.
Prior governmental approval of foreign investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may
continue to be adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies also have been and may continue to be adversely affected by economic
conditions in the countries with which they trade.
The Fund usually effects currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market.
However, some price spread on currency exchange transactions (to cover service
charges) will be incurred when the Fund converts assets from one currency to
another.
The Fund is authorized to invest in debt securities rated in any category by
S&P or Moody's and securities which are unrated by any rating agency. See
"Investment Objectives and Policies--Debt Securities" in the SAI. As an
operating policy, which may be changed by the Board of Trustees without
Shareholder approval, the Fund will not invest more than 5% of its total
assets in debt securities rated lower than BBB by S&P or Baa by Moody's. The
Board of Trustees may consider a change in this operating policy if, in its
judgment, economic conditions change such that a higher level of investment in
high-risk, lower quality debt securities would be consistent with the
interests of the Fund and its Shareholders. High-risk, lower quality debt
securities, commonly referred to as "junk bonds," are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation
and may be in default. Unrated debt securities are not necessarily of lower
quality than rated securities, but they may not be attractive to as many
buyers. Regardless of rating levels, all debt securities considered for
purchase (whether rated or unrated) will be carefully analyzed by the
Investment Manager to insure, to the extent possible, that the planned
investment is sound. The Fund may, from time to time, invest up to 5% of its
total assets in defaulted debt securities if, in the opinion of the Investment
Manager, the issuer may resume interest payments in the near future.
Leveraging by means of borrowing may exaggerate the effect of any increase
or decrease in the value of portfolio securities on the Fund's net asset
value, and money borrowed will be subject to interest and other costs (which
may include commitment fees and/or
9
<PAGE>
the cost of maintaining minimum average balances) which may or may not exceed
the income received from the securities purchased with borrowed funds.
Successful use of futures contracts and related options is subject to
special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation
between movements in the securities or foreign currency on which the futures
or options contract is based and movements in the securities or currency in
the Fund's portfolio. Successful use of futures or options contracts is
further dependent on the Investment Manager's ability to correctly predict
movements in the securities or foreign currency markets, and no assurance can
be given that its judgment will be correct. Successful use of options on
securities or stock indices is subject to similar risk considerations. In
addition, by writing covered call options, the Fund gives up the opportunity,
while the option is in effect, to profit from any price increase in the
underlying security above the option exercise price.
There are further risk factors, including possible losses through the
holding of securities in domestic and foreign custodian banks and
depositories, described elsewhere in this Prospectus and in the SAI.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased at the Offering Price through any broker
which has a dealer agreement with Franklin Templeton Distributors, Inc.
("FTD"), the Principal Underwriter for Shares of the Fund, or directly from
FTD upon receipt by FTD of a completed Shareholder Application and check.
Shares of both classes of the Fund are offered at their respective public
Offering Prices, which are determined by adding the net asset value per Share
plus a front-end sales charge, next computed (i) after the Shareholder's
securities dealer receives the order which is promptly transmitted to the Fund
or (ii) after receipt of an order by mail from the Shareholder directly in
proper form (which generally means a completed Shareholder Application
accompanied by a negotiable check). The minimum initial investment is $100,
and subsequent investments must be $25 or more. These minimums may be waived
when the Shares are being purchased through retirement plans providing for
regular periodic investments, as described below under "Retirement Plans."
DIFFERENCES BETWEEN CLASS I AND CLASS II. The difference between Class I and
Class II Shares lies primarily in their front-end and contingent deferred
sales charges and Rule 12b-1 fees as described below.
Class I. All Fund Shares outstanding before the implementation of the
multiclass structure have been redesignated as Class I Shares, and will retain
their previous rights and privileges. Voting rights of each class will be the
same on matters affecting the Fund as a whole, but each will vote separately
on matters affecting its class. Class I Shares are generally subject to a
variable sales charge upon purchase and not subject to any sales charge upon
redemption. Class I Shares are subject to Rule 12b-1 fees of up to an annual
maximum of 0.35% of average daily net assets of such Shares. With this
multiclass structure, Class I Shares have higher front-end sales charges than
Class II Shares and comparatively lower Rule 12b-1 fees. Class I Shares may be
purchased at reduced front-end sales charges, or at net asset value if certain
conditions are met. In most circumstances, contingent deferred sales charges
will not be assessed against redemptions of Class I Shares. See "Management of
the Fund" and "How to Sell Shares of the Fund" for more information.
Class II. The current public Offering Price of Class II Shares is equal to
the net asset value, plus a front-end sales charge of 1% of the amount
invested. Class II Shares are also subject to a contingent deferred sales
charge of 1% if Shares are redeemed within 18 months of the calendar month
following purchase. In addition, Class II Shares are subject to Rule 12b-1
fees of up to a maximum of 1% per annum of average daily net assets of such
Shares, 0.75% of which will be retained by FTD during the first year of
investment. Class II Shares have lower front-end sales charges than Class I
Shares and comparatively higher Rule 12b-1 fees. See "How to Sell Shares of
the Fund--Contingent Deferred Sales Charge."
10
<PAGE>
Purchases of Class II Shares are limited to purchases below $1 million. Any
purchases of $1 million or more will automatically be invested in Class I
Shares, since that is more beneficial to investors. Such purchases, however,
may be subject to a contingent deferred sales charge. Investors may exceed $1
million in Class II Shares by cumulative purchases over a period of time.
Investors who intend to make investments exceeding $1 million, however, should
consider purchasing Class I Shares through a Letter of Intent instead of
purchasing Class II Shares.
DECIDING WHICH CLASS TO PURCHASE. Investors should carefully evaluate their
anticipated investment amount and time horizon prior to determining which
class of Shares to purchase. Generally, an investor who expects to invest less
than $50,000 in the Franklin Templeton Funds and who expects to make
substantial redemptions within approximately six years or less of investment
should consider purchasing Class II Shares. However, the higher annual Rule
12b-1 fees on the Class II Shares will result in slightly higher operating
expenses and lower income dividends for Class II Shares, which will accumulate
over time to outweigh the difference in front-end sales charges. For this
reason, Class I Shares may be more attractive to long-term investors even if
no sales charge reductions are available to them.
Investors who qualify to purchase Class I Shares at reduced sales charges
definitely should consider purchasing Class I Shares, especially if they
intend to hold their Shares approximately six years or more. Investors who
qualify to purchase Class I Shares at reduced sales charges but who intend to
hold their Shares less than approximately six years should evaluate whether it
is more economical to purchase Class I Shares through a Letter of Intent or
under Cumulative Quantity Discount rather than purchasing Class II Shares.
INVESTORS INVESTING $1 MILLION OR MORE IN A SINGLE PAYMENT AND OTHER INVESTORS
WHO QUALIFY TO PURCHASE CLASS I SHARES AT NET ASSET VALUE WILL BE PRECLUDED
FROM PURCHASING CLASS II SHARES.
Each class represents the same interest in the investment portfolio of the
Fund and has the same rights, except that each class has a different sales
charge, bears the separate expenses of its Rule 12b-1 distribution plan, and
has exclusive voting rights with respect to such plan. The two classes also
have separate exchange privileges.
In determining which Shares are more appropriate for a Shareholder's
investment objectives and income needs, a Shareholder should also consider
that the higher Rule 12b-1 fees for Class II will generally result in lower
dividends and consequently lower yields for Class II Shares as compared to
Class I Shares.
Each class also has a separate schedule for compensating securities dealers
for selling Fund Shares. Investors should take all of the factors regarding an
investment in each class into account before deciding which class of Shares to
purchase.
OFFERING PRICE--CLASS I. The sales charge for Class I Shares is a variable
percentage of the Offering Price depending upon the amount of the sale. A
description of the method of calculating net asset value per Share is included
under the caption "Net Asset Value" below.
The price to the public on purchases of Class I Shares made by a single
purchaser, by an individual, his or her spouse and their children under age
21, or by a single trust or fiduciary account other than an employee benefit
plan holding Shares of the Fund on or before February 1, 1995, is the net
asset value per Share plus a sales charge not exceeding 5.75% of the Offering
Price (equivalent to 6.10% of the net asset value), which is reduced on larger
sales as shown below:
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
-----------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE NET ASSET VALUE OFFERING PRICE
AT OFFERING PRICE OF THE SHARES PURCHASED OF THE SHARES PURCHASED RETAINED BY DEALERS/1/,/3/
- ----------------- ----------------------- ----------------------- --------------------------
<S> <C> <C> <C>
Less than $50,000....... 5.75% 6.10% 5.00%
$50,000 but less than
$100,000............... 4.50% 4.71% 3.75%
$100,000 but less than
$250,000............... 3.50% 3.63% 2.80%
$250,000 but less than
$500,000............... 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000............. 2.00% 2.04% 1.60%
$1,000,000 or more...... none none (see below)/2/
</TABLE>
11
<PAGE>
- -------
/1Financial/institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
/2The/following commissions will be paid by FTD, from its own resources, to
securities dealers who initiate and are responsible for purchases of $1
million or more: 1% on sales of $1 million but less than $2 million, plus
0.80% on sales of $2 million but less than $3 million, plus 0.50% on sales
of $3 million but less than $50 million, plus 0.25% on sales of $50 million
but less than $100 million, plus 0.15% on sales of $100 million or more.
Dealer concession breakpoints are reset every 12 months for purposes of
additional purchases.
/3At/the discretion of FTD, all sales charges may at times be reallowed to the
securities dealer. If 90% or more of the sales commission is reallowed, such
securities dealer may be deemed to be an underwriter as that term is defined
in the Securities Act of 1933.
No front-end sales charge applies on investments of $1 million or more, but
a contingent deferred sales charge of 1% is imposed on certain redemptions of
all or a portion of investments of $1 million or more within 12 months of the
calendar month following such investments ("contingency period"). See "How to
Sell Shares of the Fund--Contingent Deferred Sales Charge."
The size of a transaction which determines the applicable sales charge on
the purchase of Class I Shares is determined by adding the amount of the
Shareholder's current purchase plus the cost or current value (whichever is
higher) of a Shareholder's existing investment in one or more of the funds in
the Franklin Group of Funds(R) and the Templeton Family of Funds. Included for
these aggregation purposes are (i) the mutual funds in the Franklin Group of
Funds except Franklin Valuemark Funds and Franklin Government Securities Trust
(the "Franklin Funds"); (ii) other investment products underwritten by FTD or
its affiliates (although certain investments may not have the same schedule of
sales charges and/or may not be subject to reduction); and (iii) the U.S.-
registered mutual funds in the Templeton Family of Funds except Templeton
Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund, and Templeton
Variable Products Series Fund (the "Templeton Funds"). (Franklin Funds and
Templeton Funds are collectively referred to as the "Franklin Templeton
Funds.") Sales charge reductions based upon aggregate holdings of (i), (ii)
and (iii) above ("Franklin Templeton Investments") may be effective only after
notification to FTD that the investment qualifies for a discount.
Other Payments to Securities Dealers. FTD, or one of its affiliates, may
make payments, from its own resources, of up to 1% of the amount purchased to
securities dealers who initiate and are responsible for purchases made at net
asset value by certain designated retirement plans (as defined below)
(excluding IRA and IRA rollovers), certain nondesignated plans (as defined
below), certain trust companies and trust departments of banks and certain
retirement plans of organizations with collective retirement plan assets of
$10 million or more. See definitions under "Description of Special Net Asset
Value Purchases" below and as set forth in the SAI.
A sales charge of 4% of the Offering Price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan account which is a Shareholder in the Fund on or before
February 1, 1995. Of the 4% sales commission applicable to such purchases,
3.20% of the Offering Price will be retained by dealers.
Cumulative Quantity Discount. The schedule of reduced sales charges also may
be applied to qualifying sales of Class I Shares on a cumulative basis. For
this purpose, the dollar amount of the sale is added to the higher of (i) the
value (calculated at the applicable Offering Price) or (ii) the purchase
price, of Franklin Templeton Investments. The cumulative quantity discount
applies to Franklin Templeton Investments owned at the time of purchase by the
purchaser, his or her spouse, and their children under age 21. In addition,
the aggregate investments of a trustee or other fiduciary account (for an
account under exclusive investment authority) may be considered in determining
whether a reduced sales charge is available, even though there may be a number
of beneficiaries of the account. For example, if the investor held Class I
Shares valued at $40,000 (or, if valued at less than $40,000, had been
purchased for $40,000) and purchased an additional $20,000 of the Fund's Class
I Shares, the sales charge for the $20,000 purchase would be at the rate of
4.50%. It is FTD's policy to give investors the best sales charge rate
possible; however, there can be no assurance that an investor will receive the
appropriate discount unless, at the time of placing the purchase order, the
investor or the dealer makes a request for the discount and gives FTD
sufficient information to determine whether the purchase will qualify for the
discount. On telephone orders from dealers for the purchase of Class I Shares
to be registered in "street name," FTD will accept the dealer's instructions
with respect to the applicable sales charge rate to be applied. The cumulative
quantity discount may be amended or terminated at any time.
12
<PAGE>
Letter of Intent. Investors may also reduce sales charges on all investments
in Class I Shares by means of a Letter of Intent ("LOI") which expresses the
investor's intention to invest a certain amount within a 13-month period in
Class I Shares of the Fund or any other Franklin Templeton Fund. See the
Shareholder Application. Except for certain employee benefit plans, the
minimum initial investment under an LOI is 5% of the total LOI amount. Except
for Shares purchased by certain employee benefit plans, Shares purchased with
the first 5% of such amount will be held in escrow to secure payment of the
higher sales charge applicable to the Shares actually purchased if the full
amount indicated is not purchased, and such escrowed Shares will be
involuntarily redeemed to pay the additional sales charge, if necessary. A
purchase not originally made pursuant to an LOI may be included under a
subsequent LOI executed within 90 days of the purchase. Any redemptions made
by Shareholders, other than by certain employee benefit plans, during the 13-
month period will be subtracted from the amount of the purchases for purposes
of determining whether the terms of the LOI have been completed. For a further
description of the LOI, see "Purchase, Redemption and Pricing of Shares--
Letter of Intent" in the SAI.
Group Purchases. An individual who is a member of a qualified group may also
purchase Class I Shares of the Fund at the reduced sales charge applicable to
the group as a whole. The sales charge is based upon the aggregate dollar
value of Class I Shares previously purchased and still owned by the group,
plus the amount of the current purchase. For example, if members of the group
had previously invested and still held $80,000 of Class I Shares and now were
investing $25,000, the sales charge would be 3.50%. Information concerning the
current sales charge applicable to a group may be obtained by contacting FTD.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares at a discount, and
(iii) satisfies uniform criteria which enable FTD to realize economies of
scale in its costs of distributing Shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or FTD and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to FTD, and must seek to arrange for payroll
deduction or other bulk transmission of investments to the Fund.
If an investor selects a payroll deduction plan, subsequent investments will
be automatic and will continue until such time as the investor notifies the
Fund and the investor's employer to discontinue further investments. Due to
the varying procedures to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and the time the money reaches the Fund. The investment in the Fund
will be made at the Offering Price per Share determined on the day that both
the check and payroll deduction data are received in required form by the
Fund.
OFFERING PRICE--CLASS II. Unlike Class I Shares, the front-end sales charges
and dealer concessions for Class II Shares do not vary depending on the amount
of purchase. The total sales charges or underwriting commissions and dealer
concessions for Class II Shares are set forth below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
-----------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE NET ASSET VALUE OFFERING PRICE
AT OFFERING PRICE OF THE SHARES PURCHASED OF THE SHARES PURCHASED RETAINED BY DEALERS*
- ----------------- ----------------------- ----------------------- --------------------
<S> <C> <C> <C>
any amount (less than $1
million)............... 1.00% 1.01% 1.00%
</TABLE>
- -------
* FTD, or one of its affiliates, may make additional payments to securities
dealers, from its own resources, of up to 1% of the amount invested. During
the first year following a purchase of Class II Shares, FTD will keep a
portion of the Rule 12b-1 fees assessed on those Shares to partially recoup
fees FTD pays to securities dealers.
Class II Shares redeemed within 18 months of their purchase will be assessed
a contingent deferred sales charge of 1% on the lesser of the then-current net
asset value or the net asset value of such Shares at the time of purchase,
unless such charge is waived as described under "How To Sell Shares of the
Fund--Contingent Deferred Sales Charge."
13
<PAGE>
NET ASSET VALUE PURCHASES (BOTH CLASSES). Class I Shares may be purchased
without the imposition of either a front-end sales charge ("net asset value")
or a contingent deferred sales charge by (i) officers, trustees, directors,
and full-time employees of the Fund, any of the Franklin Templeton Funds, or
of Franklin Resources, Inc. and its subsidiaries (the "Franklin Templeton
Group"), and their spouses and family members, including any subsequent
payments made by such parties after cessation of employment; (ii) companies
exchanging Shares with or selling assets pursuant to a merger, acquisition or
exchange offer; (iii) insurance company separate accounts for pension plan
contracts; (iv) accounts managed by the Franklin Templeton Group; (v)
shareholders of Templeton Institutional Funds, Inc. reinvesting redemption
proceeds from that fund under an employee benefit plan qualified under Section
401 of the Internal Revenue Code of 1986, as amended (the "Code"), in Shares
of the Fund; (vi) certain unit investment trusts and unit holders of such
trusts reinvesting their distributions from the trusts in the Fund; (vii)
registered securities dealers and their affiliates, for their investment
account only; and (viii) registered personnel and employees of securities
dealers, and their spouses and family members, in accordance with the internal
policies and procedures of the employing securities dealer.
For either Class I or Class II, the same class of Shares of the Fund may be
purchased at net asset value by persons who have redeemed, within the previous
365 days, their Shares of the Fund or another of the Franklin Templeton Funds
which were purchased with a front-end sales charge or assessed a contingent
deferred sales charge on redemption. If a different class of Shares is
purchased, the full front-end sales charge must be paid at the time of
purchase of the new Shares. An investor may reinvest an amount not exceeding
the redemption proceeds. While credit will be given for any contingent
deferred sales charge paid on the Shares redeemed and subsequently
repurchased, a new contingency period will begin. Matured Shares will be
reinvested at net asset value and will not be subject to a new contingent
deferred sales charge. Shares of the Fund redeemed in connection with an
exchange into another fund (see "Exchange Privilege") are not considered
"redeemed" for this privilege. In order to exercise this privilege, a written
order for the purchase of Shares of the Fund must be received by the Fund or
the Fund's Transfer Agent within 365 days after the redemption. The 365 days,
however, do not begin to run on redemption proceeds placed immediately after
redemption in a Franklin Bank Certificate of Deposit ("CD") until the CD
(including any rollover) matures. Reinvestment at net asset value may also be
handled by a securities dealer or other financial institution, who may charge
the Shareholder a fee for this service. The redemption is a taxable
transaction but reinvestment without a sales charge may affect the amount of
gain or loss recognized and the tax basis of the Shares reinvested. If there
has been a loss on the redemption, the loss may be disallowed if a
reinvestment in the same fund is made within a 30-day period. Information
regarding the possible tax consequences of such a reinvestment is included
under "General Information--Federal Tax Information" of this Prospectus and in
the SAI.
For either Class I or Class II, the same class of Shares of the Fund or of
another of the Franklin Templeton Funds may be purchased at net asset value
and without a contingent deferred sales charge by persons who have received
dividends and capital gain distributions in cash from investments in that
class of Shares of the Fund within 365 days of the payment date of such
distribution. To exercise this privilege, a written request to reinvest the
distribution must accompany the purchase order. Additional information may be
obtained from Account Services at 1-800-393-3001. See "General Information--
Dividends and Distributions."
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by investors who have, within
the past 60 days, redeemed an investment in a mutual fund which is not part of
the Franklin Templeton Funds and which was subject to a front-end sales charge
or a contingent deferred sales charge and which has investment objectives
similar to those of the Fund.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by broker-dealers who have
entered into a supplemental agreement with FTD, or by registered investment
advisers affiliated with such broker-dealers, on behalf of their clients who
are participating in a comprehensive fee program (also known as a wrap fee
program).
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by anyone who has taken a
distribution from an existing retirement plan already invested in the Franklin
Templeton Funds (including former
14
<PAGE>
participants of the Franklin Templeton Profit Sharing 401(k) plan), to the
extent of such distribution. In order to exercise this privilege, a written
order for the purchase of Shares of the Fund must be received by Franklin
Templeton Trust Company ("FTTC"), the Fund, or Franklin Templeton Investor
Services, Inc. (the "Transfer Agent") within 365 days after the plan
distribution.
Class I Shares may also be purchased at net asset value and without the
imposition of a contingent deferred sales charge by any state, county or city,
or any instrumentality, department, authority or agency thereof which has
determined that the Fund is a legally permissible investment and which is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any registered
management investment company (an "eligible governmental authority"). SUCH
INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISERS TO DETERMINE WHETHER AND TO
WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM.
Municipal investors considering investment of proceeds of bond offerings into
the Fund should consult with expert counsel to determine the effect, if any,
of various payments made by the Fund or its investment manager or arbitrage
rebate calculations. If an investment by an eligible governmental authority at
net asset value is made through a securities dealer who has executed a dealer
agreement with FTD, FTD or one of its affiliates may make a payment, out of
its own resources, to such securities dealer in an amount not to exceed 0.25%
of the amount invested. Contact Franklin Templeton Institutional Services for
additional information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES. Class I Shares may also be
purchased at net asset value and without the imposition of a contingent
deferred sales charge by certain designated retirement plans, including
profit-sharing, pension, 401(k) and simplified employee pension plans
("designated plans"), subject to minimum requirements with respect to number
of employees or amount of purchase, which may be established by FTD.
Currently, those criteria require that the employer establishing the plan have
200 or more employees or that the amount invested or to be invested during the
subsequent 13-month period in the Fund or in any of the Franklin Templeton
Investments totals at least $1 million. Employee benefit plans not designated
above or qualified under Section 401 of the Code ("non-designated plans") may
be afforded the same privilege if they meet the above requirements as well as
the uniform criteria for qualified groups previously described under "Group
Purchases," which enable FTD to realize economies of scale in its sales
efforts and sales-related expenses.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trust companies and bank
trust departments for funds over which they exercise exclusive discretionary
investment authority and which are held in a fiduciary, agency, advisory,
custodial or similar capacity. Such purchases are subject to minimum
requirements with respect to amount of purchase, which may be established by
FTD. Currently, those criteria require that the amount invested or to be
invested during the subsequent 13-month period in the Fund or any of the
Franklin Templeton Investments must total at least $1 million. Orders for such
accounts will be accepted by mail accompanied by a check, or by telephone or
other means of electronic data transfer directly from the bank or trust
company, with payment by federal funds received by the close of business on
the next business day following such order.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trustees or other
fiduciaries purchasing securities for certain retirement plans of
organizations with collective retirement plan assets of $10 million or more,
without regard to where such assets are currently invested.
Refer to the SAI for further information regarding net asset value purchases
of Class I Shares.
ADDITIONAL DEALER COMPENSATION (BOTH CLASSES). FTD, or one of its
affiliates, from its own resources, may also provide additional compensation
to securities dealers in connection with sales of shares of the Franklin
Templeton Funds. Compensation may include financial assistance to securities
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising, sales campaigns and/or
shareholder services and programs regarding one or more of the Franklin
Templeton Funds and other dealer-sponsored programs or events. In some
instances, this compensation may be made available only to certain
15
<PAGE>
securities dealers whose representatives have sold or are expected to sell
significant amounts of shares of the Franklin Templeton Funds. Compensation
may include payment for travel expenses, including lodging, incurred in
connection with trips taken by invited registered representatives and members
of their families to locations within or outside of the United States for
meetings or seminars of a business nature. Securities dealers may not use
sales of the Fund's Shares to qualify for this compensation to the extent such
may be prohibited by the laws of any state or any self-regulatory agency, such
as the National Association of Securities Dealers, Inc. In addition, FTD or
its affiliates may make ongoing payments to brokerage firms, financial
institutions (including banks) and others to facilitate the administration and
servicing of Shareholder accounts. None of the aforementioned additional
compensation is paid for by the Fund or its Shareholders.
Ongoing payments will be made to qualifying dealers at the annual rate of
0.25% of the average daily net asset value of Class I Shares, and 1% of the
average daily net asset value of Class II Shares, registered in the name of
that broker-dealer as nominee or held in a Shareholder account that designates
that broker-dealer as dealer of record. These payments are made in order to
promote selling efforts and to compensate dealers for providing certain
services, including processing purchase and redemption transactions,
establishing Shareholder accounts and providing certain information and
assistance with respect to the Fund. For purchases on or after February 1,
1995 of Class I Shares that are subject to a contingent deferred charge, the
dealer will receive ongoing payments beginning in the thirteenth month after
the date of purchase. For all purchases of Class II Shares that are subject to
a contingent deferred sales charge, the dealer will receive payments
representing a service fee (0.25% of average daily net asset value of the
Shares) beginning in the first month after the date of the purchase, and will
receive payments representing compensation for distribution (0.75% of average
daily net asset value of the Shares) beginning in the thirteenth month after
the date of the purchase.
PURCHASING CLASS I AND CLASS II SHARES. When placing purchase orders,
investors should clearly indicate which class of Shares they intend to
purchase. A purchase order that fails to specify a class will automatically be
invested in Class I Shares. Purchases of $1 million or more in a single
payment will be invested in Class I Shares. There are no conversion features
attached to either class of Shares.
Investors who qualify to purchase Class I Shares at net asset value should
purchase Class I rather than Class II Shares. See the section "Net Asset Value
Purchases (Both Classes)" and "Description of Special Net Asset Value
Purchases" above for a discussion of when Shares may be purchased at net asset
value.
As to telephone orders placed with FTD by dealers, the dealer must receive
the investor's order before the close of the New York Stock Exchange ("NYSE")
and transmit it to FTD by 5:00 p.m., New York time, for the investor to
receive that day's Offering Price. Payment for such orders must be by check in
U.S. currency and must be promptly submitted to FTD. Orders mailed to FTD by
dealers or individual investors are effected at the net asset value of the
Fund's Shares next computed after the purchase order accompanied by payment
has been received by FTD. Such payment must be by check in U.S. currency drawn
on a commercial bank in the United States and, if over $100,000, may not be
deemed to have been received until the proceeds have been collected unless the
check is certified or issued by such bank. Any subscription may be rejected by
FTD or by the Fund.
The Fund may impose a $10 charge against a Shareholder account in the event
that a check or draft submitted for the purchase of Fund Shares is returned
unpaid to the Fund.
Investors should promptly check the confirmation advice that is mailed after
each purchase (or redemption) in order to ensure that it has been accurately
recorded in the investor's account.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received at least 10 days prior to the collection date,
or by FTD upon written notice to the investor at least 30 days prior to the
collection date.
16
<PAGE>
INSTITUTIONAL ACCOUNTS. Institutional investors will likely be required to
complete an institutional account application. There may be additional methods
of opening accounts, purchasing, redeeming or exchanging Shares of the Fund
available for institutional accounts. To obtain an institutional account
application or additional information regarding institutional accounts,
contact Franklin Templeton Institutional Services at 1-800-321-8563.
ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on
regular confirmation statements from the Transfer Agent.
TEMPLETON STAR SERVICE. From a touch-tone phone, Templeton and Franklin
Shareholders may access an automated system (day or night) which offers the
following features:
By calling the Templeton STAR Service, Shareholders may obtain current price
and yield information specific to a Templeton Fund, regardless of class, or
Franklin Class II shares; obtain account information; and request duplicate
confirmation or year-end statements and money fund checks, if applicable.
By calling the Franklin TeleFACTS system, Class I Shareholders may obtain
current price, yield or other performance information specific to a Franklin
Fund; process an exchange into an identically registered Franklin account;
obtain account information; and request duplicate confirmation or year-end
statements, money fund checks, if applicable, and deposit slips.
Share prices and account information specific to Templeton Class I or II
shares and Franklin Class II shares may also be accessed on TeleFACTS by
Franklin Class I and Class II shareholders.
The Templeton STAR Service is accessible by calling 1-800-654-0123. The
TeleFACTS system is accessible by calling 1-800-247-1753. Templeton Class I
and Class II Share codes for the Fund, which will be needed to access system
information, are 414 and 514, respectively. The system's automated operator
will prompt the caller with easy to follow step-by-step instructions from the
main menu. Other features may be added in the future.
RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which FTTC or its affiliate
acts as trustee or custodian: IRAs, Simplified Employee Pensions, 403(b)
plans, qualified plans for corporations, self-employed individuals and
partnerships, and 401(k) plans. A plan document must be adopted in order for a
retirement plan to be in existence. For further information about any of the
plans, agreements, applications and annual fees, contact Franklin Templeton
Distributors, Inc. To determine which retirement plan is appropriate, an
investor should contact his or her tax adviser.
NET ASSET VALUE. The net asset value per Share of each class of the Fund is
determined as of the scheduled closing time of the NYSE (generally 4:00 p.m.,
New York time) each day the NYSE is open for trading, by dividing the value of
the Fund's securities plus any cash and other assets (including accrued
interest and dividends receivable) less all liabilities (including accrued
expenses) by the number of Shares outstanding, adjusted to the nearest whole
cent. A security listed or traded on a recognized stock exchange or NASDAQ is
valued at its last sale price on the principal exchange on which the security
is traded. The value of a foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded, or as of the scheduled closing time of the NYSE (generally 4:00 p.m.,
New York time), if that is earlier, and that value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in effect at noon, New
York time, on the day the value of the foreign security is determined. If no
sale is reported at that time, the mean between the current bid and asked
price is used. Occasionally, events which affect the values of such securities
and such exchange rates may occur between the times at which they are
determined and the close of the NYSE, and will therefore not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at fair value as determined by the management and approved in
good faith by the Board of Trustees. All other securities for which over-the-
counter market quotations are readily available are valued at the
17
<PAGE>
mean between the current bid and asked price. Securities for which market
quotations are not readily available and other assets are valued at fair value
as determined by the management and approved in good faith by the Board of
Trustees.
Each of the Fund's classes will bear, pro-rata, all of the common expenses
of the Fund. The net asset value of all outstanding Shares of each class of
the Fund will be computed on a pro-rata basis for each outstanding Share based
on the proportionate participation in the Fund represented by the value of
Shares of such classes, except that the Class I and Class II Shares will bear
the Rule 12b-1 expenses payable under their respective plans. Due to the
specific distribution expenses and other costs that will be allocable to each
class, the dividends paid to each class of the Fund may vary.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares for the same class of shares of other
Franklin Templeton Funds which are eligible for sale in the Shareholder's
state of residence and in conformity with such fund's stated eligibility
requirements and investment minimums. Some funds, however, may not offer Class
II shares. Class I Shares may be exchanged for Class I shares of any Franklin
Templeton Funds. Class II Shares may be exchanged for Class II shares of any
Franklin Templeton Funds. No exchanges between different classes of shares
will be allowed. A contingent deferred sales charge will not be imposed on
exchanges. If the exchanged Shares were subject to a contingent deferred sales
charge in the original fund purchased, and Shares are subsequently redeemed
within 12 months (Class I Shares) or 18 months (Class II Shares) of the
calendar month following the original purchase date, a contingent deferred
sales charge will be imposed. The period will be tolled (or stopped) for the
period Class I Shares are exchanged into and held in a Franklin or Templeton
money market fund. See also "How to Sell Shares of the Fund--Contingent
Deferred Sales Charge."
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. Exchanges of the same
class of shares are made on the basis of the net asset values of the class
involved, except as set forth below. Exchanges of shares of a class which were
originally purchased without a sales charge will be charged a sales charge in
accordance with the terms of the prospectus of the fund and the class of
shares being purchased, unless the original investment on which no sales
charge was paid was transferred in from a fund on which the investor paid a
sales charge. Exchanges of shares from the Franklin Templeton Money Funds are
subject to applicable sales charges on the funds being purchased, unless the
Franklin Templeton Money Fund shares were acquired by an exchange from a fund
having a sales charge, or by reinvestment of dividends or capital gains
distributions. Exchanges of Class I Shares of the Fund which were purchased
with a lower sales charge to a fund which has a higher sales charge will be
charged the difference, unless the shares were held in the original fund for
at least six months prior to executing the exchange. All exchanges are
permitted only after at least 15 days have elapsed from the date of the
purchase of the Shares to be exchanged.
A Shareholder may exchange Shares by writing to the Transfer Agent (see "How
to Sell Shares of the Fund"), by contacting his or her investment dealer or--
if the Shareholder Application indicates that the Shareholder has not declined
the option--by telephoning 1-800-393-3001. Telephone exchange instructions
must be received by FTD by the scheduled closing time of the NYSE (generally
4:00 p.m., New York time). Telephonic exchanges can involve only Shares in
non-certificated form. Shares held in certificate form are not eligible, but
may be returned and qualify for these services. All accounts involved in a
telephonic exchange must have the same registration and dividend option as the
account from which the Shares are being exchanged. The Fund and the Transfer
Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Please refer to "Telephone
Transactions--Verification Procedures." Forms for declining the telephone
exchange privilege and prospectuses of the other funds in the Franklin
Templeton Group may be obtained from FTD. Exchange redemptions and purchases
are processed simultaneously at the Share prices next determined after the
exchange order is received. (See "How to Buy Shares of the Fund--Offering
Price.") A gain or loss for tax purposes generally will be realized upon the
exchange, depending on the tax basis of the Shares redeemed.
18
<PAGE>
This exchange privilege is available only in states where shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon 60 days' written notice. A Shareholder who wishes
to make an exchange should first obtain and review a current prospectus of the
fund into which he or she wishes to exchange. Broker-dealers who process
exchange orders on behalf of their customers may charge a fee for their
services. Such fee may be avoided by making requests for exchange directly to
the Transfer Agent.
If a substantial portion of the Fund's Shareholders should, within a short
period, elect to redeem their Shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Fund to initially invest this money in short-term, interest-bearing money
market instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objective exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
EXCHANGES OF CLASS I SHARES. The contingency period of Class I Shares will
be tolled (or stopped) for the period such Shares are exchanged into and held
in a Franklin or Templeton Class I money market fund. If a Class I account has
Shares subject to a contingent deferred sale charge, Class I Shares will be
exchanged into the new account on a "first-in, first-out" basis. See also "How
to Sell Shares of the Fund--Contingent Deferred Sales Charge."
EXCHANGES OF CLASS II SHARES. When an account is composed of Class II Shares
subject to the contingent deferred sales charge, and Shares that are not, the
Shares will be transferred proportionately into the new fund. Shares received
from reinvestment of dividends and capital gains are referred to as "free
Shares," Shares which were originally subject to a contingent deferred sales
charge but to which the contingent deferred sales charge no longer applies are
called "matured Shares," and Shares still subject to the contingent deferred
sales charge are referred to as "CDSC liable Shares." CDSC liable Shares held
for different periods of time are considered different types of CDSC liable
Shares. For instance, if a Shareholder has $1,000 in free Shares, $2,000 in
matured Shares, and $3,000 in CDSC liable Shares, and the Shareholder
exchanges $3,000 into a new fund, $500 will be exchanged from free Shares,
$1,000 from matured Shares, and $1,500 from CDSC liable Shares. Similarly, if
CDSC liable Shares have been purchased at different periods, a proportionate
amount will be taken from Shares held for each period. If, for example, the
Shareholder holds $1,000 in Shares bought three months ago, $1,000 bought six
months ago, and $1,000 bought nine months ago, and the Shareholder exchanges
$1,500 into a new fund, $500 from each of these Shares will be exchanged into
the new fund.
The only money market fund exchange option available to Class II
Shareholders is the Franklin Templeton Money Fund II ("Money Fund II"), a
series of the Franklin Templeton Money Fund Trust. No drafts (checks) may be
written on Money Fund II accounts, nor may Shareholders purchase shares of
Money Fund II directly. Class II Shares exchanged for shares of Money Fund II
will continue to age and a contingent deferred sales charge will be assessed
if CDSC liable Shares are redeemed. No other money market funds are available
for Class II Shareholders for exchange purposes. Class I Shares may be
exchanged for shares of any of the money market funds in the Franklin
Templeton Funds except Money Fund II. Draft writing privileges and direct
purchases are allowed on these money market funds as described in their
respective prospectuses.
To the extent Shares are exchanged proportionately, as opposed to another
method, such as "first-in, first-out," or free Shares followed by CDSC liable
Shares, the exchanged Shares may, in some instances, be CDSC liable even
though a redemption of such Shares, as discussed elsewhere herein, may no
longer be subject to a CDSC. The proportional method is believed by management
to more closely meet and reflect the expectations of Class II Shareholders in
the event Shares are redeemed during the contingency period. For federal
income tax purposes, the cost basis of Shares redeemed or exchanged is
determined under the Code without regard to the method of transferring Shares
chosen by the Fund for purposes of exchanging or redeeming Shares.
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<PAGE>
TRANSFERS. Transfers between identically registered accounts in the same
fund and class are treated as non-monetary and non-taxable events, and are not
subject to a contingent deferred sales charge. The transferred Shares will
continue to age from the date of original purchase. Shares of each class will
be transferred on the same basis as described above for exchanges.
CONVERSION RIGHTS. It is not presently anticipated that Class II Shares will
be converted to Class I Shares at this time. A Shareholder may, however, sell
Class II Shares and use the proceeds to purchase Class I Shares, subject to
all applicable sales charges.
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ("Timing Accounts"), FTD will deduct an administrative service fee of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase Shares based upon certain predetermined market
indicators. In accordance with the terms of their respective prospectuses,
certain funds in the Franklin Templeton Group do not accept or may place
differing limitations than those described below on exchanges by Timing
Accounts.
The Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern who:
(i) makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges Shares equal in value to at
least $5 million, or more than 1% of the Fund's net assets. Accounts under
common ownership or control, including accounts administered so as to redeem
or purchase Shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
In addition, the Fund reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to the Fund and therefore may be refused.
Finally, as indicated above, the Fund and FTD reserve the right to refuse
any order for the purchase of Shares.
HOW TO SELL SHARES OF THE FUND
Shares will be redeemed, without charge, on request of the Shareholder in
"Proper Order" to the Transfer Agent. "PROPER ORDER" MEANS THAT THE REQUEST TO
REDEEM MUST MEET ALL OF THE FOLLOWING REQUIREMENTS:
1. Except as provided below under "Redemptions by Telephone," it must be in
writing, signed by the Shareholder(s) exactly in the manner as the Shares are
registered, and must specify either the number of Shares, or the dollar amount
of Shares, to be redeemed and sent to Franklin Templeton Investor Services,
Inc., P.O. Box 33030, St. Petersburg, Florida 33733-8030;
2. The signature(s) of the redeeming Shareholder(s) must be guaranteed by an
"eligible guarantor," including (a) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (b) national securities
exchanges, registered securities associations and clearing agencies; (c)
securities broker-dealers which are members of a national securities exchange
or a clearing agency or which have minimum net capital of $100,000; or (d)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature medallion program. A notarized
signature will not be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature of each of the
redeeming Shareholders must be guaranteed. A signature guarantee is not
required for redemptions of $50,000 or less, requested by and payable to all
Shareholders of record, to be sent to the address of record for that account.
However, the Fund
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<PAGE>
reserves the right to require signature guarantees on all redemptions. A
signature guarantee is required in connection with any written request for
transfer of Shares. Also, a signature guarantee is required if the Fund or the
Transfer Agent believes that a signature guarantee would protect against
potential claims based on the transfer instructions, including, for example,
when (i) the current address of one or more joint owners of an account cannot
be confirmed; (ii) multiple owners have a dispute or give inconsistent
instructions to the Fund; (iii) the Fund has been notified of an adverse
claim; (iv) the instructions received by the Fund are given by an agent, not
the actual registered owner; (v) the Fund determines that joint owners who are
married to each other are separated or may be the subject of divorce
proceedings; or (vi) the authority of a representative of a corporation,
partnership, association, or other entity has not been established to the
satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
. Corporation--(i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
. Partnership--(i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
. Trust--(i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust
document listing the trustee(s) or a certificate of incumbency if the
trustee(s) are not listed on the account registration;
. Custodial (other than a retirement account)--Signature guaranteed
letter of instruction from the custodian;
. Accounts under court jurisdiction--Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence; and
5. Redemption of Shares held in a retirement plan for which FTTC or its
affiliate acts as trustee or custodian, must conform to the distribution
requirements of the plan and the Fund's redemption requirements above.
Distributions from such plans are subject to additional requirements under the
Code, and certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. For example, distributions from
retirement plans are subject to withholding requirements under the Code, and
the IRS Form W-4P (available from the Transfer Agent) may be required to be
submitted to the Transfer Agent with the distribution request, or the
distribution will be delayed. Franklin Templeton Investor Services, Inc. and
its affiliates assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws and will not be responsible
for any penalties assessed.
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Account Services Department by
calling 1-800-393-3001 or 813-823-8712.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer
Agent. A gain or loss for tax purposes generally will be realized upon the
redemption, depending on the tax basis of the Shares redeemed. Payment of the
redemption price ordinarily will be made by check (or by wire at the sole
discretion of the Transfer Agent if wire transfer is requested, including name
and address of the bank and the Shareholder's account number to which payment
of the redemption proceeds is to be wired) promptly after receipt of the
redemption request in Proper Order. However, if Shares have been purchased by
check, the Fund will make redemption proceeds available when a Shareholder's
check received for the Shares purchased has been cleared for payment by the
Shareholder's bank, which, depending upon the location of the Shareholder's
bank,
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could take up to 15 days or more. The check will be mailed by first-class mail
to the Shareholder's registered address (or as otherwise directed). Remittance
by wire (to a commercial bank account in the same name(s) as the Shares are
registered) or express mail, if requested, are subject to a handling charge of
$15, which will be deducted from the redemption proceeds.
The Fund, through FTD, also repurchases Shares (whether in certificate or
book-entry form) through securities dealers. The Fund normally will accept
orders to repurchase such Shares by wire or telephone from dealers for their
customers at the net asset value next computed after the dealer has received
the certificate holder's request for repurchase, if the dealer received such
request before closing time of the NYSE on that day. Dealers have the
responsibility of submitting such repurchase requests by calling not later
than 5:00 p.m., New York time, on such day in order to obtain that day's
applicable redemption price. Repurchase of Shares is for the convenience of
Shareholders and does not involve a charge by the Fund; however, securities
dealers may impose a charge on the Shareholder for transmitting the notice of
repurchase to the Fund. The Fund reserves the right to reject any order for
repurchase, which right of rejection might adversely affect Shareholders
seeking redemption through the repurchase procedure. Ordinarily, payment will
be made to the securities dealer promptly after receipt of a repurchase order
and Share certificate (if any) in "Proper Order" as set forth above. The Fund
also will accept, from member firms of the NYSE, orders to repurchase Shares
for which no certificates have been issued by wire or telephone without a
redemption request signed by the Shareholder, provided the member firm
indemnifies the Fund and FTD from any liability resulting from the absence of
the Shareholder's signature. Forms for such indemnity agreement can be
obtained from FTD.
The Fund may involuntarily redeem an investor's Shares if the net asset
value of such Shares is less than $100, except that involuntary redemptions
will not result from fluctuations in the value of an investor's Shares. In
addition, the Fund may involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
such other tax-related certifications as the Fund may require. A notice of
redemption, sent by first-class mail to the investor's address of record, will
fix a date not less than 30 days after the mailing date, and Shares will be
redeemed at net asset value at the close of business on that date, unless
sufficient additional Shares are purchased to bring the aggregate account
value up to $100 or more, or unless a certified taxpayer identification number
(or such other information as the Fund has requested) has been provided, as
the case may be. A check for the redemption proceeds will be mailed to the
investor at the address of record.
REINSTATEMENT PRIVILEGE. Shares of the Fund may be purchased at net asset
value with the proceeds from (i) a redemption of Shares of any Franklin
Templeton Fund which were purchased with an initial sales charge or assessed a
contingent deferred sales charge on redemption, or (ii) a dividend or
distribution paid by any of the Franklin Templeton Funds, within 365 days
after the date of the redemption or dividend or distribution. However, if a
Shareholder's original investment was in Class I shares of a fund with a lower
sales charge, or no sales charge, the Shareholder must pay the difference.
While credit will be given for any contingent deferred sales charge paid on
the Shares redeemed, a new contingency period will begin. Shares of the Fund
redeemed in connection with an exchange into another fund (see "Exchange
Privilege") are not considered "redeemed" for this privilege. In order to
exercise this privilege, a written order for the purchase of Shares of the
Fund must be received by the Fund or the Fund's Transfer Agent within 365 days
after the redemption. The 365 days, however, do not begin to run on redemption
proceeds placed immediately after redemption in a CD until the CD (including
any rollover) matures. The amount of gain or loss resulting from a redemption
may be affected by exercise of the reinstatement privilege if the Shares
redeemed were held for 90 days or less, or if a Shareholder reinvests in the
same fund within 30 days. Reinvestment will be at the next calculated net
asset value after receipt.
SYSTEMATIC WITHDRAWAL PLAN. A Shareholder may establish a Systematic
Withdrawal Plan ("Plan") and receive periodic payments from the account
provided that the net asset value of the Shares held by the Shareholder is at
least $5,000. There are no service charges for establishing or maintaining a
Plan. The minimum amount which the Shareholder may withdraw is $50 per
withdrawal transaction although this is merely the minimum amount allowed
under the Plan and should not be mistaken for a recommended amount. Retirement
plans subject to mandatory distribution requirements are not subject to the
$50 minimum. The Plan may be established on a monthly, quarterly, semiannual
or annual basis. If the Shareholder establishes a Plan, any capital gain
distributions and income
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dividends paid by the Fund to the Shareholder's account must be reinvested for
the Shareholder's account in additional Shares at net asset value. Payments are
then made from the liquidation of Shares at net asset value on the day of the
liquidation (which is generally on or about the 25th of the month) to meet the
specified withdrawals. Payments are generally received three to five days after
the date of liquidation. By completing the "Special Payment Instructions for
Distributions" section of the Shareholder Application included with this
Prospectus, a Shareholder may direct the selected withdrawals to another of the
Franklin Templeton Funds, to another person, or directly to a checking account.
Liquidation of Shares may reduce or possibly exhaust the Shares in the
Shareholder's account, to the extent withdrawals exceed Shares earned through
dividends and distributions, particularly in the event of a market decline. If
the withdrawal amount exceeds the total Plan balance, the account will be
closed and the remaining balance will be sent to the Shareholder. As with other
redemptions, a liquidation to make a withdrawal payment is a sale for federal
income tax purposes. Because the amount withdrawn under the Plan may be more
than the Shareholder's actual yield or income, part of such a Plan payment may
be a return of the Shareholder's investment.
Maintaining a Plan concurrently with purchases of additional Shares of the
Fund would be disadvantageous because of the sales charge on the additional
purchases. Also, redemptions of Class I Shares and Class II Shares may be
subject to a contingent deferred sales charge if the Shares are redeemed within
12 months (Class I Shares) or 18 months (Class II Shares) of the calendar month
of the original purchase date. The Shareholder should ordinarily not make
additional investments of less than $5,000 or three times the annual
withdrawals under the Plan during the time such a Plan is in effect.
With respect to Class I Shares, the contingent deferred sales charge is
waived for redemptions through a Systematic Withdrawal Plan set up prior to
February 1, 1995. With respect to Systematic Withdrawal Plans set up on or
after February 1, 1995, the applicable contingent deferred sales charge is
waived for Class I and Class II Share redemptions of up to 1% monthly of an
account's net asset value (12% annually, 6% semiannually, 3% quarterly). For
example, if a Class I account maintained an annual balance of $1,000,000, only
$120,000 could be withdrawn through a once-yearly Systematic Withdrawal Plan
free of charge; any amount over that $120,000 would be assessed a 1% (or
applicable) contingent deferred sales charge. Likewise, if a Class II account
maintained an annual balance of $10,000, only $1,200 could be withdrawn through
a once-yearly Systematic Withdrawal Plan free of charge.
A Plan may be terminated on written notice by the Shareholder or the Fund,
and it will terminate automatically if all Shares are liquidated or withdrawn
from the account, or upon the Fund's receipt of notification of the death or
incapacity of the Shareholder. Shareholders may change the amount (but not
below $50) and schedule of withdrawal payments or suspend one such payment by
giving written notice to the Transfer Agent at least seven business days prior
to the end of the month preceding a scheduled payment. Share certificates may
not be issued while a Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions--Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures to
confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions--Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption request received before the scheduled closing
time of the NYSE (generally 4:00 p.m., New York time), on any business day will
be processed that same day. The redemption check will be sent promptly, made
payable to all the registered owners on the account, and will be sent only to
the address of record. Redemption requests by telephone will not be accepted
within 30 days following an address change by telephone. In that case, a
Shareholder should follow the other redemption procedures set forth in this
Prospectus. Institutional accounts which wish to execute redemptions in excess
of $50,000 must complete an Institutional Telephone Privileges Agreement which
is available from Franklin Templeton Institutional Services by telephoning 1-
800-321-8563.
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CONTINGENT DEFERRED SALES CHARGE. In order to recover commissions paid to
securities dealers, Class I investments of $1 million or more, and any Class
II investments, redeemed within the contingency period of 12 months (Class I)
or 18 months (Class II) of the calendar month following their purchase will be
assessed a contingent deferred sales charge, unless one of the exceptions
described below applies. The charge is 1% of the lesser of the net asset value
of the Shares redeemed (exclusive of reinvested dividends and capital gain
distributions) or the net asset value at the time of purchase of such Shares,
and is retained by FTD. The contingent deferred sales charge is waived in
certain instances.
In determining if a contingent deferred sales charge applies, Shares not
subject to a contingent deferred sales charge are deemed to be redeemed first,
in the following order: (i) a calculated number of Shares representing amounts
attributable to capital appreciation of those Shares held less than the
contingency period (12 months in the case of Class I Shares and 18 months in
the case of Class II Shares); (ii) Shares purchased with reinvested dividends
and capital gain distributions; and (iii) other Shares held longer than the
contingency period, and followed by any Shares held less than the contingency
period, on a "first in, first out" basis. For tax purposes, a contingent
deferred sales charge is treated as either a reduction in redemption proceeds
or an adjustment to the cost basis of the Shares redeemed.
The contingent deferred sales charge on each class of Shares is waived, as
applicable, for: exchanges; any account fees; distributions to participants or
beneficiaries in FTTC individual retirement plan accounts due to death,
disability or attainment of age 59 1/2; tax-free returns of excess
contributions from employee benefit plans; distributions from employee benefit
plans, including those due to plan termination or plan transfer; redemptions
through a Systematic Withdrawal Plan set up for Shares prior to February 1,
1995 and, for Systematic Withdrawal Plans set up thereafter, redemptions of up
to 1% monthly of an account's net asset value (3% quarterly, 6% semiannually
or 12% annually); redemptions initiated by the Fund due to a Shareholder's
account falling below the minimum specified account size; and redemptions
following the death of the Shareholder or the beneficial owner.
All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Requests for redemptions for a SPECIFIED DOLLAR amount, unless otherwise
specified, will result in additional Shares being redeemed to cover any
applicable contingent deferred sales charge, while requests for redemption of
a SPECIFIC NUMBER of Shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their investment representative of record, if
any, may be able to execute various transactions by calling the Transfer Agent
at 1-800-393-3001.
All Shareholders will be able to: (i) effect a change in address, (ii)
change a dividend option (see "Restricted Accounts" below), (iii) transfer
Fund Shares in one account to another identically registered account in the
Fund, (iv) request the issuance of certificates (to be sent to the address of
record only) and (v) exchange Fund Shares by telephone as described in this
Prospectus. In addition, Shareholders who complete and file an Agreement as
described under "How to Sell Shares of the Fund--Redemptions by Telephone"
will be able to redeem Shares of the Fund.
VERIFICATION PROCEDURES. The Fund and the Transfer Agent, will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent
at the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So
long as the Fund and the Transfer Agent follow instructions
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<PAGE>
communicated by telephone which were reasonably believed to be genuine at the
time of their receipt, neither they nor their affiliates will be liable for
any loss to the Shareholder caused by an unauthorized transaction. The Fund
and the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions in the event such reasonable procedures are not
followed. Shareholders are, of course, under no obligation to apply for or
accept telephone transaction privileges. In any instance where the Fund or the
Transfer Agent is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed, and
neither the Fund, the Transfer Agent, nor their affiliates will be liable for
any losses which may occur because of a delay in implementing a transaction.
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on Franklin Templeton retirement accounts. To assure
compliance with all applicable regulations, special forms are required for any
distribution, redemption or dividend payment. While the telephone exchange
privilege is extended to Franklin Templeton IRA and 403(b) retirement
accounts, certain restrictions may apply to other types of retirement plans.
Changes to dividend options must also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, retirement account Shareholders may call to
speak to a Retirement Plan Specialist at 1-800-527-2020 for Franklin accounts,
or 1-800-354-9191 (press "2" when prompted to do so) for Templeton accounts.
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be difficult to
execute because of heavy telephone volume. In such situations, Shareholders
may wish to contact their dealer for assistance, or to send written
instructions to the Fund as detailed elsewhere in this Prospectus.
Neither the Fund nor the Transfer Agent will be liable for any losses
resulting from the inability of a Shareholder to execute a telephone
transaction. The telephone transaction privilege may be modified or
discontinued by the Fund at any time upon 60 days' written notice to
Shareholders.
MANAGEMENT OF THE FUND
The Trust is managed by its Board of Trustees and all powers of the Trust
are exercised by or under authority of the Board. Information relating to the
Trustees and Executive Officers is set forth under the heading "Management of
the Trust" in the SAI.
The Board has carefully reviewed the multiclass structure to ensure that no
material conflict exists between the two classes of Shares. Although the Board
does not expect to encounter material conflicts in the future, the Board will
continue to monitor the Fund and will take appropriate action to resolve such
conflicts if any should later arise.
In developing the multiclass structure, the Fund has retained the authority
to establish additional classes of Shares. It is the Fund's present intention
to offer only two classes of Shares, but new classes may be offered in the
future.
INVESTMENT MANAGER. The Investment Manager of the Fund is Templeton,
Galbraith & Hansberger Ltd., Nassau, Bahamas. The Investment Manager manages
the investment and reinvestment of the Fund's assets. The Investment Manager
is an indirect wholly owned subsidiary of Franklin Resources, Inc.
("Franklin"). Through its subsidiaries, Franklin is engaged in various aspects
of the financial services industry. The Investment Manager and its affiliates
serve as advisers for a wide variety of public investment mutual funds and
private clients in many nations. The Templeton organization has been investing
globally over the past 52 years and, with its affiliates, provides investment
management and advisory services to a worldwide client base, including over
4.3 million mutual fund shareholders, foundations, endowments, employee
benefit plans and individuals. The Investment Manager and its affiliates have
approximately 4,100 employees in the United States, Australia, Scotland,
Germany, Hong Kong, Luxembourg, Bahamas, Singapore, Canada and Russia.
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The Investment Manager uses a disciplined, long-term approach to value-
oriented global and international investing. It has an extensive global
network of investment research sources. Securities are selected for the Fund's
portfolio on the basis of fundamental company-by-company analysis. Many
different selection methods are used for different funds and clients and these
methods are changed and improved by the Investment Manager's research on
superior selection methods.
The Investment Manager does not furnish any other services or facilities for
the Fund, although such expenses are paid by some investment advisers of other
investment companies. As compensation for its services, the Fund pays the
Investment Manager a fee which, during the most recent fiscal year,
represented 0.75% of its average daily net assets. This fee is higher than
advisory fees paid by most other U.S. investment companies, primarily because
investing in securities of companies in foreign markets, many of which are not
widely followed by professional analysts, requires the Investment Manager to
invest additional time and incur added expense in developing specialized
resources, including research facilities.
Currently, the lead portfolio manager for the Fund is Dorian B. Foyil, Vice
President of the Investment Manager and head of Templeton's Research
Technology Group. Prior to joining the Templeton organization, Mr. Foyil was a
research analyst for four years with UBS Phillips & Drew in London, England.
Mark G. Holowesko, Executive Vice President of the Investment Manager,
exercises secondary portfolio management responsibilities with respect to the
Fund. Mr. Holowesko is responsible for coordinating equity research worldwide
for the Investment Manager. Prior to joining the Templeton organization, Mr.
Holowesko worked with Roy West Trust Corporation (Bahamas) Limited as an
investment administrator. His duties at Roy West included managing trust and
individual accounts, as well as research of worldwide equity markets. Further
information concerning the Investment Manager is included under the heading
"Investment Management and Other Services" in the SAI.
BUSINESS MANAGER. Templeton Global Investors, Inc. provides certain
administrative facilities and services for the Fund, including payment of
salaries of officers, preparation and maintenance of books and records,
preparation of tax returns and financial reports, monitoring compliance with
regulatory requirements and monitoring tax-deferred retirement plans. For its
services, the Fund pays the Business Manager a fee equivalent on an annual
basis to 0.15% of the combined average daily net assets of the Funds included
in the Trust (the Fund, Templeton Greater European Fund, Templeton Latin
America Fund, Templeton Americas Government Securities Fund, and Templeton
Global Infrastructure Fund), reduced to 0.135% of such combined assets in
excess of $200 million, to 0.10% of such assets in excess of $700 million, and
to 0.075% of such assets in excess of $1,200 million.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
PLANS OF DISTRIBUTIONS. A separate Plan of Distribution has been approved
and adopted for each class ("Class I Plan" and "Class II Plan," respectively,
or "Plans") pursuant to Rule 12b-1 under the 1940 Act. The Rule 12b-1 fees
charged to each class will be based solely on the distribution and servicing
fees attributable to that particular class. Any portion of fees remaining from
either Plan after distribution to securities dealers of up to the maximum
amount permitted under each Plan may be used by the class to reimburse FTD for
routine ongoing promotion and distribution expenses incurred with respect to
such class. Such expenses may include, but are not limited to, the printing of
prospectuses and reports used for sales purposes, expenses, of preparing and
distributing sales literature and related expenses, advertisements, and other
distribution-related expenses, including a prorated portion of FTD's overhead
expenses attributable to the distribution of Fund Shares, as well as any
distribution or service fees paid to securities dealers or their firms or
others who have executed a servicing agreement with the Fund, FTD or its
affiliates.
The maximum amount which the Fund may pay to FTD or others under the Class I
Plan for such distribution expenses is 0.35% per annum of Class I's average
daily net assets, payable on a quarterly basis. All expenses of distribution
and marketing in excess of 0.35% per annum will be borne by FTD, or others who
have incurred them, without reimbursement from the Fund. Under the Class I
Plan, costs and expenses not reimbursed in any one given quarter (including
costs and expenses not reimbursed because they exceed the
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<PAGE>
applicable limit of the Plan) may be reimbursed in subsequent quarters or
years, subject to applicable law. FTD has informed the Fund that costs and
expenses of Class I Shares that may be reimbursable in future quarters or
years were $650,396 (10.88% of its net assets) at March 31, 1995.
Under the Class II Plan, the maximum amount which the Fund is permitted to
pay to FTD or others for distribution expenses and related expenses is 0.75%
per annum of Class II's average daily net assets, payable quarterly. All
expenses of distribution, marketing and related services over that amount will
be borne by FTD, or others who have incurred them, without reimbursement by
the Fund. In addition, the Class II Plan provides for an additional payment by
the Fund of up to 0.25% per annum of Class II's average daily net assets as a
servicing fee, payable quarterly. This fee will be used to pay securities
dealers or others for, among other things, assisting in establishing and
maintaining customer accounts and records; assisting with purchase and
redemption requests; receiving and answering correspondence; monitoring
dividend payments from the Fund on behalf of the customers; or similar
activities related to furnishing personal services and/or maintaining
Shareholder accounts.
During the first year following the purchase of Class II Shares, FTD will
retain 0.75% per annum of Class II's average daily net assets to partially
recoup fees FTD pays to securities dealers. FTD, or its affiliates, may pay,
from its own resources, a commission of up to 1% of the amount invested to
securities dealers who initiate and are responsible for purchases of Class II
Shares.
Both Plans also cover any payments to or by the Fund, the Investment
Manager, FTD, or other parties on behalf of the Fund, the Investment Manager
or FTD, to the extent such payments are deemed to be for the financing of any
activity primarily intended to result in the sale of Shares issued by the Fund
within the context of Rule 12b-1. The payments under the Plans are included in
the maximum operating expenses which may be borne by each class of the Fund.
For more information including a discussion of the Board's policies with
regard to the amount of each Plan's fees, please see the SAI.
EXPENSES. For the fiscal year ended March 31, 1995, expenses borne by Class
I Shares of the Fund (net of reimbursement by the Business Manager) amounted
to 1.25% of the Fund's average net assets of such class. See the Expense Table
for information regarding estimated expenses of both classes of Shares for the
current fiscal year.
BROKERAGE COMMISSIONS. The Fund's brokerage policies are described under the
heading "Brokerage Allocation" in the SAI. The Fund's brokerage policies
provide that the receipt of research services from a broker and the sale of
Shares by a broker are factors which may be taken into account in allocating
securities transactions, so long as the prices and execution provided by the
broker equal the best available within the scope of the Fund's brokerage
policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The capitalization of the Trust
consists of an unlimited number of Shares of beneficial interest, par value
$0.01 per Share. The Board of Trustees is authorized, in its discretion, to
classify and allocate the unissued Shares of the Trust in an unlimited number
of separate series and may in the future divide existing series into two or
more classes. Each Share entitles the holder to one vote.
Shares for an initial investment, as well as subsequent investments,
including the reinvestment of dividends and capital gain distributions, are
generally credited to an account in the name of an investor on the books of
the Fund, without the issuance of a share certificate. Maintaining Shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss
or theft of a share certificate. No charge is made for the issuance of one
certificate for all or some of the Shares purchased in a single order. A lost,
stolen or destroyed certificate cannot be replaced without obtaining a
sufficient indemnity bond. The cost of such a bond, which is generally borne
by the Shareholder, can be 2% or more of the value of the lost, stolen or
destroyed certificates. A certificate will be issued if requested by the
Shareholder or by the securities dealer.
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VOTING RIGHTS. Shares of each class represent proportionate interests in the
assets of the Fund and have the same voting and other rights and preferences
as the other class of the Fund for matters that affect the Fund as a whole.
For matters that only affect a certain class of the Fund's Shares, however,
only Shareholders of that class will be entitled to vote. Therefore, each
class of Shares will vote separately on matters (i) affecting only that class,
(ii) expressly required to be voted on separately by state law, or (iii)
required to be voted on separately by the 1940 Act or the rules adopted
thereunder. For instance, if a change to the Rule 12b-1 plan relating to Class
I Shares requires Shareholder approval, only Shareholders of Class I may vote
on changes to the Rule 12b-1 plan affecting that class. Similarly, if a change
to the Rule 12b-1 plan relating to Class II Shares requires Shareholder
approval, only Shareholders of Class II may vote on the change to such plan.
On the other hand, if there is a proposed change to the investment objective
of the Fund, this affects all Shareholders, regardless of which class of
Shares they hold, and therefore, each Share has the same voting rights.
MEETINGS OF SHAREHOLDERS. The Trust is not required to hold annual meetings
of Shareholders and may elect not to do so. The Trust will call a special
meeting of Shareholders for the purpose of considering the removal of a person
serving as Trustee if requested in writing to do so by the holders of not less
than 10% of the Trust's outstanding Shares. The Trust is required to assist
Shareholder communications in connection with the calling of Shareholder
meetings to consider removal of a Trustee or Trustees.
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay a dividend at least
annually representing substantially all of its net investment income and any
net realized capital gains. According to the requirements of the Code,
dividends and capital gains will be calculated and distributed in the same
manner for Class I and Class II Shares. The per share amount of any income
dividends will generally differ only to the extent that each class is subject
to different Rule 12b-1 fees. Unless otherwise requested, income dividends and
capital gain distributions paid by the Fund, other than on those Shares whose
owners keep them registered in the name of a broker-dealer, are automatically
reinvested on the payment date in whole or fractional Shares at net asset
value as of the ex-dividend date, unless a Shareholder makes a written or
telephonic request for payments in cash. Dividend and capital gain
distributions are only eligible for reinvestment at net asset value in the
same class of Shares of the Fund or the same class of another of the Franklin
Templeton Funds. The processing date for the reinvestment of dividends may
vary from time to time, and does not affect the amount or value of the Shares
acquired. Income dividends and capital gain distributions will be paid in cash
on Shares during the time their owners keep them registered in the name of a
broker-dealer, unless the broker-dealer has made arrangements with the
Transfer Agent for reinvestment.
Prior to purchasing Shares of the Fund, the impact of dividends or capital
gain distributions which have been declared but not yet paid should be
carefully considered. Any dividend or capital gain distribution paid shortly
after a purchase by a Shareholder prior to the record date will have the
effect of reducing the per Share net asset value of the Shares by the amount
of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, generally will be
subject to tax.
Checks are forwarded by first-class mail to the address of record. The
proceeds of any such checks which are not accepted by the addressee and
returned to the Fund will be reinvested in the Shareholder's account in whole
or fractional Shares at the net asset value next computed after the check has
been received by the Transfer Agent. Subsequent distributions automatically
will be reinvested at net asset value as of the ex-dividend date in additional
whole or fractional Shares.
FEDERAL TAX INFORMATION. The Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. See the SAI for a summary of requirements that must be satisfied to so
qualify. A regulated investment company generally is not subject to federal
income tax on income and gains distributed in a timely manner to its
shareholders. The Fund intends to distribute to Shareholders substantially all
of its net investment income and realized capital gains, which generally will
be taxable income or capital gains in their hands. Distributions declared in
October, November or December to Shareholders of record on a date in such
month and paid during the following January will be treated as having been
received by Shareholders on December 31 in the year such distributions were
declared. The Fund will inform Shareholders each year of the amount and nature
of such income or gains. Sales or other dispositions of Fund Shares generally
will give rise to taxable gain or loss. A more detailed description of tax
consequences to Shareholders is contained in the SAI under the heading "Tax
Status."
28
<PAGE>
The Fund may be required to withhold federal income tax at the rate of 31%
of all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholder's federal income tax liability.
INQUIRIES. Shareholders' inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., P.O. Box 33030, St.
Petersburg, Florida 33733-8030--telephone 1-800-393-3001 or 813-823-8712.
Transcripts of Shareholder accounts less than three-years old are provided on
request without charge; requests for transcripts going back more than three
years from the date the request is received by the Transfer Agent are subject
to a fee of up to $15 per account.
PERFORMANCE INFORMATION. The Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over
a period of 1, 5 and 10 years (or up to the life of the Fund), will reflect
the deduction of the maximum initial sales charge and deduction of a
proportional share of Fund expenses (on an annual basis), and will assume that
all dividends and distributions are reinvested when paid. Total return may be
expressed in terms of the cumulative value of an investment in the Fund at the
end of a defined period of time. For a description of the methods used to
determine total return for the Fund, see the SAI.
Because Class II Shares were not offered prior to May 1, 1995, no
performance data is available for these Shares. After a sufficient period of
time has passed, Class II performance data will be available.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on March 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semiannual
reports (containing unaudited financial statements) are sent to Shareholders
each year. Additional copies may be obtained, without charge, upon request to
the Fund Information Department. The Fund also sends to each Shareholder a
confirmation statement after every transaction that affects the Shareholder's
account and a year-end historical confirmation statement.
29
<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service ("IRS").
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number ("SSN/TIN"), you must obtain Form SS-5 or Form SS-4 from
your local Social Security or IRS office and apply for one. If you have
checked the "Awaiting TIN" box and signed the certification, withholding will
apply to payments relating to your account unless you provide a certified TIN
within 60 days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- -------------------------------------------------------------------------------------
. Joint Actual owner of . Corporation, Corporation,
Individual account, or if Partnership, or other Partnership, or other
combined funds, the organization organization
first-named
individual
- -----------------------------------------------------------------------------------
. Unif. Minor . Broker nominee Broker nominee
Gift/Transfer
to Minor
- -----------------------------------------------------------------------------------
. Sole Owner of business
Proprietor
- -----------------------------------------------------------------------------------
. Legal Ward, Minor, or
Guardian Incompetent
- -----------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient"
box if you are an exempt recipient. Exempt recipients generally include:
<TABLE>
<S> <C>
A corporation A real estate investment trust
A financial institution A common trust fund operated by a bank under section 584(a)
An organization exempt from tax under section 501(a), or an An entity registered at all times under the Investment
individual retirement plan Company Act of 1940
A registered dealer in securities or commodities registered in the
U.S. or a U.S. possession
</TABLE>
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith.
If you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
"Exempt Foreign Person" if you are not (1) a citizen or resident of the U.S.,
or (2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an "Exempt Foreign Person" is one who has been physically present
in the U.S. for less than 31 days during the current calendar year. An
individual who is physically present in the U.S. for at least 31 days during
the current calendar year will still be treated as an "Exempt Foreign Person,"
provided that the total number of days physically present in the current
calendar year and the two preceding calendar years does not equal or exceed
183 days (counting all of the days in the current calendar year, only one-
third of the days in the first preceding calendar year and only one-sixth of
the days in the second preceding calendar year). In addition, lawful permanent
residents or green card holders may not be treated as "Exempt Foreign
Persons." If you are an individual or an entity, you must not now be, or at
this time expect to be, engaged in a U.S. trade or business with respect to
which any gain derived from transactions effected by the Fund/Payer during the
calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that
(1) the taxpayer identification number you have given is correct, and (2) the
IRS has not notified you that you are subject to backup withholding because
you failed to report certain interest or dividend income. You may use Form W-
9, "Payer's Request for Taxpayer Identification Number and Certification," to
make these certifications. If an account is no longer active, you do not have
to notify a Fund/Payer or broker of your change in status unless you also have
another account with the same Fund/Payer that is still active. If you receive
interest from more than one Fund/Payer or have dealings with more than one
broker or barter exchange, file a certificate with each. If you have more than
one account with the same Fund/Payer, the Fund/Payer may require you to file a
separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated
as having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for
three calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
30
<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly
elected _____________________ of __________________________________
TITLE CORPORATE NAME
a ____________________ organized under the laws of the State of _____ and that
TYPE OF ORGANIZATION STATE
the following is a true and correct copy of a resolution adopted by the Board
of Directors at a meeting duly called and held on ________________
DATE
RESOLVED, that the _________________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds(R) or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED, that any of the following ______ officers are authorized to
NUMBER
sign any share assignment on behalf of this Corporation or Association and to
take any other actions as may be necessary to sell or redeem its shares in the
Funds or to sign checks or drafts withdrawing funds from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary.)
- -------------------------------------- --------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- --------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- --------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- --------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- --------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes ________________________________________________________
NAME AND TITLE
CORPORATE SEAL (if appropriate)
31
<PAGE>
THE FRANKLIN TEMPLETON TELEPHONE REDEMPTION AUTHORIZATION AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
Shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Fund's Prospectus.
The telephone redemption privilege is available only to Shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges automatically available to Franklin
Templeton Fund shareholders, please sign and return this authorization to
Franklin Templeton Investor Services, Inc. ("Services"), transfer agent and
shareholder servicing agent for the Franklin Templeton Funds.
SHAREHOLDER AUTHORIZATION: I/We request the telephone redemption privilege
under the terms described below and in the prospectus for each investment
company in the Franklin Templeton Group of Funds (a "Franklin Templeton Fund"
or a "Fund"), now opened or opened at a later date, holding shares registered
as follows:
- ------------------------------------- ---------------------------------------
PRINT NAME(S) AS SHOWN IN YOUR ACCOUNT REGISTRATION ("SHAREHOLDER")
- ------------------------------------- ---------------------------------------
ACCOUNT NUMBER(S)
I/We authorize each Fund and Services to honor and act upon telephone requests
given as provided in this agreement to redeem shares from any
Shareholder account:
- ------------------------------------- ---------------------------------------
SIGNATURE(S) AND DATE
- ------------------------------------- ---------------------------------------
PRINT NAME(S) (AND TITLE/CAPACITY, IF APPLICABLE)
VERIFICATION PROCEDURES: I/We understand and agree that: (1) each Fund and
Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Services may be liable
for any losses due to unauthorized or fraudulent telephone instructions; (2)
the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the
time of the call for the purpose of establishing the caller's identification,
and the sending of confirmation statements to the address of record each time
a redemption is initiated by telephone; and (3) so long as the Fund and
Services follow the confirmation procedures in acting on instructions
communicated by telephone which were reasonably believed to be genuine at the
time of receipt, neither they, nor their parent or affiliates, will be liable
for any loss, damages or expenses caused by an unauthorized or fraudulent
redemption request.
JOINTLY OWNED/CO-TRUSTEE ACCOUNTS: Each of us signing this agreement as either
joint owners or co-trustees authorizes each Fund and Services to honor
telephone redemption requests given by ANY ONE of the signers, or our
investment representative of record, if any, ACTING ALONE.
APPOINTMENT OF ATTORNEY-IN-FACT: In order to issue telephone redemption
requests acting alone, each of us individually makes the following
appointment: I hereby appoint the other joint owner(s)/co-trustee(s) as my
agent(s) (attorney[s]-in-fact) with full power and authority to individually
act for me in any lawful way with respect to the issuance of instructions to a
Fund or Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it
is revoked by either written notice from any one of us delivered to a Fund or
Services by registered mail, return receipt requested, or by a Fund or
Services upon receipt of any information that causes a Fund or Services to
believe in good faith that there is or that there may be a dispute among any
of us with respect to the Franklin Templeton Fund account(s) covered by this
agreement. Each of us agrees to notify the Fund or Services immediately upon
the death of any of the signers.
CORPORATE/PARTNERSHIP/TRUST/RETIREMENT ACCOUNTS: The Shareholder and each of
us signing this agreement on behalf of the Shareholder represent and warrant
to each Franklin Templeton Fund and Services that the Shareholder has the
authority to enter into this agreement and that each of us is duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Services may honor a telephone redemption request given by ANY
officer/partner/member/administrator/or agent of the Shareholder ACTING ALONE.
RESTRICTED ACCOUNTS: Telephone redemptions may not be accepted on Franklin
Templeton Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin Templeton Investor Services, Inc., Attn.: Telephone Redemptions
Dept., 700 Central Avenue, St. Petersburg, Florida 33701-3628.
32
<PAGE>
The Franklin Templeton Group
Literature Request -- Call today for a free descriptive brochure and
prospectus on any of the funds listed below. The prospectus contains more
complete information, including fees, charges and expenses, and should be read
carefully before investing or sending money.
<TABLE>
<S> <C> <C>
TEMPLETON FUNDS Maryland FRANKLIN FUNDS SEEKING
HIGH CURRENT INCOME
American Trust Massachusetts***
AGE High Income Fund
Americas Government Michigan***
Securities Fund German Government Bond Fund
Minnesota***
Developing Markets Trust Global Government Income Fund
Missouri
Foreign Fund Investment Grade Income Fund
New Jersey
Global Infrastructure Fund U.S. Government Securities Fund
New York*
Global Opportunities Trust FRANKLIN FUNDS SEEKING HIGH CURRENT
North Carolina INCOME AND STABILITY OF PRINCIPAL
Greater European Fund
Ohio*** Adjustable Rate Securities Fund
Growth Fund
Oregon Adjustable U.S. Government
Growth and Income Fund Securities Fund
Pennsylvania
Income Fund Short-Intermediate U.S.
Tennessee** Government Securities Fund
Japan Fund
Texas FRANKLIN FUNDS FOR NON-U.S. INVESTORS
Latin America Fund
Virginia Tax-Advantaged High
Money Fund Yield Securities Fund
Washington**
Real Estate Securities Fund Tax-Advantaged
FRANKLIN FUNDS International Bond Fund
Smaller Companies Growth Fund SEEKING CAPITAL GROWTH
Tax-Advantaged U.S.
World Fund California Government Securities Fund
FRANKLIN FUNDS Growth Fund FRANKLIN TEMPLETON INTERNATIONAL
SEEKING TAX- CURRENCY FUNDS
FREE INCOME DynaTech Fund
Global Currency Fund
Federal Intermediate Term Equity Fund
Tax-Free Income Fund Hard Currency Fund
Global Health
Federal Tax-Free Care Fund High Income Currency
Income Fund Fund
Gold Fund
High Yield FRANKLIN MONEY MARKET FUNDS
Tax-Free Growth Fund
Income Fund California Tax-Exempt
International Money Fund
Insured Tax-Free Equity Fund
Income Fund*** Federal Money Fund
Pacific Growth
Puerto Rico Tax-Free Fund IFT U.S. Treasury Money
Income Fund Market Portfolio
Real Estate
FRANKLIN STATE-SPECIFIC Securities Money Fund
FUNDS SEEKING TAX-FREE Fund
INCOME New York Tax-Exempt
Small Cap Money Fund
Alabama Growth Fund
Tax-Exempt Money Fund
Arizona* FRANKLIN FUNDS SEEKING
GROWTH AND INCOME FRANKLIN FUND FOR
Arkansas** CORPORATIONS
Balance Sheet Investment
California* Fund Corporate Qualified
Dividend Fund
Colorado Convertible Securities
Fund FRANKLIN TEMPLETON
Connecticut VARIABLE ANNUITIES
Equity Income Fund
Florida* Franklin Valuemark
Global Utilities Fund
Georgia Franklin Templeton
Income Fund Valuemark Income
Hawaii** Plus (an immediate annuity)
Premier Return Fund
Indiana
Rising Dividends Fund
Kentucky
Strategic Income Fund
Louisiana
Utilities Fund
</TABLE>
Toll-free 1-800-DIAL BEN (1-800-342-5236)
* Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
*** Portfolio of insured municipal securities.
33
<PAGE>
NOTES
34
<PAGE>
NOTES
35
<PAGE>
- ----------------------------------
TEMPLETON GROWTH AND INCOME FUND
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Account Services
1-800-393-3001
Fund Information
1-800/DIAL BEN
Institutional Services
1-800-321-8563
This Prospectus is not
an offering of the
securities herein
described in any state
in which the offering
is not authorized. No
sales representative,
dealer, or other person
is authorized to give
any information or make
any representations
other than those
contained in this
Prospectus. Further
information may be
obtained from the
Principal Underwriter.
- ----------------------------------
[RECYCLING LOGO APPEARS HERE]
TL414 P 07/95
TEMPLETON
GROWTH
AND
INCOME
FUND
Prospectus
July 10, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
<PAGE>
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
Mail to: FRANKLIN TEMPLETON DISTRIBUTORS, INC.
P.O. Box 33031 St. Petersburg, Florida 33733-8031 (800) 393-3001
Please do not use this form for any Retirement Plan for which Franklin Templeton
Trust Company serves as custodian or trustee, or for Templeton Money Fund,
Templeton Institutional Funds or Templeton Capital Accumulator Fund. Request
separate Applications and/or Prospectuses.
- --------------------------------------------------------------------------------
SHAREHOLDER APPLICATION OR REVISION
[_] Please check the box if this is a revision and see Section 8
- --------------------------------------------------------------------------------
Please check Class I or Class II, if applicable, next to your Fund selection.
Class I and Class II shares have different sales charges and operating expenses,
among other differences, as described in each Fund's prospectus.
Date __________________
<TABLE>
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C> <C>
[_] [_]$______ AMERICAN TRUST [_] [_]$______ GLOBAL OPPORTUNITIES TRUST
[_] ______ AMERICAS GOVERNMENT SECURITIES FUND [_] [_] ______ GREATER EUROPEAN FUND
[_] [_] ______ DEVELOPING MARKETS TRUST [_] [_] ______ GROWTH FUND
[_] [_] ______ FOREIGN FUND [_] [_] ______ GROWTH AND INCOME FUND
[_] [_] ______ GLOBAL INFRASTRUCTURE FUND [_] [_] ______ INCOME FUND
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C>
[_] $______ JAPAN FUND [_] [_] OTHER: $___________
[_] [_] ______ LATIN AMERICA FUND (Except for Class II Money Fund)
[_] [_] ______ REAL ESTATE SECURITIES FUND _______________________________
[_] [_] ______ SMALLER COMPANIES GROWTH FUND _______________________________
[_] [_] ______ WORLD FUND _______________________________
</TABLE>
- --------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION (PLEASE PRINT)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
__________________________________________________ ________-________-__________
First Name Middle Initial Last Name Social Security Number (SSN)
__________________________________________________ ________-________-__________
Joint Owner(s) (Joint ownership means "Joint Social Security Number (SSN)
Tenants With Rights of Survivorship" unless
otherwise specified) All owners must sign Section 4.
- --------------------------------------------------------------------------------
[_] GIFT/TRANSFER TO A MINOR
_______________________________ As Custodian For________________________________
Name of Custodian (one only) Minor's Name (one only)
_____________Uniform Gifts/Transfers to Minors Act________-________-____________
State of Residence Minor's Social Security Number
Please Note: Custodian's Signature, not Minor's, is required in Section 4.
- --------------------------------------------------------------------------------
[_] TRUST, CORPORATION, PARTNERSHIP, RETIREMENT PLAN, OR OTHER ENTITY
__________________________________________ ____________-_______________________
Name Taxpayer Identification Number (TIN)
__________________________________________ ____________________________________
Name of Beneficiary (if to be included in Date of Trust Document (must be
the Registration) completed for registration)
________________________________________________________________________________
Name of Each Trustee (if to be included in the Registration)
- --------------------------------------------------------------------------------
2 ADDRESS
- --------------------------------------------------------------------------------
___________________________________________ Daytime Phone (___)________________
Street Address Area Code
____________________________________-______ Evening Phone (___)________________
City State Zip Code Area Code
I am a Citizen of: [_] U.S. or [_]______________________________
Country of Residence
- --------------------------------------------------------------------------------
3 INITIAL INVESTMENT ($100 minimum initial investment)
- --------------------------------------------------------------------------------
Check(s) enclosed for $___________________ . (Payable to Franklin Templeton
Distributors, Inc. or the Fund(s)
indicated above.)
- --------------------------------------------------------------------------------
4 SIGNATURE AND TAX CERTIFICATIONS
(All registered owners must sign application)
- --------------------------------------------------------------------------------
See "Important Notice Regarding Taxpayer IRS Certifications" in back of
prospectus. The Fund reserves the right to refuse to open an account without
either a certified Taxpayer Identification Number ("TIN") or a certification of
foreign status. Failure to provide tax certifications in this section may result
in backup withholding on payments relating to your account and/or in your
inability to qualify for treaty withholding rates.
I am(We are) not subject to backup withholding because I(we) have not been
notified by the IRS that I am(we are) subject to backup withholding as a result
of a failure to report all interest or dividends or because the IRS has notified
me(us) that I am(we are) no longer subject to backup withholding. (If you are
currently subject to backup withholding as a result of a failure to report all
interest or dividends, please cross out the preceding statement.)
[_] The number shown above is my(our) correct TIN, or that of the Minor named in
Section 1.
[_] AWAITING TIN. I am(We are) waiting for a number to be issued to me(us).
I(We) understand that if I(we) do not provide a TIN to the Fund within 60
days, the Fund is required to commence 31% backup withholding until I(we)
provide a certified TIN.
[_] EXEMPT RECIPIENT. Individuals cannot be exempt. Check this box only after
reading the instructions to see whether you qualify as an exempt recipient.
(You should still provide a TIN.)
[_] EXEMPT FOREIGN PERSON. Check this box only if the following statement
applies: "I am(we are) neither a citizen nor a resident of the United
States. I(we) certify to the best of my(our) knowledge and belief, I(we)
qualify as an exempt foreign person and/or entity as described in the
instructions."
Permanent address for tax purposes:
________________________________________________________________________________
Street Address City State Country Postal Code
PLEASE NOTE: The IRS only allows one TIN to be listed on an account. On joint
accounts, it is preferred that the primary account owner (or person listed first
on the account) list his/her number as requested above.
CERTIFICATION - Under the penalties of perjury, I(we) certify that (1) the
information provided on this application is true, correct and complete, (2)
I(we) have read the prospectus(es) for the Fund(s) in which I am(we are)
investing and agree to the terms thereof, and (3) I am(we are) of legal age or
an emancipated minor. I (we) acknowledge that Shares of the Fund(s) are not
insured or guaranteed by any agency or institution and that an investment in the
Shares involves risks, including the possible loss of principal.
X X
- ---------------------------------------- ---------------------------------------
Signature Signature
X X
- ---------------------------------------- ---------------------------------------
- --------------------------------------------------------------------------------
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
- --------------------------------------------------------------------------------
-----------------------
We hereby submit this application for the purchase of Templeton Dealer Number
shares of the Fund indicated above in accordance with
the terms of our selling agreement with Franklin -----------------------
Templeton Distributors, Inc. ("FTD"), and with the
Prospectus for the Fund. We agree to notify FTD of any
purchases of Class I shares which may be eligible for
reduced or eliminated sales charges.
-----------------------------------------------------------------------------
WIRE ORDER ONLY: The attached check for $_______ should be applied against
Wire Order
Confirmation Number ___________ Dated___________ For__________ Shares
-----------------------------------------------------------------------------
Securities Dealer Name__________________________________________________________
Main Office Address________________ Main Office Telephone Number (___)__________
Branch Number________ Representative Number ________ Representative Name________
Branch Address_________________________ Branch Telephone Number (___)___________
Authorized Signature, Securities Dealer______________________ Title_____________
- --------------------------------------------------------------------------------
ACCEPTED: Franklin Templeton Distributors, Inc. By___________ Date______________
- --------------------------------------------------------------------------------
Please see reverse side for Shareholder Account Privileges:
[_] Distribution Options [_] Special Instructions for Distributions
[_] Systematic Withdrawal Plan [_] Automatic Investment Plan
[_] Telephone Exchange Service [_] Letter of Intent
[_] Cumulative Quantity Discount
This application must be preceded or accompanied by a prospectus for
the Fund(s) being purchased.
<PAGE>
- --------------------------------------------------------------------------------
6 DISTRIBUTION OPTIONS (Check one)
- --------------------------------------------------------------------------------
Check one - if no box is checked, all dividends and capital gains will be
reinvested in additional shares of the Fund.
[_] Reinvest all dividends [_] Pay all dividends in cash
and capital gains. and reinvest capital gains.
[_] Pay capital gains in cash [_] Pay all dividends and
and reinvest dividends. capital gains in cash.
- --------------------------------------------------------------------------------
7 OPTIONAL SHAREHOLDER PRIVILEGES
- --------------------------------------------------------------------------------
A. SPECIAL PAYMENT INSTRUCTIONS FOR DISTRIBUTIONS (Check one box)
[_] Pay Distributions, as noted in Section 6, or [_] withdrawals, as noted in
section 7(B), to purchase shares of another Franklin or Templeton Fund.
Restrictions may apply to purchases of shares of a different class. See
the prospectus for details.
Fund Name______________________ Existing Account Number___________________
[_] Send my Distributions to the person, named below, instead of as registered
in Section 1.
Name___________________________ Street Address____________________________
City___________________________ State____________________Zip Code_________
- --------------------------------------------------------------------------------
B. SYSTEMATIC WITHDRAWAL PLAN
Please withdraw from my Franklin Templeton account $_____($50 minimum)
[_]Monthly [_]Quarterly [_]Semi-Annually or [_]Annually as set forth in the
Prospectus, starting in ______________(Month). The net asset value of the
shares held must be at least $5,000 at the time the plan is established.
Additional restrictions may apply to Class II or other shares subject to
contingent deferred sales charge, as described in the prospectus. Send the
proceeds to: [_]Address of Record OR [_]the Franklin Templeton Fund or person
specified in Section 7(A) - Special Payment Instructions for Distributions.
- --------------------------------------------------------------------------------
C. TELEPHONE TRANSACTIONS
TELEPHONE EXCHANGE PRIVILEGE: If the Fund does not receive specific
instructions from the shareholder, either in writing or by telephone, the
Telephone Exchange Privilege (see the prospectus) is automatically extended
to each account. The shareholder should understand, however, that the Fund
and Franklin Templeton Investor Services, Inc. ("FTI") or Franklin Templeton
Trust Company and their agents will not be liable for any loss, injury,
damage or expense as a result of acting upon instructions communicated by
telephone reasonably believed to be genuine. The shareholder agrees to hold
the Fund and its agents harmless from any loss, claims, or liability arising
from its or their compliance with such instructions. The shareholder
understands that this option is subject to the terms and conditions set forth
in the prospectus of the fund to be acquired.
[_]No, I do NOT wish to participate in the Telephone Exchange Privilege or
authorize the Fund or its agents, including FTI or Templeton Funds Trust
Company, to act upon instructions received by telephone to exchange shares
for shares of any other account(s) within the Franklin Templeton Group of
Funds.
Telephone Redemption Privilege: This is available to shareholders who
specifically request it and who complete the Franklin Templeton Telephone
Redemption Authorization Agreement in the back of the Fund's prospectus.
- --------------------------------------------------------------------------------
D. AUTOMATIC INVESTMENT PLAN
IMPORTANT: ATTACH AN UNSIGNED, VOIDED CHECK (FOR CHECKING ACCOUNTS) OR A
SAVINGS ACCOUNT DEPOSIT SLIP HERE, AND COMPLETE THE INFORMATION BELOW. I(We)
would like to establish an Automatic Investment Plan (the "Plan") as
described in the Prospectus. I(We) agree to reimburse FTI and/or FTD for any
expenses or losses that they may incur in connection with my(our) plan,
including any caused by my(our) bank's failure to act in accordance with
my(our) request. If my(our) bank makes any erroneous payment or fails to make
a payment after shares are purchased on my(our) behalf, any such purchase may
be cancelled and I(we) hereby authorize redemptions and/or deductions from
my(our) account for that purpose.
Debit my (circle one) savings, checking, other ________ account monthly for
$__________($25 minimum) on or about the [_]1st [_]5th [_]15th or [_]20th day
starting_______(month), to be invested in (name of
Fund)___________________Account Number (if known)_______
INSTRUCTIONS TO BANK - AUTOMATIC INVESTMENT PLAN AUTHORIZATION
To:__________________________________ ______________________________________
Name of Your Bank ABA Number
___________________________ _________________ ____________ ______________
Street Address City State Zip Code
I(We) authorize you to charge my(our) Checking/Savings Account and to make
payment to FTD, upon instructions from FTD. I(We) agree that in making payment
for such charges your rights shall be the same as if each were a charge made and
signed personally by me(us). This authority shall remain in effect until you
receive written notice from me(us) changing its terms or revoking it. Until you
actually receive such notice, I(we) agree that you shall be fully protected in
paying any charge under this authority. I(we) further agree that if any such
charge is not made, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever.
X_________________________________________________ ___________________________
Signature(s) EXACTLY as shown on your bank records Date
______________________________________ _______________________________________
Print Name(s) Account Number
______________________________ _________________ ____________ ______________
Your Street Address City State Zip Code
- --------------------------------------------------------------------------------
E. LETTER OF INTENT (LOI)
[_]I(We) agree to the terms of the LOI and provisions for reservations of
Class I shares and grant FTD the security interest set forth in the
Prospectus. Although I am(we are) not obligated to do so, it is my(our)
intention to invest over a 13 month period in Class I and/or Class II shares
of one or more Franklin or Templeton Funds (including all money market funds
in the Franklin Templeton Group) an aggregate amount at least equal to that
which is checked below. I understand that reduced sales charges will apply
only to purchases of Class I shares.
<TABLE>
<S> <C> <C> <C> <C>
[_]$50,000-99,999 (except for Income Fund [_]$100,000-249,999 [_]$250,000-499,999 [_]$500,000-999,999 [_]$1,000,0000 or more
and Americas Government Securities Fund)
</TABLE>
Purchases of Class I Shares under LOI of $1,000,000 or more are made at net
asset value and may be subject to a contingent deferred sales charge as
described in the prospectus.
Purchases made within the last 90 days will be included as part of your LOI.
Please write in your Account Number(s)____________ ____________ ____________
- --------------------------------------------------------------------------------
F. CUMULATIVE QUANTITY DISCOUNT -- APPLICABLE TO CLASS I SHARES ONLY
Class I shares may be purchased at the offering price applicable to the total
of (a) the dollar amount then being purchased plus (b) the amount equal to
the cost or current value (whichever is higher) of the combined holdings of
the purchaser, his or her spouse, and their children under age 21, of Class I
and Class II shares of funds in the Franklin Templeton Group as stated in the
prospectus. In order for this cumulative quantity discount to be made
available, the shareholder or his or her securities dealer must notify FTI or
FTD of the total holdings in the Franklin Templeton Group each time an order
is placed. I understand that reduced sales charges will apply only to
purchases of Class I shares.
[_]I(We) own shares of more than one Fund in the Franklin Templeton Group and
qualify for the Cumulative Quantity Discount described above and in the
Prospectus.
My(Our) other Account Number(s) are ___________ ___________ _______________
- --------------------------------------------------------------------------------
8 ACCOUNT REVISION (If Applicable)
- --------------------------------------------------------------------------------
If you are using this application to revise your Account Registration, or wish
to have Distributions sent to an address other than the address on your existing
Account's Registration, a Signature Guarantee is required. Signatures of all
registered owners must be guaranteed by an "eligible guarantor" as defined in
the "How to Sell Shares of the Fund" section in the Fund's Prospectus. A Notary
Public is not an acceptable guarantor.
X________________________________________ ____________________________________
Signature(s) of Registered Account Owners Account Number(s)
X________________________________________ ____________________________________
X________________________________________
X________________________________________ ____________________________________
Signature Guarantee Stamp
NOTE: For any change in registration, please send us any outstanding
Certificates by Registered Mail.
- --------------------------------------------------------------------------------
TLGOF APP 07/95
<PAGE>
TEMPLETON PROSPECTUS -- JULY 10, 1995
GLOBAL INFRASTRUCTURE FUND
- -------------------------------------------------------------------------------
INVESTMENT The investment objective of Templeton Global Infrastructure
OBJECTIVE Fund (the "Fund") is long-term capital growth. The Fund seeks
AND POLICIES its objective by investing primarily in securities of domestic
and foreign companies that are principally engaged in or
related to the development, operation or rehabilitation of the
physical and social infrastructures of various nations
throughout the world. THE FUND MAY BORROW MONEY FOR INVESTMENT
PURPOSES, WHICH MAY INVOLVE GREATER RISK AND ADDITIONAL COSTS
TO THE FUND. IN ADDITION, THE FUND MAY INVEST UP TO 15% OF ITS
ASSETS IN ILLIQUID SECURITIES, INCLUDING UP TO 10% OF ITS
ASSETS IN RESTRICTED SECURITIES, WHICH MAY INVOLVE GREATER
RISK AND INCREASED FUND EXPENSES. SEE "RISK FACTORS." The Fund
is a series of Templeton Global Investment Trust.
- -------------------------------------------------------------------------------
PURCHASE OF Please complete and return the Shareholder Application. If you
SHARES need assistance in completing this form, please call our
Account Services Department. The Fund offers two classes to
its investors: Templeton Global Infrastructure Fund--Class I
("Class I") and Templeton Global Infrastructure Fund--Class II
("Class II"). Investors can choose between Class I Shares,
which generally bear a higher front-end sales charge and lower
ongoing Rule 12b-1 distribution fees ("Rule 12b-1 fees"), and
Class II Shares, which generally have a lower front-end sales
charge and higher ongoing Rule 12b-1 fees. Investors should
consider the differences between the two classes, including
the impact of sales charges and distribution fees, in choosing
the more suitable class given their anticipated investment
amount and time horizon. See "How to Buy Shares of the Fund--
Differences Between Class I and Class II." The minimum initial
investment is $100 ($25 minimum for subsequent investments).
- -------------------------------------------------------------------------------
PROSPECTUS This Prospectus sets forth concisely information about the
INFORMATION Fund that a prospective investor ought to know before
investing. Investors are advised to read and retain this
Prospectus for future reference. A Statement of Additional
Information ("SAI") dated July 10, 1995 has been filed with
the Securities and Exchange Commission (the "SEC") and is
incorporated in its entirety by reference in and made a part
of this Prospectus. The SAI is available without charge upon
request to Franklin Templeton Distributors, Inc., P.O. Box
33030, St. Petersburg, Florida 33733-8030 or by calling the
Fund Information Department.
- -------------------------------------------------------------------------------
FUND INFORMATION DEPARTMENT--1-800/DIAL BEN
- -------------------------------------------------------------------------------
TEMPLETON "STAR" SERVICE (24 hours, seven days a week access to current
prices, shareholder account balances/values, last transaction and duplicate
account statements) -- 1-800-654-0123
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE TABLE..................................................... 2
FINANCIAL HIGHLIGHTS.............................................. 3
GENERAL DESCRIPTION............................................... 4
Investment Objective and Policies................................. 4
INVESTMENT TECHNIQUES............................................. 5
Temporary Investments............................................. 6
Borrowing......................................................... 6
Loans of Portfolio Securities..................................... 6
Options on Securities or Indices.................................. 6
Forward Foreign Currency Contracts and
Options on Foreign Currencies................................... 6
Futures Contracts................................................. 7
Repurchase Agreements............................................. 7
Depositary Receipts............................................... 8
Illiquid and Restricted Securities................................ 8
RISK FACTORS...................................................... 8
HOW TO BUY SHARES OF THE FUND..................................... 10
Differences Between Class I and Class II.......................... 10
Deciding Which Class to Purchase.................................. 11
Offering Price -- Class I......................................... 11
Offering Price -- Class II........................................ 14
Net Asset Value Purchases (Both Classes).......................... 14
Description of Special Net Asset Value
Purchases....................................................... 15
CAPTION>
Page
----
<S> <C>
Additional Dealer Compensation
(Both Classes).................................................. 16
Purchasing Class I and Class II Shares............................ 16
Automatic Investment Plan......................................... 17
Institutional Accounts............................................ 17
Account Statements................................................ 17
Templeton STAR Service............................................ 17
Retirement Plans.................................................. 18
Net Asset Value................................................... 18
EXCHANGE PRIVILEGE................................................ 18
Exchanges of Class I Shares....................................... 19
Exchanges of Class II Shares...................................... 19
Transfers......................................................... 20
Conversion Rights................................................. 20
Exchanges by Timing Accounts...................................... 20
HOW TO SELL SHARES OF THE FUND.................................... 21
Reinstatement Privilege........................................... 22
Systematic Withdrawal Plan........................................ 23
Redemptions by Telephone.......................................... 24
Contingent Deferred Sales Charge.................................. 24
TELEPHONE TRANSACTIONS............................................ 25
Verification Procedures........................................... 25
Restricted Accounts............................................... 25
General........................................................... 25
<CAPTION>
Page
----
<S> <C>
MANAGEMENT OF THE FUND............................................ 25
Investment Manager................................................ 26
Business Manager.................................................. 26
Transfer Agent.................................................... 26
Custodian......................................................... 27
Plans of Distribution............................................. 27
Expenses.......................................................... 27
Brokerage Commissions............................................. 27
GENERAL INFORMATION............................................... 28
Description of Shares/Share Certificates.......................... 28
Voting Rights..................................................... 28
Meetings of Shareholders.......................................... 28
Dividends and Distributions....................................... 28
Federal Tax Information........................................... 29
Inquiries......................................................... 29
Performance Information........................................... 29
Statements and Reports............................................ 29
WITHHOLDING INFORMATION........................................... 30
CORPORATE RESOLUTION.............................................. 31
AUTHORIZATION AGREEMENT........................................... 32
THE FRANKLIN TEMPLETON GROUP...................................... 33
</TABLE>
- -------------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder will bear directly or indirectly
in connection with an investment in the Fund. The figures are estimates of the
Fund's expenses for the current fiscal year, restated to reflect current sales
charges and Rule 12b-1 fees for each class.
<TABLE>
<CAPTION>
CLASS I CLASS II
------- --------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage
of Offering Price)....................................... 5.75% 1.00%/1/
Deferred Sales Charge..................................... None/2/ 1.00%/3/
Exchange Fee (per transaction)............................ $5.00/4/ $5.00/4/
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................... 0.75% 0.75%
Rule 12b-1 Fees/5/........................................ 0.35% 1.00%
Other Expenses (audit, legal, business management,
transfer agent and custodian) ........................... 2.15% 2.15%
Total Fund Operating Expenses ............................ 3.25% 3.90%
</TABLE>
- -------
/1/ Although Class II has a lower front-end sales charge than Class I, over time
the higher Rule 12b-1 fee for Class II may cause Shareholders to pay more
for Class II Shares than for Class I Shares. Given the maximum front-end
sales charge and the rate of Rule 12b-1 fees for each class, it is estimated
that this would take less than six years for Shareholders who maintain total
Shares valued at less than $50,000 in the Franklin Templeton Funds.
Shareholders with larger investments in the Franklin Templeton Funds will
reach the cross-over point more quickly. (See "How to Buy Shares of the
Fund.")
/2/ Class I investments of $1 million or more are not subject to a front-end
sales charge; however, a contingent deferred sales charge of 1% is generally
imposed on certain redemptions within a "contingency period" of 12 months of
the calendar month following such investments. See "How to Sell Shares of
the Fund--Contingent Deferred Sales Charge."
/3/ Class II Shares redeemed within a "contingency period" of 18 months of the
calendar month following such investments are subject to a 1% contingent
deferred sales charge. See "How to Sell Shares of the Fund--Contingent
Deferred Sales Charge."
/4/ $5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.
/5/ Annual Rule 12b-1 fees may not exceed 0.35% of the Fund's average net assets
attributable to Class I Shares and 1% of the Fund's average net assets
attributable to Class II Shares. Consistent with the National Association of
Securities Dealers, Inc.'s rules, it is possible that the combination of
front-end sales charges and Rule 12b-1 fees could cause long-term
Shareholders to pay more than the economic equivalent of the maximum front-
end sales charges permitted under those same rules.
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. The information in this table does not reflect the charge of up to
$15 per transaction if a Shareholder requests that redemption proceeds be sent
by express mail or wired to a commercial bank account. For a more detailed
discussion of these matters, investors should refer to the appropriate
sections of this Prospectus.
EXAMPLE
As required by SEC regulations, the following example illustrates the
expenses, including the maximum front-end sales charge and applicable
contingent deferred sales charge, that apply to a $1,000 investment in the
Fund over various time periods assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class I........................ $88 $152 $218 $392
Class II....................... $59 $128 $208 $418
You would pay the following
expenses on the same
investment in Class II Shares,
assuming no redemption........ $49 $128 $208 $418
</TABLE>
For the purpose of this example, it is assumed that a contingent deferred
sales charge will not apply to Class I Shares.
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES, INCLUDING
FEES SET BY CONTRACT, SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN
THOSE SHOWN. The operating expenses are borne by the Fund and only indirectly
by Shareholders as a result of their investment in the Fund. In addition,
federal securities regulations require the example to assume an annual return
of 5%, but the Fund's actual return may be more or less than 5%.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
McGladrey & Pullen, LLP, independent certified public accountants, for the
periods indicated in their report which is incorporated by reference and which
appears in the Fund's 1995 Annual Report to Shareholders. This statement
should be read in conjunction with the other financial statements and notes
thereto included in the Fund's 1995 Annual Report to Shareholders which
contains further information about the Fund's performance, and which is
available to Shareholders upon request and without charge. Information
regarding Class II Shares will be included in this table after they have been
offered to the public for a reasonable period of time.
<TABLE>
<CAPTION>
MARCH 14, 1994
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
PER SHARE OPERATING PERFORMANCE MARCH 31, 1995 MARCH 31, 1994
(for a Share outstanding throughout the period) -------------- ----------------
<S> <C> <C>
Net asset value, beginning of period........... $ 10.01 $10.00
Income from investment operations:
Net investment income.......................... .07 .009
Net realized and unrealized gain (loss)........ (.61) .001
------- ------
Total from investment operations............... (.54) .01
Distributions to Shareholders from net invest-
ment income................................... (.04) --
------- ------
Change in net asset value...................... (.58) .01
------- ------
Net asset value, end of period................. $ 9.43 $10.01
======= ======
TOTAL RETURN* (5.41)% 0.10%
RATIOS/SUPPLEMENT DATA
Net assets, end of period (000)................ $18,717 $ 101
Ratio of expenses to average net assets........ 3.25% 32.02%**
Ratio of expenses, net of reimbursement, to av-
erage net assets.............................. 1.25% 1.25%**
Ratio of net investment of income to average
net assets.................................... 1.38% 1.89%**
Portfolio turnover rate........................ 3.21% --
</TABLE>
- -------
* Total return does not reflect sales charges. Not annualized.
** Annualized.
3
<PAGE>
GENERAL DESCRIPTION
Templeton Global Investment Trust (the "Trust") was organized as a business
trust under the laws of Delaware on December 21, 1993, and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end
management investment company. It has five series of shares, each of which is
a separate mutual fund: Templeton Global Infrastructure Fund (the "Fund"),
Templeton Growth and Income Fund (formerly Templeton Global Rising Dividends
Fund), Templeton Greater European Fund and Templeton Latin America Fund, all
diversified funds, and Templeton Americas Government Securities Fund, a non-
diversified fund. Prospectuses for Templeton Growth and Income Fund, Templeton
Greater European Fund, Templeton Latin America Fund and Templeton Americas
Government Securities Fund are available upon request and without charge from
the Principal Underwriter. The Fund has two classes of Shares of beneficial
interest with a par value of $.01: Templeton Global Infrastructure Fund--Class
I and Templeton Global Infrastructure Fund--Class II. All Fund Shares
outstanding before May 1, 1995 have been redesignated as Class I Shares, and
will retain their previous rights and privileges, except for legally required
modifications to Shareholder voting procedures, as discussed in "General
Information--Voting Rights."
Shares of the Fund may be purchased (minimum investment of $100 initially
and $25 thereafter) at the current public Offering Price. The current public
Offering Price of the Class I Shares is equal to the net asset value (see "How
to Buy Shares of the Fund--Net Asset Value"), plus a variable sales charge not
exceeding 5.75% of the Offering Price depending upon the amount invested. The
current public Offering Price of the Class II Shares is equal to the net asset
value, plus a sales charge of 1% of the amount invested. (See "How to Buy
Shares of the Fund.")
INVESTMENT OBJECTIVE AND POLICIES. The investment objective of the Fund is
long-term capital growth. The Fund seeks to achieve this objective by
investing at least 65% of its total assets in securities of domestic and
foreign companies that are principally engaged in or related to the
development, operation or rehabilitation of the physical and social
infrastructures of various nations throughout the world. The Fund's investment
objective and the investment restrictions set forth under "Investment
Objectives and Policies--Investment Restrictions" in the SAI are fundamental
and may not be changed without Shareholder approval. All other investment
policies and practices described in this Prospectus are not fundamental and
may be changed by the Board of Trustees without Shareholder approval.
The Fund's investment objective is based on the belief that the development
of the physical and social infrastructures of world economies is essential for
economic growth and must be undertaken by all countries to achieve and
maintain competitive industrial bases. A company is "principally engaged in or
related to the development, operation or rehabilitation of physical and social
infrastructures of various nations throughout the world" if at least 50% of
its assets (marked-to-market), gross income or net profits are attributable to
activities related to the following industries, among others: communications;
production of building materials; power generation; public utilities;
distribution of goods and services; toll road operation and development; the
manufacturing of steel and other metals; air, sea, land and rail
transportation; rail, aircraft and seacraft manufacturing and rehabilitation;
port ownership and operation; operation of water utilities and waste water
treatment facilities; industrial fabrication; bridge erection; heating,
ventilation and air conditioning (HVAC) manufacturing and installation;
manufacturing and operation of pollution control equipment; operation of
medical facilities; development and construction of housing; operation of
broadcast media; and the manufacturing, operation, installation and
maintenance of technology-related infrastructure such as local and wide-area
network software and other essential components in the movement of
information. Companies providing construction materials or equipment, or
engineering, construction and contracting services, would also be included, as
would companies providing funding or expertise necessary for the completion of
infrastructure projects.
The evolving long-term international trend favoring more market-oriented
economies challenges countries with developing markets to upgrade their
national economies in order to compete in the international marketplace. This
trend may be facilitated by local or international political, economic or
financial developments that could benefit companies engaged in the development
of these countries' national economies. Certain of these countries,
particularly countries such as Mexico and the countries of the Pacific Basin,
have experienced relatively high rates of economic growth in recent years. The
development of the local infrastructures in these countries is a crucial
element in their continued growth. For example, Japan, Hong Kong, Singapore,
Taiwan, South Korea, Thailand, Malaysia, Indonesia and the Philippines have
all recently made substantial, long-term commitments to the development of
their infrastructures.
4
<PAGE>
Many investors, particularly individuals, lack the information, capability
or inclination to invest in foreign capital markets. It also may not be
permissible for such investors to invest directly in certain markets. Unlike
many intermediary investment vehicles, such as closed-end investment companies
that invest in a single country, the Fund will seek to allocate investment
risk among the capital markets of a number of countries. Under normal
circumstances, the Fund will invest at least 65% of its total assets in
issuers domiciled in at least three different nations (one of which may be the
United States). The Fund will not necessarily seek to diversify investments on
a geographical basis or on the basis of the level of economic development of
any particular country. While there exists much information indicating that
foreign capital markets may experience growth as a result of a renewed
international commitment to the development of economic infrastructures, there
can be no assurance, of course, that such growth will occur or that the
securities purchased by the Fund will provide long-term capital growth.
Consistent with its investment objective, the Fund expects to invest at
least 65% of its total assets in securities of issuers listed on United States
or foreign securities exchanges or the NASDAQ system that are principally
engaged in or related to infrastructure industries. The Fund will generally
invest in equity securities of such issuers, defined as common stock,
preferred stock, securities convertible into or exchangeable for such
securities, warrants or rights to subscribe to or purchase such securities,
and sponsored or unsponsored American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs")
(collectively, "Depositary Receipts"). The Fund may also invest in debt
securities (defined as bonds, notes, debentures, commercial paper, time
deposits and bankers' acceptances) of issuers involved in or related to
infrastructure industries. There is no limitation on the percentage of the
Fund's assets that may be invested in debt securities, subject to the Fund's
investment objective. Certain debt securities can provide the potential for
capital appreciation based on various factors such as changes in interest
rates, economic and market conditions, improvement in an issuer's ability to
repay principal and pay interest, and ratings upgrades. Additionally,
convertible bonds offer the potential for capital appreciation through the
conversion feature, which enables the holder of the bond to benefit from
increases in the market price of the securities into which they are
convertible. Debt securities purchased by the Fund may be rated in any
category by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P"), or may be unrated by any rating agency. Such securities
may include high-risk, lower quality debt securities, commonly referred to as
"junk bonds." As an operating policy, which may be changed by the Board of
Trustees, the Fund will not invest more than 5% of its total assets in debt
securities rated lower than Baa by Moody's or BBB by S&P. Debt securities are
subject to certain market and credit risks. See "Investment Objectives and
Policies -- Debt Securities" in the SAI for descriptions of debt securities
rated BBB by S&P and Baa by Moody's.
The Fund may also lend its portfolio securities and borrow money for
investment purposes ( i.e., "leverage" its portfolio). In addition, the Fund
may enter into transactions in options on securities, securities indices and
foreign currencies, forward foreign currency contracts, and futures contracts
and related options. These are generally referred to as derivative instruments
and involve special risk factors, which are described below. When deemed
appropriate by the Fund's investment manager, Templeton Investment Counsel,
Inc. (the "Investment Manager"), the Fund may invest cash balances in
repurchase agreements and other money market investments to maintain liquidity
in an amount to meet expenses or for day-to-day operating purposes. These
investment techniques are described below and under the heading "Investment
Objectives and Policies" in the SAI.
The Fund invests for long-term growth of capital and does not emphasize
short-term trading profits. Accordingly, the Fund expects to have an annual
portfolio turnover rate not exceeding 50%. There can be no assurance that the
Fund's investment objective will be achieved.
INVESTMENT TECHNIQUES
The Fund is authorized to use the various investment techniques described
below. Although these strategies are regularly used by some investment
companies and other institutional investors in various markets, some of these
strategies cannot at the present time be used to a significant extent by the
Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
5
<PAGE>
TEMPORARY INVESTMENTS. For temporary defensive purposes, the Fund may invest
up to 100% of its total assets in the following money market securities,
denominated in U.S. dollars or in the currency of any foreign country, issued
by entities organized in the United States or any foreign country: debt
obligations issued or guaranteed by the U.S. Government or the governments of
foreign countries, their agencies or instrumentalities; short-term time
deposits with banks; repurchase agreements with banks and broker-dealers with
respect to U.S. Government obligations; and finance company and corporate
commercial paper, and other short-term corporate obligations, in each case
rated Prime-1 by Moody's or A or better by S&P or, if unrated, of comparable
quality as determined by the Investment Manager.
BORROWING. The Fund may borrow up to one-third of the value of its total
assets from banks to increase its holdings of portfolio securities. Under the
1940 Act, the Fund is required to maintain continuous asset coverage of 300%
with respect to such borrowings and to sell (within three days) sufficient
portfolio holdings to restore such coverage if it should decline to less than
300% due to market fluctuations or otherwise, even if such liquidations of the
Fund's holdings may be disadvantageous from an investment standpoint.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of portfolio securities on the Fund's net asset value,
and money borrowed will be subject to interest and other costs (which may
include commitment fees and/or the cost of maintaining minimum average
balances) which may or may not exceed the income received from the securities
purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of its total
assets to generate income for the purpose of offsetting operating expenses.
Such loans must be secured by collateral (consisting of any combination of
cash, U.S. Government securities or irrevocable letters of credit) in an
amount at least equal (on a daily marked-to-market basis) to the current
market value of the securities loaned. The Fund may terminate the loans at any
time and obtain the return of the securities loaned within five business days.
The Fund will continue to receive any interest or dividends paid on the loaned
securities and will continue to retain any voting rights with respect to the
securities. In the event that the borrower defaults on its obligation to
return borrowed securities, because of insolvency or otherwise, the Fund could
experience delays and costs in gaining access to the collateral and could
suffer a loss to the extent that the value of the collateral falls below the
market value of the borrowed securities.
OPTIONS ON SECURITIES OR INDICES. To increase its return or to hedge all or
a portion of its portfolio investments, the Fund may write ( i.e., sell)
covered put and call options and purchase put and call options on securities
or securities indices that are traded on United States and foreign exchanges
or in the over-the-counter markets. An option on a security is a contract that
permits the purchaser of the option, in return for the premium paid, the right
to buy a specified security (in the case of a call option) or to sell a
specified security (in the case of a put option) from or to the writer of the
option at a designated price during the term of the option. An option on a
securities index permits the purchaser of the option, in return for the
premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of
the option. The Fund may write a call or put option only if the option is
"covered." This means that so long as the Fund is obligated as the writer of a
call option, it will own the underlying securities subject to the call, or
hold a call at the same or lower exercise price, for the same exercise period,
and on the same securities as the written call. A put is covered if the Fund
maintains liquid assets with a value equal to the exercise price in a
segregated account, or holds a put on the same underlying securities at an
equal or greater exercise price. The value of the underlying securities on
which options may be written at any one time will not exceed 15% of the total
assets of the Fund. The Fund will not purchase put or call options if the
aggregate premium paid for such options would exceed 5% of its total assets at
the time of purchase.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. The
Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to attempt to minimize the risk to the Fund from adverse changes
in the relationship between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers.
6
<PAGE>
The Fund will enter into forward contracts only under two circumstances.
First, when the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may desire to "lock in" the
U.S. dollar price of the security in relation to another currency by entering
into a forward contract to buy the amount of foreign currency needed to settle
the transaction. Second, when the Investment Manager believes that the
currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, it may enter into a forward contract to
sell or buy the amount of the former foreign currency approximating the value
of some or all of the Fund's portfolio securities denominated in such foreign
currency. The second investment practice is generally referred to as "cross-
hedging." The Fund has no specific limitation on the percentage of assets it
may commit to forward contracts, subject to its stated investment objective
and policies, except that the Fund will not enter into a forward contract if
the amount of assets set aside to cover forward contracts would impede
portfolio management or the Fund's ability to meet redemption requests.
Although forward contracts will be used primarily to protect the Fund from
adverse currency movements, they also involve the risk that anticipated
currency movements will not be accurately predicted.
The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines
in the U.S. dollar value of foreign currency-denominated portfolio securities
and against increases in the U.S. dollar cost of such securities to be
acquired. As in the case of other kinds of options, however, the writing of an
option on a foreign currency constitutes only a partial hedge, up to the
amount of the premium received, and the Fund could be required to purchase or
sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event
of rate movements adverse to the Fund's position, it may forfeit the entire
amount of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by the Fund are traded on U.S. and
foreign exchanges or over-the-counter.
FUTURES CONTRACTS. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock and bond index futures contracts, foreign
currency futures contracts and options on any of the foregoing. A financial
futures contract is an agreement between two parties to buy or sell a
specified debt security at a set price on a future date. An index futures
contract is an agreement to take or make delivery of an amount of cash based
on the difference between the value of the index at the beginning and at the
end of the contract period. A futures contract on a foreign currency is an
agreement to buy or sell a specified amount of a currency for a set price on a
future date.
When the Fund enters into a futures contract, it must make an initial
deposit, known as "initial margin," as a partial guarantee of its performance
under the contract. As the value of the security, index or currency
fluctuates, either party to the contract is required to make additional margin
payments, known as "variation margin," to cover any additional obligation it
may have under the contract. In addition, when the Fund enters into a futures
contract, it will segregate assets or "cover" its position in accordance with
the 1940 Act. (See "Investment Objectives and Policies -- Futures Contracts"
in the SAI.) With respect to positions in futures and related options that do
not constitute "bona fide hedging" positions, the Fund will not enter into a
futures contract or related option contract if, immediately thereafter, the
aggregate initial margin deposits relating to such positions plus premiums
paid by it for open futures option positions, less the amount by which any
such options are "in-the-money," would exceed 5% of the Fund's total assets.
REPURCHASE AGREEMENTS. For temporary defensive purposes and for cash
management purposes, the Fund may, without limit, enter into repurchase
agreements with U.S. banks and broker-dealers. Under a repurchase agreement,
the Fund acquires a security from a U.S. bank or a registered broker-dealer
and simultaneously agrees to resell the security back to the bank or broker-
dealer at a specified time and price. The repurchase price is in excess of the
purchase price by an amount which reflects an agreed-upon rate of return,
which is not tied to the coupon rate on the underlying security. Under the
1940 Act, repurchase agreements are considered to be loans collateralized by
the underlying security and therefore will be fully collateralized. However,
if the seller should default on its obligation to repurchase the underlying
security, the Fund may experience delay or difficulty in exercising its rights
to realize upon the security and might incur a loss if the value of the
security declines, as well as incur disposition costs in liquidating the
security.
7
<PAGE>
DEPOSITARY RECEIPTS. ADRs are Depositary Receipts typically issued by a U.S.
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. EDRs and GDRs are typically issued by foreign banks
or trust companies, although they also may be issued by U.S. banks or trust
companies, and evidence ownership of underlying securities issued by either a
foreign or a United States corporation. Generally, Depositary Receipts in
registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements
to have its securities traded in the form of Depositary Receipts. In
unsponsored programs, the issuer may not be directly involved in the creation
of the program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value
of the Depositary Receipts. Depositary Receipts also involve the risks of
other investments in foreign securities, as discussed below. For purposes of
the Fund's investment policies, the Fund's investments in Depositary Receipts
will be deemed to be investments in the underlying securities.
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest up to 15% of its
total assets in illiquid securities, for which there is a limited trading
market and for which a low trading volume of a particular security may result
in abrupt and erratic price movements. The Fund may be unable to dispose of
its holdings in illiquid securities at then-current market prices and may have
to dispose of such securities over extended periods of time. The Fund may also
invest in securities that are sold (i) in private placement transactions
between their issuers and their purchasers and that are neither listed on an
exchange nor traded over-the-counter, or (ii) in transactions between
qualified institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended. Such restricted securities are subject to contractual or
legal restrictions on subsequent transfer. As a result of the absence of a
public trading market, such restricted securities may in turn be less liquid
and more difficult to value than publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized from the sales could, due to illiquidity, be less than those
originally paid by the Fund or less than their fair value. In addition,
issuers whose securities are not publicly traded may not be subject to the
disclosure and other investor protection requirements that may be applicable
if their securities were publicly traded. If any privately placed or Rule 144A
securities held by the Fund are required to be registered under the securities
laws of one or more jurisdictions before being resold, the Fund may be
required to bear the expenses of registration. The Fund will limit its
investment in restricted securities to 10% of its total assets, except that
Rule 144A securities determined by the Board of Trustees to be liquid are not
subject to this limitation.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund, nor
can there be any assurance that the Fund's investment objective will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Fund can decrease as well as increase, depending on a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions and market
factors. In addition to the factors which affect the value of individual
securities, a Shareholder may anticipate that the value of the Shares of the
Fund will fluctuate with movements in the broader equity and bond markets. A
decline in the stock market of any country in which the Fund is invested may
also be reflected in declines in the price of Shares of the Fund. Changes in
currency valuations will also affect the price of Shares of the Fund. History
reflects both decreases and increases in worldwide stock markets and currency
valuations, and these may reoccur unpredictably in the future. The value of
debt securities held by the Fund generally will vary inversely with changes in
prevailing interest rates. Additionally, investment decisions made by the
Investment Manager will not always be profitable or prove to have been
correct. The Fund is not intended as a complete investment program.
8
<PAGE>
The Fund has the right to purchase securities in any foreign country,
developed or developing. Investors should consider carefully the substantial
risks involved in investing in securities issued by companies and governments
of foreign nations, which are in addition to the usual risks inherent in
domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations (including, for example, withholding taxes on interest and dividends)
or other taxes imposed with respect to investments in foreign nations, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country), foreign investment controls on daily stock
market movements, default in foreign government securities, political or
social instability, or diplomatic developments which could affect investment
in securities of issuers in foreign nations. Some countries may withhold
portions of interest and dividends at the source. In addition, in many
countries there is less publicly available information about issuers than is
available in reports about companies in the United States. Foreign companies
are not generally subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to United States companies. Further, the Fund
may encounter difficulties or be unable to vote proxies, exercise shareholder
rights, pursue legal remedies, and obtain judgments in foreign courts.
Commission rates in foreign countries, which are sometimes fixed rather than
subject to negotiation as in the United States, are likely to be higher.
Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is
earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to subsequent declines
in value of the portfolio security or, if the Fund has entered into a contract
to sell the security, could result in possible liability to the purchaser. In
many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States. There is an increased risk, therefore, of uninsured
loss due to lost, stolen, or counterfeit stock certificates. In addition, the
foreign securities markets of many of the countries in which the Fund may
invest may also be smaller, less liquid, and subject to greater price
volatility than those in the United States. As an open-end investment company,
the Fund is limited in the extent to which it may invest in illiquid
securities. See "Investment Objectives and Policies -- Risk Factors" in the
SAI.
Prior governmental approval of foreign investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may
continue to be adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies also have been and may continue to be adversely affected by economic
conditions in the countries with which they trade.
The Fund usually effects currency exchange transactions on a spot ( i.e.,
cash) basis at the spot rate prevailing in the foreign exchange market.
However, some price spread on currency exchange transactions (to cover service
charges) will be incurred when the Fund converts assets from one currency to
another.
The Fund is authorized to invest in debt securities rated in any category by
S&P or Moody's and securities which are unrated by any rating agency. See
"Investment Objectives and Policies--Debt Securities" in the SAI. As an
operating policy, which may be changed
9
<PAGE>
by the Board of Trustees without Shareholder approval, the Fund will not
invest more than 5% of its total assets in debt securities rated lower than
BBB by S&P or Baa by Moody's. The Board of Trustees may consider a change in
this operating policy if, in its judgment, economic conditions change such
that a higher level of investment in high-risk, lower quality debt securities
would be consistent with the interests of the Fund and its Shareholders. High-
risk, lower quality debt securities, commonly referred to as "junk bonds," are
regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation and may be in default. Unrated debt securities are not
necessarily of lower quality than rated securities, but they may not be
attractive to as many buyers. Regardless of rating levels, all debt securities
considered for purchase (whether rated or unrated) will be carefully analyzed
by the Investment Manager to insure, to the extent possible, that the planned
investment is sound. The Fund may, from time to time, invest up to 5% of its
total assets in defaulted debt securities if, in the opinion of the Investment
Manager, the issuer may resume interest payments in the near future.
Leveraging by means of borrowing may exaggerate the effect of any increase
or decrease in the value of portfolio securities on the Fund's net asset
value, and money borrowed will be subject to interest and other costs (which
may include commitment fees and/or the cost of maintaining minimum average
balances) which may or may not exceed the income received from the securities
purchased with borrowed funds.
Successful use of futures contracts and related options is subject to
special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation
between movements in the securities or foreign currency on which the futures
or options contract is based and movements in the securities or currency in
the Fund's portfolio. Successful use of futures or options contracts is
further dependent on the Investment Manager's ability to correctly predict
movements in the securities or foreign currency markets, and no assurance can
be given that its judgment will be correct. Successful use of options on
securities or stock indices is subject to similar risk considerations. In
addition, by writing covered call options, the Fund gives up the opportunity,
while the option is in effect, to profit from any price increase in the
underlying security above the option exercise price.
There are further risk factors, including possible losses through the
holding of securities in domestic and foreign custodian banks and
depositories, described elsewhere in this Prospectus and in the SAI.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased at the Offering Price through any broker
which has a dealer agreement with Franklin Templeton Distributors, Inc.
("FTD"), the Principal Underwriter for Shares of the Fund, or directly from
FTD upon receipt by FTD of a completed Shareholder Application and check.
Shares of both classes of the Fund are offered at their respective public
Offering Prices, which are determined by adding the net asset value per Share
plus a front-end sales charge, next computed (i) after the Shareholder's
securities dealer receives the order which is promptly transmitted to the Fund
or (ii) after receipt of an order by mail from the Shareholder directly in
proper form (which generally means a completed Shareholder Application
accompanied by a negotiable check). The minimum initial investment is $100,
and subsequent investments must be $25 or more. These minimums may be waived
when the Shares are being purchased through retirement plans providing for
regular periodic investments, as described below under "Retirement Plans."
DIFFERENCES BETWEEN CLASS I AND CLASS II. The difference between Class I and
Class II Shares lies primarily in their front-end and contingent deferred
sales charges and Rule 12b-1 fees as described below.
Class I. All Fund Shares outstanding before the implementation of the
multiclass structure have been redesignated as Class I Shares, and will retain
their previous rights and privileges. Voting rights of each class will be the
same on matters affecting the Fund as a whole, but each will rate separately
on matters affecting its class. Class I Shares are generally subject to a
variable sales charge upon
10
<PAGE>
purchase and not subject to any sales charge upon redemption. Class I Shares
are subject to Rule 12b-1 fees of up to an annual maximum of 0.35% of average
daily net assets of such Shares. With this multiclass structure, Class I
Shares have higher front-end sales charges than Class II Shares and
comparatively lower Rule 12b-1 fees. Class I Shares may be purchased at
reduced front-end sales charges, or at net asset value if certain conditions
are met. In most circumstances, contingent deferred sales charges will not be
assessed against redemptions of Class I Shares. See "Management of the Fund"
and "How to Sell Shares of the Fund" for more information.
Class II. The current public Offering Price of Class II Shares is equal to
the net asset value, plus a front-end sales charge of 1% of the amount
invested. Class II Shares are also subject to a contingent deferred sales
charge of 1% if Shares are redeemed within 18 months of the calendar month
following purchase. In addition, Class II Shares are subject to Rule 12b-1
fees of up to a maximum of 1% per annum of average daily net assets of such
Shares, 0.75% of which will be retained by FTD during the first year of
investment. Class II Shares have lower front-end sales charges than Class I
Shares and comparatively higher Rule 12b-1 fees. See "How to Sell Shares of
the Fund--Contingent Deferred Sales Charge."
Purchases of Class II Shares are limited to purchases below $1 million. Any
purchases of $1 million or more will automatically be invested in Class I
Shares, since that is more beneficial to investors. Such purchases, however,
may be subject to a contingent deferred sales charge. Investors may exceed $1
million in Class II Shares by cumulative purchases over a period of time.
Investors who intend to make investments exceeding $1 million, however, should
consider purchasing Class I Shares through a Letter of Intent instead of
purchasing Class II Shares.
DECIDING WHICH CLASS TO PURCHASE. Investors should carefully evaluate their
anticipated investment amount and time horizon prior to determining which
class of Shares to purchase. Generally, an investor who expects to invest less
than $50,000 in the Franklin Templeton Funds and who expects to make
substantial redemptions within approximately six years or less of investment
should consider purchasing Class II Shares. However, the higher annual Rule
12b-1 fees on the Class II Shares will result in slightly higher operating
expenses and lower income dividends for Class II Shares, which will accumulate
over time to outweigh the difference in front-end sales charges. For this
reason, Class I Shares may be more attractive to long-term investors even if
no sales charge reductions are available to them.
Investors who qualify to purchase Class I Shares at reduced sales charges
definitely should consider purchasing Class I Shares, especially if they
intend to hold their Shares approximately six years or more. Investors who
qualify to purchase Class I Shares at reduced sales charges but who intend to
hold their Shares less than approximately six years should evaluate whether it
is more economical to purchase Class I Shares through a Letter of Intent or
under Cumulative Quantity Discount rather than purchasing Class II Shares.
INVESTORS INVESTING $1 MILLION OR MORE IN A SINGLE PAYMENT AND OTHER INVESTORS
WHO QUALIFY TO PURCHASE CLASS I SHARES AT NET ASSET VALUE WILL BE PRECLUDED
FROM PURCHASING CLASS II SHARES.
Each class represents the same interest in the investment portfolio of the
Fund and has the same rights, except that each class has a different sales
charge, bears the separate expenses of its Rule 12b-1 distribution plan, and
has exclusive voting rights with respect to such plan. The two classes also
have separate exchange privileges.
In determining which Shares are more appropriate for a Shareholder's
investment objectives and income needs, a Shareholder should also consider
that the higher Rule 12b-1 fees for Class II will generally result in lower
dividends and consequently lower yields for Class II Shares as compared to
Class I Shares.
Each class also has a separate schedule for compensating securities dealers
for selling Fund Shares. Investors should take all of the factors regarding an
investment in each class into account before deciding which class of Shares to
purchase.
OFFERING PRICE -- CLASS I. The sales charge for Class I Shares is a variable
percentage of the Offering Price depending upon the amount of the sale. A
description of the method of calculating net asset value per Share is included
under the caption "Net Asset Value" below.
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<PAGE>
The price to the public on purchases of Class I Shares made by a single
purchaser, by an individual, his or her spouse and their children under age
21, or by a single trust or fiduciary account other than an employee benefit
plan holding Shares of the Fund on or before February 1, 1995, is the net
asset value per Share plus a sales charge not exceeding 5.75% of the Offering
Price (equivalent to 6.10% of the net asset value), which is reduced on larger
sales as shown below:
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
---------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE OF THE NET ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS/1/,/3/
- ----------------- --------------------- ----------------------- --------------------------
<S> <C> <C> <C>
Less than $50,000....... 5.75% 6.10% 5.00%
$50,000 but less than
$100,000............... 4.50% 4.71% 3.75%
$100,000 but less than
$250,000............... 3.50% 3.63% 2.80%
$250,000 but less than
$500,000............... 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000............. 2.00% 2.04% 1.60%
$1,000,000 or more...... none none (see below)/2/
</TABLE>
- -------
/1/ Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
/2/ The following commissions will be paid by FTD, from its own resources, to
securities dealers who initiate and are responsible for purchases of $1
million or more: 1% on sales of $1 million but less than $2 million, plus
0.80% on sales of $2 million but less than $3 million, plus 0.50% on sales
of $3 million but less than $50 million, plus 0.25% on sales of $50 million
but less than $100 million, plus 0.15% on sales of $100 million or more.
Dealer concession breakpoints are reset every 12 months for purposes of
additional purchases.
/3/ At the discretion of FTD, all sales charges may at times be reallowed to the
securities dealer. If 90% or more of the sales commission is reallowed, such
securities dealer may be deemed to be an underwriter as that term is defined
in the Securities Act of 1933.
No front-end sales charge applies on investments of $1 million or more, but
a contingent deferred sales charge of 1% is imposed on certain redemptions of
all or a portion of investments of $1 million or more within 12 months of the
calendar month following such investments ("contingency period"). See "How to
Sell Shares of the Fund--Contingent Deferred Sales Charge."
The size of a transaction which determines the applicable sales charge on
the purchase of Class I Shares is determined by adding the amount of the
Shareholder's current purchase plus the cost or current value (whichever is
higher) of a Shareholder's existing investment in one or more of the funds in
the Franklin Group of Funds(R) and the Templeton Family of Funds. Included for
these aggregation purposes are (i) the mutual funds in the Franklin Group of
Funds except Franklin Valuemark Funds and Franklin Government Securities Trust
(the "Franklin Funds"); (ii) other investment products underwritten by FTD or
its affiliates (although certain investments may not have the same schedule of
sales charges and/or may not be subject to reduction); and (iii) the U.S.-
registered mutual funds in the Templeton Family of Funds except Templeton
Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund, and Templeton
Variable Products Series Fund (the "Templeton Funds"). (Franklin Funds and
Templeton Funds are collectively referred to as the "Franklin Templeton
Funds.") Sales charge reductions based upon aggregate holdings of (i), (ii)
and (iii) above ("Franklin Templeton Investments") may be effective only after
notification to FTD that the investment qualifies for a discount.
Other Payments to Securities Dealers. FTD, or one of its affiliates, may
make payments, from its own resources, of up to 1% of the amount purchased to
securities dealers who initiate and are responsible for purchases made at net
asset value by certain designated retirement plans (as defined below)
(excluding IRA and IRA rollovers), certain non-designated plans (as defined
below), certain trust companies and trust departments of banks and certain
retirement plans of organizations with collective retirement plan assets of
$10 million or more. See definitions under "Description of Special Net Asset
Value Purchases" below and as set forth in the SAI.
12
<PAGE>
A sales charge of 4% of the Offering Price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan account which is a Shareholder in the Fund on or before
February 1, 1995. Of the 4% sales charge applicable to such purchases, 3.20%
of the Offering Price will be retained by dealers.
Cumulative Quantity Discount. The schedule of reduced sales charges also may
be applied to qualifying sales of Class I Shares on a cumulative basis. For
this purpose, the dollar amount of the sale is added to the higher of (i) the
value (calculated at the applicable Offering Price) or (ii) the purchase
price, of Franklin Templeton Investments. The cumulative quantity discount
applies to Franklin Templeton Investments owned at the time of purchase by the
purchaser, his or her spouse, and their children under age 21. In addition,
the aggregate investments of a trustee or other fiduciary account (for an
account under exclusive investment authority) may be considered in determining
whether a reduced sales charge is available, even though there may be a number
of beneficiaries of the account. For example, if the investor held Class I
Shares valued at $40,000 (or, if valued at less than $40,000, had been
purchased for $40,000) and purchased an additional $20,000 of the Fund's Class
I Shares, the sales charge for the $20,000 purchase would be at the rate of
4.50%. It is FTD's policy to give investors the best sales charge rate
possible; however, there can be no assurance that an investor will receive the
appropriate discount unless, at the time of placing the purchase order, the
investor or the dealer makes a request for the discount and gives FTD
sufficient information to determine whether the purchase will qualify for the
discount. On telephone orders from dealers for the purchase of Class I Shares
to be registered in "street name," FTD will accept the dealer's instructions
with respect to the applicable sales charge rate to be applied. The cumulative
quantity discount may be amended or terminated at any time.
Letter of Intent. Investors may also reduce sales charges on all investments
in Class I Shares by means of a Letter of Intent ("LOI") which expresses the
investor's intention to invest a certain amount within a 13-month period in
Class I Shares of the Fund or any other Franklin Templeton Fund. See the
Shareholder Application. Except for certain employee benefit plans, the
minimum initial investment under an LOI is 5% of the total LOI amount. Except
for Shares purchased by certain employee benefit plans, Shares purchased with
the first 5% of such amount will be held in escrow to secure payment of the
higher sales charge applicable to the Shares actually purchased if the full
amount indicated is not purchased, and such escrowed Shares will be
involuntarily redeemed to pay the additional sales charge, if necessary. A
purchase not originally made pursuant to an LOI may be included under a
subsequent LOI executed within 90 days of the purchase. Any redemptions made
by Shareholders, other than by certain employee benefit plans, during the 13-
month period will be subtracted from the amount of the purchases for purposes
of determining whether the terms of the LOI have been completed. For a further
description of the LOI, see "Purchase, Redemption and Pricing of Shares --
Letter of Intent" in the SAI.
Group Purchases. An individual who is a member of a qualified group may also
purchase Class I Shares of the Fund at the reduced sales charge applicable to
the group as a whole. The sales charge is based upon the aggregate dollar
value of Class I Shares previously purchased and still owned by the group,
plus the amount of the current purchase. For example, if members of the group
had previously invested and still held $80,000 of Class I Shares and now were
investing $25,000, the sales charge would be 3.50%. Information concerning the
current sales charge applicable to a group may be obtained by contacting FTD.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares at a discount, and
(iii) satisfies uniform criteria which enable FTD to realize economies of
scale in its costs of distributing Shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or FTD and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to FTD, and must seek to arrange for payroll
deduction or other bulk transmission of investments to the Fund.
If an investor selects a payroll deduction plan, subsequent investments will
be automatic and will continue until such time as the investor notifies the
Fund and the investor's employer to discontinue further investments. Due to
the varying procedures to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and
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<PAGE>
the time the money reaches the Fund. The investment in the Fund will be made
at the Offering Price per Share determined on the day that both the check and
payroll deduction data are received in required form by the Fund.
OFFERING PRICE -- CLASS II. Unlike Class I Shares, the front-end sales
charges and dealer concessions for Class II Shares do not vary depending on
the amount of purchase. The total sales charges or underwriting commissions
and dealer concessions for Class II Shares are set forth below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE OF THE NET ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS*
- ----------------- --------------------- ---------------------- --------------------
<S> <C> <C> <C>
any amount (less than $1
million)............... 1.00% 1.01% 1.00%
</TABLE>
- -------
* FTD, or one of its affiliates, may make additional payments to securities
dealers, from its own resources, of up to 1% of the amount invested. During
the first year following a purchase of Class II Shares, FTD will keep a
portion of the Rule 12b-1 fees assessed on those Shares to partially recoup
fees FTD pays to securities dealers.
Class II Shares redeemed within 18 months of their purchase will be assessed
a contingent deferred sales charge of 1% on the lesser of the then-current net
asset value or the net asset value of such Shares at the time of purchase,
unless such charge is waived as described under "How To Sell Shares of the
Fund--Contingent Deferred Sales Charge."
NET ASSET VALUE PURCHASES (BOTH CLASSES). Class I Shares may be purchased
without the imposition of either a front-end sales charge ("net asset value")
or a contingent deferred sales charge by (i) officers, trustees, directors,
and full-time employees of the Fund, any of the Franklin Templeton Funds, or
of Franklin Resources, Inc. and its subsidiaries (the "Franklin Templeton
Group"), and their spouses and family members, including any subsequent
payments made by such parties after cessation of employment; (ii) companies
exchanging Shares with or selling assets pursuant to a merger, acquisition or
exchange offer; (iii) insurance company separate accounts for pension plan
contracts; (iv) accounts managed by the Franklin Templeton Group; (v)
shareholders of Templeton Institutional Funds, Inc. reinvesting redemption
proceeds from that fund under an employee benefit plan qualified under Section
401 of the Internal Revenue Code of 1986, as amended (the "Code"), in Shares
of the Fund; (vi) certain unit investment trusts and unit holders of such
trusts reinvesting their distributions from the trusts in the Fund; (vii)
registered securities dealers and their affiliates, for their investment
account only; and (viii) registered personnel and employees of securities
dealers, and their spouses and family members, in accordance with the internal
policies and procedures of the employing securities dealer.
For either Class I or Class II, the same class of Shares of the Fund may be
purchased at net asset value by persons who have redeemed, within the previous
365 days, their Shares of the Fund or another of the Franklin Templeton Funds
which were purchased with a front-end sales charge or assessed a contingent
deferred sales charge on redemption. If a different class of Shares is
purchased, the full front-end sales charge must be paid at the time of
purchase of the new Shares. An investor may reinvest an amount not exceeding
the redemption proceeds. While credit will be given for any contingent
deferred sales charge paid on the Shares redeemed and subsequently
repurchased, a new contingency period will begin. Matured Shares will be
reinvested at net asset value and will not be subject to a new contingent
deferred sales charge. Shares of the Fund redeemed in connection with an
exchange into another fund (see "Exchange Privilege") are not considered
"redeemed" for this privilege. In order to exercise this privilege, a written
order for the purchase of Shares of the Fund must be received by the Fund or
the Fund's Transfer Agent within 365 days after the redemption. The 365 days,
however, do not begin to run on redemption proceeds placed immediately after
redemption in a Franklin Bank Certificate of Deposit ("CD") until the CD
(including any rollover) matures. Reinvestment at net asset value may also be
handled by a securities dealer or other financial institution, who may charge
the Shareholder a fee for this service. The redemption is a taxable
transaction but reinvestment without a sales charge may affect the amount of
gain or loss recognized and the tax basis of the Shares reinvested. If there
has been a loss on the redemption, the loss may be disallowed if a
reinvestment in the same fund is made within a
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<PAGE>
30-day period. Information regarding the possible tax consequences of such a
reinvestment is included under "General Information--Federal Tax Information"
of this Prospectus and in the SAI.
For either Class I or Class II, the same class of Shares of the Fund or of
another of the Franklin Templeton Funds may be purchased at net asset value
and without a contingent deferred sales charge by persons who have received
dividends and capital gain distributions in cash from investments in that
class of Shares of the Fund within 365 days of the payment date of such
distribution. To exercise this privilege, a written request to reinvest the
distribution must accompany the purchase order. Additional information may be
obtained from Account Services at 1-800-393-3001. See "General Information--
Dividends and Distributions."
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by investors who have, within
the past 60 days, redeemed an investment in a mutual fund which is not part of
the Franklin Templeton Funds and which was subject to a front-end sales charge
or a contingent deferred sales charge and which has investment objectives
similar to those of the Fund.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by broker-dealers who have
entered into a supplemental agreement with FTD, or by registered investment
advisers affiliated with such broker-dealers, on behalf of their clients who
are participating in a comprehensive fee program (also known as a wrap fee
program).
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by anyone who has taken a
distribution from an existing retirement plan already invested in the Franklin
Templeton Funds (including former participants of the Franklin Templeton
Profit Sharing 401(k) plan), to the extent of such distribution. In order to
exercise this privilege, a written order for the purchase of Shares of the
Fund must be received by Franklin Templeton Trust Company ("FTTC"), the Fund,
or Franklin Templeton Investor Services, Inc. (the "Transfer Agent") within
365 days after the plan distribution.
Class I Shares may also be purchased at net asset value and without the
imposition of a contingent deferred sales charge by any state, county or city,
or any instrumentality, department, authority or agency thereof which has
determined that the Fund is a legally permissible investment and which is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any registered
management investment company (an "eligible governmental authority"). SUCH
INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISERS TO DETERMINE WHETHER AND TO
WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM.
Municipal investors considering investment of proceeds of bond offerings into
the Fund should consult with expert counsel to determine the effect, if any,
of various payments made by the Fund or its investment manager or arbitrage
rebate calculations. If an investment by an eligible governmental authority at
net asset value is made through a securities dealer who has executed a dealer
agreement with FTD, FTD or one of its affiliates may make a payment, out of
its own resources, to such securities dealer in an amount not to exceed 0.25%
of the amount invested. Contact Franklin Templeton Institutional Services for
additional information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES. Class I Shares may also be
purchased at net asset value and without the imposition of a contingent
deferred sales charge by certain designated retirement plans, including
profit-sharing, pension, 401(k) and simplified employee pension plans
("designated plans"), subject to minimum requirements with respect to number
of employees or amount of purchase, which may be established by FTD.
Currently, those criteria require that the employer establishing the plan have
200 or more employees or that the amount invested or to be invested during the
subsequent 13-month period in the Fund or in any of the Franklin Templeton
Investments totals at least $1 million. Employee benefit plans not designated
above or qualified under Section 401 of the Code ("non-designated plans") may
be afforded the same privilege if they meet the above requirements as well as
the uniform criteria for qualified groups previously described under "Group
Purchases," which enable FTD to realize economies of scale in its sales
efforts and sales-related expenses.
15
<PAGE>
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trust companies and bank
trust departments for funds over which they exercise exclusive discretionary
investment authority and which are held in a fiduciary, agency, advisory,
custodial or similar capacity. Such purchases are subject to minimum
requirements with respect to amount of purchase, which may be established by
FTD. Currently, those criteria require that the amount invested or to be
invested during the subsequent 13-month period in the Fund or any of the
Franklin Templeton Investments must total at least $1 million. Orders for such
accounts will be accepted by mail accompanied by a check, or by telephone or
other means of electronic data transfer directly from the bank or trust
company, with payment by federal funds received by the close of business on
the next business day following such order.
Class I Shares may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trustees or other
fiduciaries purchasing securities for certain retirement plans of
organizations with collective retirement plan assets of $10 million or more,
without regard to where such assets are currently invested.
Refer to the SAI for further information regarding net asset value purchases
of Class I Shares.
ADDITIONAL DEALER COMPENSATION (BOTH CLASSES). FTD, or one of its
affiliates, from its own resources, may also provide additional compensation
to securities dealers in connection with sales of shares of the Franklin
Templeton Funds. Compensation may include financial assistance to securities
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising, sales campaigns and/or
shareholder services and programs regarding one or more of the Franklin
Templeton Funds and other dealer-sponsored programs or events. In some
instances, this compensation may be made available only to certain securities
dealers whose representatives have sold or are expected to sell significant
amounts of shares of the Franklin Templeton Funds. Compensation may include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their
families to locations within or outside of the United States for meetings or
seminars of a business nature. Securities dealers may not use sales of the
Fund's Shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. In addition, FTD or its
affiliates may make ongoing payments to brokerage firms, financial
institutions (including banks) and others to facilitate the administration and
servicing of shareholder accounts. None of the aforementioned additional
compensation is paid for by the Fund or its Shareholders.
Ongoing payments will be made to qualifying dealers at the annual rate of
0.25% of the average daily net asset value of Class I Shares, and 1% of the
average daily net asset value of Class II Shares, registered in the name of
that broker-dealer as nominee or held in a Shareholder account that designates
that broker-dealer as dealer of record. These payments are made in order to
promote selling efforts and to compensate dealers for providing certain
services, including processing purchase and redemption transactions,
establishing Shareholder accounts and providing certain information and
assistance with respect to the Fund. For purchases on or after February 1,
1995 of Class I Shares that are subject to a contingent deferred sales charge,
the dealer will receive ongoing payments beginning in the thirteenth month
after the date of the purchase. For all purchases of Class II Shares that are
subject to a contingent deferred sales charge, the dealer will receive
payments representing a service fee (0.25% of average daily net asset value of
the Shares) beginning in the first month after the date of the purchase, and
will receive payments representing compensation for distribution (0.75% of
average daily net asset value of the Shares) beginning in the thirteenth month
after the date of the purchase.
PURCHASING CLASS I AND CLASS II SHARES. When placing purchase orders,
investors should clearly indicate which class of Shares they intend to
purchase. A purchase order that fails to specify a class will automatically be
invested in Class I Shares. Purchases of $1 million or more in a single
payment will be invested in Class I Shares. There are no conversion features
attached to either class of Shares.
Investors who qualify to purchase Class I Shares at net asset value should
purchase Class I rather than Class II Shares. See the section "Net Asset Value
Purchases (Both Classes)" and "Description of Special Net Asset Value
Purchases" above for a discussion of when Shares may be purchased at net asset
value.
16
<PAGE>
As to telephone orders placed with FTD by dealers, the dealer must receive
the investor's order before the close of the New York Stock Exchange ("NYSE")
and transmit it to FTD by 5:00 p.m., New York time, for the investor to
receive that day's Offering Price. Payment for such orders must be by check in
U.S. currency and must be promptly submitted to FTD. Orders mailed to FTD by
dealers or individual investors are effected at the net asset value of the
Fund's Shares next computed after the purchase order accompanied by payment
has been received by FTD. Such payment must be by check in U.S. currency drawn
on a commercial bank in the United States and, if over $100,000, may not be
deemed to have been received until the proceeds have been collected unless the
check is certified or issued by such bank. Any subscription may be rejected by
FTD or by the Fund.
The Fund may impose a $10 charge against a Shareholder account in the event
that a check or draft submitted for the purchase of Fund Shares is returned
unpaid to the Fund.
Investors should promptly check the confirmation advice that is mailed after
each purchase (or redemption) in order to ensure that it has been accurately
recorded in the investor's account.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received at least 10 days prior to the collection date,
or by FTD upon written notice to the investor at least 30 days prior to the
collection date.
INSTITUTIONAL ACCOUNTS. Institutional investors will likely be required to
complete an institutional account application. There may be additional methods
of opening accounts, purchasing, redeeming or exchanging Shares of the Fund
available for institutional accounts. To obtain an institutional account
application or additional information regarding institutional accounts,
contact Franklin Templeton Institutional Services at 1-800-321-8563.
ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on
regular confirmation statements from the Transfer Agent.
TEMPLETON STAR SERVICE. From a touch-tone phone, Templeton and Franklin
Shareholders may access an automated system (day or night) which offers the
following features:
By calling the Templeton STAR Service, Shareholders may obtain current price
and yield information specific to a Templeton Fund, regardless of class, or
Franklin Class II shares; obtain account information; and request duplicate
confirmation or year-end statements and money fund checks, if applicable.
By calling the Franklin TeleFACTS system, Class I Shareholders may obtain
current price, yield or other performance information specific to a Franklin
Fund; process an exchange into an identically registered Franklin account;
obtain account information; and request duplicate confirmation or year-end
statements, money fund checks, if applicable, and deposit slips.
Share prices and account information specific to Templeton Class I or II
shares and Franklin Class II shares may also be accessed on TeleFACTS by
Franklin Class I and Class II shareholders.
The Templeton STAR Service is accessible by calling 1-800-654-0123. The
TeleFACTS system is accessible by calling 1-800-247-1753. Templeton Class I
and Class II Share codes for the Fund, which will be needed to access system
information, are 413 and 513, respectively. The system's automated operator
will prompt the caller with easy to follow step-by-step instructions from the
main menu. Other features may be added in the future.
17
<PAGE>
RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which FTTC or its affiliate
acts as trustee or custodian: IRAs, Simplified Employee Pensions, 403(b)
plans, qualified plans for corporations, self-employed individuals and
partnerships, and 401(k) plans. A plan document must be adopted in order for a
retirement plan to be in existence. For further information about any of the
plans, agreements, applications and annual fees, contact Franklin Templeton
Distributors, Inc. To determine which retirement plan is appropriate, an
investor should contact his or her tax adviser.
NET ASSET VALUE. The net asset value per Share of each class of the Fund is
determined as of the scheduled closing time of the NYSE (generally 4:00 p.m.,
New York time) each day the NYSE is open for trading, by dividing the value of
the Fund's securities plus any cash and other assets (including accrued
interest and dividends receivable) less all liabilities (including accrued
expenses) by the number of Shares outstanding, adjusted to the nearest whole
cent. A security listed or traded on a recognized stock exchange or NASDAQ is
valued at its last sale price on the principal exchange on which the security
is traded. The value of a foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded, or as of the scheduled closing time of the NYSE (generally 4:00 p.m.,
New York time), if that is earlier, and that value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in effect at noon, New
York time, on the day the value of the foreign security is determined. If no
sale is reported at that time, the mean between the current bid and asked
price is used. Occasionally, events which affect the values of such securities
and such exchange rates may occur between the times at which they are
determined and the close of the NYSE, and will therefore not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at fair value as determined by the management and approved in
good faith by the Board of Trustees. All other securities for which over-the-
counter market quotations are readily available are valued at the mean between
the current bid and asked price. Securities for which market quotations are
not readily available and other assets are valued at fair value as determined
by the management and approved in good faith by the Board of Trustees.
Each of the Fund's classes will bear, pro-rata, all of the common expenses
of the Fund. The net asset value of all outstanding Shares of each class of
the Fund will be computed on a pro-rata basis for each outstanding Share based
on the proportionate participation in the Fund represented by the value of
Shares of such classes, except that the Class I and Class II Shares will bear
the Rule 12b-1 expenses payable under their respective plans. Due to the
specific distribution expenses and other costs that will be allocable to each
class, the dividends paid to each class of the Fund may vary.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares for the same class of shares of other
Franklin Templeton Funds which are eligible for sale in the Shareholder's
state of residence and in conformity with such fund's stated eligibility
requirements and investment minimums. Some funds, however, may not offer Class
II shares. Class I Shares may be exchanged for Class I shares of any Franklin
Templeton Funds. Class II Shares may be exchanged for Class II shares of any
Franklin Templeton Funds. No exchanges between different classes of shares
will be allowed. A contingent deferred sales charge will not be imposed on
exchanges. If the exchanged Shares were subject to a contingent deferred sales
charge in the original fund purchased, and Shares are subsequently redeemed
within 12 months (Class I Shares) or 18 months (Class II Shares) of the
calendar month following the original purchase date, a contingent deferred
sales charge will be imposed. The period will be tolled (or stopped) for the
period Class I Shares are exchanged into and held in a Franklin or Templeton
money market fund. See also "How to Sell Shares of the Fund -- Contingent
Deferred Sales Charge."
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. Exchanges of the same
class of shares are made on the basis of the net asset values of the class
involved, except as set forth below. Exchanges of shares of a class which were
originally purchased without a sales charge will be charged a sales charge in
accordance with the terms of the prospectus of the fund and the class of
shares being purchased, unless the original investment on which no sales
charge was paid was transferred in from a fund on which the investor paid a
sales charge. Exchanges of shares from
18
<PAGE>
the Franklin Templeton Money Funds are subject to applicable sales charges on
the funds being purchased, unless the Franklin Templeton Money Fund shares
were acquired by an exchange from a fund having a sales charge, or by
reinvestment of dividends or capital gain distributions. Exchanges of Class I
Shares of the Fund which were purchased with a lower sales charge to a fund
which has a higher sales charge will be charged the difference, unless the
shares were held in the original fund for at least six months prior to
executing the exchange. All exchanges are permitted only after at least 15
days have elapsed from the date of the purchase of the Shares to be exchanged.
A Shareholder may exchange Shares by writing to the Transfer Agent (see "How
to Sell Shares of the Fund"), by contacting his or her investment dealer or --
if the Shareholder Application indicates that the Shareholder has not
declined the option -- by telephoning 1-800-393-3001. Telephone exchange
instructions must be received by FTD by the scheduled closing time of the NYSE
(generally 4:00 p.m., New York time). Telephonic exchanges can involve only
Shares in non-certificated form. Shares held in certificate form are not
eligible, but may be returned and qualify for these services. All accounts
involved in a telephonic exchange must have the same registration and dividend
option as the account from which the Shares are being exchanged. The Fund and
the Transfer Agent will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Please refer to "Telephone
Transactions -- Verification Procedures." Forms for declining the telephone
exchange privilege and prospectuses of the other funds in the Franklin
Templeton Group may be obtained from FTD. Exchange redemptions and purchases
are processed simultaneously at the Share prices next determined after the
exchange order is received. (See "How to Buy Shares of the Fund -- Offering
Price.") A gain or loss for tax purposes generally will be realized upon the
exchange, depending on the tax basis of the Shares redeemed.
This exchange privilege is available only in states where shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon 60 days' written notice. A Shareholder who wishes
to make an exchange should first obtain and review a current prospectus of the
fund into which he or she wishes to exchange. Broker-dealers who process
exchange orders on behalf of their customers may charge a fee for their
services. Such fee may be avoided by making requests for exchange directly to
the Transfer Agent.
If a substantial portion of the Fund's Shareholders should, within a short
period, elect to redeem their Shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Fund to initially invest this money in short-term, interest-bearing money
market instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objective exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
EXCHANGES OF CLASS I SHARES. The contingency period of Class I Shares will
be tolled (or stopped) for the period such Shares are exchanged into and held
in a Franklin or Templeton Class I money market fund. If a Class I account has
Shares subject to a contingent deferred sale charge, Class I Shares will be
exchanged into the new account on a "first-in, first-out" basis. See also "How
to Sell Shares of the Fund--Contingent Deferred Sales Charge."
EXCHANGES OF CLASS II SHARES. When an account is composed of Class II Shares
subject to the contingent deferred sales charge, and Shares that are not, the
Shares will be transferred proportionately into the new fund. Shares received
from reinvestment of dividends and capital gains are referred to as "free
Shares," Shares which were originally subject to a contingent deferred sales
charge but to which the contingent deferred sales charge no longer applies are
called "matured Shares," and Shares still subject to the contingent deferred
sales charge are referred to as "CDSC liable Shares." CDSC liable Shares held
for different periods of time are considered different types of CDSC liable
Shares. For instance, if a Shareholder has $1,000 in free Shares, $2,000 in
matured Shares, and $3,000 in CDSC liable Shares, and the Shareholder
exchanges $3,000 into a new fund, $500 will be exchanged from free Shares,
$1,000 from
19
<PAGE>
matured Shares, and $1,500 from CDSC liable Shares. Similarly, if CDSC liable
Shares have been purchased at different periods, a proportionate amount will
be taken from Shares held for each period. If, for example, the Shareholder
holds $1,000 in Shares bought three months ago, $1,000 bought six months ago,
and $1,000 bought nine months ago, and the Shareholder exchanges $1,500 into a
new fund, $500 from each of these Shares will be exchanged into the new fund.
The only money market fund exchange option available to Class II
Shareholders is the Franklin Templeton Money Fund II ("Money Fund II"), a
series of the Franklin Templeton Money Fund Trust. No drafts (checks) may be
written on Money Fund II accounts, nor may Shareholders purchase shares of
Money Fund II directly. Class II Shares exchanged for shares of Money Fund II
will continue to age and a contingent deferred sales charge will be assessed
if CDSC liable Shares are redeemed. No other money market funds are available
for Class II Shareholders for exchange purposes. Class I Shares may be
exchanged for shares of any of the money market funds in the Franklin
Templeton Funds except Money Fund II. Draft writing privileges and direct
purchases are allowed on these money market funds as described in their
respective prospectuses.
To the extent Shares are exchanged proportionately, as opposed to another
method, such as "first-in, first-out," or free Shares followed by CDSC liable
Shares, the exchanged Shares may, in some instances, be CDSC liable even
though a redemption of such Shares, as discussed elsewhere herein, may no
longer be subject to a CDSC. The proportional method is believed by management
to more closely meet and reflect the expectations of Class II Shareholders in
the event Shares are redeemed during the contingency period. For federal
income tax purposes, the cost basis of Shares redeemed or exchanged is
determined under the Code without regard to the method of transferring Shares
chosen by the Fund for purposes of exchanging or redeeming Shares.
TRANSFERS. Transfers between identically registered accounts in the same
fund and class are treated as non-monetary and non-taxable events, and are not
subject to a contingent deferred sales charge. The transferred Shares will
continue to age from the date of original purchase. Shares of each class will
be transferred on the same basis as described above for exchanges.
CONVERSION RIGHTS. It is not presently anticipated that Class II Shares will
be converted to Class I Shares. A Shareholder may, however, sell Class II
Shares and use the proceeds to purchase Class I Shares, subject to all
applicable sales charges.
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ("Timing Accounts"), FTD will deduct an administrative service of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase Shares based upon certain predetermined market
indicators. In accordance with the terms of their respective prospectuses,
certain funds in the Franklin Templeton Group do not accept or may place
differing limitations than those described below on exchanges by Timing
Accounts.
The Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern who:
(i) makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges Shares equal in value to at
least $5 million, or more than 1% of the Fund's net asset. Accounts under
common ownership or control, including accounts administered so as to redeem
to purchase Shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
In addition, the Fund reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to the Fund and therefore may be refused.
Finally, as indicated above, the Fund and FTD reserve the right to refuse
any order for the purchase of Shares.
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HOW TO SELL SHARES OF THE FUND
Shares will be redeemed, without charge, on request of the Shareholder in
"Proper Order" to the Transfer Agent. "PROPER ORDER" MEANS THAT THE REQUEST TO
REDEEM MUST MEET ALL OF THE FOLLOWING REQUIREMENTS:
1. Except as provided below under "Redemptions by Telephone," it must be in
writing, signed by the Shareholder(s) exactly in the manner as the Shares are
registered, and must specify either the number of Shares, or the dollar amount
of Shares, to be redeemed and sent to Franklin Templeton Investor Services,
Inc., P.O. Box 33030, St. Petersburg, Florida 33733-8030;
2. The signature(s) of the redeeming Shareholder(s) must be guaranteed by an
"eligible guarantor," including (a) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (b) national securities
exchanges, registered securities associations and clearing agencies; (c)
securities broker-dealers which are members of a national securities exchange
or a clearing agency or which have minimum net capital of $100,000; or (d)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature medallion program. A notarized
signature will not be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature of each of the
redeeming Shareholders must be guaranteed. A signature guarantee is not
required for redemptions of $50,000 or less, requested by and payable to all
Shareholders of record, to be sent to the address of record for that account.
However, the Fund reserves the right to require signature guarantees on all
redemptions. A signature guarantee is required in connection with any written
request for transfer of Shares. Also, a signature guarantee is required if the
Fund or the Transfer Agent believes that a signature guarantee would protect
against potential claims based on the transfer instructions, including, for
example, when (i) the current address of one or more joint owners of an
account cannot be confirmed; (ii) multiple owners have a dispute or give
inconsistent instructions to the Fund; (iii) the Fund has been notified of an
adverse claim; (iv) the instructions received by the Fund are given by an
agent, not the actual registered owner; (v) the Fund determines that joint
owners who are married to each other are separated or may be the subject of
divorce proceedings; or (vi) the authority of a representative of a
corporation, partnership, association, or other entity has not been
established to the satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
. Corporation--(i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
. Partnership--(i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
. Trust--(i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust
document listing the trustee(s) or a certificate of incumbency if the
trustee(s) are not listed on the account registration;
. Custodial (other than a retirement account)--Signature guaranteed
letter of instruction from the custodian;
. Accounts under court jurisdiction--Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence; and
5. Redemption of Shares held in a retirement plan for which FTTC or its
affiliate acts as trustee or custodian must conform to the distribution
requirements of the plan and the Fund's redemption requirements above.
Distributions from such plans are subject to
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additional requirements under the Code, and certain documents (available from
the Transfer Agent) must be completed before the distribution may be made. For
example, distributions from retirement plans are subject to withholding
requirements under the Code, and the IRS Form W-4P (available from the
Transfer Agent) may be required to be submitted to the Transfer Agent with the
distribution request, or the distribution will be delayed. Franklin Templeton
Investor Services, Inc. and its affiliates assume no responsibility to
determine whether a distribution satisfies the conditions of applicable tax
laws and will not be responsible for any penalties assessed.
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Account Services Department by
calling 1-800-393-3001 or 813-823-8712.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer
Agent. A gain or loss for tax purposes generally will be realized upon the
redemption, depending on the tax basis of the Shares redeemed. Payment of the
redemption price ordinarily will be made by check (or by wire at the sole
discretion of the Transfer Agent if wire transfer is requested, including name
and address of the bank and the Shareholder's account number to which payment
of the redemption proceeds is to be wired) promptly after receipt of the
redemption request in Proper Order. However, if Shares have been purchased by
check, the Fund will make redemption proceeds available when a Shareholder's
check received for the Shares purchased has been cleared for payment by the
Shareholder's bank, which, depending upon the location of the Shareholder's
bank, could take up to 15 days or more. The check will be mailed by first-
class mail to the Shareholder's registered address (or as otherwise directed).
Remittance by wire (to a commercial bank account in the same name(s) as the
Shares are registered) or express mail, if requested, are subject to a
handling charge of $15, which will be deducted from the redemption proceeds.
The Fund, through FTD, also repurchases Shares (whether in certificate or
book-entry form) through securities dealers. The Fund normally will accept
orders to repurchase such Shares by wire or telephone from dealers for their
customers at the net asset value next computed after the dealer has received
the certificate holder's request for repurchase, if the dealer received such
request before closing time of the NYSE on that day. Dealers have the
responsibility of submitting such repurchase requests by calling not later
than 5:00 p.m., New York time, on such day in order to obtain that day's
applicable redemption price. Repurchase of Shares is for the convenience of
Shareholders and does not involve a charge by the Fund; however, securities
dealers may impose a charge on the Shareholder for transmitting the notice of
repurchase to the Fund. The Fund reserves the right to reject any order for
repurchase, which right of rejection might adversely affect Shareholders
seeking redemption through the repurchase procedure. Ordinarily, payment will
be made to the securities dealer promptly after receipt of a repurchase order
and Share certificate (if any) in "Proper Order" as set forth above. The Fund
also will accept, from member firms of the NYSE, orders to repurchase Shares
for which no certificates have been issued by wire or telephone without a
redemption request signed by the Shareholder, provided the member firm
indemnifies the Fund and FTD from any liability resulting from the absence of
the Shareholder's signature. Forms for such indemnity agreement can be
obtained from FTD.
The Fund may involuntarily redeem an investor's Shares if the net asset
value of such Shares is less than $100, except that involuntary redemptions
will not result from fluctuations in the value of an investor's Shares. In
addition, the Fund may involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
such other tax-related certifications as the Fund may require. A notice of
redemption, sent by first-class mail to the investor's address of record, will
fix a date not less than 30 days after the mailing date, and Shares will be
redeemed at net asset value at the close of business on that date, unless
sufficient additional Shares are purchased to bring the aggregate account
value up to $100 or more, or unless a certified taxpayer identification number
(or such other information as the Fund has requested) has been provided, as
the case may be. A check for the redemption proceeds will be mailed to the
investor at the address of record.
REINSTATEMENT PRIVILEGE. Shares of the Fund may be purchased at net asset
value with the proceeds from (i) a redemption of Shares of any Franklin
Templeton Fund which were purchased with an initial sales charge or assessed a
contingent deferred sales
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charge on redemption, or (ii) a dividend or distribution paid by any of the
Franklin Templeton Funds, within 365 days after the date of the redemption or
dividend or distribution. However, if a Shareholder's original investment was
in Class I shares of a fund with a lower sales charge, or no sales charge, the
Shareholder must pay the difference. While credit will be given for any
contingent deferred sales charge paid on the Shares redeemed, a new
contingency period will begin. Shares of the Fund redeemed in connection with
an exchange into another fund (see "Exchange Privilege") are not considered
"redeemed" for this privilege. In order to exercise this privilege, a written
order for the purchase of Shares of the Fund must be received by the Fund or
the Fund's Transfer Agent within 365 days after the redemption. The 365 days,
however, do not begin to run on redemption proceeds placed immediately after
redemption in a CD until the CD (including any rollover) matures. The amount
of gain or loss resulting from a redemption may be affected by exercise of the
reinstatement privilege if the Shares redeemed were held for 90 days or less,
or if a Shareholder reinvests in the same fund within 30 days. Reinvestment
will be at the next calculated net asset value after receipt.
SYSTEMATIC WITHDRAWAL PLAN. A Shareholder may establish a Systematic
Withdrawal Plan ("Plan") and receive periodic payments from the account
provided that the net asset value of the Shares held by the Shareholder is at
least $5,000. There are no service charges for establishing or maintaining a
Plan. The minimum amount which the Shareholder may withdraw is $50 per
withdrawal transaction although this is merely the minimum amount allowed
under the Plan and should not be mistaken for a recommended amount. Retirement
plans subject to mandatory distribution requirements are not subject to the
$50 minimum. The Plan may be established on a monthly, quarterly, semiannual
or annual basis. If the Shareholder establishes a Plan, any capital gain
distributions and income dividends paid by the Fund to the Shareholder's
account must be reinvested for the Shareholder's account in additional Shares
at net asset value. Payments are then made from the liquidation of Shares at
net asset value on the day of the liquidation (which is generally on or about
the 25th of the month) to meet the specified withdrawals. Payments are
generally received three to five days after the date of liquidation. By
completing the "Special Payment Instructions for Distributions" section of the
Shareholder Application included with this Prospectus, a Shareholder may
direct the selected withdrawals to another of the Franklin Templeton Funds, to
another person, or directly to a checking account. Liquidation of Shares may
reduce or possibly exhaust the Shares in the Shareholder's account, to the
extent withdrawals exceed Shares earned through dividends and distributions,
particularly in the event of a market decline. If the withdrawal amount
exceeds the total Plan balance, the account will be closed and the remaining
balance will be sent to the Shareholder. As with other redemptions, a
liquidation to make a withdrawal payment is a sale for federal income tax
purposes. Because the amount withdrawn under the Plan may be more than the
Shareholder's actual yield or income, part of such a Plan payment may be a
return of the Shareholder's investment.
Maintaining a Plan concurrently with purchases of additional Shares of the
Fund would be disadvantageous because of the sales charge on the additional
purchases. Also, redemptions of Class I Shares and Class II Shares may be
subject to a contingent deferred sales charge if the Shares are redeemed
within 12 months (Class I Shares) or 18 months (Class II Shares) of the
calendar month of the original purchase date. The Shareholder should
ordinarily not make additional investments of less than $5,000 or three times
the annual withdrawals under the Plan during the time such a Plan is in
effect.
With respect to Class I Shares, the contingent deferred sales charge is
waived for redemptions through a Systematic Withdrawal Plan set up prior to
February 1, 1995. With respect to Systematic Withdrawal Plans set up on or
after February 1, 1995, the applicable contingent deferred sales charge is
waived for Class I and Class II Share redemptions of up to 1% monthly of an
account's net asset value (12% annually, 6% semiannually, 3% quarterly). For
example, if a Class I account maintained an annual balance of $1,000,000, only
$120,000 could be withdrawn through a once-yearly Systematic Withdrawal Plan
free of charge; any amount over that $120,000 would be assessed a 1% (or
applicable) contingent deferred sales charge. Likewise, if a Class II account
maintained an annual balance of $10,000, only $1,200 could be withdrawn
through a once-yearly Systematic Withdrawal Plan free of charge.
A Plan may be terminated on written notice by the Shareholder or the Fund,
and it will terminate automatically if all Shares are liquidated or withdrawn
from the account, or upon the Fund's receipt of notification of the death or
incapacity of the Shareholder. Shareholders may change the amount (but not
below $50) and schedule of withdrawal payments or suspend one such payment by
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giving written notice to the Transfer Agent at least seven business days prior
to the end of the month preceding a scheduled payment. Share certificates may
not be issued while a Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions -- Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions -- Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before the scheduled closing
time of the NYSE (generally 4:00 p.m., New York time), on any business day
will be processed that same day. The redemption check will be sent promptly,
made payable to all the registered owners on the account, and will be sent
only to the address of record. Redemption requests by telephone will not be
accepted within 30 days following an address change by telephone. In that
case, a Shareholder should follow the other redemption procedures set forth in
this Prospectus. Institutional accounts which wish to execute redemptions in
excess of $50,000 must complete an Institutional Telephone Privileges
Agreement which is available from Franklin Templeton Institutional Services by
telephoning 1-800-321-8563.
CONTINGENT DEFERRED SALES CHARGE. In order to recover commissions paid to
securities dealers, Class I investments of $1 million or more, and any Class
II investments, redeemed within the contingency period of 12 months (Class I)
or 18 months (Class II) of the calendar month following their purchase will be
assessed a contingent deferred sales charge, unless one of the exceptions
described below applies. The charge is 1% of the lesser of the net asset value
of the Shares redeemed (exclusive of reinvested dividends and capital gain
distributions) or the net asset value at the time of purchase of such Shares,
and is retained by FTD. The contingent deferred sales charge is waived in
certain instances.
In determining if a contingent deferred sales charge applies, Shares not
subject to a contingent deferred sales charge are deemed to be redeemed first,
in the following order: (i) a calculated number of Shares representing amounts
attributable to capital appreciation of those Shares held less than the
contingency period (12 months in the case of Class I Shares and 18 months in
the case of Class II Shares); (ii) Shares purchased with reinvested dividends
and capital gain distributions; and (iii) other Shares held longer than the
contingency period, and followed by any Shares held less than the contingency
period, on a "first in, first out" basis. For tax purposes, a contingent
deferred sales charge is treated as either a reduction in redemption proceeds
or an adjustment to the cost basis of the Shares redeemed.
The contingent deferred sales charge on each class of Shares is waived, as
applicable, for: exchanges; any account fees; distributions to participants or
beneficiaries in FTTC individual retirement plan accounts due to death,
disability or attainment of age 59 1/2; tax-free returns of excess
contributions from employee benefit plans; distributions from employee benefit
plans, including those due to plan termination or plan transfer; redemptions
through a Systematic Withdrawal Plan set up for Shares prior to February 1,
1995 and, for Systematic Withdrawal Plans set up thereafter, redemptions of up
to 1% monthly of an account's net asset value (3% quarterly, 6% semiannually
or 12% annually); redemptions initiated by the Fund due to a Shareholder's
account falling below the minimum specified account size; and redemptions
following the death of the Shareholder or the beneficial owner.
All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Requests for redemptions for a SPECIFIED DOLLAR amount, unless otherwise
specified, will result in additional Shares being redeemed to cover any
applicable contingent deferred sales charge, while requests for redemption of
a SPECIFIC NUMBER of Shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
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TELEPHONE TRANSACTIONS
Shareholders of the Fund and their investment representative of record, if
any, may be able to execute various transactions by calling the Transfer Agent
at 1-800-393-3001.
All Shareholders will be able to: (i) effect a change in address, (ii)
change a dividend option (see "Restricted Accounts" below), (iii) transfer
Fund Shares in one account to another identically registered account in the
Fund, and (iv) request the issuance of certificates (to be sent to the address
of record only) and (v) exchange Fund Shares by telephone as described in this
Prospectus. In addition, Shareholders who complete and file an Agreement as
described under "How to Sell Shares of the Fund -- Redemptions by Telephone"
will be able to redeem Shares of the Fund.
VERIFICATION PROCEDURES. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent
at the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So
long as the Fund and the Transfer Agent follow instructions communicated by
telephone which were reasonably believed to be genuine at the time of their
receipt, neither they nor their affiliates will be liable for any loss to the
Shareholder caused by an unauthorized transaction. The Fund and the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions in the event such reasonable procedures are not followed.
Shareholders are, of course, under no obligation to apply for or accept
telephone transaction privileges. In any instance where the Fund or the
Transfer Agent is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed, and
neither the Fund, the Transfer Agent, nor their affiliates will be liable for
any losses which may occur because of a delay in implementing a transaction.
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on Franklin Templeton retirement accounts. To assure
compliance with all applicable regulations, special forms are required for any
distribution, redemption or dividend payment. While the telephone exchange
privilege is extended to Franklin Templeton IRA and 403(b) retirement
accounts, certain restrictions may apply to other types of retirement plans.
Changes to dividend options must also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, retirement account Shareholders may call to
speak to a Retirement Plan Specialist at 1-800-527-2020 for Franklin accounts,
or 1-800-354-9191 (press "2" when prompted to do so) for Templeton accounts.
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be difficult to
execute because of heavy telephone volume. In such situations, Shareholders
may wish to contact their dealer for assistance, or to send written
instructions to the Fund as detailed elsewhere in this Prospectus.
Neither the Fund nor the Transfer Agent will be liable for any losses
resulting from the inability of a Shareholder to execute a telephone
transaction. The telephone transaction privilege may be modified or
discontinued by the Fund at any time upon 60 days' written notice to
Shareholders.
MANAGEMENT OF THE FUND
The Trust is managed by its Board of Trustees and all powers of the Trust
are exercised by or under authority of the Board. Information relating to the
Trustees and Executive Officers is set forth under the heading "Management of
the Trust" in the SAI.
The Board has carefully reviewed the multiclass structure to ensure that no
material conflict exists between the two classes of Shares. Although the Board
does not expect to encounter material conflicts in the future, the Board will
continue to monitor the Fund and will take appropriate action to resolve such
conflicts if any should later arise.
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In developing the multiclass structure, the Fund has retained the authority
to establish additional classes of Shares. It is the Fund's present intention
to offer only two classes of Shares, but new classes may be offered in the
future.
INVESTMENT MANAGER. The Investment Manager of the Fund is Templeton
Investment Counsel, Inc., Broward Financial Centre, Fort Lauderdale, Florida
33394-3091. The Investment Manager manages the investment and reinvestment of
the Fund's assets. The Investment Manager is an indirect wholly owned
subsidiary of Franklin Resources, Inc. ("Franklin"). Through its subsidiaries,
Franklin is engaged in various aspects of the financial services industry. The
Investment Manager and its affiliates serve as advisers for a wide variety of
public investment mutual funds and private clients in many nations. The
Templeton organization has been investing globally over the past 52 years and,
with its affiliates, provides investment management and advisory services to a
worldwide client base, including over 4.3 million mutual fund shareholders,
foundations, endowments, employee benefit plans and individuals. The
Investment Manager and its affiliates have approximately 4,100 employees in
the United States, Australia, Scotland, Germany, Hong Kong, Luxembourg,
Bahamas, Singapore, Canada and Russia.
The Investment Manager uses a disciplined, long-term approach to value-
oriented global and international investing. It has an extensive global
network of investment research sources. Securities are selected for the Fund's
portfolio on the basis of fundamental company-by-company analysis. Many
different selection methods are used for different funds and clients and these
methods are changed and improved by the Investment Manager's research on
superior selection methods.
The Investment Manager does not furnish any other services or facilities for
the Fund, although such expenses are paid by some investment advisers of other
investment companies. As compensation for its services, the Fund pays the
Investment Manager a fee which, during the most recent fiscal year,
represented 0.75% of its average daily net assets. This fee is higher than
advisory fees paid by most other U.S. investment companies, primarily because
investing in securities of companies in foreign markets, many of which are not
widely followed by professional analysts, requires the Investment Manager to
invest additional time and incur added expense in developing specialized
resources, including research facilities.
Currently, the lead portfolio manager for the Fund is Gary Clemons. Prior to
joining the Investment Manager in 1993, Mr. Clemons was a research analyst for
Templeton Quantitative Advisors, Inc. in New York. At Templeton Quantitative
Advisors, Inc., he was also responsible for management of a small
capitalization fund. Mark R. Beveridge exercises secondary portfolio
management responsibilities with respect to the Fund. Mr. Beveridge, Vice
President of the Investment Manager, joined the Templeton organization in 1985
as a security analyst. Prior to joining the Templeton organization, Mr.
Beveridge was a principal with a financial accounting software firm based in
Miami, Florida. Further information concerning the Investment Manager is
included under the heading "Investment Management and Other Services" in
the SAI.
BUSINESS MANAGER. Templeton Global Investors, Inc. provides certain
administrative facilities and services for the Fund, including payment of
salaries of officers, preparation and maintenance of books and records,
preparation of tax returns and financial reports, monitoring compliance with
regulatory requirements and monitoring tax-deferred retirement plans. For its
services, the Fund pays the Business Manager a monthly fee equivalent on an
annual basis to 0.15% of the combined average daily net assets of the Funds
included in the Trust (the Fund, Templeton Growth and Income Fund, Templeton
Greater European Fund, Templeton Latin America Fund and Templeton Americas
Government Securities Fund), reduced to 0.135% of such combined assets in
excess of $200 million, to 0.10% of such assets in excess of $700 million, and
to 0.075% of such assets in excess of $1,200 million.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
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CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
PLANS OF DISTRIBUTION. A separate Plan of Distribution has been approved and
adopted for each class ("Class I Plan" and "Class II Plan," respectively, or
"Plans") pursuant to Rule 12b-1 under the 1940 Act. The Rule 12b-1 fees
charged to each class will be based solely on the distribution and servicing
fees attributable to that particular class. Any portion of fees remaining from
either Plan after distribution to securities dealers of up to the maximum
amount permitted under each Plan may be used by the class to reimburse FTD for
routine ongoing promotion and distribution expenses incurred with respect to
such class. Such expenses may include, but are not limited to, the printing of
prospectuses and reports used for sales purposes, expenses of preparing and
distributing sales literature and related expenses, advertisements, and other
distribution-related expenses, including a prorated portion of FTD's overhead
expenses attributable to the distribution of Fund Shares, as well as any
distribution or service fees paid to securities dealers or their firms or
others who have executed a servicing agreement with the Fund, FTD or its
affiliates.
The maximum amount which the Fund may pay to FTD or others under the Class I
Plan for such distribution expenses is 0.35% per annum of Class I's average
daily net assets, payable on a quarterly basis. All expenses of distribution
and marketing in excess of 0.35% per annum will be borne by FTD, or others who
have incurred them, without reimbursement from the Fund. Under the Class I
Plan, costs and expenses not reimbursed in any one given quarter (including
costs and expenses not reimbursed because they exceed the applicable limit of
the Plan) may be reimbursed in subsequent quarters or years, subject to
applicable law. FTD has informed the Fund that costs and expenses of Class I
Shares that may be reimbursable in future quarters or years were $930,070
(4.96% of its net assets) at March 31, 1995.
Under the Class II Plan, the maximum amount which the Fund is permitted to
pay to FTD or others for distribution expenses and related expenses is 0.75%
per annum of Class II's average daily net assets, payable quarterly. All
expenses of distribution, marketing and related services over that amount will
be borne by FTD, or others who have incurred them, without reimbursement by
the Fund. In addition, the Class II Plan provides for an additional payment by
the Fund of up to 0.25% per annum of Class II's average daily net assets as a
servicing fee, payable quarterly. This fee will be used to pay securities
dealers or others for, among other things, assisting in establishing and
maintaining customer accounts and records; assisting with purchase and
redemption requests; receiving and answering correspondence; monitoring
dividend payments from the Fund on behalf of the customers; or similar
activities related to furnishing personal services and/or maintaining
Shareholder accounts.
During the first year following the purchase of Class II Shares, FTD will
retain 0.75% per annum of Class II's average daily net assets to partially
recoup fees FTD pays to securities dealers. FTD, or its affiliates, may pay,
from its own resources, a commission of up to 1% of the amount invested to
securities dealers who initiate and are responsible for purchases of Class II
Shares.
Both Plans also cover any payments to or by the Fund, the Investment
Manager, FTD, or other parties on behalf of the Fund, the Investment Manager
or FTD, to the extent such payments are deemed to be for the financing of any
activity primarily intended to result in the sale of Shares issued by the Fund
within the context of Rule 12b-1. The payments under the Plans are included in
the maximum operating expenses which may be borne by each class of the Fund.
For more information including a discussion of the Board's policies with
regard to the amount of each Plan's fees, please see the SAI.
EXPENSES. For the fiscal year ended March 31, 1995, expenses borne by Class
I Shares of the Fund (net of reimbursement expense) amounted to 1.25% of the
Fund's average net assets of such class. See the Expense Table for information
regarding estimated expenses of both classes of Shares for the current fiscal
year.
BROKERAGE COMMISSIONS. The Fund's brokerage policies are described under the
heading "Brokerage Allocation" in the SAI. The Fund's brokerage policies
provide that the receipt of research services from a broker and the sale of
Shares by a broker are factors which may be taken into account in allocating
securities transactions, so long as the prices and execution provided by the
broker equal the best available within the scope of the Fund's brokerage
policies.
27
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The capitalization of the Trust
consists of an unlimited number of Shares of beneficial interest, par value
$0.01 per Share. The Board of Trustees is authorized, in its discretion, to
classify and allocate the unissued Shares of the Trust in an unlimited number
of separate series and may in the future divide existing series into two or
more classes. Each Share entitles the holder to one vote.
Shares for an initial investment, as well as subsequent investments,
including the reinvestment of dividends and capital gain distributions, are
generally credited to an account in the name of an investor on the books of
the Fund, without the issuance of a share certificate. Maintaining Shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss
or theft of a share certificate. No charge is made for the issuance of one
certificate for all or some of the Shares purchased in a single order. A lost,
stolen or destroyed certificate cannot be replaced without obtaining a
sufficient indemnity bond. The cost of such a bond, which is generally borne
by the Shareholder, can be 2% or more of the value of the lost, stolen or
destroyed certificate. A certificate will be issued if requested by the
Shareholder or by the securities dealer.
VOTING RIGHTS. Shares of each class represent proportionate interests in the
assets of the Fund and have the same voting and other rights and preferences
as the other class of the Fund for matters that affect the Fund as a whole.
For matters that only affect a certain class of the Fund's Shares, however,
only Shareholders of that class will be entitled to vote. Therefore, each
class of Shares will vote separately on matters (i) affecting only that class,
(ii) expressly required to be voted on separately by state law, or (iii)
required to be voted on separately by the 1940 Act or the rules adopted
thereunder. For instance, if a change to the Rule 12b-1 plan relating to Class
I Shares requires Shareholder approval, only Shareholders of Class I may vote
on changes to the Rule 12b-1 plan affecting that class. Similarly, if a change
to the Rule 12b-1 plan relating to Class II Shares requires Shareholder
approval, only Shareholders of Class II may vote on the change to such plan.
On the other hand, if there is a proposed change to the investment objective
of the Fund, this affects all Shareholders, regardless of which class of
Shares they hold, and therefore, each Share has the same voting rights.
MEETINGS OF SHAREHOLDERS. The Trust is not required to hold annual meetings
of Shareholders and may elect not to do so. The Trust will call a special
meeting of Shareholders for the purpose of considering the removal of a person
serving as Trustee if requested in writing to do so by the holders of not less
than 10% of the Trust's outstanding Shares. The Trust is required to assist
Shareholder communications in connection with the calling of Shareholder
meetings to consider removal of a Trustee or Trustees.
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay a dividend at least
annually representing substantially all of its net investment income and any
net realized capital gains. According to the requirements of the Code,
dividends and capital gains will be calculated and distributed in the same
manner for Class I and Class II Shares. The per Share amount of any income
dividends will generally differ only to the extent that each class is subject
to different Rule 12b-1 fees. Unless otherwise requested, income dividends and
capital gain distributions paid by the Fund, other than on those Shares whose
owners keep them registered in the name of a broker-dealer, are automatically
reinvested on the payment date in whole or fractional Shares at net asset
value as of the ex-dividend date, unless a Shareholder makes a written or
telephonic request for payments in cash. Dividend and capital gain
distributions are only eligible for reinvestment at net asset value in the
same class of Shares of the Fund or the same class of another of the Franklin
Templeton Funds. The processing date for the reinvestment of dividends may
vary from time to time, and does not affect the amount or value of the Shares
acquired. Income dividends and capital gain distributions will be paid in cash
on Shares during the time their owners keep them registered in the name of a
broker-dealer, unless the broker-dealer has made arrangements with the
Transfer Agent for reinvestment.
Prior to purchasing Shares of the Fund, the impact of dividends or capital
gain distributions which have been declared but not yet paid should be
carefully considered. Any dividend or capital gain distribution paid shortly
after a purchase by a Shareholder prior to the record date will have the
effect of reducing the per Share net asset value of the Shares by the amount
of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, generally will be
subject to tax.
28
<PAGE>
Checks are forwarded by first-class mail to the address of record. The
proceeds of any such checks which are not accepted by the addressee and
returned to the Fund will be reinvested in the Shareholder's account in whole
or fractional Shares at the net asset value next computed after the check has
been received by the Transfer Agent. Subsequent distributions automatically
will be reinvested at net asset value as of the ex-dividend date in additional
whole or fractional Shares.
FEDERAL TAX INFORMATION. The Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. See the SAI for a summary of requirements that must be satisfied to so
qualify. A regulated investment company generally is not subject to federal
income tax on income and gains distributed in a timely manner to its
shareholders. The Fund intends to distribute to Shareholders substantially all
of its net investment income and realized capital gains, which generally will
be taxable income or capital gains in their hands. Distributions declared in
October, November or December to Shareholders of record on a date in such
month and paid during the following January will be treated as having been
received by Shareholders on December 31 in the year such distributions were
declared. The Fund will inform Shareholders each year of the amount and nature
of such income or gains. Sales or other dispositions of Fund Shares generally
will give rise to taxable gain or loss. A more detailed description of tax
consequences to Shareholders is contained in the SAI under the heading "Tax
Status."
The Fund may be required to withhold federal income tax at the rate of 31%
of all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholder's federal income tax liability.
INQUIRIES. Shareholders' inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., P.O. Box 33030, St.
Petersburg, Florida 33733-8030--telephone 1-800-393-3001 or 813-823-8712.
Transcripts of Shareholder accounts less than three-years old are provided on
request without charge; requests for transcripts going back more than three
years from the date the request is received by the Transfer Agent are subject
to a fee of up to $15 per account.
PERFORMANCE INFORMATION. The Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over
a period of 1, 5 and 10 years (or up to the life of the Fund), will reflect
the deduction of the maximum initial sales charge and deduction of a
proportional share of Fund expenses (on an annual basis), and will assume that
all dividends and distributions are reinvested when paid. Total return may be
expressed in terms of the cumulative value of an investment in the Fund at the
end of a defined period of time. For a description of the methods used to
determine total return for the Fund, see the SAI.
Because Class II Shares were not offered prior to May 1, 1995, no
performance data is available for these Shares. After a sufficient period of
time has passed, Class II performance data will be available.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on March 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semiannual
reports (containing unaudited financial statements) are sent to Shareholders
each year. Additional copies may be obtained, without charge, upon request to
the Fund Information Department. The Fund also sends to each Shareholder a
confirmation statement after every transaction that affects the Shareholder's
account and a year-end historical confirmation statement.
29
<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service ("IRS").
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number ("SSN/TIN"), you must obtain Form SS-5 or Form SS-4 from
your local Social Security or IRS office and apply for one. If you have
checked the "Awaiting TIN" box and signed the certification, withholding will
apply to payments relating to your account unless you provide a certified TIN
within 60 days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Estate, or Pension Plan Trust Trust, Estate, or Pension Plan Trust
- ------------------------------------------------------------------------------------------------------------------------------------
. Joint Individual Actual owner of account, or if . Corporation, Partnership, or other Corporation, Partnership, or other
combined funds, the first-named organization organization
individual
- ------------------------------------------------------------------------------------------------------------------------------------
. Unif. Minor . Broker nominee Broker nominee
Gift/Transfer to
Minor
- ------------------------------------------------------------------------------------------------------------------------------------
. Sole Proprietor Owner of business
- ------------------------------------------------------------------------------------------------------------------------------------
. Legal Ward, Minor, or Guardian Incompetent
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient"
box if you are an exempt recipient. Exempt recipients generally include:
A corporation A real estate investment trust
A financial institution A common trust fund operated by a bank
under section 584(a)
An organization exempt from tax
under section 501(a), or an An entity registered at all times
individual retirement plan under the Investment Company
Act of 1940
A registered dealer in securities or
commodities registered in the U.S.
or a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith.
If you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
"Exempt Foreign Person" if you are not (1) a citizen or resident of the U.S.,
or (2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an "Exempt Foreign Person" is one who has been physically present
in the U.S. for less than 31 days during the current calendar year. An
individual who is physically present in the U.S. for at least 31 days during
the current calendar year will still be treated as an "Exempt Foreign Person,"
provided that the total number of days physically present in the current
calendar year and the two preceding calendar years does not equal or exceed
183 days (counting all of the days in the current calendar year, only one-
third of the days in the first preceding calendar year and only one-sixth of
the days in the second preceding calendar year). In addition, lawful permanent
residents or green card holders may not be treated as "Exempt Foreign
Persons." If you are an individual or an entity, you must not now be, or at
this time expect to be, engaged in a U.S. trade or business with respect to
which any gain derived from transactions effected by the Fund/Payer during the
calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that
(1) the taxpayer identification number you have given is correct, and (2) the
IRS has not notified you that you are subject to backup withholding because
you failed to report certain interest or dividend income. You may use Form W-
9, "Payer's Request for Taxpayer Identification Number and Certification," to
make these certifications. If an account is no longer active, you do not have
to notify a Fund/Payer or broker of your change in status unless you also have
another account with the same Fund/Payer that is still active. If you receive
interest from more than one Fund/Payer or have dealings with more than one
broker or barter exchange, file a certificate with each. If you have more than
one account with the same Fund/Payer, the Fund/Payer may require you to file a
separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated
as having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for
three calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
30
<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that each Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to a Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
___________________ of __________________________________________________
TITLE CORPORATE NAME
a _________________________________ organized under the laws of the State of
TYPE OF ORGANIZATION
________________________ and that the following is a true and correct copy of
STATE
a resolution adopted by the Board of Directors at a meeting duly called and
held on _________________________
DATE
RESOLVED, that the _________________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds (R) or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED, that any of the following _________________ officers are
NUMBER
authorized to sign any share assignment on behalf of this Corporation or
Association and to take any other actions as may be necessary to sell or
redeem its shares in the Funds or to sign checks or drafts withdrawing funds
from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary.)
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- ---------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes ________________________________________________________
NAME AND TITLE
CORPORATE SEAL (if appropriate)
31
<PAGE>
THE FRANKLIN TEMPLETON TELEPHONE REDEMPTION AUTHORIZATION AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
Shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Fund's Prospectus.
The telephone redemption privilege is available only to Shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges automatically available to Franklin
Templeton Fund shareholders, please sign and return this authorization to
Franklin Templeton Investor Services, Inc. ("Services"), transfer agent and
shareholder servicing agent for the Franklin Templeton Funds.
SHAREHOLDER AUTHORIZATION: I/We request the telephone redemption privilege
under the terms described below and in the prospectus for each investment
company in the Franklin Templeton Group of Funds (a "Franklin Templeton Fund"
or a "Fund"), now opened or opened at a later date, holding shares registered
as follows:
- ------------------------------------- ---------------------------------------
PRINT NAME(S) AS SHOWN IN YOUR ACCOUNT REGISTRATION ("SHAREHOLDER")
- ------------------------------------- ---------------------------------------
ACCOUNT NUMBER(S)
I/We authorize each Fund and Services to honor and act upon telephone requests
given as provided in this agreement to redeem shares from any
Shareholder account:
- ------------------------------------- ---------------------------------------
SIGNATURE(S) AND DATE
- ------------------------------------- ---------------------------------------
PRINT NAME(S) (AND TITLE/CAPACITY, IF APPLICABLE)
VERIFICATION PROCEDURES: I/We understand and agree that: (1) each Fund and
Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Services may be liable
for any losses due to unauthorized or fraudulent telephone instructions; (2)
the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the
time of the call for the purpose of establishing the caller's identification,
and the sending of confirmation statements to the address of record each time
a redemption is initiated by telephone; and (3) so long as the Fund and
Services follow the confirmation procedures in acting on instructions
communicated by telephone which were reasonably believed to be genuine at the
time of receipt, neither they, nor their parent or affiliates, will be liable
for any loss, damages or expenses caused by an unauthorized or fraudulent
redemption request.
JOINTLY OWNED/CO-TRUSTEE ACCOUNTS: Each of us signing this agreement as either
joint owners or co-trustees authorizes each Fund and Services to honor
telephone redemption requests given by ANY ONE of the signers, or our
investment representative of record, if any, ACTING ALONE.
APPOINTMENT OF ATTORNEY-IN-FACT: In order to issue telephone redemption
requests acting alone, each of us individually makes the following
appointment: I hereby appoint the other joint owner(s)/co-trustee(s) as my
agent(s) (attorney[s]-in-fact) with full power and authority to individually
act for me in any lawful way with respect to the issuance of instructions to a
Fund or Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it
is revoked by either written notice from any one of us delivered to a Fund or
Services by registered mail, return receipt requested or by a Fund or Services
upon receipt of any information that causes a Fund or Services to believe in
good faith that there is or that there may be a dispute among any of us with
respect to the Franklin Templeton Fund account(s) covered by this agreement.
Each of us agrees to notify the Fund or Services immediately upon the death of
any of the signers.
CORPORATE/PARTNERSHIP/TRUST/RETIREMENT ACCOUNTS: The Shareholder and each of
us signing this agreement on behalf of the Shareholder represent and warrant
to each Franklin Templeton Fund and Services that the Shareholder has the
authority to enter into this agreement and that each of us is duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Services may honor a telephone redemption request given by ANY
officer/partner/member/administrator/or agent of the Shareholder ACTING ALONE.
RESTRICTED ACCOUNTS: Telephone redemptions may not be accepted on Franklin
Templeton Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin Templeton Investor Services, Inc., Attn.: Telephone Redemptions
Dept., 700 Central Avenue, St. Petersburg, Florida 33701-3628.
32
<PAGE>
The Franklin Templeton Group
Literature Request -- Call today for a free descriptive brochure and
prospectus on any of the funds listed below. The prospectus contains more
complete information, including fees, charges and expenses, and should be read
carefully before investing or sending money.
TEMPLETON Maryland FRANKLIN FUNDS SEEKING
FUNDS Massachusetts*** HIGH CURRENT INCOME
American Trust Michigan*** AGE High Income Fund
Americas Government Minnesota*** German Government Bond
Securities Fund Missouri Fund
Developing Markets Trust New Jersey Global Government Income
Foreign Fund New York* Fund
Global Infrastructure North Carolina Investment Grade Income
Fund Ohio*** Fund
Global Opportunities Oregon U.S. Government
Trust Pennsylvania Securities Fund
Greater European Fund Tennessee**
Growth Fund Texas FRANKLIN FUNDS SEEKING
Growth and Income Fund Virginia HIGH CURRENT INCOME AND
Income Fund Washington** STABILITY OF PRINCIPAL
Japan Fund Adjustable Rate
Latin America Fund FRANKLIN FUNDSSEEKING Securities Fund
Money Fund CAPITAL GROWTH Adjustable U.S.
Real Estate Securities California Growth Fund Government Securities
Fund DynaTech Fund Fund
Smaller Companies Equity Fund Short-Intermediate U.S.
Growth Fund Global Health Care Fund Government Securities
World Fund Gold Fund Fund
Growth Fund
FRANKLIN FUNDS International Equity FRANKLIN FUNDS FOR NON-
SEEKING TAX- Fund U.S. INVESTORS
FREE INCOME Pacific Growth Fund Tax-Advantaged High
Federal Intermediate Real Estate Yield Securities Fund
Term Tax-Free Income Fund Securities Fund Tax-Advantaged
Federal Tax-Free Income Small Cap International Bond Fund
Fund Growth Fund Tax-Advantaged U.S.
High Yield Tax-Free Government Securities
Income Fund FRANKLIN FUNDS SEEKING Fund
Insured Tax-Free Income GROWTH AND INCOME
Fund*** Balance Sheet FRANKLIN TEMPLETON
Puerto Rico Tax-Free Investment Fund INTERNATIONAL CURRENCY
Income Fund Convertible Securities FUNDS
Fund Global Currency Fund
FRANKLIN STATE-SPECIFIC Equity Income Fund Hard Currency Fund
FUNDS SEEKING TAX-FREE Global Utilities Fund High Income Currency
INCOME Income Fund Fund
Alabama Premier Return Fund
Arizona* Rising Dividends Fund FRANKLIN MONEY MARKET
Arkansas** Strategic Income Fund FUNDS
California* Utilities Fund California Tax-Exempt
Colorado Money Fund
Connecticut Federal Money Fund
Florida* IFT U.S. Treasury Money
Georgia Market Portfolio
Hawaii** Money Fund
Indiana New York Tax-Exempt
Kentucky Money Fund
Louisiana Tax-Exempt Money Fund
FRANKLIN FUND FOR
CORPORATIONS
Corporate Qualified
Dividend Fund
FRANKLIN TEMPLETON
VARIABLE ANNUITIES
Franklin Valuemark
Franklin Templeton
Valuemark Income
Plus (an immediate
annuity)
Toll-free 1-800-DIAL BEN (1-800-342-5236)
Louisiana
* Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
*** Portfolio of insured municipal securities.
33
<PAGE>
NOTES
-----
34
<PAGE>
NOTES
-----
35
<PAGE>
- -----------------------------------------------------
TEMPLETON GLOBAL
INFRASTRUCTURE FUND
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Account Services
1-800-393-3001
Fund Information
1-800/DIAL BEN
Institutional Services
1-800-321-8563
This Prospectus is not an offering of the securities
herein described in any state in which the offering
is not authorized. No sales representative, dealer,
or other person is authorized to give any
information or make any representations other
than those contained in this Prospectus. Further
information may be obtained from the Principal
Underwriter.
- -----------------------------------------------------
TL413 P 07/95
[RECYCLING LOGO
APPEARS HERE]
TEMPLETON
GLOBAL
INFRASTRUCTURE
FUND
Prospectus
July 10, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
<PAGE>
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
Mail to: FRANKLIN TEMPLETON DISTRIBUTORS, INC.
P.O. Box 33031 St. Petersburg, Florida 33733-8031 (800) 393-3001
Please do not use this form for any Retirement Plan for which Franklin Templeton
Trust Company serves as custodian or trustee, or for Templeton Money Fund,
Templeton Institutional Funds or Templeton Capital Accumulator Fund. Request
separate Applications and/or Prospectuses.
- --------------------------------------------------------------------------------
SHAREHOLDER APPLICATION OR REVISION
[_] Please check the box if this is a revision and see Section 8
- --------------------------------------------------------------------------------
Please check Class I or Class II, if applicable, next to your Fund selection.
Class I and Class II shares have different sales charges and operating expenses,
among other differences, as described in each Fund's prospectus.
Date __________________
<TABLE>
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C> <C>
[_] [_]$______ AMERICAN TRUST [_] [_]$______ GLOBAL OPPORTUNITIES TRUST
[_] ______ AMERICAS GOVERNMENT SECURITIES FUND [_] [_] ______ GREATER EUROPEAN FUND
[_] [_] ______ DEVELOPING MARKETS TRUST [_] [_] ______ GROWTH FUND
[_] [_] ______ FOREIGN FUND [_] [_] ______ GROWTH AND INCOME FUND
[_] [_] ______ GLOBAL INFRASTRUCTURE FUND [_] [_] ______ INCOME FUND
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C>
[_] $______ JAPAN FUND [_] [_] OTHER: $___________
[_] [_] ______ LATIN AMERICA FUND (Except for Class II Money Fund)
[_] [_] ______ REAL ESTATE SECURITIES FUND _______________________________
[_] [_] ______ SMALLER COMPANIES GROWTH FUND _______________________________
[_] [_] ______ WORLD FUND _______________________________
</TABLE>
- --------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION (PLEASE PRINT)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
__________________________________________________ ________-________-__________
First Name Middle Initial Last Name Social Security Number (SSN)
__________________________________________________ ________-________-__________
Joint Owner(s) (Joint ownership means "Joint Social Security Number (SSN)
Tenants With Rights of Survivorship" unless
otherwise specified) All owners must sign Section 4.
- --------------------------------------------------------------------------------
[_] GIFT/TRANSFER TO A MINOR
_______________________________ As Custodian For________________________________
Name of Custodian (one only) Minor's Name (one only)
_____________Uniform Gifts/Transfers to Minors Act________-________-____________
State of Residence Minor's Social Security Number
Please Note: Custodian's Signature, not Minor's, is required in Section 4.
- --------------------------------------------------------------------------------
[_] TRUST, CORPORATION, PARTNERSHIP, RETIREMENT PLAN, OR OTHER ENTITY
__________________________________________ ____________-_______________________
Name Taxpayer Identification Number (TIN)
__________________________________________ ____________________________________
Name of Beneficiary (if to be included in Date of Trust Document (must be
the Registration) completed for registration)
________________________________________________________________________________
Name of Each Trustee (if to be included in the Registration)
- --------------------------------------------------------------------------------
2 ADDRESS
- --------------------------------------------------------------------------------
___________________________________________ Daytime Phone (___)________________
Street Address Area Code
____________________________________-______ Evening Phone (___)________________
City State Zip Code Area Code
I am a Citizen of: [_] U.S. or [_]______________________________
Country of Residence
- --------------------------------------------------------------------------------
3 INITIAL INVESTMENT ($100 minimum initial investment)
- --------------------------------------------------------------------------------
Check(s) enclosed for $___________________ . (Payable to Franklin Templeton
Distributors, Inc. or the Fund(s)
indicated above.)
- --------------------------------------------------------------------------------
4 SIGNATURE AND TAX CERTIFICATIONS
(All registered owners must sign application)
- --------------------------------------------------------------------------------
See "Important Notice Regarding Taxpayer IRS Certifications" in back of
prospectus. The Fund reserves the right to refuse to open an account without
either a certified Taxpayer Identification Number ("TIN") or a certification of
foreign status. Failure to provide tax certifications in this section may result
in backup withholding on payments relating to your account and/or in your
inability to qualify for treaty withholding rates.
I am(We are) not subject to backup withholding because I(we) have not been
notified by the IRS that I am(we are) subject to backup withholding as a result
of a failure to report all interest or dividends or because the IRS has notified
me(us) that I am(we are) no longer subject to backup withholding. (If you are
currently subject to backup withholding as a result of a failure to report all
interest or dividends, please cross out the preceding statement.)
[_] The number shown above is my(our) correct TIN, or that of the Minor named in
Section 1.
[_] AWAITING TIN. I am(We are) waiting for a number to be issued to me(us).
I(We) understand that if I(we) do not provide a TIN to the Fund within 60
days, the Fund is required to commence 31% backup withholding until I(we)
provide a certified TIN.
[_] EXEMPT RECIPIENT. Individuals cannot be exempt. Check this box only after
reading the instructions to see whether you qualify as an exempt recipient.
(You should still provide a TIN.)
[_] EXEMPT FOREIGN PERSON. Check this box only if the following statement
applies: "I am(we are) neither a citizen nor a resident of the United
States. I(we) certify to the best of my(our) knowledge and belief, I(we)
qualify as an exempt foreign person and/or entity as described in the
instructions."
Permanent address for tax purposes:
________________________________________________________________________________
Street Address City State Country Postal Code
PLEASE NOTE: The IRS only allows one TIN to be listed on an account. On joint
accounts, it is preferred that the primary account owner (or person listed first
on the account) list his/her number as requested above.
CERTIFICATION - Under the penalties of perjury, I(we) certify that (1) the
information provided on this application is true, correct and complete, (2)
I(we) have read the prospectus(es) for the Fund(s) in which I am(we are)
investing and agree to the terms thereof, and (3) I am(we are) of legal age or
an emancipated minor. I (we) acknowledge that Shares of the Fund(s) are not
insured or guaranteed by any agency or institution and that an investment in the
Shares involves risks, including the possible loss of principal.
X X
- ---------------------------------------- ---------------------------------------
Signature Signature
X X
- ---------------------------------------- ---------------------------------------
- --------------------------------------------------------------------------------
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
- --------------------------------------------------------------------------------
-----------------------
We hereby submit this application for the purchase of Templeton Dealer Number
shares of the Fund indicated above in accordance with
the terms of our selling agreement with Franklin -----------------------
Templeton Distributors, Inc. ("FTD"), and with the
Prospectus for the Fund. We agree to notify FTD of any
purchases of Class I shares which may be eligible for
reduced or eliminated sales charges.
-----------------------------------------------------------------------------
WIRE ORDER ONLY: The attached check for $_______ should be applied against
Wire Order
Confirmation Number ___________ Dated___________ For__________ Shares
-----------------------------------------------------------------------------
Securities Dealer Name__________________________________________________________
Main Office Address________________ Main Office Telephone Number (___)__________
Branch Number________ Representative Number ________ Representative Name________
Branch Address_________________________ Branch Telephone Number (___)___________
Authorized Signature, Securities Dealer______________________ Title_____________
- --------------------------------------------------------------------------------
ACCEPTED: Franklin Templeton Distributors, Inc. By___________ Date______________
- --------------------------------------------------------------------------------
Please see reverse side for Shareholder Account Privileges:
[_] Distribution Options [_] Special Instructions for Distributions
[_] Systematic Withdrawal Plan [_] Automatic Investment Plan
[_] Telephone Exchange Service [_] Letter of Intent
[_] Cumulative Quantity Discount
This application must be preceded or accompanied by a prospectus for
the Fund(s) being purchased.
<PAGE>
- --------------------------------------------------------------------------------
6 DISTRIBUTION OPTIONS (Check one)
- --------------------------------------------------------------------------------
Check one - if no box is checked, all dividends and capital gains will be
reinvested in additional shares of the Fund.
[_] Reinvest all dividends [_] Pay all dividends in cash
and capital gains. and reinvest capital gains.
[_] Pay capital gains in cash [_] Pay all dividends and
and reinvest dividends. capital gains in cash.
- --------------------------------------------------------------------------------
7 OPTIONAL SHAREHOLDER PRIVILEGES
- --------------------------------------------------------------------------------
A. SPECIAL PAYMENT INSTRUCTIONS FOR DISTRIBUTIONS (Check one box)
[_] Pay Distributions, as noted in Section 6, or [_] withdrawals, as noted in
section 7(B), to purchase shares of another Franklin or Templeton Fund.
Restrictions may apply to purchases of shares of a different class. See
the prospectus for details.
Fund Name______________________ Existing Account Number___________________
[_] Send my Distributions to the person, named below, instead of as registered
in Section 1.
Name___________________________ Street Address____________________________
City___________________________ State____________________Zip Code_________
- --------------------------------------------------------------------------------
B. SYSTEMATIC WITHDRAWAL PLAN
Please withdraw from my Franklin Templeton account $_____($50 minimum)
[_]Monthly [_]Quarterly [_]Semi-Annually or [_]Annually as set forth in the
Prospectus, starting in ______________(Month). The net asset value of the
shares held must be at least $5,000 at the time the plan is established.
Additional restrictions may apply to Class II or other shares subject to
contingent deferred sales charge, as described in the prospectus. Send the
proceeds to: [_]Address of Record OR [_]the Franklin Templeton Fund or person
specified in Section 7(A) - Special Payment Instructions for Distributions.
- --------------------------------------------------------------------------------
C. TELEPHONE TRANSACTIONS
TELEPHONE EXCHANGE PRIVILEGE: If the Fund does not receive specific
instructions from the shareholder, either in writing or by telephone, the
Telephone Exchange Privilege (see the prospectus) is automatically extended
to each account. The shareholder should understand, however, that the Fund
and Franklin Templeton Investor Services, Inc. ("FTI") or Franklin Templeton
Trust Company and their agents will not be liable for any loss, injury,
damage or expense as a result of acting upon instructions communicated by
telephone reasonably believed to be genuine. The shareholder agrees to hold
the Fund and its agents harmless from any loss, claims, or liability arising
from its or their compliance with such instructions. The shareholder
understands that this option is subject to the terms and conditions set forth
in the prospectus of the fund to be acquired.
[_]No, I do NOT wish to participate in the Telephone Exchange Privilege or
authorize the Fund or its agents, including FTI or Templeton Funds Trust
Company, to act upon instructions received by telephone to exchange shares
for shares of any other account(s) within the Franklin Templeton Group of
Funds.
Telephone Redemption Privilege: This is available to shareholders who
specifically request it and who complete the Franklin Templeton Telephone
Redemption Authorization Agreement in the back of the Fund's prospectus.
- --------------------------------------------------------------------------------
D. AUTOMATIC INVESTMENT PLAN
IMPORTANT: ATTACH AN UNSIGNED, VOIDED CHECK (FOR CHECKING ACCOUNTS) OR A
SAVINGS ACCOUNT DEPOSIT SLIP HERE, AND COMPLETE THE INFORMATION BELOW. I(We)
would like to establish an Automatic Investment Plan (the "Plan") as
described in the Prospectus. I(We) agree to reimburse FTI and/or FTD for any
expenses or losses that they may incur in connection with my(our) plan,
including any caused by my(our) bank's failure to act in accordance with
my(our) request. If my(our) bank makes any erroneous payment or fails to make
a payment after shares are purchased on my(our) behalf, any such purchase may
be cancelled and I(we) hereby authorize redemptions and/or deductions from
my(our) account for that purpose.
Debit my (circle one) savings, checking, other ________ account monthly for
$__________($25 minimum) on or about the [_]1st [_]5th [_]15th or [_]20th day
starting_______(month), to be invested in (name of
Fund)___________________Account Number (if known)_______
INSTRUCTIONS TO BANK - AUTOMATIC INVESTMENT PLAN AUTHORIZATION
To:__________________________________ ______________________________________
Name of Your Bank ABA Number
___________________________ _________________ ____________ ______________
Street Address City State Zip Code
I(We) authorize you to charge my(our) Checking/Savings Account and to make
payment to FTD, upon instructions from FTD. I(We) agree that in making payment
for such charges your rights shall be the same as if each were a charge made and
signed personally by me(us). This authority shall remain in effect until you
receive written notice from me(us) changing its terms or revoking it. Until you
actually receive such notice, I(we) agree that you shall be fully protected in
paying any charge under this authority. I(we) further agree that if any such
charge is not made, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever.
X_________________________________________________ ___________________________
Signature(s) EXACTLY as shown on your bank records Date
______________________________________ _______________________________________
Print Name(s) Account Number
______________________________ _________________ ____________ ______________
Your Street Address City State Zip Code
- --------------------------------------------------------------------------------
E. LETTER OF INTENT (LOI)
[_]I(We) agree to the terms of the LOI and provisions for reservations of
Class I shares and grant FTD the security interest set forth in the
Prospectus. Although I am(we are) not obligated to do so, it is my(our)
intention to invest over a 13 month period in Class I and/or Class II shares
of one or more Franklin or Templeton Funds (including all money market funds
in the Franklin Templeton Group) an aggregate amount at least equal to that
which is checked below. I understand that reduced sales charges will apply
only to purchases of Class I shares.
<TABLE>
<S> <C> <C> <C> <C>
[_]$50,000-99,999 (except for Income Fund [_]$100,000-249,999 [_]$250,000-499,999 [_]$500,000-999,999 [_]$1,000,0000 or more
and Americas Government Securities Fund)
</TABLE>
Purchases of Class I Shares under LOI of $1,000,000 or more are made at net
asset value and may be subject to a contingent deferred sales charge as
described in the prospectus.
Purchases made within the last 90 days will be included as part of your LOI.
Please write in your Account Number(s)____________ ____________ ____________
- --------------------------------------------------------------------------------
F. CUMULATIVE QUANTITY DISCOUNT -- APPLICABLE TO CLASS I SHARES ONLY
Class I shares may be purchased at the offering price applicable to the total
of (a) the dollar amount then being purchased plus (b) the amount equal to
the cost or current value (whichever is higher) of the combined holdings of
the purchaser, his or her spouse, and their children under age 21, of Class I
and Class II shares of funds in the Franklin Templeton Group as stated in the
prospectus. In order for this cumulative quantity discount to be made
available, the shareholder or his or her securities dealer must notify FTI or
FTD of the total holdings in the Franklin Templeton Group each time an order
is placed. I understand that reduced sales charges will apply only to
purchases of Class I shares.
[_]I(We) own shares of more than one Fund in the Franklin Templeton Group and
qualify for the Cumulative Quantity Discount described above and in the
Prospectus.
My(Our) other Account Number(s) are ___________ ___________ _______________
- --------------------------------------------------------------------------------
8 ACCOUNT REVISION (If Applicable)
- --------------------------------------------------------------------------------
If you are using this application to revise your Account Registration, or wish
to have Distributions sent to an address other than the address on your existing
Account's Registration, a Signature Guarantee is required. Signatures of all
registered owners must be guaranteed by an "eligible guarantor" as defined in
the "How to Sell Shares of the Fund" section in the Fund's Prospectus. A Notary
Public is not an acceptable guarantor.
X________________________________________ ____________________________________
Signature(s) of Registered Account Owners Account Number(s)
X________________________________________ ____________________________________
X________________________________________
X________________________________________ ____________________________________
Signature Guarantee Stamp
NOTE: For any change in registration, please send us any outstanding
Certificates by Registered Mail.
- --------------------------------------------------------------------------------
TLGOF APP 07/95
<PAGE>
TEMPLETON AMERICAS GOVERNMENT SECURITIES FUND
PROSPECTUS -- JULY 10, 1995
- --------------------------------------------------------------------------------
INVESTMENT The primary investment objective of Templeton Americas
OBJECTIVES Government Securities Fund (the "Fund") is a high level of
AND POLICIES current income. Total return is a secondary objective. The Fund
seeks to achieve its objectives by investing at least 65% of
its total assets in debt securities issued or guaranteed by
governments, government agencies, political subdivisions, and
other government entities of countries located in the Western
Hemisphere (i.e., North, South and Central America and the
surrounding waters). The Fund is a series of Templeton Global
Investment Trust. THE FUND MAY ENGAGE IN VARIOUS INVESTMENT
TECHNIQUES (SUCH AS BORROWING MONEY FOR INVESTMENT PURPOSES AND
INVESTING UP TO 15% OF ITS ASSETS IN ILLIQUID SECURITIES,
INCLUDING UP TO 10% OF ITS ASSETS IN RESTRICTED SECURITIES)
WHICH MAY INVOLVE SIGNIFICANT RISKS AND INCREASED FUND
EXPENSES. SEE "RISK FACTORS." INVESTORS SHOULD CAREFULLY
CONSIDER THESE RISKS BEFORE INVESTING.
SUBSTANTIALLY ALL THE FUND'S ASSETS AT ANY ONE TIME MAY BE
INVESTED IN NON-INVESTMENT GRADE DEBT INSTRUMENTS (I.E., JUNK
BONDS) THAT INVOLVE GREATER RISKS, INCLUDING THE RISK OF
DEFAULT, AND THAT ARE PREDOMINANTLY SPECULATIVE. INVESTORS
SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING. THE
FUND MAY NOT BE SUITABLE FOR ALL INVESTORS. SEE "RISK FACTORS."
- --------------------------------------------------------------------------------
PURCHASE OF Please complete and return the Shareholder Application. If you
SHARES need assistance in completing this form, please call our
Account Services Department. The Fund's Shares may be purchased
at a price equal to their net asset value plus a sales charge
not exceeding 4.25% of the Offering Price. The minimum initial
investment is $100 ($25 minimum for subsequent investments).
- --------------------------------------------------------------------------------
PROSPECTUS
INFORMATION This Prospectus sets forth concisely information about the Fund
that a prospective investor ought to know before investing.
Investors are advised to read and retain this Prospectus for
future reference. A Statement of Additional Information ("SAI")
dated July 10, 1995, has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated in its
entirety by reference in and made a part of this Prospectus.
The SAI is available without charge upon request to Franklin
Templeton Distributors, Inc., P.O. Box 33030, St. Petersburg,
Florida 33733-8030 or by calling the Fund Information
Department.
- --------------------------------------------------------------------------------
FUND INFORMATION DEPARTMENT--1-800/DIAL BEN
- --------------------------------------------------------------------------------
TEMPLETON "STAR" SERVICE (24 hours, seven days a week access to current prices,
shareholder account balances/values, last transaction and duplicate account
statements) -- 1-800-654-0123
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE TABLE........ 2
FINANCIAL HIGHLIGHTS
.................... 3
GENERAL DESCRIPTION . 4
Investment Objective
and Policies........ 4
Brady Bonds.......... 5
Other Debt Securities
of Government
Entities............ 6
Structured
Investments......... 6
Mortgage-Backed and
Asset-Backed
Securities.......... 7
Derivative Mortgage-
Backed Securities... 8
INVESTMENT
TECHNIQUES.......... 9
Temporary
Investments......... 9
Borrowing............ 10
Loans of Portfolio
Securities.......... 10
Options on Securities
or Indices.......... 10
Forward Foreign
Currency Contracts
and Options on
Foreign Currencies.. 10
Futures Contracts.... 11
Repurchase
Agreements.......... 11
Illiquid and
Restricted
Securities.......... 11
Investment Companies. 12
RISK FACTORS......... 12
Foreign Currency
Exchange............ 12
Sovereign Debt....... 12
Foreign Investments.. 13
High-Risk Debt
Securities.......... 14
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Tax Considerations... 14
Leverage............. 15
Futures Contracts and
Related Options..... 15
Non-Diversified
Status.............. 15
HOW TO BUY SHARES OF
THE FUND............ 16
Offering Price....... 16
Net Asset Value
Purchases........... 18
Description of
Special Net Asset
Value Purchases..... 19
Additional Dealer
Compensation........ 19
Purchasing Funds
Shares.............. 20
Automatic Investment
Plan................ 20
Institutional
Accounts............ 20
Account Statements... 20
Templeton STAR
Service............. 20
Retirement Plans..... 21
Net Asset Value...... 21
EXCHANGE PRIVILEGE... 21
Transfers............ 22
Exchanges by Timing
Accounts............ 22
HOW TO SELL SHARES OF
THE FUND............ 23
Reinstatement
Privilege........... 25
Systematic Withdrawal
Plan................ 25
Redemptions by
Telephone........... 26
Contingent Deferred
Sales Charge........ 26
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
TELEPHONE
TRANSACTIONS........ 27
Verification
Procedures.......... 27
Restricted Accounts.. 27
General.............. 27
MANAGEMENT OF THE
FUND................ 28
Investment Manager
and Sub-Adviser..... 28
Business Manager..... 29
Transfer Agent....... 29
Custodian............ 29
Plan of Distribution. 29
Expenses............. 29
Brokerage
Commissions......... 29
GENERAL INFORMATION.. 29
Description of
Shares/Share
Certificates........ 29
Meetings of
Shareholders........ 30
Dividends and
Distributions....... 30
Federal Tax
Information......... 30
Inquiries............ 31
Performance
Information......... 31
Statements and
Reports............. 31
APPENDIX -- BOND
RATINGS............. 32
WITHHOLDING
INFORMATION......... 33
CORPORATE RESOLUTION. 34
AUTHORIZATION
AGREEMENT........... 35
THE FRANKLIN
TEMPLETON GROUP..... 36
</TABLE>
- --------------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a Shareholder will bear directly or indirectly
in connection with an investment in the Fund. The figures are estimates of the
Fund's expenses for the current fiscal year.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of Offering
Price)............................................................... 4.25%
Deferred Sales Charge................................................. None/1/
Exchange Fee (per transaction)........................................ $5.00
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees....................................................... 0.60%
Rule 12b-1 Fees/3/.................................................... 0.35%
Other Expenses (audit, legal, business management, transfer agent and
custodian) (after expense reimbursement)............................. 0.30%
Total Fund Operating Expenses (after expense reimbursement)........... 1.25%
</TABLE>
- -------
/1/ Investments of $1 million or more are not subject to a front-end sales
charge; however, a contingent deferred sales charge of 1%, is generally
imposed on certain redemptions within a "contingency period" of 12 months of
the calendar month following such investments. See "How to Sell Shares of
the Fund--Contingent Deferred Sales Charge."
/2/ $5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.
/3/ Annual Rule 12b-1 fees may not exceed 0.35% of the Fund's average net assets
attributable to Shares. Consistent with the National Association of
Securities Dealers, Inc.'s rules, it is possible that the combination of
front-end sales charges and Rule 12b-1 fees could cause long-term
Shareholders to pay more than the economic equivalent of the maximum front-
end sales charges permitted under those same rules.
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. The information in this table does not reflect the charge of up to
$15 per transaction if a Shareholder requests that redemption proceeds be sent
by express mail or wired to a commercial bank account. For a more detailed
discussion of these matters, investors should refer to the appropriate
sections of this Prospectus.
EXAMPLE
As required by SEC regulations, the following example illustrates the
expenses, including the maximum front-end sales charge and applicable
contingent deferred sales charge, that apply to a $1,000 investment in the
Fund over various time periods assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C>
$55 $80 $108 $187
</TABLE>
For purposes of this example, it is assumed that a contingent deferred sales
charge will not apply.
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES, INCLUDING
FEES SET BY CONTRACT, SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN
THOSE SHOWN. The operating expenses are borne by the Fund and only indirectly
by Shareholders as a result of their investment in the Fund. In addition,
federal securities regulations require the example to assume an annual return
of 5%, but the Fund's actual return may be more or less than 5%.
The Fund's investment manager, Templeton Global Bond Managers, a division of
Templeton Investment Counsel, Inc. (the "Investment Manager"), has voluntarily
agreed to reduce its investment management fee to the extent necessary to
limit total expenses
2
<PAGE>
(excluding interest, taxes, brokerage commissions and extraordinary expenses)
to 1.25% of the Fund's average daily net assets. If such fee reduction is
insufficient to so limit the Fund's total expenses, the Fund's Business
Manager, Templeton Global Investors, Inc., has voluntarily agreed to reduce
its fee and, to the extent necessary, assume other Fund expenses, so as to so
limit the Fund's total expenses. If this policy were not in effect, the Fund's
"Other Expenses" and "Total Fund Operating Expenses" would be 5.54% and 6.49%,
respectively, and you would pay the following expenses on a $1,000 investment,
assuming 5% annual return and redemption at the end of each time period: $104
for one year, $225 for three years, $342 for five years and $620 for ten
years. As long as this temporary expense limitation continues, it may lower
the Fund's expenses and increase its yield. After December 31, 1995, the
expense limitation may be terminated or revised at any time, at which time the
Fund's expenses may increase and its yield may be reduced, depending on the
total assets of the Fund.
FINANCIAL HIGHLIGHTS
The following table of selected financial information has been audited by
McGladrey & Pullen, LLP, independent certified public accountants, for the
periods indicated in their report which is incorporated by reference and which
appears in the Fund's 1995 Annual Report to Shareholders. This statement
should be read in conjunction with the other financial statements and notes
thereto included in the Fund's 1995 Annual Report to Shareholders which
contains further information about the Fund's performance, and which is
available to Shareholders upon request and without charge.
<TABLE>
<CAPTION>
JUNE 27, 1994
(COMMENCEMENT OF
OPERATIONS) TO
PER SHARE OPERATING PERFORMANCE MARCH 31, 1995
(for a Share outstanding throughout the period) ----------------
<S> <C>
Net asset value, beginning of period.......................... $10.00
------
Income from investment operations:
Net investment income....................................... .30
Net realized and unrealized loss............................ (.43)
------
Total from investment operations.......................... (.13)
------
Distribution:
Dividend from net investment income......................... (.28)
------
Change in net asset value..................................... (.41)
------
Net asset value, end of period................................ $ 9.59
======
TOTAL RETURN* (1.33)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)............................... $2,826
Ratio of expenses to average net assets....................... 6.49%**
Ratio of expenses, net of reimbursement, to average net
assets....................................................... 1.25%**
Ratio of net investment income to average net assets.......... 5.07%**
Portfolio turnover rate....................................... --
</TABLE>
- -------
* Total Return does not reflect sales charge. Not annualized.
** Annualized.
3
<PAGE>
GENERAL DESCRIPTION
Templeton Global Investment Trust (the "Trust") was organized as a business
trust under the laws of Delaware on December 21, 1993, and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end
management investment company. It has three series of shares, each of which is
a separate mutual fund: Templeton Americas Government Securities Fund (the
"Fund"), a non-diversified fund, and Templeton Growth and Income Fund
(formerly Templeton Global Rising Dividends Fund), Templeton Greater European
Fund, Templeton Latin America Fund, Templeton Americas Government Securities
Fund and Templeton Global Infrastructure Fund, all diversified funds.
Prospectuses for Templeton Growth and Income Fund, Templeton Greater European
Fund, Templeton Latin America Fund, Templeton Americas Government Securities
Fund and Templeton Global Infrastructure Fund are available upon request and
without charge from the Principal Underwriter.
INVESTMENT OBJECTIVE AND POLICIES. The primary investment objective of the
Fund is a high level of current income. Total return is a secondary objective.
The Fund seeks to achieve its objectives by investing at least 65% of its
total assets in debt securities issued or guaranteed by governments,
government agencies, political subdivisions, and other government entities
("Government Entities") of countries located in the Western Hemisphere (i.e.,
North, South and Central America and the surrounding waters). The Fund's
investment objective and the investment restrictions set forth under
"Investment Objectives and Policies -- Investment Restrictions" in the SAI are
fundamental and may not be changed without Shareholder approval. All other
investment policies and practices described in this Prospectus are not
fundamental, and may be changed by the Board of Trustees without Shareholder
approval. There can be no assurance that the Fund's investment objectives will
be achieved.
The Fund's investment manager, Templeton Investment Counsel, Inc., acting
through its Templeton Global Bond Managers division (the "Investment
Manager"), and the Fund's sub-adviser, Franklin Advisers, Inc. (the "Sub-
Adviser"), will actively manage the Fund's assets in response to market,
political and general economic conditions, and will seek to adjust the Fund's
investments based on their perception of which investments would best enable
the Fund to achieve its investment objectives. In their analysis, the
Investment Manager and the Sub-Adviser will consider various factors,
including their views regarding interest and currency exchange rate changes
and credit risks. Such professional investment management may be attractive to
investors, particularly individuals, who lack the time, information,
capability or inclination to effect such an investment strategy directly.
The Fund's investments in debt obligations of Government Entities will
consist of (i) fixed income or floating rate bonds, notes, bills and
debentures issued or guaranteed by governments, governmental agencies or
instrumentalities, or government owned, controlled or sponsored entities
(including central banks located in the Western Hemisphere), including
warrants for any such obligations, and (ii) debt obligations issued by
entities organized and operated for the purpose of restructuring the
investment characteristics of securities issued by any of the entities
described above, including indexed or currency-linked securities. Such
obligations may be issued in either registered or bearer form. Many of these
securities are trading at substantial discounts to their par value and it is
expected that initially a significant portion of the Fund's assets will be
invested in securities purchased at a discount to par value. Such securities
involve special tax considerations which may adversely affect the Fund. See
"Risk Factors -- Tax Considerations."
The Fund may invest up to 35% of its total assets in securities of
corporations and financial institutions in countries located in the Western
Hemisphere, including corporate and commercial obligations such as medium-term
notes and commercial paper, which may be indexed to foreign currency exchange
rates. Indexed notes and commercial paper typically provide that the principal
amount is adjusted upwards or downwards (but not below zero) at maturity to
reflect fluctuations in the exchange rate between two currencies during the
period the obligation is outstanding, depending on the terms of the specific
security. In selecting the two currencies, the Investment Manager will
consider the correlation and relative yields of various currencies. The Fund
will purchase an indexed obligation using the currency in which it is
denominated and, at maturity, will receive interest and principal payments
thereon in that currency. The amount of principal payable by the issuer at
maturity, however, will vary (i.e., increase or decrease) in response to the
change (if any) in the exchange rate between the two specified currencies
during the period from the date the instrument is issued to its maturity date.
The potential for realizing gains as a result of changes in foreign currency
exchange rates may enable the Fund to hedge the currency
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in which the obligation is denominated (or to effect cross-hedges against
other currencies) against a decline in the U.S. Dollar value of investments
denominated in foreign currencies while generating interest income on the
obligation. However, indexed notes involve the risk of loss (i.e., reduced
principal payable on the note) in the event that exchange rate movements are
not accurately predicted. Such obligations may be deemed liquid investments if
they can be disposed of promptly in the ordinary course of business at a value
reasonably close to that used in the calculation of the Fund's net asset value
per Share; otherwise, they will be deemed illiquid investments subject to the
restrictions set forth in the SAI under "Investment Restrictions."
The Fund may invest in securities denominated in or indexed to the currency
of one country in the Western Hemisphere although issued by a governmental
entity, corporation or financial institution of another such country. For
example, the Fund may invest in a Mexican peso denominated obligation issued
by a U.S. corporation. Such investments involve credit risks associated with
the issuer and currency risks associated with the currency in which the
obligation is denominated.
The Fund also may invest in participations in, or bonds and notes backed by,
pools of mortgage, credit card, automobile or other types of receivables.
These investments are described more fully below under "Mortgage-Backed and
Asset-Backed Securities." Because of liquidity and valuation concerns relating
to investments in certain derivative mortgage-backed securities, investments
in such securities will be restricted as discussed below under "Derivative
Mortgage-Backed Securities."
The Fund has established no rating criteria for the debt securities in which
it may invest and such securities may not be rated at all for
creditworthiness. Investments in debt securities rated in the medium to lower
rating categories of nationally recognized statistical rating organizations
such as Standard & Poor's Corporation ("S&P") and Moody's Investors Service,
Inc. ("Moody's") or in unrated securities of comparable quality involve
special risks which are described more fully below under "Risk Factors." See
the Appendix for a description of the various bond rating categories.
The Fund may invest a portion of its assets in debt instruments issued by
Western Hemisphere companies engaged in the financial services industry,
including banks, thrift institutions, insurance companies, securities firms
and holding companies of any of the foregoing. Such investments may include
certificates of deposit, time deposits, bankers' acceptances, and other
obligations issued by such entities, as well as repurchase agreements entered
into with such entities.
The Fund may also lend its portfolio securities and borrow money for
investment purposes (i.e., "leverage" its portfolio). In addition, the Fund
may enter into transactions in options on securities, securities indices and
foreign currencies, forward foreign currency contracts, and futures contracts
and related options. These are generally referred to as derivative
instruments, and involve special risk factors, which are described below. When
deemed appropriate by the Investment Manager or the Sub-Adviser, the Fund may
invest cash balances in repurchase agreements and other money market
investments to maintain liquidity in an amount to meet expenses or for day-to-
day operating purposes. These investment techniques are described below and
under the heading "Investment Objectives and Policies" in the SAI.
When the Investment Manager believes that market conditions warrant, the
Fund may adopt a temporary defensive position and may invest without limit in
money market securities denominated in U.S. dollars or in the currency of any
foreign country. See "Investment Techniques -- Temporary Investments."
The Fund does not emphasize short-term trading profits and usually expects
to have an annual portfolio turnover rate generally not exceeding 200%. A high
turnover rate (e.g., a rate in excess of 100%) increases transaction costs and
may increase the amount of the Fund's short-term capital gain, which is taxed
as ordinary income when distributed to Shareholders. The U.S. Federal tax
requirement that the Fund derive less than 30% of its gross income from the
sale or disposition of securities and certain other assets held for less than
three months may limit the Fund's ability to dispose of its securities. See
"Tax Status" in the SAI.
BRADY BONDS. The Fund may invest without limit in certain debt obligations
customarily referred to as "Brady Bonds," which are created through the
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt
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restructuring under a plan introduced by former U.S. Secretary of the
Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Bonds are not considered
U.S. Government securities and are considered speculative. Brady Plan debt
restructurings have been implemented to date in several countries, including
Argentina, Brazil, Bulgaria, Costa Rica, the Dominican Republic, Ecuador,
Jordan, Mexico, Nigeria, the Philippines, Uruguay and Venezuela (collectively,
the "Brady Countries"). It is expected that other countries will undertake a
Brady Plan debt restructuring in the future, including Peru, Poland and
Panama.
Brady Bonds have been issued only recently, and, accordingly, do not have a
long payment history. They may be collateralized or uncollateralized and
issued in various currencies (although most are U.S. dollar-denominated) and
they are actively traded in the over-the-counter secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate
par bonds or floating rate discount bonds, are generally collateralized in
full as to principal by U.S. Treasury zero coupon bonds which have the same
maturity as the Brady Bonds. Interest payments on these Brady Bonds generally
are collateralized on a one-year or longer rolling-forward basis by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of interest payments or, in the case of floating rate bonds,
initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest
payments but generally are not collateralized. Brady Bonds are often viewed as
having three or four valuation components: (i) the collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii)
the uncollateralized interest payments; and (iv) any uncollateralized
repayment of principal at maturity (these uncollateralized amounts constitute
the "residual risk").
Most Mexican Brady Bonds issued to date have principal repayments at final
maturity fully collateralized by U.S. Treasury zero coupon bonds (or
comparable collateral denominated in other currencies) and interest coupon
payments collateralized on an 18-month rolling-forward basis by funds held in
escrow by an agent for the bondholders. A significant portion of the
Venezuelan Brady Bonds and the Argentine Brady Bonds issued to date have
principal repayments at final maturity collateralized by U.S. Treasury zero
coupon bonds (or comparable collateral denominated in other currencies) and/or
interest coupon payments collateralized on a 14-month (for Venezuela) or 12-
month (for Argentina) rolling-forward basis by securities held by the Federal
Reserve Bank of New York as collateral agent.
Brady Bonds involve various risk factors including residual risk and the
history of defaults with respect to commercial bank loans by public and
private entities of countries issuing Brady Bonds. There can be no assurance
that Brady Bonds in which the Fund may invest will not be subject to
restructuring arrangements or to requests for new credit, which may cause the
Fund to suffer a loss of interest or principal on any of its holdings.
OTHER DEBT SECURITIES OF GOVERNMENT ENTITIES. In addition to Brady Bonds,
the Fund may invest in debt obligations of Government Entities, including, but
not limited to, restructured external debt that has not undergone a Brady-
style debt exchange, and internal government debt such as Mexican Treasury
Bills known as Certificados de Tesoreria ("CETES"), Argentine Bonos del Tesoro
("BOTE") and Bonos de Inversion y Crecimiento-Quinta Serie ("BIC V"), and
Venezuelan zero coupon notes.
STRUCTURED INVESTMENTS. Included among the issuers of Western Hemisphere
debt securities in which the Fund may invest are entities organized and
operated solely for the purpose of restructuring the investment
characteristics of various securities. These entities are typically organized
by investment banking firms which receive fees in connection with establishing
each entity and arranging for the placement of its securities. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, of specified instruments (such as Brady Bonds) and the
issuance by that entity of one or more classes of securities ("Structured
Investments") backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued Structured Investments to create securities with
different investment characteristics such as varying
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maturities, payment priorities or interest rate provisions. The extent of the
payments made with respect to Structured Investments is dependent on the
extent of the cash flow on the underlying instruments. Because Structured
Investments of the type in which the Fund anticipates investing typically
involve no credit enhancement, their credit risk will generally be equivalent
to that of the underlying instruments.
The Fund is permitted to invest in a class of Structured Investments that is
either subordinated or unsubordinated to the right of payment of another
class. Subordinated Structured Investments typically have higher yields and
present greater risks than unsubordinated Structured Investments. Although the
Fund's purchase of subordinated Structured Investments would have a similar
economic effect to that of borrowing against the underlying securities, the
purchase will not be deemed to be leverage for purposes of the limitations
placed on the extent of the Fund's assets that may be used for borrowing
activities. See "Investment Techniques -- Borrowing."
Certain issuers of Structured Investments may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, the Fund's investment in
these Structured Investments may be limited by the restrictions contained in
the 1940 Act described below under "Investment Techniques -- Investment
Companies." Structured Investments are typically sold in private placement
transactions, and there currently is no active trading market for Structured
Investments. To the extent such investments are illiquid, they will be subject
to the restrictions set forth in the SAI under "Investment Objectives and
Policies -- Investment Restrictions."
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Fund may invest without
limit in mortgage-backed securities issued or guaranteed by Government
Entities, and may invest up to 35% of its total assets in privately issued
mortgage-backed and asset-backed securities. Mortgage-backed securities are
securities that directly or indirectly represent an interest in, or are backed
by and payable from, mortgage loans secured by real property. Asset-backed
securities generally consist of structures similar to mortgage-backed
securities, except that the underlying asset pools are comprised of other
types of financial assets such as credit card, automobile or other types of
receivables and commercial loans. Mortgage-backed and asset-backed securities
are issued in structured financing wherein the sponsor securitizes the
underlying mortgage loans or financial assets in order to liquify the
underlying assets or to achieve certain other financial goals. The special
considerations and risks inherent in investments in mortgage-backed and asset-
backed securities are discussed more fully below.
The mortgage-backed securities in which the Fund may invest will primarily
be guaranteed by the Government National Mortgage Association ("GNMA") or
issued by the Federal National Mortgage Association ("FNMA") or the Federal
Home Loan Mortgage Corporation ("FHLMC"). Certain of the asset-backed
securities in which the Fund will invest may be guaranteed by the Small
Business Administration ("SBA") or issued in programs originated by the
Resolution Trust Corporation ("RTC"). GNMA, FNMA, FHLMC, SBA and RTC are
agencies or instrumentalities of the United States.
Certain of the mortgage-backed and asset-backed securities in which the Fund
may invest will be issued by private issuers. Private issuers include
originators of or investors in mortgage loans and receivables such as savings
and loan associations, mortgage bankers, commercial banks, investment banks,
finance companies and special purpose finance subsidiaries of any of the
above. Securities issued by private issuers may be subject to certain types of
credit enhancements issued in respect of those securities. Such credit
enhancements may include insurance policies, bank letters of credit,
guarantees by third parties or protections afforded by the structure of a
particular transaction (e.g., the use of reserve funds, over-collateralization
or the issuance of subordinated securities as protection for more senior
securities being purchased by the Fund). In purchasing securities for the
Fund, the Investment Manager and the Sub-Adviser will take into account not
only the creditworthiness of the issuer of the securities but also the
creditworthiness of the provider of any external credit enhancement of the
securities.
The Fund may invest in pass-through mortgage-backed securities that
represent ownership interests in a pool of mortgages on single-family or
multi-family residences. Such securities represent interests in pools of
residential mortgage loans originated by U.S. governmental or private lenders
and guaranteed, to the extent provided in such securities, by the U.S.
Government, one of its agencies or instrumentalities or by private guarantors.
Such securities, which are ownership interests in the underlying mortgage
loans, differ from conventional debt securities, which provide for periodic
payment of interest in fixed amounts (usually semiannually) and principal
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payments at maturity or on specified call dates. Mortgage pass-through
securities provide for monthly payments that "pass-through" the monthly
interest and principal payments (including any prepayments) made by the
individual borrowers on the pooled mortgage loans, net of any fees paid to the
guarantor of such securities and the servicer of the underlying mortgage
loans. The Fund may also invest in collateralized mortgage obligations
("CMOs") which are debt obligations collateralized by mortgage loans or
mortgage pass-through securities.
The yield characteristics of mortgage-backed and asset-backed securities
differ from traditional corporate debt securities. Among the major differences
are that interest and principal payments are made more frequently, usually
monthly, and that principal may be prepaid at any time because the underlying
mortgage loans or other assets generally may be prepaid at any time. As a
result, if the Fund purchases such a security at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a prepayment
rate that is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if the Fund purchases these securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity. The Fund may invest a
portion of its assets in derivative mortgage-backed securities, such as
stripped mortgage-backed securities, which are highly sensitive to changes in
prepayment and interest rates. The Investment Manager and the Sub-Adviser will
seek to manage these risks (and potential benefits) by investing in a variety
of such securities and may seek to hedge such investments with the use of
financial futures contracts. See "Investment Techniques -- Futures Contracts."
Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in
mortgagors' housing needs, job transfers, unemployment, mortgagors' net equity
in the mortgaged properties and servicing decisions. Generally, however,
prepayments on fixed rate mortgage loans will increase during a period of
falling interest rates and decrease during a period of rising interest rates.
Accordingly, amounts available for reinvestment by the Fund are likely to be
greater during a period of declining interest rates and, as a result, likely
to be reinvested at lower interest rates than during a period of rising
interest rates. Although asset-backed securities generally are less likely to
experience substantial prepayments than are mortgage-backed securities,
certain of the factors that affect the rate of prepayments on mortgage-backed
securities also affect the rate of prepayments on asset-backed securities.
However, during any particular period, the predominant factors affecting
prepayment rates on mortgage-backed and asset-backed securities may be
different. Mortgage-backed and asset-backed securities may decrease in value
as a result of increases in interest rates and may benefit less than other
fixed income securities from declining interest rates because of the risk of
prepayment.
The Fund's yield will also be affected by the yields on instruments in which
the Fund is able to reinvest the proceeds of payments and prepayments.
Accelerated prepayments on securities purchased by the Fund at a premium also
impose a risk of loss of principal because the premium may not have been fully
amortized at the time the principal is repaid in full.
DERIVATIVE MORTGAGE-BACKED SECURITIES. The Fund may invest up to 25% of its
total assets in various derivative mortgage-backed securities, which are
synthetic securities designed to be highly sensitive to certain types of
interest rate and principal prepayment scenarios. Derivative instruments
primarily consist of some form of stripped mortgage-backed securities ("SMBS")
that commonly involve different classes of securities that receive
disproportionate amounts of the interest and principal distributions on a pool
of mortgage assets.
SMBSs are typically issued by the same types of issuers as are mortgage-
backed securities. The structure of SMBSs, however, is different. A common
variety of SMBS involves a class (the principal-only or PO class) that
receives some of the interest and most of the principal from the underlying
assets, while the other class (the interest-only or IO class) receives most of
the interest and the remainder of the principal. In the most extreme case, the
IO class receives only interest, while the PO class receives only principal.
The yield to maturity on an IO class is extremely sensitive to the rate of
principal payments (including prepayments) on the related underlying assets,
and a rapid rate of principal payments in excess of that considered in pricing
the securities will have a material adverse effect on an IO security's yield
to maturity. If the underlying mortgage assets experience greater than
anticipated payments of principal, the Fund may fail to recoup fully its
initial investment in IOs. In addition, there are certain types of IOs which
represent the interest portion of a particular
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class as opposed to the interest portion of the entire pool. The sensitivity
of these types of IOs to interest rate fluctuations may be increased because
of the characteristics of the principal portion to which they relate. The
impact of IOs on the Fund's portfolio may be offset to some degree by
investments in mortgage-backed securities and inverse floaters (floating rate
securities the interest rate of which is adjusted up or down inversely to
changes in a specified index). As interest rates fall, presenting a greater
risk of unanticipated prepayments of principal, the negative effect on the
Fund because of its holdings of IOs should be diminished somewhat because of
the increased yield on the inverse floating rate CMOs or the increased
appreciation on the fixed rate securities. Under certain interest rate
scenarios, the Fund may decide to retain investments in IOs or inverse
floaters yielding less than prevailing interest rates in order to avoid
capital losses on the sale of such investments.
The Fund may also combine IOs and IO-related derivative mortgage products
with LIBOR-based inverse floaters (LIBOR being the London interbank offered
rate). A LIBOR-based inverse floater is a floating rate security the interest
rate of which is adjusted up or down inversely to changes in LIBOR; as LIBOR
decreases, the interest rate paid by the inverse floater would increase, and
vice versa. Depending on the amount of leverage built into the inverse
floater, the yield could vary in excess of the change in LIBOR because of the
leverage built into the inverse floater formula. The yield on an inverse
floater varies inversely with interest rates because as LIBOR decreases, the
interest payable on the inverse floater increases. The converse is true, of
course, when LIBOR increases. When an inverse floater is combined with an IO
or IO-type derivative product, the result is a synthetic security that tends
to provide a somewhat less volatile yield over a wide range of interest rate
and prepayment rate scenarios.
New types of mortgage-backed and asset-backed securities, derivative
securities and hedging instruments are developed and marketed from time to
time. Consistent with its investment objectives, policies and restrictions,
the Fund may, upon disclosure to Shareholders, invest in such new types of
securities and instruments that the Investment Manager and/or the Sub-Adviser
believe may assist the Fund in achieving its investment objectives.
The staff of the SEC has taken the position (which has been adopted as an
investment policy of the Fund) that the determination of whether a particular
U.S. Government issued IO or PO that is backed by fixed-rate mortgages is
liquid may be made by the Investment Manager or the Sub-Adviser under
guidelines and standards established by the Trust's Board of Trustees. Such a
security may be deemed liquid if it can be disposed of promptly in the
ordinary course of business at a value reasonably close to that used in the
calculation of the Fund's net asset value per share. The SEC's staff also has
taken the position that all other IOs and POs are illiquid securities which
are subject to the Fund's limitation on investments in illiquid securities, as
set forth in the SAI under "Investment Objectives and Policies -- Investment
Restrictions."
INVESTMENT TECHNIQUES
The Fund is authorized to use the various investment techniques described
below. Although these strategies are regularly used by some investment
companies and other institutional investors in various markets, some of these
strategies cannot at the present time be used to a significant extent by the
Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
TEMPORARY INVESTMENTS. For temporary defensive purposes, the Fund may invest
up to 100% of its total assets in the following money market securities,
denominated in U.S. dollars or in the currency of any foreign country, issued
by entities organized in the United States or any foreign country: short-term
(less than twelve months to maturity) and medium-term (not greater than five
years to maturity) obligations issued or guaranteed by the U.S. Government or
the governments of foreign countries, their agencies or instrumentalities;
finance company and corporate commercial paper, and other short-term corporate
obligations, in each case rated Prime-1 by Moody's or A or better by S&P or,
if unrated, of comparable quality as determined by the Investment Manager;
obligations (including certificates of deposit, time deposits and bankers'
acceptances) of banks; and repurchase agreements with banks and broker-dealers
with respect to such securities.
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BORROWING. The Fund may borrow up to one-third of the value of its total
assets from banks to increase its holdings of portfolio securities. Under the
1940 Act, the Fund is required to maintain continuous asset coverage of 300%
with respect to such borrowings and to sell (within three days) sufficient
portfolio holdings to restore such coverage if it should decline to less than
300% due to market fluctuations or otherwise, even if such liquidations of the
Fund's holdings may be disadvantageous from an investment standpoint.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of portfolio securities on the Fund's net asset value,
and money borrowed will be subject to interest and other costs (which may
include commitment fees and/or the cost of maintaining minimum average
balances) which may or may not exceed the income received from the securities
purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of the Fund's
total assets to generate income for the purpose of offsetting operating
expenses. Such loans must be secured by collateral (consisting of any
combination of cash, U.S. Government securities or irrevocable letters of
credit) in an amount at least equal (on a daily marked-to-market basis) to the
current market value of the securities loaned. The Fund may terminate the
loans at any time and obtain the return of the securities loaned within five
business days. The Fund will continue to receive any interest or dividends
paid on the loaned securities and will continue to retain any voting rights
with respect to the securities. In the event that the borrower defaults on its
obligation to return borrowed securities, because of insolvency or otherwise,
the Fund could experience delays and costs in gaining access to the collateral
and could suffer a loss to the extent that the value of the collateral falls
below the market value of the borrowed securities.
OPTIONS ON SECURITIES OR INDICES. The Fund may write (i.e., sell) covered
put and call options and purchase put and call options on securities or
securities indices that are traded on United States and foreign exchanges or
in the over-the-counter markets. An option on a security is a contract that
permits the purchaser of the option, in return for the premium paid, the right
to buy a specified security (in the case of a call option) or to sell a
specified security (in the case of a put option) from or to the writer of the
option at a designated price during the term of the option. An option on a
securities index permits the purchaser of the option, in return for the
premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of
the option. The Fund may write a call or put option only if the option is
"covered." This means that so long as the Fund is obligated as the writer of a
call option, it will own the underlying securities subject to the call, or
hold a call at the same or lower exercise price, for the same exercise period,
and on the same securities as the written call. A put is covered if the Fund
maintains liquid assets with a value equal to the exercise price in a
segregated account, or holds a put on the same underlying securities at an
equal or greater exercise price. The value of the underlying securities on
which options may be written at any one time will not exceed 15% of the total
assets of the Fund. The Fund will not purchase put or call options if the
aggregate premium paid for such options would exceed 5% of its total assets at
the time of purchase.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. The
Fund will normally conduct its foreign currency exchange transactions either
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through entering into forward contracts to
purchase or sell foreign currencies. The Fund will generally not enter into a
forward contract with a term of greater than one year. A forward contract is
an obligation to purchase or sell a specific currency for an agreed price at a
future date which is individually negotiated and privately traded by currency
traders and their customers.
The Fund will generally enter into forward contracts only under two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed
to settle the transaction. Second, when the Investment Manager believes that
the currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, it may enter into a forward contract to
sell or buy the former foreign currency (or another currency which acts as a
proxy for that currency) approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." The Fund has
no specific limitation on the percentage of assets it may commit to forward
contracts, subject to its stated investment objectives and policies, except
that the
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Fund will not enter into a forward contract if the amount of assets set aside
to cover forward contracts would impede portfolio management or the Fund's
ability to meet redemption requests. Although forward contracts will be used
primarily to protect the Fund from adverse currency movements, they also
involve the risk that anticipated currency movements will not be accurately
predicted.
The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines
in the U.S. dollar value of foreign currency denominated portfolio securities
and against increases in the U.S. dollar cost of such securities to be
acquired. As in the case of other kinds of options, however, the writing of an
option on a foreign currency constitutes only a partial hedge, up to the
amount of the premium received, and the Fund could be required to purchase or
sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event
of rate movements adverse to the Fund's position, it may forfeit the entire
amount of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by the Fund are traded on U.S. and
foreign exchanges or over-the-counter.
FUTURES CONTRACTS. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock and bond index futures contracts, foreign
currency futures contracts and options on any of the foregoing. A financial
futures contract is an agreement between two parties to buy or sell a
specified debt security at a set price on a future date. An index futures
contract is an agreement to take or make delivery of an amount of cash based
on the difference between the value of the index at the beginning and at the
end of the contract period. A futures contract on a foreign currency is an
agreement to buy or sell a specified amount of a currency for a set price on a
future date.
When the Fund enters into a futures contract, it must make an initial
deposit, known as "initial margin," as a partial guarantee of its performance
under the contract. As the value of the security, index or currency
fluctuates, either party to the contract is required to make additional margin
payments, known as "variation margin," to cover any additional obligation it
may have under the contract. In addition, when the Fund enters into a futures
contract, it will segregate assets or "cover" its position in accordance with
the 1940 Act. See "Investment Objectives and Policies -- Futures Contracts" in
the SAI.
REPURCHASE AGREEMENTS. For temporary defensive purposes and for cash
management purposes, the Fund may enter into repurchase agreements with U.S.
banks and broker-dealers. Under a repurchase agreement, the Fund acquires a
security from a U.S. bank or a registered broker-dealer and simultaneously
agrees to resell the security back to the bank or broker-dealer at a specified
time and price. The repurchase price is in excess of the original purchase
price paid by the Fund by an amount which reflects an agreed-upon rate of
return and which is not tied to any coupon rate on the underlying security.
Under the 1940 Act, repurchase agreements are considered to be loans
collateralized by the underlying security and therefore will be fully
collateralized. However, if the bank or broker-dealer should default on its
obligation to repurchase the underlying security, the Fund may experience a
delay or difficulties in exercising its rights to realize upon the security
and might incur a loss if the value of the security declines, as well as incur
disposition costs in liquidating the security.
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest up to 15% of its
total assets in illiquid securities, for which there is a limited trading
market and for which a low trading volume of a particular security may result
in abrupt and erratic price movements. The Fund may be unable to dispose of
its holdings in illiquid securities at then-current market prices and may have
to dispose of such securities over extended periods of time. The Fund may also
invest in securities that are sold (i) in private placement transactions
between their issuers and their purchasers and that are neither listed on an
exchange nor traded over-the-counter, or (ii) in transactions between
qualified institutional buyers pursuant to Rule 144A under the U.S. Securities
Act of 1933, as amended (the "1933 Act"). Such restricted securities are
subject to contractual or legal restrictions on subsequent transfer. As a
result of the absence of a public trading market, such restricted securities
may in turn be less liquid and more difficult to value than publicly traded
securities. Although these securities may be resold in privately negotiated
transactions, the prices realized from the sales could, due to illiquidity, be
less than those originally paid by the Fund or less than their fair value. In
addition, issuers whose securities are not publicly traded may not be subject
to the disclosure and other investor protection requirements that may be
applicable if their securities were publicly traded. If any
11
<PAGE>
privately placed or Rule 144A securities held by the Fund are required to be
registered under the securities laws of one or more jurisdictions before being
resold, the Fund may be required to bear the expenses of registration. The
Fund will limit its investment in restricted securities other than Rule 144A
securities to 10% of its total assets, and will limit its investment in all
restricted securities, including Rule 144A securities, to 15% of its total
assets. Restricted securities, other than Rule 144A securities determined by
the Board of Trustees to be liquid, are considered to be illiquid and are
subject to the Fund's limitation on investment in illiquid securities.
INVESTMENT COMPANIES. The Fund may invest in other investment companies,
other than those for which the Investment Manager or its affiliates serve as
investment adviser or sponsor, which invest principally in securities in which
the Fund is authorized to invest. Under the 1940 Act, the Fund may invest a
maximum of 10% of its total assets in the securities of other investment
companies and not more than 5% of its total assets in the securities of any
one investment company, provided the investment does not represent more than
3% of the voting stock of the acquired investment company at the time such
shares are purchased. To the extent the Fund invests in other investment
companies, the Fund's Shareholders will incur certain duplicative fees and
expenses, including investment advisory fees. The Fund's investment in certain
investment companies will result in special U.S. federal income tax
consequences described under "Tax Status" in the SAI.
RISK FACTORS
Shareholders should understand that all investments involve risk and there
can be no guarantee against loss resulting from an investment in the Fund, nor
can there be any assurance that the Fund's investment objectives will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Fund can decrease as well as increase, depending on a
variety of factors, which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions and market
factors. In addition to the factors which affect the value of individual
securities, a Shareholder may anticipate that the value of the Shares of the
Fund will fluctuate with movements in the broader equity and bond markets.
Changes in the prevailing rates of interest in any of the countries in which
the Fund is invested will likely affect the value of the Fund's holdings and
thus the value of the Shares of the Fund. Increased rates of interest which
frequently accompany inflation and/or a growing economy are likely to have a
negative effect on the value of Fund Shares. In addition, changes in currency
valuations will impact the price of the Shares of the Fund. History reflects
both increases and decreases in interest rates in individual countries and
throughout the world, and in currency valuations, and these may reoccur
unpredictably in the future. Additionally, investment decisions made by the
Investment Manager will not always be profitable or prove to have been
correct. The Fund is not intended as a complete investment program.
FOREIGN CURRENCY EXCHANGE. Since the Fund is authorized to invest in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates relative to the U.S. dollar will
affect the value of securities in the portfolio and the unrealized
appreciation or depreciation of investments insofar as U.S. investors are
concerned. Changes in foreign currency exchange rates relative to the U.S.
dollar will also affect the Fund's yield on assets denominated in currencies
other than the U.S. dollar.
SOVEREIGN DEBT. The debt obligations ("sovereign debt") issued or guaranteed
by Latin American governmental entities in which the Fund may invest involve
great risk and are deemed to be the equivalent in terms of quality to high
risk, low rated securities (i.e., junk bonds, as discussed below) and are
subject to many of the same risks as such securities. Similarly, the Fund may
have difficulty disposing of certain sovereign debt obligations because there
may be a thin trading market for such securities.
Certain Latin American countries are among the largest debtors to commercial
banks and foreign governments. The issuer or governmental authority that
controls the repayment of sovereign debt may not be willing or able to repay
the principal and/or pay interest when due in accordance with the terms of
such obligations. A Government Entity's willingness or ability to repay
principal and pay interest due in a timely manner may be affected by, among
other factors, its cash flow situation, and, in the case of a government
debtor, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the Government Entity's dependence
on expected disbursements from third parties, the Government Entity's policy
toward the International Monetary Fund and the political constraints to which
a Government Entity may
12
<PAGE>
be subject. Government Entities may default on their sovereign debt and may
also be dependent on expected disbursements from foreign governments,
multilateral agencies and others abroad to reduce principal and interest
arrearages on their debt. The commitment on the part of these governments,
agencies and others to make such disbursements may be conditioned on a
debtor's implementation of economic reforms or economic performance and the
timely service of such debtor's obligations. Failure to implement such
reforms, achieve such levels of economic performance or repay principal or
interest when due may result in the cancellation of such third parties'
commitments to lend funds to the government debtor, which may further impair
such debtor's ability or willingness to timely service its debts. Holders of
sovereign debt (including the Fund) may be requested to participate in the
rescheduling of such debt and to extend further loans to Government Entities.
As a result of the foregoing, a government obligor may default on its
obligations. If such an event occurs, the Fund may have limited legal recourse
against the issuer and guarantor. Remedies must, in some cases, be pursued in
the courts of the defaulting party itself, and the ability of the holder of
foreign government debt securities to obtain recourse may be subject to the
political climate in the relevant country. In addition, no assurance can be
given that the holders of commercial bank debt will not contest payments to
the holders of other foreign government debt obligations in the event of
default under their commercial bank loan agreements.
Government obligors in developing and emerging market countries are among
the world's largest debtors to commercial banks, other governments,
international financial organizations and other financial institutions. The
issuers of the government debt securities in which the Fund expects to invest
have in the past experienced substantial difficulties in servicing their
external debt obligations, which led to defaults on certain obligations and
the restructuring of certain indebtedness. Restructuring arrangements have
included, among other things, reducing and rescheduling interest and principal
payments by negotiating new or amended credit agreements or converting
outstanding principal and unpaid interest to Brady Bonds, and obtaining new
credit to finance interest payments. Holders of certain foreign government
debt securities may be requested to participate in the restructuring of such
obligations and to extend further loans to their issuers. There can be no
assurance that the Brady Bonds and other foreign government debt securities in
which the Fund may invest will not be subject to similar restructuring
arrangements or to requests for new credit which may adversely affect the
Fund's holdings. Furthermore, certain participants in the secondary market for
such debt may be directly involved in negotiating the terms of these
arrangements and may therefore have access to information not available to
other market participants.
FOREIGN INVESTMENTS. The Fund has the right to purchase securities in any
foreign country, developed or developing. Investors should consider carefully
the substantial risks involved in investing in securities issued by companies
and governments of foreign nations, which are in addition to the usual risks
inherent in domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations (including, for example, withholding taxes on interest and dividends)
or other taxes imposed with respect to investments in foreign nations, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country), foreign investment controls on daily stock
market movements, political or social instability or diplomatic developments
which could affect investment in securities of issuers in foreign nations.
Some countries may withhold portions of interest and dividends at the source.
In addition, in many countries there is less publicly available information
about issuers than is available in reports about companies in the United
States. Foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to United States
companies. Further, the Fund may encounter difficulties or be unable to vote
proxies, exercise shareholder rights, pursue legal remedies, and obtain
judgments in foreign courts. Commission rates in foreign countries, which are
sometimes fixed rather than subject to negotiation as in the United States,
are likely to be higher. Foreign securities markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when assets of the Fund
are uninvested and no return is earned thereon. The inability of the Fund to
make intended security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result either in losses
to the Fund due to subsequent declines in value of the portfolio security or,
if the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. In many foreign countries
13
<PAGE>
there is less government supervision and regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the United
States. There is an increased risk, therefore, of uninsured loss due to lost,
stolen, or counterfeit stock certificates. In addition, the foreign securities
markets of many of the countries in which the Fund may invest may also be
smaller, less liquid, and subject to greater price volatility than those in
the United States. As an open-end investment company, the Fund is limited in
the extent to which it may invest in illiquid securities. See "Investment
Objectives and Policies -- Investment Restrictions" in the SAI.
Prior governmental approval of foreign investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitation also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may
continue to be adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies also have been and may continue to be adversely affected by economic
conditions in the countries with which they trade.
HIGH-RISK DEBT SECURITIES. The Fund has established no rating criteria for
the debt securities in which it may invest, and such securities may not be
rated at all for creditworthiness. Although they may offer higher yields than
do higher rated securities, high-risk, low rated debt securities (commonly
referred to as "junk bonds") and unrated debt securities generally involve
greater volatility of price and risk of principal and income, including the
possibility of default by, or bankruptcy of, the issuers of the securities. In
addition, the markets in which low rated and unrated debt securities are
traded are more limited than those in which higher rated securities are
traded. The existence of limited markets for particular securities may
diminish the Fund's ability to sell the securities at fair value either to
meet redemption requests or to respond to a specific economic event such as a
deterioration in the creditworthiness of the issuer. Reduced secondary market
liquidity for certain low rated or unrated debt securities also may make it
more difficult for the Fund to obtain accurate market quotations for purposes
of valuing the Fund's portfolio. Market quotations are generally available on
many low rated or unrated securities only from a limited number of dealers and
may not necessarily represent firm bids of such dealers or prices for actual
sales.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Fund to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such creditworthiness analysis than
would be the case if the Fund were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic downturns or individual corporate developments.
A projection of an economic downturn or of a period of rising interest rates,
for example, could cause a decline in low rated debt securities prices because
the advent of a recession could lessen the ability of a highly leveraged
company to make principal and interest payments on its debt securities. If the
issuer of low rated debt securities defaults, the Fund may incur additional
expenses seeking recovery.
TAX CONSIDERATIONS. The Fund may accrue and report interest income on debt
securities, such as zero coupon bonds, pay-in-kind securities or debt
securities issued or acquired at a discount, even though it receives no cash
interest until the security's maturity or payment date. In order to qualify
for beneficial tax treatment afforded regulated investment companies, and to
generally be relieved of
14
<PAGE>
federal tax liabilities, the Fund must distribute all of its net income and
gains to Shareholders (see "General Information--Federal Tax Information")
generally on an annual basis. The Fund may have to dispose of portfolio
securities under disadvantageous circumstances to generate cash or leverage
itself by borrowing cash in order to satisfy the distribution requirement.
If, as a result of exchange controls or other foreign laws or restrictions
regarding repatriation of capital, the Fund were unable to distribute an
amount equal to substantially all of its investment company taxable income (as
determined for U.S. tax purposes) within applicable time periods, the Fund
would not qualify for the favorable federal income tax treatment afforded
regulated investment companies, or, even if it did so qualify, it might become
liable for federal taxes on undistributed income. In addition, the ability of
the Fund to obtain timely and accurate information relating to its investments
is a significant factor in complying with the requirements applicable to
regulated investment companies and in making tax-related computations. Thus,
if the Fund were unable to obtain accurate information on a timely basis, it
might be unable to qualify as a regulated investment company or its tax
computations might be subject to revisions (which could result in the
imposition of taxes, interest and penalties). See "Tax Status" in the SAI.
LEVERAGE. Leveraging by means of borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities on the Fund's net
asset value, and money borrowed will be subject to interest and other costs
(which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the income received from the
securities purchased with borrowed funds. The use of leverage will
significantly increase the Fund's investment risk.
FUTURES CONTRACTS AND RELATED OPTIONS. Successful use of futures contracts
and related options is subject to special risk considerations. A liquid
secondary market for any futures or options contract may not be available when
a futures or options position is sought to be closed. In addition, there may
be an imperfect correlation between movements in the securities or foreign
currency on which the futures or options contract is based and movements in
the securities or currency in the Fund's portfolio. Successful use of futures
or options contracts is further dependent on the Investment Manager's ability
to correctly predict movements in the securities or foreign currency markets,
and no assurance can be given that its judgment will be correct. Successful
use of options on securities or indices is subject to similar risk
considerations. In addition, by writing covered call options, the Fund gives
up the opportunity, while the option is in effect, to profit from any price
increase in the underlying security above the option exercise price.
NON-DIVERSIFIED STATUS. The Fund is a "non-diversified" investment company,
which means the Fund is not limited in the proportion of its assets that may
be invested in the securities of a single issuer. However, the Fund intends to
conduct its operations so as to qualify as a "regulated investment company"
for purposes of the Internal Revenue Code of 1986, as amended (the "Code"),
which generally will relieve the Fund of any liability for Federal income tax
to the extent its earnings are distributed to Shareholders. See "General
Information -- Federal Tax Information." To so qualify, among other
requirements, the Fund will limit its investments so that, in general, at the
close of each quarter of the taxable year, (i) not more than 25% of the market
value of the Fund's total assets will be invested in the securities of a
single issuer, and (ii) with respect to 50% of the market value of its total
assets, not more than 5% of the market value of its total assets will be
invested in the securities of a single issuer and the Fund will not own more
than 10% of the outstanding voting securities of a single issuer. The Fund's
investments in U.S. Government securities and other regulated investment
companies are not subject to these limitations. Because the Fund, as a non-
diversified investment company, may invest in a smaller number of individual
issuers than a diversified investment company, and may be more susceptible to
any single economic, political or regulatory occurrence, an investment in the
Fund may present greater risk to an investor than an investment in a
diversified company.
There are further risk factors, including risks associated with mortgage-
backed securities (particularly derivative mortgage-backed securities) and
illiquid and restricted securities, which are described under "General
Description -- Investment Objectives and Policies" in this Prospectus, and
possible losses through the holding of securities in domestic and foreign
custodian banks and depositories, described under "Risk Factors" in the SAI.
15
<PAGE>
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased at the Offering Price through any broker
which has a dealer agreement with Franklin Templeton Distributors, Inc.
("FTD"), the Principal Underwriter for Shares of the Fund, or directly from
FTD upon receipt by FTD of a completed Shareholder Application and check. The
minimum initial investment is $100 and subsequent investments must be $25 or
more. These minimums may be waived when the Shares are being purchased through
retirement plans providing for regular periodic investments, as described
below under "Retirement Plans."
OFFERING PRICE. Shares of the Fund are offered at their public Offering
Price, which is determined by adding the net asset value per Share plus a
front-end sales charge, next computed (i) after the Shareholder's securities
dealer receives the order which is promptly transmitted to the Fund or (ii)
after receipt of an order by mail from the Shareholder directly in proper form
(which generally means a completed Shareholder Application accompanied by a
negotiable check).
The price to the public on purchases of the Fund's Shares made by a single
purchaser, by an individual, his or her spouse and their children under age
21, or by a single trust or fiduciary account, other than an employee benefit
plan holding Shares of the Fund on or before February 1, 1995, is the net
asset value per Share plus a sales charge not exceeding 4.25% of the Offering
Price (equivalent to 4.44% of the net asset value), which is reduced on larger
sales as shown below:
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------
AS A PERCENTAGE OF AS A PERCENTAGE OF PORTION OF TOTAL
AMOUNT OF SALE OFFERING PRICE OF THE NET ASSET VALUE OF THE OFFERING PRICE
AT OFFERING PRICE SHARES PURCHASED SHARES PURCHASED RETAINED BY DEALERS/1/,/3/
----------------- --------------------- ---------------------- --------------------------
<S> <C> <C> <C>
Less than $100,000...... 4.25% 4.44% 4.00%
$100,000 but less than
$250,000............... 3.50% 3.63% 3.25%
$250,000 but less than
$500,000............... 2.75% 2.83% 2.50%
$500,000 but less than
$1,000,000............. 2.15% 2.20% 2.00%
$1,000,000 or more...... none none (see below)/2/
</TABLE>
- -------
/1/ Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
/2/ The following commissions will be paid by FTD, from its own resources, to
securities dealers who initiate and are responsible for purchases of $1
million or more: 1% on sales of $1 million but less than $2 million, plus
0.80% on sales of $2 million but less than $3 million, plus 0.50% on sales
of $3 million but less than $50 million, plus 0.25% on sales of $50 million
but less than $100 million, plus 0.15% on sales of $100 million or more.
Dealer concession breakpoints are reset every 12 months for purposes of
additional purchases.
/3/ At the discretion of FTD, all sales charges may at times be reallowed to the
securities dealer. If 90% or more of the sales commission is reallowed, such
securities dealer may be deemed to be an underwriter as that term is defined
in the Securities Act of 1933.
No front-end sales charge applies on investments of $1 million or more, but
a contingent deferred sales charge of 1% is imposed on certain redemptions of
all or a portion of investments of $1 million or more within 12 months of the
calendar month following such investments ("contingency period"). See "How to
Sell Shares of the Fund--Contingent Deferred Sales Charge."
The size of a transaction which determines the applicable sales charge on
the purchase of Fund Shares is determined by adding the amount of the
Shareholder's current purchase plus the cost or current value (whichever is
higher) of a Shareholder's existing investment in one or more of the funds in
the Franklin Group of Funds(R) and the Templeton Family of Funds. Included for
these aggregation purposes are (i) the mutual funds in the Franklin Group of
Funds (R) except Franklin Valuemark Funds and Franklin Government Securities
Trust (the "Franklin Funds"); (ii) other investment products underwritten by
FTD or its affiliates (although certain investments may not have the same
schedule of sales charges and/or may not be subject to reduction); and (iii)
the U.S.-registered mutual funds in the Templeton Family of Funds except
Templeton Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund and
Templeton Variable Products Series Fund (the "Templeton Funds"). (Franklin
Funds and Templeton Funds are collectively referred to as the "Franklin
Templeton Funds.") Sales charge reductions based upon aggregate holdings of
(i), (ii) and (iii) above ("Franklin Templeton Investments") may be effective
only after notification to FTD that the investment qualifies for a discount.
16
<PAGE>
Other Payments to Securities Dealers. FTD, or one of its affiliates, may
make payments, from its own resources, of up to 1% of the amount purchased to
securities dealers who initiate and are responsible for purchases made at net
asset value by certain designated retirement plans (as defined below)
(excluding IRA and IRA rollovers), certain non-designated plans (as defined
below), certain trust companies and trust departments of banks and certain
retirement plans of organizations with collective retirement plan assets of
$10 million or more. See definitions under "Description of Special Net Asset
Value Purchases" below and as set forth in the SAI.
A sales charge of 4% of the Offering Price (4.17% of the net asset value) is
applicable to all purchases of Shares made for any qualified or non-qualified
employee benefit plan account which is a Shareholder in the Fund on or before
February 1, 1995. Of the 4% sales commission applicable to such purchases,
3.20% of the Offering Price will be retained by dealers.
Cumulative Quantity Discount. The schedule of reduced sales charges also may
be applied to qualifying sales on a cumulative basis. For this purpose, the
dollar amount of the sale is added to the higher of (i) the value (calculated
at the applicable Offering Price) or (ii) the purchase price, of Franklin
Templeton Investments. The cumulative quantity discount applies to Franklin
Templeton Investments owned at the time of purchase by the purchaser, his or
her spouse, and their children under age 21. In addition, the aggregate
investments of a trustee or other fiduciary account (for an account under
exclusive investment authority) may be considered in determining whether a
reduced sales charge is available, even though there may be a number of
beneficiaries of the account. For example, if the investor held Shares valued
at $90,000 (or, if valued at less than $90,000, had been purchased for
$90,000) and purchased an additional $20,000 of the Fund's Shares, the sales
charge for the $20,000 purchase would be at the rate of 3.50%. It is FTD's
policy to give investors the best sales charge rate possible; however, there
can be no assurance that an investor will receive the appropriate discount
unless, at the time of placing the purchase order, the investor or the dealer
makes a request for the discount and gives FTD sufficient information to
determine whether the purchase will qualify for the discount. On telephone
orders from dealers for the purchase of Shares to be registered in "Street
name," FTD will accept the dealer's instructions with respect to the
applicable sales charge rate to be applied. The cumulative quantity discount
may be amended or terminated at any time.
Letter of Intent. Investors may also reduce sales charges on all investments
by means of a Letter of Intent ("LOI") which expresses the investor's
intention to invest a certain amount within a 13-month period in Shares of the
Fund or any other Franklin Templeton Fund. See the Shareholder Application.
Except for certain employee benefit plans, the minimum initial investment
under an LOI is 5% of the total LOI amount. Except for Shares purchased by
certain employee benefit plans, Shares purchased with the first 5% of such
amount will be held in escrow to secure payment of the higher sales charge
applicable to the Shares actually purchased if the full amount indicated is
not purchased, and such escrowed Shares will be involuntarily redeemed to pay
the additional sales charge, if necessary. A purchase not originally made
pursuant to an LOI may be included under a subsequent LOI executed within 90
days of the purchase. Any redemptions made by Shareholders, other than by
certain employee benefit plans, during the 13-month period will be subtracted
from the amount of the purchases for purposes of determining whether the terms
of the LOI have been completed. For a further description of the LOI, see
"Purchase, Redemption and Pricing of Shares--Letter of Intent" in the SAI.
Group Purchases. An individual who is a member of a qualified group may also
purchase Shares of the Fund at the reduced sales charge applicable to the
group as a whole. The sales charge is based upon the aggregate dollar value of
Shares previously purchased and still owned by the group, plus the amount of
the current purchase. For example, if members of the group had previously
invested and still held $90,000 of Fund Shares and now were investing $10,000,
the sales charge would be 3.50%. Information concerning the current sales
charge applicable to a group may be obtained by contacting FTD.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund Shares at a discount, and
(iii) satisfies uniform criteria which enable FTD to realize economies of
scale in its costs of distributing Shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or FTD and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to FTD, and must seek to arrange for payroll
deduction or other bulk transmission of investments to the Fund.
17
<PAGE>
If an investor selects a payroll deduction plan, subsequent investments will
be automatic and will continue until such time as the investor notifies the
Fund and the investor's employer to discontinue further investments. Due to
the varying procedures to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and the time the money reaches the Fund. The investment in the Fund
will be made at the Offering Price per Share determined on the day that both
the check and payroll deduction data are received in required form by the
Fund.
NET ASSET VALUE PURCHASES. Shares may be purchased without the imposition of
a front-end sales charge ("net asset value") or a contingent deferred sales
charge by (i) officers, trustees, directors, and full-time employees of the
Fund, any of the Franklin Templeton Funds, or of Franklin Resources, Inc. and
its subsidiaries (the "Franklin Templeton Group"), and their spouses and
family members, including any subsequent payments made by such parties after
cessation of employment; (ii) companies exchanging Shares with or selling
assets pursuant to a merger, acquisition or exchange offer; (iii) insurance
company separate accounts for pension plan contracts; (iv) accounts managed by
the Franklin Templeton Group; (v) Shareholders of Templeton Institutional
Funds, Inc. reinvesting redemption proceeds from that fund under an employee
benefit plan qualified under Section 401 of the Internal Revenue Code of 1986,
as amended (the "Code"), in Shares of the Fund; (vi) certain unit investment
trusts and unit holders of such trusts reinvesting their distributions from
the trusts in the Fund; (vii) registered securities dealers and their
affiliates, for their investment account only; and (viii) registered personnel
and employees of securities dealers, and their spouses and family members, in
accordance with the internal policies and procedures of the employing
securities dealers.
Shares of the Fund may be purchased at net asset value by persons who have
redeemed, within the previous 365 days, their Shares of the Fund or Class I
shares of another of the Franklin Templeton Funds which were purchased with a
front-end sales charge or assessed a contingent deferred sales charge on
redemption. An investor may reinvest an amount not exceeding the redemption
proceeds. While credit will be given for any contingent deferred sales charge
paid on the Shares redeemed and subsequently repurchased, a new contingency
period will begin. Matured Shares will be reinvested at net asset value and
will not be subject to a new contingent deferred sales charge. Shares of the
Fund redeemed in connection with an exchange into another fund (see "Exchange
Privilege") are not considered "redeemed" for this privilege. In order to
exercise this privilege, a written order for the purchase of Shares of the
Fund must be received by the Fund or the Fund's Transfer Agent within 365 days
after the redemption. The 365 days, however, do not begin to run on redemption
proceeds placed immediately after redemption in a Franklin Bank Certificate of
Deposit ("CD") until the CD (including any rollover) matures. Reinvestment at
net asset value may also be handled by a securities dealer or other financial
institution, who may charge the Shareholder a fee for this service. The
redemption is a taxable transaction but reinvestment without a sales charge
may affect the amount of gain or loss recognized and the tax basis of the
Shares reinvested. If there has been a loss on the redemption, the loss may be
disallowed if a reinvestment in the same fund is made within a 30-day period.
Information regarding the possible tax consequences of such a reinvestment is
included under "General Information--Federal Tax Information" of this
Prospectus and in the SAI.
Shares of the Fund or Class I shares of another of the Franklin Templeton
Funds may be purchased at net asset value and without a contingent deferred
sales charge by persons who have received dividends and capital gain
distributions in cash from investments in the Fund within 365 days of the
payment date of such distribution. To exercise this privilege, a written
request to reinvest the distribution must accompany the purchase order.
Additional information may be obtained from Account Services at 1-800-393-
3001. See "General Information--Dividends and Distributions."
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by investors who have, within the past 60
days, redeemed an investment in a mutual fund which is not part of the
Franklin Templeton Funds and which charged the investor a contingent deferred
sales charge upon redemption, and which has investment objectives similar to
those of the Fund.
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by broker-dealers who have entered into a
supplemental agreement with FTD, or by registered investment advisers
affiliated with such broker-dealers, on behalf of their clients who are
participating in a comprehensive fee program (also known as a wrap fee
program).
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Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by anyone who has taken a distribution from
an existing retirement plan already invested in the Franklin Templeton Funds
(including former participants of the Franklin Templeton Profit Sharing 401(k)
plan), to the extent of such distribution. In order to exercise this
privilege, a written order for the purchase of Shares of the Fund must be
received by Franklin Templeton Trust Company ("FTTC"), the Funds, or Franklin
Templeton Investor Services, Inc. (the "Transfer Agent") within 365 days after
the plan distribution.
Shares may also be purchased at net asset value and without the imposition
of a contingent deferred sales charge by any state, county or city, or any
instrumentality, department, authority or agency thereof which has determined
that the Fund is a legally permissible investment and which is prohibited by
applicable investment laws from paying a sales charge or commission in
connection with the purchase of shares of any registered management investment
company (an "eligible governmental authority"). SUCH INVESTORS SHOULD CONSULT
THEIR OWN LEGAL ADVISERS TO DETERMINE WHETHER AND TO WHAT EXTENT THE SHARES OF
THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM. Municipal investors
considering investment of proceeds of bond offerings into the Fund should
consult with expert counsel to determine the effect, if any, of various
payments made by the Fund or its investment manager on arbitrage rebate
calculations. If an investment by an eligible governmental authority at net
asset value is made through a securities dealer who has executed a dealer
agreement with FTD, FTD or one of its affiliates may make a payment, out of
its own resources, to such securities dealer in an amount not to exceed 0.25%
of the amount invested. Contact Franklin Templeton Institutional Services for
additional information.
DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES. Shares may also be
purchased at net asset value and without the imposition of a contingent
deferred sales charge by certain designated retirement plans, including
profit-sharing, pension, 401(k) and simplified employee pension plans
("designated plans"), subject to minimum requirements with respect to number
of employees or amount of purchase, which may be established by FTD.
Currently, those criteria require that the employer establishing the plan have
200 or more employees or that the amount invested or to be invested during the
subsequent 13-month period in the Fund or in any of the Franklin Templeton
Investments totals at least $1 million. Employee benefit plans not designated
above or qualified under Section 401 of the Code ("non-designated plans") may
be afforded the same privilege if they meet the above requirements as well as
the uniform criteria for qualified groups previously described under "Group
Purchases," which enable FTD to realize economies of scale in its sales
efforts and sales-related expenses.
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by trust companies and bank trust departments
for funds over which they exercise exclusive discretionary investment
authority and which are held in a fiduciary, agency, advisory, custodial or
similar capacity. Such purchases are subject to minimum requirements with
respect to amount of purchase, which may be established by FTD. Currently,
those criteria require that the amount invested or to be invested during the
subsequent 13-month period in the Fund or any of the Franklin Templeton
Investments must total at least $1 million. Orders for such accounts will be
accepted by mail accompanied by a check, or by telephone or other means of
electronic data transfer directly from the bank or trust company, with payment
by federal funds received by the close of business on the next business day
following such order.
Shares may be purchased at net asset value and without the imposition of a
contingent deferred sales charge by trustees or other fiduciaries purchasing
securities for certain retirement plans of organizations with collective
retirement plan assets of $10 million or more, without regard to where such
assets are currently invested.
Refer to the SAI for further information regarding net asset value purchases
of Shares.
ADDITIONAL DEALER COMPENSATION. FTD, or one of its affiliates, from its own
resources, may also provide additional compensation to securities dealers in
connection with sales of Shares of the Franklin Templeton Funds. Compensation
may include financial assistance to securities dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising, sales campaigns and/or Shareholder services and programs
regarding one or more of the Franklin Templeton Funds and other dealer-
sponsored programs or events. In some instances, this compensation may be made
available only to certain securities dealers whose
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representatives have sold or are expected to sell significant amounts of
shares of the Franklin Templeton Funds. Compensation may include payment for
travel expenses, including lodging, incurred in connection with trips taken by
invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. Securities dealers may not use sales of the Fund's Shares to qualify
for this compensation to the extent such may be prohibited by the laws of any
state or any self-regulatory agency, such as the National Association of
Securities Dealers, Inc. In addition, FTD or its affiliates may make ongoing
payments to brokerage firms, financial institutions (including banks) and
others to facilitate the administration and servicing of Shareholder accounts.
None of the aforementioned additional compensation is paid for by the Fund or
its Shareholders.
Ongoing payments will be made to qualifying dealers at the annual rate of
0.25% of the average daily net asset value of Shares registered in the name of
that broker-dealer as nominee or held in a Shareholder account that designates
that broker-dealer as dealer of record. These payments are made in order to
promote selling efforts and to compensate dealers for providing certain
services, including processing purchase and redemption transactions,
establishing Shareholder accounts and providing certain information and
assistance with respect to the Fund. For purchases of Shares that are subject
to a contingent deferred sales charge, the dealer will receive ongoing
payments beginning in the thirteenth month after the date of purchase.
PURCHASING FUND SHARES. As to telephone orders placed with FTD by dealers,
the dealer must receive the investor's order before the close of the New York
Stock Exchange ("NYSE") and transmit it to FTD by 5:00 p.m., New York time,
for the investor to receive that day's Offering Price. Payment for such orders
must be by check in U.S. currency and must be promptly submitted to FTD.
Orders mailed to FTD by dealers or individual investors are effected at the
net asset value of the Fund's Shares next computed after the purchase order
accompanied by payment has been received by FTD. Such payment must be by check
in U.S. currency drawn on a commercial bank in the U.S. and, if over $100,000,
may not be deemed to have been received until the proceeds have been collected
unless the check is certified or issued by such bank. Any subscription may be
rejected by FTD or by the Fund.
The Fund may impose a $10 charge against a Shareholder account in the event
that a check or draft submitted for the purchase of Fund Shares is returned
unpaid to the Fund.
Investors should promptly check the confirmation advice that is mail after
each purchase (or redemption) in order to ensure that it has been accurately
recorded in the investor's account.
AUTOMATIC INVESTMENT PLAN. Investors may accumulate Fund Shares regularly
each month by means of automatic debits to their checking accounts ($25
minimum). Forms for this purpose are in the Shareholder Application in this
Prospectus. Such a plan is voluntary and may be discontinued by written notice
to FTD, which must be received at least 10 days prior to the collection date,
or by FTD upon written notice to the investor at least 30 days prior to the
collection date.
INSTITUTIONAL ACCOUNTS. Institutional investors will likely be required to
complete an institutional account application. There may be additional methods
of opening accounts, purchasing, redeeming or exchanging Shares of the Fund
available for institutional accounts. To obtain an institutional account
application or additional information regarding institutional accounts,
contact Franklin Templeton Institutional Services at 1-800-321-8563.
ACCOUNT STATEMENTS. Shareholder accounts are opened in accordance with the
Shareholder's registration instructions. Transactions in the account, such as
additional investments and dividend reinvestments, will be reflected on
regular confirmation statements from the Transfer Agent.
TEMPLETON STAR SERVICE. From a touch-tone phone, Templeton and Franklin
Shareholders may access an automated system (day or night) which offers the
following features:
By calling the Templeton STAR Service, Shareholders may obtain current price
and yield information specific to a Templeton Fund, regardless of class, or
Franklin Class II shares; obtain account information; and request duplicate
confirmation or year-end statements and money fund checks, if applicable.
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By calling the Franklin TeleFACTS System, Class I Shareholders may obtain
current price, yield or other performance information specific to a Franklin
Fund; process an exchange into an identically registered Franklin account;
obtain account information; and request duplicate confirmation or year-end
statements, money fund checks, if applicable, and deposit slips.
Share prices and account information specific to Templeton Class I or II
shares and Franklin Class II shares may also be accessed on TeleFACTS by
Franklin Class I and Class II shareholders.
The Templeton STAR Service is accessible by calling 1-800-654-0123. The
TeleFACTS system is accessible by calling 1-800-247-1753. The code for the
Fund, which will be needed to access system information is 416. The system's
automated operator will prompt the caller with easy to follow step-by-step
instructions from the main menu. Other features may be added in the future.
RETIREMENT PLANS. Shares of the Fund may be purchased through various
retirement plans including the following plans for which FTTC or its affiliate
acts as trustee or custodian: IRAs, Simplified Employee Pensions, 403(b)
plans, qualified plans for corporations, self-employed individuals and
partnerships, and 401(k) plans. A plan document must be adopted in order for a
retirement plan to be in existence. For further information about any of the
plans, agreements, applications and annual fees, contact Franklin Templeton
Distributors, Inc. To determine which retirement plan is appropriate, an
investor should contact his or her tax adviser.
NET ASSET VALUE. The net asset value per Share is determined as of the
scheduled closing time of the NYSE (generally 4:00 p.m., New York time) each
day the NYSE is open for trading, by dividing the value of the Fund's
securities plus any cash and other assets (including accrued interest and
dividends receivable) less all liabilities (including accrued expenses) by the
number of Shares outstanding, adjusted to the nearest whole cent. A security
listed or traded on a recognized stock exchange or NASDAQ is valued at its
last sale price on the principal exchange on which the security is traded. The
value of a foreign security is determined in its national currency as of the
close of trading on the foreign exchange on which it is traded or as of the
scheduled closing time of the NYSE (generally 4:00 p.m., New York time), if
that is earlier, and that value is then converted into its U.S. dollar
equivalent at the foreign exchange rate in effect at noon, New York time, on
the day the value of the foreign security is determined. If no sale is
reported at that time, the mean between the current bid and asked price is
used. Occasionally, events which affect the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the NYSE, and will therefore not be reflected in the computation
of the Fund's net asset value. If events materially affecting the value of
such securities occur during such period, then these securities will be valued
at fair value as determined by the management and approved in good faith by
the Board of Trustees. All other securities for which over-the-counter market
quotations are readily available are valued at the mean between the current
bid and asked price. Securities for which market quotations are not readily
available and other assets are valued at fair value as determined by the
management and approved in good faith by the Board of Trustees.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares for Class I shares of other Franklin
Templeton Funds which are eligible for sale in the Shareholder's state of
residence and in conformity with such fund's stated eligibility requirements
and investment minimums. Shares may not be exchanged for Class II shares of
any Franklin Templeton Funds. A contingent deferred sales charge will not be
imposed on exchanges. If the exchanged Shares were subject to a contingent
deferred sales charge in the original fund purchased, and Shares are
subsequently redeemed within 12 months following the calendar month following
the original purchase date, a contingent deferred sales charge will be
imposed. See also "How to Sell Shares of the Fund--Contingent Deferred Sales
Charge."
Exchange purchases are subject to the minimum investment requirements of the
fund purchased and no sales charge generally applies. Exchanges are made on
the basis of the net asset values of the Shares involved, except as set forth
below. Exchanges of Shares which were originally purchased without a sales
charge will be charged a sales charge in accordance with the terms of the
prospectus of the fund being purchased, unless the original investment on
which no sales charge was paid was transferred in from a fund on which the
investor paid a sales charge. Exchanges of shares from the Franklin Templeton
Money Funds are subject to
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applicable sales charges on the funds being purchased, unless the Franklin
Templeton Money Fund shares were acquired by an exchange from a fund having a
sales charge, or by reinvestment of dividends or capital gain distributions.
Exchanges of Shares of the Fund which were purchased with a lower sales charge
to a fund which has a higher sales charge will be charged the difference,
unless
the Shares were held in the original fund for at least six months prior to
executing the exchange. All exchanges are permitted only after at least 15
days have elapsed from the date of the purchase of the Shares to be exchanged.
A Shareholder may exchange Shares by writing to the Transfer Agent (see "How
to Sell Shares of the Fund"), by contacting his or her investment dealer or--
if the Shareholder Application indicates that the Shareholder has not declined
the option--by telephoning 1-800-393-3001. Telephone exchange instructions
must be received by FTD by the scheduled closing time of the NYSE (generally
4:00 p.m., New York time). Telephonic exchanges can involve only Shares in
non-certificated form. Shares held in certificate form are not eligible, but
may be returned and qualify for these services. All accounts involved in a
telephonic exchange must have the same registration and dividend option as the
account from which the Shares are being exchanged. The Trust and the Transfer
Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Please refer to "Telephone
Transactions--Verification Procedures." Forms for declining the telephone
exchange privilege and prospectuses of the other funds in the Franklin
Templeton Group may be obtained from FTD. Exchange redemptions and purchases
are processed simultaneously at the Share prices next determined after the
exchange order is received. (See "How to Buy Shares of the Fund--Offering
Price.") A gain or loss for tax purposes generally will be realized upon the
exchange, depending on the tax basis of the Shares redeemed.
This exchange privilege is available only in states where Shares of the fund
being acquired may legally be sold and may be modified, limited or terminated
at any time by the Fund upon 60 days' written notice. A Shareholder who wishes
to make an exchange should first obtain and review a current prospectus of the
fund into which he or she wishes to exchange. Broker-dealers who process
exchange orders on behalf of their customers may charge a fee for their
services. Such fee may be avoided by making requests for exchange directly to
the Transfer Agent.
If a substantial portion of the Fund's Shareholders should, within a short
period, elect to redeem their Shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Fund to initially invest this money in short-term, interest-bearing money
market instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objective exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
The contingency period of Shares will be tolled (or stopped) for the period
such Shares are exchange into and held in a Franklin or Templeton Class I
money market fund. If an account has Shares subject to a contingent deferred
sales charge, Shares will be exchanged into the new account on a "first-in,
first-out" basis. See also "How to Sell Shares of the Fund--Contingent
Deferred Sales Charge."
TRANSFERS. Transfer between identically registered accounts in the same fund
and class are treated as non-monetary and non-taxable events, and are not
subject to a contingent deferred sales charge. The transferred Shares will
continue to age from the date of original purchase.
EXCHANGES BY TIMING ACCOUNTS. In the case of market timing or allocation
services ("Timing Accounts"), FTD will deduct an administrative service fee of
$5.00 per exchange. Timing Accounts generally include accounts administered so
as to redeem or purchase Shares based upon certain predetermined market
indicators. In accordance with the terms of their respective prospectuses,
certain funds in the Franklin Templeton Group do not accept or may place
differing limitations than those described below on exchanges by Timing
Accounts.
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The Fund reserve the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing
Account or any person whose transactions seem to follow a timing pattern
who: (i) makes an exchange request out of the Fund within two weeks of an
earlier exchange request out of the Fund; (ii) makes more than two exchanges
out of the Fund per calendar quarter; or (iii) exchanges Shares equal in value
to at least $5 million, or more than 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase Shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
In addition, the Fund reserves the right to refuse the purchase side of
exchange requests by any Timing Account, person, or group if, in the
Investment Manager's judgment, the Fund would be unable to invest effectively
in accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. A Shareholder's exchanges into the Fund may
be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to the Fund and therefore may be refused.
Finally, as indicated above, the Fund and FTD reserve the right to refuse
any order for the purchases of Shares.
HOW TO SELL SHARES OF THE FUND
Shares will be redeemed, without charge, on request of the Shareholder in
"Proper Order" to the Transfer Agent. "PROPER ORDER" MEANS THAT THE REQUEST TO
REDEEM MUST MEET ALL OF THE FOLLOWING REQUIREMENTS:
1. It must be in writing, signed by the Shareholder(s) exactly in the manner
as the Shares are registered, and must specify either the number of Shares, or
the dollar amount of Shares, to be redeemed and sent to Franklin Templeton
Investor Services, Inc., P.O. Box 33030, St. Petersburg, Florida 33733-8030;
2. The signature(s) of the redeeming Shareholder(s) must be guaranteed by an
"eligible guarantor," including (a) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (b) national securities
exchanges, registered securities associations and clearing agencies; (c)
securities broker-dealers which are members of a national securities exchange
or a clearing agency or which have minimum net capital of $100,000; or (d)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature medallion program. A notarized
signature will not be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature of each of the
redeeming Shareholders must be guaranteed. A signature guarantee is not
required for redemptions of $50,000 or less, requested by and payable to all
Shareholders of record, to be sent to the address of record for that account.
However, the Fund reserves the right to require signature guarantees on all
redemptions. A signature guarantee is required in connection with any written
request for transfer of Shares. Also, a signature guarantee is required if the
Fund or the Transfer Agent believes that a signature guarantee would protect
against potential claims based on the transfer instructions, including, for
example, when (i) the current address of one or more joint owners of an
account cannot be confirmed; (ii) multiple owners have a dispute or give
inconsistent instructions to the Fund; (iii) the Fund has been notified of an
adverse claim; (iv) the instructions received by the Fund are given by an
agent, not the actual registered owner; (v) the Fund determines that joint
owners who are married to each other are separated or may be the subject of
divorce proceedings; or (vi) the authority of a representative of a
corporation, partnership, association, or other entity has not been
established to the satisfaction of the Fund;
3. Any outstanding certificates must accompany the request together with a
stock power signed by the Shareholder(s), with signature(s) guaranteed as
described in Item 2 above;
4. Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction, require the following
documentation to be in proper form:
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. Corporation -- (i) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (ii) a corporate
resolution in a form satisfactory to the Transfer Agent;
. Partnership -- (i) Signature guaranteed letter of instruction from a
general partner and, if necessary, (ii) pertinent pages from the
partnership agreement identifying the general partners or other
documentation in a form satisfactory to the Transfer Agent;
. Trust -- (i) Signature guaranteed letter of instruction from the
trustee(s), and (ii) a copy of the pertinent pages of the trust
document listing the trustee(s) or a certificate of incumbency if the
trustee(s) are not listed on the account registration;
. Custodial (other than a retirement account) -- Signature guaranteed
letter of instruction from the custodian;
. Accounts under court jurisdiction -- Check court documents and the
applicable state law since these accounts have varying requirements,
depending upon the state of residence; and
5. Redemption of Shares held in a retirement plan for which FTTC or its
affiliate acts as trustee or custodian must conform to the distribution
requirements of the plan and the Fund's redemption requirements above.
Distributions from such plans are subject to additional requirements under the
Code, and certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. For example, distributions from
retirement plans are subject to withholding requirements under the Code, and
the IRS Form W-4P (available from the Transfer Agent) may be required to be
submitted to the Transfer Agent with the distribution request, or the
distribution will be delayed. Franklin Templeton Investor Services, Inc. and
its affiliates assume no responsibility to determine whether a distribution
satisfies the conditions of applicable tax laws and will not be responsible
for any penalties assessed.
To avoid delay in redemption or transfer, Shareholders having questions
about these requirements should contact the Account Services Department by
calling 1-800-393-3001 or 813-823-8712.
The redemption price will be the net asset value of the Shares next computed
after the redemption request in Proper Order is received by the Transfer
Agent. A gain or loss for tax purposes generally will be realized upon the
redemption, depending on the tax basis of the Shares redeemed. Payment of the
redemption price ordinarily will be made by check (or by wire at the sole
discretion of the Transfer Agent if wire transfer is requested, including name
and address of the bank and the Shareholder's account number to which payment
of the redemption proceeds is to be wired) promptly after receipt of the
redemption request in Proper Order. However, if Shares have been purchased by
check, the Fund will make redemption proceeds available when a Shareholder's
check received for the Shares purchased has been cleared for payment by the
Shareholder's bank, which, depending upon the location of the Shareholder's
bank, could take up to 15 days or more. The check will be mailed by first-
class mail to the Shareholder's registered address (or as otherwise directed).
Remittance by wire (to a commercial bank account in the same name(s) as the
Shares are registered) or express mail, if requested, are subject to a
handling charge of up to $15, which will be deducted from the redemption
proceeds.
The Fund, through FTD, also repurchases Shares (whether in certificate or
book-entry form) through securities dealers. The Fund normally will accept
orders to repurchase such Shares by wire or telephone from dealers for their
customers at the net asset value next computed after the dealer has received
the Shareholder's request for repurchase, if the dealer received such request
before the scheduled closing time of the NYSE (generally 4:00 p.m., New York
time) on that day. Dealers have the responsibility of submitting such
repurchase requests by calling not later than 5:00 p.m., New York time, on
such day in order to obtain that day's applicable redemption price. Repurchase
of Shares is for the convenience of Shareholders and does not involve a charge
by the Fund; however, securities dealers may impose a charge on the
Shareholder for transmitting the notice of repurchase to the Fund. The Fund
reserves the right to reject any order for repurchase, which right of
rejection might adversely affect Shareholders seeking redemption through the
repurchase procedure. Ordinarily, payment will be made to the securities
dealer promptly after receipt of a repurchase order and Share certificate (if
any) in "Proper Order" as set forth above. The Fund also will accept, from
member firms of the NYSE, orders to repurchase Shares for which no
certificates have been issued by wire or telephone without a redemption
request signed by the Shareholder, provided the member firm indemnifies the
Fund and FTD from any liability resulting from the absence of the
Shareholder's signature. Forms for such indemnity agreement can be obtained
from FTD.
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The Fund may involuntarily redeem an investor's Shares if the net asset
value of such Shares is less than $100, except that involuntary redemptions
will not result from fluctuations in the value of an investor's Shares. In
addition, the Fund may involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
such other tax-related certifications as the Fund may require. A notice of
redemption, sent by first-class mail to the investor's address of record, will
fix a date not less than 30 days after the mailing date, and Shares will be
redeemed at net asset value at the close of business on that date, unless
sufficient additional Shares are purchased to bring the aggregate account
value up to $100 or more, or unless a certified taxpayer identification number
(or such other information as the Fund has requested) has been provided, as
the case may be. A check for the redemption proceeds will be mailed to the
investor at the address of record.
REINSTATEMENT PRIVILEGE. Shares of the Fund may be purchased at net asset
value with the proceeds from (i) a redemption of Shares of any Franklin
Templeton Fund which were purchased with an initial sales charge or assessed a
contingent deferred sales charge on redemption, or (ii) a dividend or
distribution paid by any of the Franklin Templeton Funds, within 365 days
after the date of the redemption or dividend or distribution. However, if a
Shareholder's original investment was in a fund with a lower sales charge, or
no sales charge, the Shareholder must pay the difference. While credit will be
given for any contingent deferred sales charge paid on the Shares redeemed, a
new contingency period will begin. Shares of the Fund redeemed in connection
with an exchange into another fund (see "Exchange Privilege") are not
considered redeemed for this privilege. In order to exercise this privilege, a
written order for the purchase of Shares of the Fund must be received by the
Fund or the Fund's Transfer Agent within 365 days after the redemption. The
365 days, however, do not begin to run on redemption proceeds placed
immediately after redemption in a Franklin Bank Certificate of Deposit ("CD")
until the CD (including any rollover) matures. The amount of gain or loss
resulting from a redemption may be affected by exercise of the reinstatement
privilege if the Shares redeemed were held for 90 days or less, or if a
Shareholder reinvests in the same fund within 30 days. Reinvestment will be at
the next calculated net asset value after receipt.
SYSTEMATIC WITHDRAWAL PLAN. A Shareholder may establish a Systematic
Withdrawal Plan ("Plan") and receive regular periodic payments from the
account provided that the net asset value of the Shares held by the
Shareholder is at least $5,000. There are no service charges for establishing
or maintaining a Plan. The minimum amount which the Shareholder may withdraw
is $50 per withdrawal transaction although this is merely the minimum amount
allowed under the Plan and should not be mistaken for a recommended amount.
Retirement plans subject to mandatory distribution requirements are not
subject to the $50 minimum. The Plan may be established on a monthly,
quarterly, semiannual or annual basis. If the Shareholder establishes a Plan,
any capital gain distributions and income dividends paid by the Fund to the
Shareholder's account must be reinvested for the Shareholder's account in
additional Shares at net asset value. Payments are then made from the
liquidation of Shares at net asset value on the day of the liquidation (which
is generally on or about the 25th of the month) to meet the specified
withdrawals. Payments are generally received three to five days after the date
of liquidation. By completing the "Special Payment Instructions for
Distributions" section of the Shareholder Application included with this
Prospectus, a Shareholder may direct the selected withdrawals to another of
the Franklin Templeton Funds, to another person, or directly to a checking
account. Liquidation of Shares may reduce or possibly exhaust the Shares in
the Shareholder's account, to the extent withdrawals exceed Shares earned
through dividends and distributions, particularly in the event of a market
decline. If the withdrawal amount exceeds the total Plan balance, the account
will be closed and the remaining balance will be sent to the Shareholder. As
with other redemptions, a liquidation to make a withdrawal payment is a sale
for federal income tax purposes. Because the amount withdrawn under the Plan
may be more than the Shareholder's actual yield or income, part of such a Plan
payment may be a return of the Shareholder's investment.
Maintaining a Plan concurrently with purchases of additional Shares of a
Fund would be disadvantageous because of the sales charge on the additional
purchases. Also, redemptions of Shares may be subject to a contingent deferred
sales charge if the Shares are redeemed within 12 months of the calendar month
of the original purchase date. The Shareholder should ordinarily not make
additional investments of less than $5,000 or three times the annual
withdrawals under the Plan during the time such a Plan is in effect.
With respect to Systematic Withdrawal Plans, the applicable contingent
deferred sales charge is waived for Share redemptions of up to 1% monthly of
an account's net asset value (12% annually, 6% semiannually, 3% quarterly).
For example, if an account
25
<PAGE>
maintained an annual balance of $1,000,000, only $120,000 could be withdrawn
through a once-yearly Systematic Withdrawal Plan free of charge; any amount
over that $120,000 would be assessed a 1% (or applicable) contingent deferred
sales charge.
A Plan may be terminated on written notice by the Shareholder or the Fund,
and it will terminate automatically if all Shares are liquidated or withdrawn
from the account, or upon the Fund's receipt of notification of the death or
incapacity of the Shareholder. Shareholders may change the amount (but not
below $50) and schedule of withdrawal payments or suspend one such payment by
giving written notice to the Transfer Agent at least seven business days prior
to the end of the month preceding a scheduled payment. Share certificates may
not be issued while a Plan is in effect.
REDEMPTIONS BY TELEPHONE. Shareholders who file a Telephone Redemption
Authorization Agreement (the "Agreement") (a copy of which is included in this
Prospectus) may redeem Shares of the Fund by telephone, subject to the
Restricted Account exception noted under "Telephone Transactions -- Restricted
Accounts." The Fund and the Transfer Agent will employ reasonable procedures
to confirm that instructions given by telephone are genuine. Shareholders,
however, bear the risk of loss in certain cases as described under "Telephone
Transactions -- Verification Procedures."
For Shareholder accounts with a completed Agreement on file, redemptions of
uncertificated Shares or Shares which have previously been deposited with the
Fund or the Transfer Agent may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before the scheduled closing
time of the NYSE (generally 4:00 p.m., New York time), on any business day
will be processed that same day. The redemption check will be sent promptly,
made payable to all the registered owners on the account, and will be sent
only to the address of record. Redemption requests by telephone will not be
accepted within 30 days following an address change by telephone. In that
case, a Shareholder should follow the other redemption procedures set forth in
this Prospectus. Institutional accounts which wish to execute redemptions in
excess of $50,000 must complete an Institutional Telephone Privileges
Agreement which is available from Franklin Templeton Institutional Services by
telephoning 1-800-321-8563.
CONTINGENT DEFERRED SALES CHARGE. In order to recover commissions paid to
securities dealers on qualified investments of $1 million or more, a
contingent deferred sales charge of 1% applies to redemptions of those
investments within the contingency period of 12 months following the calendar
month of their purchase, unless one of the exceptions described below applies.
The charge is 1% of the lesser of the net asset value of the Shares redeemed
(exclusive of reinvested dividends and capital gain distributions) or the net
asset value of such Shares at the time of purchase, and is retained by FTD.
The contingent deferred sales charge is waived in certain instances.
In determining if a contingent deferred sales charge applies, Shares not
subject to a contingent deferred sales charge are deemed to be redeemed first,
in the following order: (i) a calculated number of Shares representing amounts
attributable to capital appreciation of those Shares held less than the
contingency period of 12 months; (ii) Shares purchased with reinvested
dividends and capital gain distributions; and (iii) other Shares held longer
than the contingency period, and followed by any Shares held less than the
contingency period, on a "first in, first out" basis. For tax purposes, a
contingent deferred sales charge is treated as either a reduction in
redemption proceeds or an adjustment to the cost basis of the Shares redeemed.
The contingent deferred sales charge is waived, as applicable, for:
exchanges; any account fees; distributions to participants or beneficiaries in
FTTC individual retirement plan accounts due to death, disability or
attainment of age 59 1/2; tax-free returns of excess contributions from
employee benefit plans; distributions from employee benefit plans, including
those due to plan termination or plan transfer; redemptions through a
Systematic Withdrawal Plan of up to 1% monthly of an account's net asset value
(3% quarterly, 6% semiannually or 12% annually); redemptions initiated by the
Fund due to a Shareholder's account falling below the minimum specified
account size; and redemptions following the death of the Shareholder or the
beneficial owner.
All investments made during a calendar month, regardless of when during the
month the investment occurred, will age one month on the last day of that
month and each subsequent month.
26
<PAGE>
Requests for redemptions for a SPECIFIED DOLLAR amount, unless otherwise
specified, will result in additional Shares being redeemed to cover any
applicable contingent deferred sales charge, while requests for redemption of
a SPECIFIC NUMBER of Shares will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their investment representative of record, if
any, may be able to execute various transactions by calling the Transfer Agent
at 1-800-393-3001.
All Shareholders will be able to: (i) effect a change in address,
(ii) change a dividend option (see "Restricted Accounts" below),
(iii) transfer Fund Shares in one account to another identically registered
account in the Fund, (iv) request the issuance of certificates (to be sent to
the address of record only) and (v) exchange Fund Shares by telephone as
described in this Prospectus. In addition, Shareholders who complete and file
an Agreement as described under "How to Sell Shares of the Fund--Redemptions
by Telephone" will be able to redeem Shares of the Fund.
VERIFICATION PROCEDURES. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These will include: recording all telephone calls requesting
account activity by telephone, requiring that the caller provide certain
personal and/or account information requested by the telephone service agent
at the time of the call for the purpose of establishing the caller's
identification, and sending a confirmation statement on redemptions to the
address of record each time account activity is initiated by telephone. So
long as the Fund and the Transfer Agent follow instructions communicated by
telephone which were reasonably believed to be genuine at the time of their
receipt, neither they nor their affiliates will be liable for any loss to the
Shareholder caused by an unauthorized transaction. The Fund and the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions in the event such reasonable procedures are not followed.
Shareholders are, of course, under no obligation to apply for or accept
telephone transaction privileges. In any instance where the Fund or the
Transfer Agent is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed, and
neither the Fund, the Transfer Agent, nor their affiliates will be liable for
any losses which may occur because of a delay in implementing a transaction.
RESTRICTED ACCOUNTS. Telephone redemptions and dividend option changes may
not be accepted on Franklin Templeton retirement accounts. To assure
compliance with all applicable regulations, special forms are required for any
distribution, redemption, or dividend payment. While the telephone exchange
privilege is extended to Franklin Templeton IRA and 403(b) retirement
accounts, certain restrictions may apply to other types of retirement plans.
Changes to dividend options must also be made in writing.
To obtain further information regarding distribution or transfer procedures,
including any required forms, retirement account shareholders may call to
speak to a Retirement Plan Specialist at 1-800/527-2020 for Franklin accounts,
or 1-800/354-9191 (press "2" when prompted to do so) for Templeton accounts.
GENERAL. During periods of drastic economic or market changes, it is
possible that the telephone transaction privileges will be difficult to
execute because of heavy telephone volume. In such situations, Shareholders
may wish to contact their registered dealer for assistance, or to send written
instructions to the Fund as detailed elsewhere in this Prospectus.
Neither the Fund nor the Transfer Agent will be liable for any losses
resulting from the inability of a Shareholder to execute a telephone
transaction. The telephone transaction privilege may be modified or
discontinued by the Fund at any time upon 60 days' written notice to
Shareholders.
27
<PAGE>
MANAGEMENT OF THE FUND
The Trust is managed by its Board of Trustees and all powers of the Trust
are exercised by or under authority of the Board. Information relating to the
Trustees and executive officers is set forth under the heading "Management of
the Trust" in the SAI.
INVESTMENT MANAGER AND SUB-ADVISER. The Investment Manager of the Fund is
Templeton Global Bond Managers, a division of Templeton Investment Counsel,
Inc., a Florida corporation with offices at Broward Financial Centre, Ft.
Lauderdale, Florida 33394-3091. The Investment Manager manages the investment
and reinvestment of the Fund's assets. The Investment Manager does not furnish
any other services or facilities for the Fund, although such expenses are paid
by some investment advisers of other investment companies. As compensation for
its services, the Fund pays the Investment Manager a monthly fee, equal on an
annual basis to 0.60% of its average daily net assets during the year. The
Fund also pays its own operating expenses, including: (1) its pro rata portion
of the fees and expenses of the Trust's disinterested Trustees; (2) interest
expenses; (3) taxes and governmental fees; (4) brokerage commissions and other
expenses incurred in acquiring or disposing of portfolio securities; (5) the
expenses of registering and qualifying its Shares for sale with the SEC and
with various state securities commissions; (6) expenses of its independent
public accountants and legal counsel; (7) insurance premiums; (8) fees and
expenses of the Custodian and Transfer Agent and any related services; (9)
expenses of obtaining quotations of portfolio securities and of pricing
Shares; (10) its pro rata portion of the expenses of maintaining the Trust's
legal existence and of Shareholders' meetings; (11) expenses of preparation
and distribution to existing Shareholders of periodic reports, proxy materials
and prospectuses; (12) payments made pursuant to the Fund's Distribution Plan
(see "Plan of Distribution"); and (13) fees and expenses of membership in
industry organizations.
The Investment Manager has entered into a sub-advisory agreement with
Franklin Advisers, Inc. (the "Sub-Adviser"), a California corporation with
offices at 777 Mariners Island Boulevard, San Mateo, California 94403-7777,
pursuant to which the Sub-Adviser provides the Investment Manager with
investment advisory assistance and portfolio management advice with regard to
the Fund's investments in securities of U.S. issuers. For its services, the
Investment Manager pays the Sub-Adviser a monthly fee at an annual rate of
0.25% of the Fund's average daily net assets.
The Investment Manager and the Sub-Adviser are indirect wholly owned
subsidiaries of Franklin Resources, Inc. ("Franklin"). Through its
subsidiaries, Franklin is engaged in various aspects of the financial services
industry. The Investment Manager, the Sub-Adviser and their affiliates serve
as advisers for a wide variety of public investment mutual funds and private
clients in many nations. The Templeton organization has been investing
globally over the past 52 years and, with its affiliates, provides investment
management and advisory services to a worldwide client base, including over
4.3 million mutual fund shareholders, foundations, endowments, employee
benefit plans and individuals. The Investment Manager and its affiliates have
approximately 4,100 employees in the United States, Australia, Scotland,
Germany, Hong Kong, Luxembourg, Bahamas, Singapore, Canada and Russia.
The Investment Manager uses a disciplined, long-term approach to global and
international investing. It has an extensive global network of investment
research sources. Securities are selected for the Fund's portfolio on the
basis of fundamental company-by-company analysis. Many different selection
methods are used for different funds and clients and these methods are changed
and improved by the Investment Manager's research on superior selection
methods.
Currently, the lead portfolio manager for the Fund is Thomas W. Wilkinson, a
Vice President of the Investment Manager. Prior to joining the Templeton
organization, Mr. Wilkinson helped optimize network utilization for Bell
Laboratories. Douglas R. Lempereur exercises secondary portfolio management
responsibilities with respect to the Fund. Mr. Lempereur, senior Vice
president of the Investment Manager, joined the Templeton organization in
1988. Prior to joining the Templeton organization he was a securities analyst
for Colonial Management Association.
28
<PAGE>
BUSINESS MANAGER. Templeton Global Investors, Inc. provides certain
administrative facilities and services for the Fund, including payment of
salaries of officers, preparation and maintenance of books and records,
preparation of tax returns and financial reports, monitoring compliance with
regulatory requirements and monitoring tax-deferred retirement plans. For its
services, the Fund pays the Business Manager a fee equivalent on an annual
basis to 0.15% of the combined average daily net assets of the funds included
in the Trust (the Fund, Templeton Growth and Income Fund, Templeton Greater
European Fund, Templeton Latin America Fund, and Templeton Global
Infrastructure Fund) reduced to 0.135% of such combined assets in excess of
$200 million, to 0.10% of such assets in excess of $700 million, and to 0.075%
of such assets in excess of $1,200 million.
TRANSFER AGENT. Franklin Templeton Investor Services, Inc. serves as
transfer agent and dividend disbursing agent for the Fund.
CUSTODIAN. The Chase Manhattan Bank, N.A. serves as custodian of the Fund's
assets.
PLAN OF DISTRIBUTION. A Plan of Distribution has been approved for the Fund
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Any portion of Rule
12b-1 fees remaining from the Plan after distribution to securities dealers of
up to the maximum amount permitted under the Plan may be used by the Fund to
reimburse FTD for routine ongoing promotion and distribution expenses incurred
with respect to the Fund. Such expenses may include, but are not limited to,
the printing of prospectuses and reports used for sales purposes, expenses of
preparing and distributing sales literature and related expenses,
advertisements, and other distribution-related expenses, including a prorated
portion of FTD's overhead expenses attributable to the distribution of Fund
Shares, as well as any distribution or service fees paid to securities dealers
or their firms or others who have executed a servicing agreement with the
Fund, FTD or its affiliates.
The maximum amount which the Fund may pay to FTD or others under the Plan
for such distribution expenses is 0.35% per annum of average daily net assets,
payable on a quarterly basis. All expenses of distribution and marketing in
excess of 0.35% per annum will be borne by FTD, or others who have incurred
them, without reimbursement from the Fund. Under the Plan, costs and expenses
not reimbursed in any one given quarter (including costs and expenses not
reimbursed because they exceed the applicable limit under the Plan) may be
reimbursed in subsequent quarters or years, subject to applicable law. FTD has
informed the Fund that the costs and expenses that may be reimbursable in
future quarters or years were $3,617 (0.12% of its net assets) at March 31,
1995.
The Plan also covers any payments to or by the Fund, the Investment Manager,
FTD, or other parties on behalf of the Fund, the Investment Manager or FTD, to
the extent such payments are deemed to be for the financing of any activity
primarily intended to result in the sale of Shares issued by the Fund within
the context of Rule 12b-1. The payments under the Plan are included in the
maximum operating expenses which may be borne by the Fund. For more
information, including a discussion of the Board's policies with regard to the
amount of the Plan's fees, please see the SAI.
BROKERAGE COMMISSIONS. The Fund's brokerage policies are described under the
heading "Brokerage Allocation" in the SAI. The Fund's brokerage policies
provide that the receipt of research services from a broker and the sale of
Shares by a broker are factors which may be taken into account in allocating
securities transactions, so long as the prices and execution provided by the
broker equal the best available within the scope of the Fund's brokerage
policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The capitalization of the Trust
consists of an unlimited number of Shares of beneficial interest, par value
$0.01 per Share. The Board of Trustees is authorized, in its discretion, to
classify and allocate the unissued Shares of the Trust in an unlimited number
of separate series and may in the future divide existing series into two or
more classes. Each Share entitles the holder to one vote.
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<PAGE>
Shares for an initial investment, as well as subsequent investments,
including the reinvestment of dividends and capital gain distributions, are
generally credited to an account in the name of an investor on the books of
the Fund, without the issuance of a share certificate. Maintaining Shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss
or theft of a share certificate. No charge is made for the issuance of one
certificate for all or some of the Shares purchased in a single order. A lost,
stolen or destroyed certificate cannot be replaced without obtaining a
sufficient indemnity bond. The cost of such a bond, which is generally borne
by the Shareholder, can be 2% or more of the value of the lost, stolen or
destroyed certificate. A certificate will be issued if requested by the
Shareholder or by the securities dealer.
MEETINGS OF SHAREHOLDERS. The Trust is not required to hold annual meetings
of Shareholders and may elect not to do so. The Trust will call a special
meeting of Shareholders for the purpose of considering the removal of a person
serving as Trustee if requested in writing to do so by the holders of not less
than 10% of the Trust's outstanding Shares. The Trust is required to assist
Shareholder communications in connection with the calling of Shareholder
meetings to consider removal of a Trustee or Trustees.
DIVIDENDS AND DISTRIBUTIONS. The Fund intends normally to pay a monthly
dividend representing substantially all of its net investment income and to
distribute at least annually any net realized capital gains. Income dividends
and capital gain distributions paid by the Fund, other than on those Shares
whose owners keep them registered in the name of a broker-dealer, are
automatically reinvested on the payment date in whole or fractional Shares of
the Fund at net asset value as of the ex-dividend date, unless a Shareholder
makes a written or telephonic request for payments in cash. The processing
date for the reinvestment of dividends may vary from month to month, and does
not affect the amount or value of the Shares acquired. Income dividends and
capital gain distributions will be paid in cash on Shares during the time
their owners keep them registered in the name of a broker-dealer, unless the
broker-dealer has made arrangements with the Transfer Agent for reinvestment.
Prior to purchasing Shares of the Fund, the impact of dividends or capital
gain distributions which have been declared but not yet paid should be
carefully considered. Any dividend or capital gain distribution paid shortly
after a purchase by a Shareholder prior to the record date will have the
effect of reducing the per Share net asset value of the Shares by the amount
of the dividend or distribution. All or a portion of such dividend or
distribution, although in effect a return of capital, generally will be
subject to tax.
Checks are forwarded by first-class mail to the address of record. The
proceeds of any such checks which are not accepted by the addressee and
returned to the Fund will be reinvested in the Shareholder's account in whole
or fractional Shares at the net asset value next computed after the check has
been received by the Transfer Agent. Subsequent distributions automatically
will be reinvested at net asset value as of the ex-dividend date in additional
whole or fractional Shares.
FEDERAL TAX INFORMATION. The Fund intends to elect to be treated and to
qualify each year as a regulated investment company under Subchapter M of the
Code. See the SAI for a summary of requirements that must be satisfied to so
qualify. A regulated investment company generally is not subject to federal
income tax on income and gains distributed in a timely manner to its
shareholders. The Fund intends to distribute to Shareholders substantially all
of its net investment income and realized capital gains, which generally will
be taxable income or capital gains in their hands. Distributions declared in
October, November or December to Shareholders of record on a date in such
month and paid during the following January will be treated as having been
received by Shareholders on December 31 in the year such distributions were
declared. The Fund will inform Shareholders each year of the amount and nature
of such income or gains. Sales or other dispositions of Fund Shares generally
will give rise to taxable gain or loss. A more detailed description of tax
consequences to Shareholders is contained in the SAI under the heading "Tax
Status."
The Fund may be required to withhold Federal income tax at the rate of 31%
of all taxable distributions (including redemptions) paid to Shareholders who
fail to provide the Fund with their correct taxpayer identification number or
to make required certifications or where the Fund or the Shareholder has been
notified by the Internal Revenue Service that the Shareholder is subject to
backup withholding. Corporate Shareholders and certain other Shareholders
specified in the Code are exempt from backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
Shareholder's federal income tax liability.
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<PAGE>
INQUIRIES. Shareholders' inquiries will be answered promptly. They should be
addressed to Franklin Templeton Investor Services, Inc., P.O. Box 33030, St.
Petersburg, Florida 33733-8030 -- telephone 1-800-393-3001 or 813-823-8712.
Transcripts of Shareholder accounts less than three-years old are provided on
request without charge; requests for transcripts going back more than three
years from the date the request is received by the Transfer Agent are subject
to a fee of up to $15 per account.
PERFORMANCE INFORMATION. The Fund may include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Fund over
a period of 1, 5 and 10 years (or up to the life of the Fund), will reflect
the deduction of the maximum initial sales charge and deduction of a
proportional share of Fund expenses (on an annual basis), and will assume that
all dividends and distributions are reinvested when paid. Total return may be
expressed in terms of the cumulative value of an investment in the Fund at the
end of a defined period of time. For a description of the methods used to
determine total return for the Fund, see the SAI.
STATEMENTS AND REPORTS. The Fund's fiscal year ends on March 31. Annual
reports (containing financial statements audited by independent auditors and
additional information regarding the Fund's performance) and semiannual
reports (containing unaudited financial statements) are sent to Shareholders
each year. Additional copies may be obtained, without charge, upon request to
the Fund Information Department. The Fund also sends to each Shareholder a
confirmation statement after every transaction that affects the Shareholder's
account and a year-end historical confirmation statement.
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<PAGE>
APPENDIX
BOND RATINGS
Bonds rated Aa by Moody's Investors Service, Inc. ("Moody's") are judged by
Moody's to be of high quality by all standards. Together with bonds rated Aaa
(Moody's highest rating), they comprise what are generally known as high-grade
bonds. Aa bonds are rated lower than Aaa bonds because margins of protection
may not be as large as those of Aaa bonds, or fluctuations of protective
elements may be of greater amplitude, or there may be other elements present
which make the long-term risks appear somewhat larger than those applicable to
Aaa securities. Bonds which are rated A by Moody's possess many favorable
investment attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Moody's Baa rated bonds are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payment and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements because
their future cannot be considered as well assured. Uncertainty of position
characterizes bonds in this class, because the protection of interest and
principal payments often may be very moderate and not well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period of time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds rated AAA by Standard & Poor's Corporation ("S&P") are considered by
S&P to be the highest grade obligations and possess the ultimate degree of
protection as to principal and interest. Bonds rated AA are judged by S&P to
be high-grade obligations and in the majority of instances differ only in
small degree from issues rated AAA (S&P's highest rating). Bonds rated A by
S&P have a strong capacity to pay principal and interest, although they are
somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions.
S&P's BBB rated bonds, or medium-grade category bonds, are between sound
obligations and those where the speculative elements begin to predominate.
Although these bonds have adequate asset coverage and normally are protected
by satisfactory earnings, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and principal.
Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and
principal in accordance with the terms of the obligation. While such bonds may
have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
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INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
GENERAL. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service ("IRS").
OBTAINING A NUMBER. If you do not have a Social Security Number/Taxpayer
Identification Number ("SSN/TIN"), you must obtain Form SS-5 or Form SS-4 from
your local Social Security or IRS office and apply for one. If you have
checked the "Awaiting TIN" box and signed the certification, withholding will
apply to payments relating to your account unless you provide a certified TIN
within 60 days.
WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE TAXPAYER ID # OF
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
. Individual Individual . Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- -----------------------------------------------------------------------------------
. Joint Actual owner of . Corporation, Corporation,
Individual account, or if Partnership, or other Partnership, or other
combined funds, the organization organization
first-named
individual
- -----------------------------------------------------------------------------------
. Unif. Minor . Broker nominee Broker nominee
Gift/Transfer
to Minor
- -----------------------------------------------------------------------------------
. Sole Owner of business
Proprietor
- -----------------------------------------------------------------------------------
. Legal Ward, Minor, or
Guardian Incompetent
- -----------------------------------------------------------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient"
box if you are an exempt recipient. Exempt recipients generally include:
A corporation A real estate investment trust
A financial institution A common trust fund operated by a bank
under section 584(a)
An organization exempt from tax An entity registered at all times
under section 501(a), or an under the Investment Company
individual retirement plan Act of 1940
A registered dealer in securities or
commodities registered in the U.S.
or a U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject
to an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your Federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith.
If you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. Generally, you are an
"Exempt Foreign Person" if you are not (1) a citizen or resident of the U.S.,
or (2) a U.S. corporation, partnership, estate, or trust. In the case of an
individual, an "Exempt Foreign Person" is one who has been physically present
in the U.S. for less than 31 days during the current calendar year. An
individual who is physically present in the U.S. for at least 31 days during
the current calendar year will still be treated as an "Exempt Foreign Person,"
provided that the total number of days physically present in the current
calendar year and the two preceding calendar years does not equal or exceed
183 days (counting all of the days in the current calendar year, only one-
third of the days in the first preceding calendar year and only one-sixth of
the days in the second preceding calendar year). In addition, lawful permanent
residents or green card holders may not be treated as "Exempt Foreign
Persons." If you are an individual or an entity, you must not now be, or at
this time expect to be, engaged in a U.S. trade or business with respect to
which any gain derived from transactions effected by the Fund/Payer during the
calendar year is effectively connected to the U.S.
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual,
provide your permanent address. If you are a partnership or corporation,
provide the address of your principal office. If you are an estate or trust,
provide the address of your permanent residence or the principal office of any
fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that
(1) the taxpayer identification number you have given is correct, and (2) the
IRS has not notified you that you are subject to backup withholding because
you failed to report certain interest or dividend income. You may use Form W-
9, "Payer's Request for Taxpayer Identification Number and Certification," to
make these certifications. If an account is no longer active, you do not have
to notify a Fund/Payer or broker of your change in status unless you also have
another account with the same Fund/Payer that is still active. If you receive
interest from more than one Fund/Payer or have dealings with more than one
broker or barter exchange, file a certificate with each. If you have more than
one account with the same Fund/Payer, the Fund/Payer may require you to file a
separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years. Only certifications that are in proper order will be treated
as having been filed with the Fund.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for
three calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
33
<PAGE>
FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of
a resolution or other certificate of authority to authorize the purchase as
well as sale (redemption) of shares and withdrawals by checks or drafts. You
may use the following form of resolution or you may prefer to use your own. It
is understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly
elected _______________________________ of _______________________________
TITLE CORPORATE
NAME
a _ organized under the laws of the State of _ and that the following is a
TYPE OF ORGANIZATION STATE
true and correct copy of a resolution adopted by the Board of Directors at a
meeting duly called and held on __________________________________________
DATE
RESOLVED, that the ____________________________________________ of this
OFFICERS' TITLES
Corporation or Association are authorized to open an account in the name of
the Corporation or Association with one or more of the Franklin Group of
Funds(R) or Templeton Family of Funds (collectively, the "Funds") and to
deposit such funds of this Corporation or Association in this account as
they deem necessary or desirable; that the persons authorized below may
endorse checks and other instruments for deposit to said account or
accounts; and
FURTHER RESOLVED, that any of the following _____ officers are authorized to
sign any share assignment on
NUMBER
behalf of this Corporation or Association and to take any other actions as
may be necessary to sell or redeem its shares in the Funds or to sign
checks or drafts withdrawing funds from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold harmless,
indemnify, and defend the Funds, their custodian bank, Franklin Templeton
Distributors, Inc., Franklin Templeton Investor Services, Inc., and their
affiliates, from any claim, loss or liability resulting in whole or in
part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary.)
- -------------------------------------- --------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- --------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- --------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- --------------------------------------
NAME/TITLE (PLEASE PRINT OR TYPE) SIGNATURE
- -------------------------------------- --------------------------------------
NAME OF CORPORATION OR ASSOCIATION DATE
Certified from minutes ___________________________________________________
NAME AND TITLE
CORPORATE SEAL (if appropriate)
34
<PAGE>
THE FRANKLIN TEMPLETON TELEPHONE REDEMPTION AUTHORIZATION AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
Shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Fund's Prospectus.
The telephone redemption privilege is available only to Shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges automatically available to Franklin
Templeton Fund shareholders, please sign and return this authorization to
Franklin Templeton Investor Services, Inc. ("Services"), transfer agent and
shareholder servicing agent for the Franklin Templeton Funds.
SHAREHOLDER AUTHORIZATION: I/We request the telephone redemption privilege
under the terms described below and in the prospectus for each investment
company in the Franklin Templeton Group of Funds (a "Franklin Templeton Fund"
or a "Fund"), now opened or opened at a later date, holding shares registered
as follows:
- ------------------------------------- ---------------------------------------
PRINT NAME(S) AS SHOWN IN YOUR ACCOUNT REGISTRATION ("SHAREHOLDER")
- ------------------------------------- ---------------------------------------
ACCOUNT NUMBER(S)
I/We authorize each Fund and Services to honor and act upon telephone requests
given as provided in this agreement to redeem shares from any
Shareholder account:
- ------------------------------------- ---------------------------------------
SIGNATURE(S) AND DATE
- ------------------------------------- ---------------------------------------
PRINT NAME(S) (AND TITLE/CAPACITY, IF APPLICABLE)
VERIFICATION PROCEDURES: I/We understand and agree that: (1) each Fund and
Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Services may be liable
for any losses due to unauthorized or fraudulent telephone instructions; (2)
the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the
time of the call for the purpose of establishing the caller's identification,
and the sending of confirmation statements to the address of record each time
a redemption is initiated by telephone; and (3) so long as the Fund and
Services follow the confirmation procedures in acting on instructions
communicated by telephone which were reasonably believed to be genuine at the
time of receipt, neither they, nor their parent or affiliates, will be liable
for any loss, damages or expenses caused by an unauthorized or fraudulent
redemption request.
JOINTLY OWNED/CO-TRUSTEE ACCOUNTS: Each of us signing this agreement as either
joint owners or co-trustees authorizes each Fund and Services to honor
telephone redemption requests given by ANY ONE of the signers, or our
investment representative of record, if any, ACTING ALONE.
APPOINTMENT OF ATTORNEY-IN-FACT: In order to issue telephone redemption
requests acting alone, each of us individually makes the following
appointment: I hereby appoint the other joint owner(s)/co-trustee(s) as my
agent(s) (attorney[s]-in-fact) with full power and authority to individually
act for me in any lawful way with respect to the issuance of instructions to a
Fund or Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it
is revoked by either written notice from any one of us delivered to a Fund or
Services by registered mail, return receipt requested or by a Fund or Services
upon receipt of any information that causes a Fund or Services to believe in
good faith that there is or that there may be a dispute among any of us with
respect to the Franklin Templeton Fund account(s) covered by this agreement.
Each of us agrees to notify the Fund or Services immediately upon the death of
any of the signers.
CORPORATE/PARTNERSHIP/TRUST/RETIREMENT ACCOUNTS: The Shareholder and each of
us signing this agreement on behalf of the Shareholder represent and warrant
to each Franklin Templeton Fund and Services that the Shareholder has the
authority to enter into this agreement and that each of us is duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Services may honor a telephone redemption request given by ANY
officer/partner/member/administrator/or agent of the Shareholder ACTING ALONE.
RESTRICTED ACCOUNTS: Telephone redemptions may not be accepted on Franklin
Templeton Trust Company or Templeton Funds Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin Templeton Investor Services, Inc., Attn.: Telephone Redemptions
Dept., P.O. Box 33030, St. Petersburg, Florida 33733-8030.
35
<PAGE>
The Franklin Templeton Group
Literature Request -- Call today for a free descriptive brochure and
prospectus on any of the funds listed below. The prospectus contains more
complete information, including fees, charges and expenses, and should be read
carefully before investing or sending money.
TEMPLETON FUNDS Maryland FRANKLIN FUNDS SEEKING
American Trust Massachusetts*** HIGH CURRENT INCOME
Americas Government Michigan*** AGE High Income Fund
Securities Fund Minnesota*** German Government Bond Fund
Developing Markets Trust Missouri Global Government Income
Foreign Fund New Jersey Fund
Global Infrastructure Fund New York* Investment Grade Income
Global Opportunities Trust North Carolina Fund
Greater European Fund Ohio*** U.S. Government Securities
Growth Fund Oregon Fund
Pennsylvania
Growth and Income Fund Tennessee** FRANKLIN FUNDS SEEKING
Income Fund Texas HIGH CURRENT INCOME AND
Japan Fund Virginia STABILITY OF PRINCIPAL
Latin America Fund Washington** Adjustable Rate
Money Fund Securities Fund
Real Estate FRANKLIN FUNDS Adjustable U.S.
Securities Fund SEEKING CAPITAL GROWTH Government Securities Fund
Smaller Companies California Growth Fund Short-Intermediate U.S.
Growth Fund DynaTech Fund Government Securities Fund
World Fund Equity Fund
Global Health Care Fund FRANKLIN FUNDS FOR NON-
FRANKLIN FUNDS Gold Fund U.S. INVESTORS
SEEKING TAX- Growth Fund Tax-Advantaged High
FREE INCOME International Equity Fund Yield Securities Fund
Federal Intermediate Term Pacific Growth Fund Tax-Advantaged
Tax-Free Income Fund Real Estate Securities International Bond Fund
Federal Tax-Free Income Fund Tax-Advantaged U.S.
Fund Small Cap Growth Fund Government Securities Fund
High Yield Tax-Free
Income Fund FRANKLIN FUNDS SEEKING FRANKLIN TEMPLETON
Insured Tax-Free GROWTH AND INCOME INTERNATIONAL CURRENCY
Income Fund*** Balance Sheet Investment FUNDS
Puerto Rico Tax-Free Fund Global Currency Fund
Income Fund Convertible Securities Hard Currency Fund
Fund High Income Currency
FRANKLIN STATE-SPECIFIC Equity Income Fund Fund
FUNDS SEEKING TAX-FREE Global Utilities Fund
INCOME Income Fund FRANKLIN MONEY MARKET
Alabama Premier Return Fund FUNDS
Arizona* Rising Dividends Fund California Tax-Exempt
Arkansas** Strategic Income Fund Money Fund
California* Utilities Fund Federal Money Fund
Colorado IFT U.S. Treasury Money
Connecticut Market Portfolio
Florida* Money Fund
Georgia New York Tax-Exempt
Hawaii** Money Fund
Indiana Tax-Exempt Money Fund
Kentucky
Louisiana FRANKLIN FUND FOR
CORPORATIONS
Corporate Qualified
Dividend Fund
FRANKLIN TEMPLETON
VARIABLE ANNUITIES
Franklin Valuemark
Franklin Templeton
Valuemark Income
Plus (an immediate
annuity)
Toll-free 1-800-DIAL BEN (1-800-342-5236)
* Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
36
<PAGE>
NOTES
37
<PAGE>
NOTES
38
<PAGE>
NOTES
-----
39
<PAGE>
- --------------------------
TEMPLETON AMERICAS
GOVERNMENT
SECURITIES FUND
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Account Services
1-800-393-3001
Fund Information
1-800/DIAL BEN
Institutional Services
1-800-321-8563
This Prospectus is not
an offering of the
securities herein
described in any state
in which the offering
is not authorized. No
sales representative,
dealer, or other person
is authorized to give
any information or make
any representations
other than those
contained in this
Prospectus. Further
information may be
obtained from the
Principal Underwriter.
- --------------------------
[RECYCLING LOGO APPEARS HERE] TL416 P 07/95
TEMPLETON
AMERICAS
GOVERNMENT SECURITIES
FUND
Prospectus
July 10, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
<PAGE>
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
Mail to: FRANKLIN TEMPLETON DISTRIBUTORS, INC.
P.O. Box 33031 St. Petersburg, Florida 33733-8031 (800) 393-3001
Please do not use this form for any Retirement Plan for which Franklin Templeton
Trust Company serves as custodian or trustee, or for Templeton Money Fund,
Templeton Institutional Funds or Templeton Capital Accumulator Fund. Request
separate Applications and/or Prospectuses.
- --------------------------------------------------------------------------------
SHAREHOLDER APPLICATION OR REVISION
[_] Please check the box if this is a revision and see Section 8
- --------------------------------------------------------------------------------
Please check Class I or Class II, if applicable, next to your Fund selection.
Class I and Class II shares have different sales charges and operating expenses,
among other differences, as described in each Fund's prospectus.
Date __________________
<TABLE>
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C> <C>
[_] [_]$______ AMERICAN TRUST [_] [_]$______ GLOBAL OPPORTUNITIES TRUST
[_] ______ AMERICAS GOVERNMENT SECURITIES FUND [_] [_] ______ GREATER EUROPEAN FUND
[_] [_] ______ DEVELOPING MARKETS TRUST [_] [_] ______ GROWTH FUND
[_] [_] ______ FOREIGN FUND [_] [_] ______ GROWTH AND INCOME FUND
[_] [_] ______ GLOBAL INFRASTRUCTURE FUND [_] [_] ______ INCOME FUND
<CAPTION>
CLASS CLASS
I II I II
<S> <C> <C>
[_] $______ JAPAN FUND [_] [_] OTHER: $___________
[_] [_] ______ LATIN AMERICA FUND (Except for Class II Money Fund)
[_] [_] ______ REAL ESTATE SECURITIES FUND _______________________________
[_] [_] ______ SMALLER COMPANIES GROWTH FUND _______________________________
[_] [_] ______ WORLD FUND _______________________________
</TABLE>
- --------------------------------------------------------------------------------
1 ACCOUNT REGISTRATION (PLEASE PRINT)
- --------------------------------------------------------------------------------
[_] INDIVIDUAL OR JOINT ACCOUNT
__________________________________________________ ________-________-__________
First Name Middle Initial Last Name Social Security Number (SSN)
__________________________________________________ ________-________-__________
Joint Owner(s) (Joint ownership means "Joint Social Security Number (SSN)
Tenants With Rights of Survivorship" unless
otherwise specified) All owners must sign Section 4.
- --------------------------------------------------------------------------------
[_] GIFT/TRANSFER TO A MINOR
_______________________________ As Custodian For________________________________
Name of Custodian (one only) Minor's Name (one only)
_____________Uniform Gifts/Transfers to Minors Act________-________-____________
State of Residence Minor's Social Security Number
Please Note: Custodian's Signature, not Minor's, is required in Section 4.
- --------------------------------------------------------------------------------
[_] TRUST, CORPORATION, PARTNERSHIP, RETIREMENT PLAN, OR OTHER ENTITY
__________________________________________ ____________-_______________________
Name Taxpayer Identification Number (TIN)
__________________________________________ ____________________________________
Name of Beneficiary (if to be included in Date of Trust Document (must be
the Registration) completed for registration)
________________________________________________________________________________
Name of Each Trustee (if to be included in the Registration)
- --------------------------------------------------------------------------------
2 ADDRESS
- --------------------------------------------------------------------------------
___________________________________________ Daytime Phone (___)________________
Street Address Area Code
____________________________________-______ Evening Phone (___)________________
City State Zip Code Area Code
I am a Citizen of: [_] U.S. or [_]______________________________
Country of Residence
- --------------------------------------------------------------------------------
3 INITIAL INVESTMENT ($100 minimum initial investment)
- --------------------------------------------------------------------------------
Check(s) enclosed for $___________________ . (Payable to Franklin Templeton
Distributors, Inc. or the Fund(s)
indicated above.)
- --------------------------------------------------------------------------------
4 SIGNATURE AND TAX CERTIFICATIONS
(All registered owners must sign application)
- --------------------------------------------------------------------------------
See "Important Notice Regarding Taxpayer IRS Certifications" in back of
prospectus. The Fund reserves the right to refuse to open an account without
either a certified Taxpayer Identification Number ("TIN") or a certification of
foreign status. Failure to provide tax certifications in this section may result
in backup withholding on payments relating to your account and/or in your
inability to qualify for treaty withholding rates.
I am(We are) not subject to backup withholding because I(we) have not been
notified by the IRS that I am(we are) subject to backup withholding as a result
of a failure to report all interest or dividends or because the IRS has notified
me(us) that I am(we are) no longer subject to backup withholding. (If you are
currently subject to backup withholding as a result of a failure to report all
interest or dividends, please cross out the preceding statement.)
[_] The number shown above is my(our) correct TIN, or that of the Minor named in
Section 1.
[_] AWAITING TIN. I am(We are) waiting for a number to be issued to me(us).
I(We) understand that if I(we) do not provide a TIN to the Fund within 60
days, the Fund is required to commence 31% backup withholding until I(we)
provide a certified TIN.
[_] EXEMPT RECIPIENT. Individuals cannot be exempt. Check this box only after
reading the instructions to see whether you qualify as an exempt recipient.
(You should still provide a TIN.)
[_] EXEMPT FOREIGN PERSON. Check this box only if the following statement
applies: "I am(we are) neither a citizen nor a resident of the United
States. I(we) certify to the best of my(our) knowledge and belief, I(we)
qualify as an exempt foreign person and/or entity as described in the
instructions."
Permanent address for tax purposes:
________________________________________________________________________________
Street Address City State Country Postal Code
PLEASE NOTE: The IRS only allows one TIN to be listed on an account. On joint
accounts, it is preferred that the primary account owner (or person listed first
on the account) list his/her number as requested above.
CERTIFICATION - Under the penalties of perjury, I(we) certify that (1) the
information provided on this application is true, correct and complete, (2)
I(we) have read the prospectus(es) for the Fund(s) in which I am(we are)
investing and agree to the terms thereof, and (3) I am(we are) of legal age or
an emancipated minor. I (we) acknowledge that Shares of the Fund(s) are not
insured or guaranteed by any agency or institution and that an investment in the
Shares involves risks, including the possible loss of principal.
X X
- ---------------------------------------- ---------------------------------------
Signature Signature
X X
- ---------------------------------------- ---------------------------------------
- --------------------------------------------------------------------------------
5 BROKER/DEALER USE ONLY (PLEASE PRINT)
- --------------------------------------------------------------------------------
-----------------------
We hereby submit this application for the purchase of Templeton Dealer Number
shares of the Fund indicated above in accordance with
the terms of our selling agreement with Franklin -----------------------
Templeton Distributors, Inc. ("FTD"), and with the
Prospectus for the Fund. We agree to notify FTD of any
purchases of Class I shares which may be eligible for
reduced or eliminated sales charges.
-----------------------------------------------------------------------------
WIRE ORDER ONLY: The attached check for $_______ should be applied against
Wire Order
Confirmation Number ___________ Dated___________ For__________ Shares
-----------------------------------------------------------------------------
Securities Dealer Name__________________________________________________________
Main Office Address________________ Main Office Telephone Number (___)__________
Branch Number________ Representative Number ________ Representative Name________
Branch Address_________________________ Branch Telephone Number (___)___________
Authorized Signature, Securities Dealer______________________ Title_____________
- --------------------------------------------------------------------------------
ACCEPTED: Franklin Templeton Distributors, Inc. By___________ Date______________
- --------------------------------------------------------------------------------
Please see reverse side for Shareholder Account Privileges:
[_] Distribution Options [_] Special Instructions for Distributions
[_] Systematic Withdrawal Plan [_] Automatic Investment Plan
[_] Telephone Exchange Service [_] Letter of Intent
[_] Cumulative Quantity Discount
This application must be preceded or accompanied by a prospectus for
the Fund(s) being purchased.
<PAGE>
- --------------------------------------------------------------------------------
6 DISTRIBUTION OPTIONS (Check one)
- --------------------------------------------------------------------------------
Check one - if no box is checked, all dividends and capital gains will be
reinvested in additional shares of the Fund.
[_] Reinvest all dividends [_] Pay all dividends in cash
and capital gains. and reinvest capital gains.
[_] Pay capital gains in cash [_] Pay all dividends and
and reinvest dividends. capital gains in cash.
- --------------------------------------------------------------------------------
7 OPTIONAL SHAREHOLDER PRIVILEGES
- --------------------------------------------------------------------------------
A. SPECIAL PAYMENT INSTRUCTIONS FOR DISTRIBUTIONS (Check one box)
[_] Pay Distributions, as noted in Section 6, or [_] withdrawals, as noted in
section 7(B), to purchase shares of another Franklin or Templeton Fund.
Restrictions may apply to purchases of shares of a different class. See
the prospectus for details.
Fund Name______________________ Existing Account Number___________________
[_] Send my Distributions to the person, named below, instead of as registered
in Section 1.
Name___________________________ Street Address____________________________
City___________________________ State____________________Zip Code_________
- --------------------------------------------------------------------------------
B. SYSTEMATIC WITHDRAWAL PLAN
Please withdraw from my Franklin Templeton account $_____($50 minimum)
[_]Monthly [_]Quarterly [_]Semi-Annually or [_]Annually as set forth in the
Prospectus, starting in ______________(Month). The net asset value of the
shares held must be at least $5,000 at the time the plan is established.
Additional restrictions may apply to Class II or other shares subject to
contingent deferred sales charge, as described in the prospectus. Send the
proceeds to: [_]Address of Record OR [_]the Franklin Templeton Fund or person
specified in Section 7(A) - Special Payment Instructions for Distributions.
- --------------------------------------------------------------------------------
C. TELEPHONE TRANSACTIONS
TELEPHONE EXCHANGE PRIVILEGE: If the Fund does not receive specific
instructions from the shareholder, either in writing or by telephone, the
Telephone Exchange Privilege (see the prospectus) is automatically extended
to each account. The shareholder should understand, however, that the Fund
and Franklin Templeton Investor Services, Inc. ("FTI") or Franklin Templeton
Trust Company and their agents will not be liable for any loss, injury,
damage or expense as a result of acting upon instructions communicated by
telephone reasonably believed to be genuine. The shareholder agrees to hold
the Fund and its agents harmless from any loss, claims, or liability arising
from its or their compliance with such instructions. The shareholder
understands that this option is subject to the terms and conditions set forth
in the prospectus of the fund to be acquired.
[_]No, I do NOT wish to participate in the Telephone Exchange Privilege or
authorize the Fund or its agents, including FTI or Templeton Funds Trust
Company, to act upon instructions received by telephone to exchange shares
for shares of any other account(s) within the Franklin Templeton Group of
Funds.
Telephone Redemption Privilege: This is available to shareholders who
specifically request it and who complete the Franklin Templeton Telephone
Redemption Authorization Agreement in the back of the Fund's prospectus.
- --------------------------------------------------------------------------------
D. AUTOMATIC INVESTMENT PLAN
IMPORTANT: ATTACH AN UNSIGNED, VOIDED CHECK (FOR CHECKING ACCOUNTS) OR A
SAVINGS ACCOUNT DEPOSIT SLIP HERE, AND COMPLETE THE INFORMATION BELOW. I(We)
would like to establish an Automatic Investment Plan (the "Plan") as
described in the Prospectus. I(We) agree to reimburse FTI and/or FTD for any
expenses or losses that they may incur in connection with my(our) plan,
including any caused by my(our) bank's failure to act in accordance with
my(our) request. If my(our) bank makes any erroneous payment or fails to make
a payment after shares are purchased on my(our) behalf, any such purchase may
be cancelled and I(we) hereby authorize redemptions and/or deductions from
my(our) account for that purpose.
Debit my (circle one) savings, checking, other ________ account monthly for
$__________($25 minimum) on or about the [_]1st [_]5th [_]15th or [_]20th day
starting_______(month), to be invested in (name of
Fund)___________________Account Number (if known)_______
INSTRUCTIONS TO BANK - AUTOMATIC INVESTMENT PLAN AUTHORIZATION
To:__________________________________ ______________________________________
Name of Your Bank ABA Number
___________________________ _________________ ____________ ______________
Street Address City State Zip Code
I(We) authorize you to charge my(our) Checking/Savings Account and to make
payment to FTD, upon instructions from FTD. I(We) agree that in making payment
for such charges your rights shall be the same as if each were a charge made and
signed personally by me(us). This authority shall remain in effect until you
receive written notice from me(us) changing its terms or revoking it. Until you
actually receive such notice, I(we) agree that you shall be fully protected in
paying any charge under this authority. I(we) further agree that if any such
charge is not made, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever.
X_________________________________________________ ___________________________
Signature(s) EXACTLY as shown on your bank records Date
______________________________________ _______________________________________
Print Name(s) Account Number
______________________________ _________________ ____________ ______________
Your Street Address City State Zip Code
- --------------------------------------------------------------------------------
E. LETTER OF INTENT (LOI)
[_]I(We) agree to the terms of the LOI and provisions for reservations of
Class I shares and grant FTD the security interest set forth in the
Prospectus. Although I am(we are) not obligated to do so, it is my(our)
intention to invest over a 13 month period in Class I and/or Class II shares
of one or more Franklin or Templeton Funds (including all money market funds
in the Franklin Templeton Group) an aggregate amount at least equal to that
which is checked below. I understand that reduced sales charges will apply
only to purchases of Class I shares.
<TABLE>
<S> <C> <C> <C> <C>
[_]$50,000-99,999 (except for Income Fund [_]$100,000-249,999 [_]$250,000-499,999 [_]$500,000-999,999 [_]$1,000,0000 or more
and Americas Government Securities Fund)
</TABLE>
Purchases of Class I Shares under LOI of $1,000,000 or more are made at net
asset value and may be subject to a contingent deferred sales charge as
described in the prospectus.
Purchases made within the last 90 days will be included as part of your LOI.
Please write in your Account Number(s)____________ ____________ ____________
- --------------------------------------------------------------------------------
F. CUMULATIVE QUANTITY DISCOUNT -- APPLICABLE TO CLASS I SHARES ONLY
Class I shares may be purchased at the offering price applicable to the total
of (a) the dollar amount then being purchased plus (b) the amount equal to
the cost or current value (whichever is higher) of the combined holdings of
the purchaser, his or her spouse, and their children under age 21, of Class I
and Class II shares of funds in the Franklin Templeton Group as stated in the
prospectus. In order for this cumulative quantity discount to be made
available, the shareholder or his or her securities dealer must notify FTI or
FTD of the total holdings in the Franklin Templeton Group each time an order
is placed. I understand that reduced sales charges will apply only to
purchases of Class I shares.
[_]I(We) own shares of more than one Fund in the Franklin Templeton Group and
qualify for the Cumulative Quantity Discount described above and in the
Prospectus.
My(Our) other Account Number(s) are ___________ ___________ _______________
- --------------------------------------------------------------------------------
8 ACCOUNT REVISION (If Applicable)
- --------------------------------------------------------------------------------
If you are using this application to revise your Account Registration, or wish
to have Distributions sent to an address other than the address on your existing
Account's Registration, a Signature Guarantee is required. Signatures of all
registered owners must be guaranteed by an "eligible guarantor" as defined in
the "How to Sell Shares of the Fund" section in the Fund's Prospectus. A Notary
Public is not an acceptable guarantor.
X________________________________________ ____________________________________
Signature(s) of Registered Account Owners Account Number(s)
X________________________________________ ____________________________________
X________________________________________
X________________________________________ ____________________________________
Signature Guarantee Stamp
NOTE: For any change in registration, please send us any outstanding
Certificates by Registered Mail.
- --------------------------------------------------------------------------------
TLGOF APP 07/95
<PAGE>
Part B
10 Cover Page
11 Table of Contents
12 General Information and History
13 Investment Objectives and Policies
14 Management of the Trust
15 Principal Shareholders
16 Investment Management and Other Services
17 Brokerage Allocation
18 Description of Shares; Part A
19 Purchase, Redemption and Pricing of Shares
20 Tax Status
21 Principal Underwriter
22 Performance Information
23 Financial Statements
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED
JULY 10, 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
SUPPLEMENTED 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) 237-0738
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...........................................27
-Investment Management
Agreements.......................................27
-Management Fees...................................28
-The Investment Managers...........................29
-Sub-Advisory Agreement............................29
-Business Manager..................................30
-Custodian and Transfer Agent......................31
-Legal Counsel.....................................32
-Independent Accountants...........................32
-Reports to Shareholders...........................32
Brokerage Allocation.................................33
Purchase, Redemption and Pricing of
Shares.............................................36
-Ownership and Authority Disputes..................36
-Tax-Deferred Retirement Plans.....................37
-Letter of Intent..................................38
-Special Net Asset Value
Purchases......................................39
Tax Status...........................................40
Principal Underwriter................................48
Description of Shares................................50
Performance Information..............................51
Financial Statements.................................54
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
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("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").
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
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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 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
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rated debt securities, be more dependent upon such creditworthiness analysis
than would be the case if the Fund were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in low rated debt securities prices because the
advent of a recession could lessen the ability of a highly leveraged company to
make principal and interest payments on its debt securities. If the issuer of
low rated debt securities defaults, 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.
FUTURES CONTRACTS. Each Fund may purchase and sell
financial futures contracts. Although some financial futures
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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 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.
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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 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
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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. 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
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(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.
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.
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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
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.
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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.)
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.
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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.
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
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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, 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.
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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 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.
<PAGE>
^ ^
There is little historical data on Russian securities markets because
they are relatively new and a substantial proportion of securities transactions
in Russia are privately negotiated outside of stock exchanges. Because of the
recent formation of the securities markets as well as the underdeveloped state
of the banking and telecommunications systems, settlement, clearing and
registration of securities transactions are subject to significant risks.
Ownership of shares (except where shares are held through depositories that meet
the requirements of the 1940 Act) is defined according to entries in the
company's share register and normally evidenced by extracts from the register or
by formal share certificates. However, there is no central registration system
for shareholders and these services are carried out by the companies themselves
or by registrars located throughout Russia. These registrars are not necessarily
subject to effective state supervision and it is possible for 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
<PAGE>
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 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.
<PAGE>
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
The Trustees consider at least annually the likelihood of the
imposition by any foreign government of exchange control restrictions which
would affect the liquidity of the 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."
<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 these funds and clients may
contain many or some of the same securities. When any two or more of these funds
or clients are engaged simultaneously in the purchase or sale of the same
security, the transactions are placed for execution in a manner designed to be
equitable to each party. The larger size of the transaction may affect the price
of the security and/or the quantity which may be bought or sold for each party.
If the transaction is large enough, brokerage commissions in certain countries
may be negotiated below those otherwise chargeable.
Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other remuneration in
connection therewith, may be effected between any of these funds, or between
funds and private clients, under procedures adopted pursuant to Rule 17a-7 under
the 1940 Act.
PERSONAL SECURITIES TRANSACTIONS. Access persons of the Franklin Templeton
Group, as defined in SEC Rule 17(j) under the 1940 Act, who are employees of
Franklin Resources, Inc. or their subsidiaries, are permitted to engage in
personal securities transactions subject to the following general restrictions
and procedures: (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.
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:
<PAGE>
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. ^
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. ^
^
F. BRUCE CLARKE
19 Vista View Blvd.
Thornhill, Ontario
Trustee
Retired; formerly, credit
adviser, National Bank of
Canada, Toronto. ^
<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.
HASSO-G VON DIERGARDT-NAGLO
R.R. 3
Stouffville, Ontario
Trustee
Farmer; and president of
Clairhaven Investments, Ltd. and
other private investment
companies. ^
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. ^
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
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).
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. ^
CHARLES B. JOHNSON*
777 Mariners Island Blvd.
San Mateo, California
Chairman of the Board
and Vice President
President, chief executive officer, and director of Franklin Resources, Inc.;
chairman of the board and director of Franklin Advisers, Inc. and Franklin
Templeton Distributors, Inc.; director of Franklin Administrative Services,
Inc., General Host Corporation and Templeton Global Investors, Inc.; and officer
and director, trustee or managing general partner, as the case may be, of most
other subsidiaries of Franklin Resources, Inc. and of 55 of the investment
companies in the Franklin Templeton Group.
BETTY P. KRAHMER
2201 Kentmere Parkway
Wilmington, Delaware
Trustee
Director or trustee of various civic associations; formerly, economic analyst,
U.S. Government.
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
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. ^
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.
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).
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).
<PAGE>
NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS
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).
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.
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.
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).
<PAGE>
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).
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).
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).
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.
JEFFREY L. STEELE
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
Partner, Dechert Price & Rhoads.
<PAGE>
- --------------------------
* 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.
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>
Name of
TRUSTEE
Aggregate
Compensation from
THE TRUST*
Number of
Franklin Templeton
Fund Boards on which
TRUSTEE SERVES
Total Compensation
from All Funds in
Franklin Templeton
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
<PAGE>
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 June 16, 1995, there were 594,395 Shares of Growth and Income
Fund outstanding, of which 595 Shares (0.1%) were owned beneficially, directly
or indirectly, by all the Trustees and Officers of the Trust as a group. As of
June 16, 1995, there were 1,982,187 Shares of Infrastructure Fund outstanding,
of which 559 Shares (0.03%) were owned beneficially, directly or indirectly, by
all the Trustees and Officers of the Trust as a group. As of June 16, 1995,
there were 294,755 Shares of Americas Government Securities Fund outstanding, of
which 170 Shares (less than 0.01%) were owned beneficially, directly or
indirectly, by all the Trustees and Officers of the Trust as a group. As of June
16, 1995, to the knowledge of management, no person owned beneficially 5% or
more of the outstanding Shares of Growth and Income Fund, except Templeton
Global Investors, Inc., 500 E. Broward Blvd., Suite 2100, Fort Lauderdale,
Florida 33394 ("Templeton Global Investors") owned 103,614 Shares (16% of the
outstanding Shares). As of June 16, 1995, to the knowledge of management, no
person owned beneficially 5% or more of the outstanding Shares of Infrastructure
Fund^. As of June 16, 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 257,354 Shares (83% 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, relating to Growth and Income Fund
and Infrastructure Fund were approved by the Board of Trustees,
<PAGE>
including a majority of the Trustees who were not parties to the Agreements or
interested persons of any such party, at a meeting on February 25, 1994, 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, 1995.
The Investment Management Agreement, dated June 27, 1994, 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 March 18, 1994, and
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
Investment Management Agreements, dated May 8, 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 April 25, 1995, and by
Templeton Global Investors, Inc., as sole Shareholder of Greater European Fund
and Latin America Fund, on May 8, 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 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 one or more of its
affiliates has selected for one or more of its other clients or for clients of
its affiliates, the orders for all such securities transactions are placed for
execution by methods determined by the Investment Manager, with approval by
<PAGE>
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 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
<PAGE>
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 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.
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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;
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,
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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 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
<PAGE>
Government Securities Fund. These fees are adjusted each year to
reflect changes in the Department of Labor Consumer Price Index.
LEGAL COUNSEL. Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, D.C. 20005, is legal counsel for the 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 Fund Information 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.
<PAGE>
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
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.
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
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.
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.
<PAGE>
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
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
<PAGE>
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, 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).
<PAGE>
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 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,
<PAGE>
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 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.
<PAGE>
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.
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
<PAGE>
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 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-
<PAGE>
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 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
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
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 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
<PAGE>
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. ^
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
<PAGE>
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 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
<PAGE>
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 total return for the
period from March 14, 1994 (commencement of operations) through September 30,
1994, on an annualized basis, was 2.74% for Growth and Income Fund and 6.36% for
Infrastructure Fund. The total return for the period from June 27, 1994
(commencement of operations) through September 30, 1994, on an annualized basis,
was 0.00% for Americas Government Securities Fund. The average, annual total
return for the one-year period ended March 31, 1995 was -4.40% for Growth and
Income Fund 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.
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 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),
<PAGE>
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 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:
(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.
<PAGE>
(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.
(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."
- --------
* Sir John Templeton sold the Templeton organization to
Franklin Resources, Inc. in October, 1992 and resigned from
the Fund's Board on April 16, 1995. He is no longer
involved with the investment management process.
<PAGE>
o "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."
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.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: Incorporated by reference
from the 1995 Annual Report to Shareholders of
Templeton Global Rising Dividends Fund,
Templeton Global Infrastructure Fund and
Templeton Americas Government Securities Fund:
Financial Highlights
Independent Auditors' Report
Investment Portfolios as of March 31, 1995
Statements of Assets and Liabilities
as of March 31, 1995
Statements of Operations for the year ended
March 31, 1995
Statements of Changes in Net Assets for the
year ended March 31, 1995 and the period ended
March 31, 1994
Notes to Financial Statements
(b) Exhibits:
(1) Trust Instrument
(2) Bylaws
(3) Not applicable
(4)(A) Not applicable
(5)(A) Investment Management Agreement -
Templeton Global Rising Dividends Fund
(B) Investment Management Agreement -
Templeton Global Infrastructure Fund
(C) Investment Management Agreement -
Templeton Americas Government Securities
Fund
(D) Sub-Advisory Agreement - Templeton
Americas Government Securities Fund
(E) Investment Management Agreement -
Templeton Greater European Fund*
(F) Investment Management Agreement -
Templeton Latin America Fund*
(6)(A) Amended and Restated Distribution
Agreement*
(B) Form of Dealer Agreement
(7) Not applicable
<PAGE>
(8) Amended and Restated Custody Agreement*
(9)(A) Amended and Restated Business Management
Agreement*
(B) Amended and Restated Transfer Agent
Agreement*
(C) Form of Sub-Transfer Agent Services
Agreement
(D) Form of Shareholder Sub-Accounting
Services Agreement
(10) Opinion and consent of counsel (filed
with Rule 24f-2 Notice)***
(11) Consent of Independent Public Accountants
(12) Not applicable
(13)(A) Investment Letter**
(14) Not applicable
(15)(A)(i) Distribution Plan - Templeton Global
Rising Dividends Fund Class I**
(ii) Distribution Plan - Templeton Global
Rising Dividends Fund Class II**
(B)(i) Distribution Plan - Templeton Global
Infrastructure Fund Class I**
(ii) Distribution Plan - Templeton Global
Infrastructure Fund Class II**
(C) Distribution Plan - Templeton Americas
Government Securities Fund
(D)(i) Distribution Plan - Templeton Greater
European Fund Class I*
(ii) Distribution Plan - Templeton Greater
European Fund Class II*
(E)(i) Distribution Plan - Templeton Latin
America Fund Class I*
(ii) Distribution Plan - Templeton Latin
America Fund Class II*
<PAGE>
(16) Schedule showing computation of
performance quotations provided in
response to Item 22 (unaudited)
(17) Assistant Secretary's Certificate
pursuant to Rule 483(b)
(18) Form of Multiclass Plan**
(27) Financial Data Schedule
- --------------------
* Filed with Post-Effective Amendment No. 4 to the
Registration Statement on February 21, 1995.
** Filed with Post-Effective Amendment No. 5 to the
Registration Statement on May 1, 1995.
*** Rule 24f-2 Notice filed with the Securities & Exchange Commission
on May 26, 1995.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Record Holders
Templeton Global Rising Dividends Fund
(Templeton Growth and Income Fund)
<PAGE>
Shares of Beneficial Interest, par value $0.01 per share:
763 Class I shareholders, 9 Class II shareholders as of
May 31, 1995.
Templeton Global Infrastructure Fund
Shares of Beneficial Interest, par value $0.01 per share:
3,217 Class I shareholders, 27 Class II shareholders as of
May 31, 1995.
Templeton Americas Government Securities Fund
Shares of Beneficial Interest, par value $0.01 per share:
62 Class I shareholders, 0 Class II shareholders as of May
31, 1995.
Templeton Greater European Fund
Shares of Beneficial Interest, par value $0.01 per share:
1 Class I shareholder, 1 Class II shareholder as of May 5,
1995.
Templeton Latin America Fund
Shares of Beneficial Interest, par value $0.01 per share:
1 Class I shareholder, 1 Class II shareholder as of May 5,
1995.
Item 27. Indemnification
Reference is made to Article X, Section 10.02 of the
Registrant's Trust Instrument, which is filed
herewith.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to trustees,
officers and controlling persons of the Registrant by the
Registrant pursuant to the Trust Instrument or otherwise,
the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and,
therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
trustees, officers or controlling persons of the
Registrant in connection with the successful defense of
any act, suit or proceeding) is asserted by such trustees,
officers or controlling persons in connection with the
shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by
it is
<PAGE>
against public policy as expressed in the Act and will be
governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Advisers
and their Officers and Directors
The business and other connections of Templeton, Galbraith
& Hansberger Ltd. (the investment adviser of Templeton
Growth and Income Fund, Templeton Greater European Fund,
and Templeton Latin America Fund) and Templeton Investment
Counsel, Inc. (the investment adviser of Templeton Global
Infrastructure Fund and Templeton Americas Government
Securities Fund) are described in Parts A and B.
For information relating to the investment advisers'
officers and directors, reference is made to Forms ADV
filed under the Investment Advisers Act of 1940 by
Templeton, Galbraith & Hansberger Ltd. and Templeton
Investment Counsel, Inc.
Item 29. Principal Underwriters
(a) Franklin Templeton Distributors, Inc. also acts
as principal underwriter of shares of Templeton
Growth Fund, Inc., Templeton Funds, Inc.,
Templeton Smaller Companies Growth Fund, Inc.,
Templeton Income Trust, Templeton Real Estate
Securities Fund, Templeton Capital Accumulator
Fund, Inc., Templeton Developing Markets Trust,
Templeton American Trust, Inc., Templeton
Institutional Funds, Inc., Templeton Global
Opportunities Trust, Templeton Variable Products
Series Fund, Templeton Variable Annuity Fund,
AGE High Income Fund, Inc., Franklin Balance
Sheet Investment Fund, Franklin California Tax
Free Income Fund, Inc., Franklin California Tax
Free Trust, Franklin Custodian Funds, Inc.,
Franklin Equity Fund, Franklin Federal Money
Fund, Franklin Federal Tax-Free Income Fund,
Franklin Gold Fund, Franklin International
Trust, Franklin Investors Securities Trust,
Franklin Managed Trust, Franklin Money Fund,
Franklin Municipal Securities Trust, Franklin
New York Tax-Free Income Fund, Franklin New York
Tax-Free Trust, Franklin Premier Return Fund,
Franklin Real Estate Securities Trust, Franklin
Strategic Series, Franklin Tax-Advantaged High
Yield Securities Fund, Franklin Tax-Advantaged
International Bond Fund, Franklin Tax-Advantaged
U.S. Government Securities Fund, Franklin Tax
Exempt Money Fund, Franklin Tax-Free Trust,
Franklin Templeton Japan Fund, Institutional
<PAGE>
Fiduciary Trust, Franklin Templeton Money Fund,
and Franklin Templeton Global Trust.
(b) The directors and officers of FTD are identified
below. Except as otherwise indicated, the address
of each director and officer is 777 Mariners
Island Blvd., San Mateo, CA 94404.
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name Underwriter Registrant
<S> <C> <C>
Gregory E. Johnson President None
Charles B. Johnson Chairman of the Trustee and
Board and Director Vice President
Rupert H. Johnson, Jr. Executive Vice None
President and Director
Harmon E. Burns Executive Vice None
President and Director
Edward V. McVey Senior Vice President None
Kenneth V. Domingues Senior Vice President None
Martin L. Flanagan Senior Vice President Vice President
and Treasurer
William J. Lippman Senior Vice President None
Loretta Fry Vice President None
Deborah R. Gatzek Senior Vice President None
and Assistant Secretary
Richard C. Stoker Senior Vice President None
Charles E. Johnson Senior Vice President None
500 East Broward Blvd.
Ft. Lauderdale, FL 33394
James K. Blinn Vice President None
Richard O. Conboy Vice President None
James A. Escobedo Vice President None
^
<PAGE>
^
Peter Jones Vice President None
700 Central Avenue
St. Petersburg, FL 33701
Philip J. Kearns Vice President None
Jack Lemein Vice President None
John R. McGee Vice President None
Thomas M. Mistele Vice President Secretary
700 Central Avenue
St. Petersburg, FL 33701
Harry G. Mumford Vice President None
^
Vivian J. Palmieri Vice President None
Kent P. Strazza Vice President None
John R. Trayser Vice President None
Leslie M. Kratter Secretary None
^
Robert N. Geppner Assistant Vice None
President
^
John R. Kay Assistant Vice Vice President
500 East Broward Blvd. President
Ft. Lauderdale, FL 33394
^
Karen DeBellis Assistant Treasurer None
700 Central Avenue
St. Petersburg, FL 33701
Philip A. Scatena Assistant Treasurer None
</TABLE>
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of
<PAGE>
the Investment Company Act of 1940 and rules promul-gated
thereunder are in the possession of Templeton Global
Investors, Inc., 500 East Broward Blvd., Fort
Lauderdale, Florida 33394.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant undertakes to call a meeting of
Shareholders for the purpose of voting upon the
question of removal of a Trustee or Trustees when
requested to do so by the holders of at least 10%
of the Registrant's outstanding shares of
beneficial interest and in connection with such
meeting to comply with the shareholder
communications provisions of Section 16(c) of the
Investment Company Act of 1940.
(d) Registrant undertakes to furnish to each person to
whom a Prospectus for a series of the Registrant is
provided a copy of the series' latest annual report,
upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant certifies that it
meets all the requirements for effectiveness of the Registration Statement
pursuant to Rule 485 (b) under the Securities Act of 1993 and has duly caused
this amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Petersburg, Florida
on the 7th day of July, 1995.
TEMPLETON GLOBAL INVESTMENT TRUST
By: Mark G. Holowesko, President*
*By: /s/ THOMAS M. MISTELE
Thomas M. Mistele
attorney-in-fact**
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
President July 7, 1995
Mark G. Holowesko* (Principal Executive
Officer)
Treasurer July 7, 1995
James R. Baio* (Principal Financial
and Accounting Officer)
Trustee July 7, 1995
Charles B. Johnson*
Trustee July 7, 1995
Martin L. Flanagan*
<PAGE>
SIGNATURE TITLE DATE
Trustee July 7, 1995
Hasso-G von Diergardt-Naglo*
Trustee July 7, 1995
F. Bruce Clarke*
Trustee July 7, 1995
Betty P. Krahmer*
Trustee July 7, 1995
Fred R. Millsaps*
Trustee July 7, 1995
John Wm. Galbraith
Trustee July 7, 1995
Andrew H. Hines, Jr.*
Trustee July 7, 1995
Harris J. Ashton*
Trustee July 7, 1995
S. Joseph Fortunato*
Trustee July 7, 1995
Gordon S. Macklin*
Trustee July 7, 1995
Nicholas F. Brady*
</TABLE>
*By: /s/ THOMAS M. MISTELE
Thomas M. Mistele
attorney-in-fact**
- ----------------------
** Powers of attorney were filed in Pre-Effective Amendment No.
1 to the Registration Statement on Form N-1A of Templeton
<PAGE>
Global Investment Trust (File No. 33-73244), filed on
March 1, 1994.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS FILED WITH
POST-EFFECTIVE AMENDMENT NO. 7 TO THE
REGISTRATION STATEMENT ON FORM N-1A
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
EXHIBIT INDEX
Exhibit Number Name of Exhibit
( 1) Trust Instrument
( 2) Bylaws
( 5)(A) Investment Management Agreement -
Templeton Global Rising Dividends Fund
(B) Investment Management Agreement -
Templeton Global Infrastructure Fund
(C) Investment Management Agreement -
Templeton Americas Government Securities
Fund
(D) Sub-Advisory Agreement -
Templeton Americas Government Securities
Fund
( 6)(B) Dealer Agreement
( 9)(C) Form of Sub-Transfer Agent Services
Agreement
(D) Form of Shareholders Sub-Accounting
Services Agreement
(11) Consent of Independent Public
Accountants
(15)(C) Distribution Plan - Templeton Americas
Government Securities Fund
(16) Schedule showing computation of
performance quotations provided in
response to Item 22 (unaudited)
(17) Assistant Secretary's Certificate
pursuant to Rule 483 (b)
(27) Financial Data Schedule
TEMPLETON GLOBAL INVESTMENT TRUST
TRUST INSTRUMENT
DATED DECEMBER 21, 1993
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
TABLE OF CONTENTS
Page
ARTICLE I NAME AND DEFINITIONS
Section 1.01 Name 1
Section 1.02 Definitions 1
ARTICLE II BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest 2
Section 2.02 Issuance of Shares 3
Section 2.03 Register of Shares
and Share Certificates 3
Section 2.04 Transfer of Shares 3
Section 2.05 Treasury Shares 4
Section 2.06 Establishment of Serie 4
Section 2.07 Investment in the Trust 5
Section 2.08 Assets and Liabilities
of Series 5
Section 2.09 No Preemptive Rights 6
Section 2.10 No Personal
Liability of Shareholders 6
Section 2.11 Assent to Trust Instrument. 7
ARTICLE III THE TRUSTEES
Section 3.01 Management of the Trust 7
Section 3.02 Initial Trustees 8
Section 3.03 Term of Office 8
Section 3.04 Vacancies and Appointments 8
Section 3.05 Temporary Absence 9
Section 3.06 Number of Trustees 9
Section 3.07 Effect of Ending of
a Trustee's Service 9
Section 3.08 Ownership of
Assets of the Trust 9
ARTICLE IV POWERS OF THE TRUSTEES
Section 4.01 Powers 9
Section 4.02 Issuance and
Repurchase of Shares 13
Section 4.03 Trustees and
Officers as Shareholders 13
Section 4.04 Action by the Trustees 13
Section 4.05 Chairman of the Trustees 14
Section 4.06 Principal Transactions 14
ARTICLE V EXPENSES OF THE TRUST 14
<PAGE>
ARTICLE VI INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
Section 6.01 Investment Adviser 15
Section 6.02 Principal Underwriter 16
Section 6.03 Administrator 16
Section 6.04 Transfer Agent 16
Section 6.05 Parties to Contract 16
Section 6.06 Provisions and Amendments 17
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers 17
Section 7.02 Meetings 18
Section 7.03 Quorum and Required Vote 18
ARTICLE VIII CUSTODIAN
Section 8.01 Appointment and Duties 19
Section 8.02 Central Certificate System 19
ARTICLE IX DISTRIBUTIONS AND REDEMPTIONS
Section 9.01 Distributions 20
Section 9.02 Redemptions 20
Section 9.03 Determination of
Net Asset Value 20
and Valuation of Portfolio Assets
Section 9.04 Suspension of the Right
of Redemption 22
ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.01 Limitation of Liability 22
Section 10.02 Indemnification 22
Section 10.03 Shareholders 24
ARTICLE XI MISCELLANEOUS
Section 11.01 Trust Not a Partnership 24
Section 11.02 Trustee's Good Faith Action, 25
Expert Advice, No Bond or Surety
Section 11.03 Establishment of Record Dates 25
Section 11.04 Termination of Trust 25
Section 11.05 Reorganization 26
Section 11.06 Filing of Copies,
References, Headings 27
Section 11.07 Applicable Law 27
Section 11.08 Amendments 28
Section 11.09 Fiscal Year 29
Section 11.10 Name Reservation 29
Section 11.11 Provisions in Conflict
with Law 29
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
December 21, 1993
TRUST INSTRUMENT, made by Thomas M. Mistele and Harold F.
McElraft (the "Trustees").
WHEREAS, the Trustees desire to establish a business trust
for the investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property
contributed to the trust hereunder shall be held and managed in trust under this
Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
Section 1.01 Name. The name of the trust created hereby is
"Templeton Global Investment Trust."
Section 1.02 Definitions. Wherever used herein, unless
otherwise required by the context or specifically provided:
(a) "Bylaws" means the Bylaws of the Trust as adopted by
the Trustees, as amended from time to time.
(b) "Commission" has the meaning given it in the 1940 Act.
"Affiliated Person," "Assignment," "Interested Person" and "Principal
Underwriter" shall have the respective meanings given them in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the Commission
or any rules or regulations adopted by or interpretive releases of the
Commission thereunder. "Majority Shareholder Vote" shall have the same meaning
as the term "vote of a majority of the outstanding voting securities" is given
in the 1940 Act, as modified by or interpreted by any applicable order or orders
of the Commission or any rules or regulations adopted by or interpretive
releases of the Commission thereunder.
(c) "Delaware Act" refers to Chapter 38 of Title 12 of the Delaware
Code entitled "Treatment of Delaware Business Trusts," as amended from time to
time.
(d) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 9.03 hereof.
(e) "Outstanding Shares" means those Shares shown from time to time
in the books of the Trust or its transfer agent as then issued and outstanding,
but shall not include Shares which have
- 1 -
<PAGE>
been redeemed or repurchased by the Trust and which are at the
time held in the treasury of the Trust.
(f) "Principal Underwriter" means a party, other than the
Trust, to a contract described in Section 6.02 hereof.
(g) "Series" means a series of Shares of the Trust
established in accordance with the provisions of Article II,
Section 2.06 hereof.
(h) "Shareholder" means a record owner of Outstanding
Shares of the Trust.
(i) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or class thereof shall be divided and may include fractions of Shares as
well as whole Shares.
(j) The "Trust" means Templeton Global Investment Trust and reference
to the Trust, when applicable to one or more Series of the Trust, shall refer to
any such Series.
(k) The "Trustees" means the person or persons who has or have signed
this Trust Instrument, so long as he or they shall continue in office in
accordance with the terms hereof, and all other persons who may from time to
time be duly qualified and serving as Trustees in accordance with the provisions
of Article III hereof and reference herein to a Trustee or to the Trustees shall
refer to the individual Trustees in their capacity as Trustees hereunder.
(l) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
(m) The "1940 Act" means the Investment Company Act of
1940, as amended from time to time.
ARTICLE II
BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest. The beneficial interest
in the Trust shall be divided into such transferable Shares of one or more
separate and distinct Series or classes of a Series as the Trustees shall from
time to time create and establish. The number of Shares of each Series, and
class thereof, authorized hereunder is unlimited and each Share shall have a par
value of $0.01. All Shares issued hereunder, including without limitation,
Shares issued in connection with a
- 2 -
<PAGE>
dividend in Shares or a split or reverse split of Shares, shall be fully paid
and nonassessable.
Section 2.02 Issuance of Shares. The Trustees in their discretion
may, from time to time, without vote of the Shareholders, issue Shares, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, subject to applicable law, including cash or securities, at such
time or times and on such terms as the Trustees may deem appropriate, and may in
such manner acquire other assets (including the acquisition of assets subject
to, and in connection with, the assumption of liabilities) and businesses. In
connection with any issuance of Shares, the Trustees may issue fractional Shares
and Shares held in the treasury. The Trustees may from time to time divide or
combine the Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or 1/1,000th
of a Share or integral multiples thereof. The Trustees, the Principal
Underwriter or any other person the Trustees may authorize for the purpose may,
in their discretion, reject any application for the issuance of Shares.
Section 2.03 Register of Shares and Share Certificates. A
register shall be kept at the principal office of the Trust or an
office of the Trust's transfer agent which shall contain the
names and addresses of the Shareholders of each Series, the
number of Shares of that Series (or any class or classes thereof)
held by them respectively and a record of all transfers thereof.
As to Shares for which no certificate has been issued, such
register shall be conclusive as to who are the holders of the
Shares and who shall be entitled to receive dividends or other
distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or other distribution, nor to have notice
given to him as herein or in the Bylaws provided, until he has
given his address to the transfer agent or such officer or other
agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued
for the Shares; however, the Trustees, in their discretion, may
authorize the issuance of Share certificates and promulgate
appropriate rules and regulations as to their use.
Section 2.04 Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer and such evidence of the genuineness of
- 3 -
<PAGE>
such execution and authorization and of such other matters as may be required.
Upon such delivery the transfer shall be recorded on the register of the Trust,
after which the transferee of Shares will be regarded as a Shareholder. Until
such record is made, the Shareholder of record shall be deemed to be the holder
of such Shares for all purposes hereunder and neither the Trustees nor the
Trust, nor any transfer agent or registrar nor any officer, employee or agent of
the Trust shall be affected by any notice of the proposed transfer.
Section 2.05 Treasury Shares. Shares held in the treasury shall,
until reissued pursuant to Section 2.02 hereof, not confer any voting rights on
the Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 2.06 Establishment of Series. The Trust created hereby shall
consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with any such
Series shall be held and accounted for separately from the assets of the Trust
or any other Series. The Trustees shall have full power and authority, in their
sole discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or classes thereof
into a greater or lesser number, to classify or reclassify any issued Shares or
any Series or classes thereof into one or more Series or classes of Shares, and
to take such other action with respect to the Shares as the Trustees may deem
desirable. The establishment and designation of any Series shall be effective
upon the adoption of a resolution by a majority of the Trustees setting forth
such establishment and designation and the relative rights and preferences of
the Shares of such Series. A Series may issue any number of Shares and need not
issue shares. At any time that there are no Shares outstanding of any particular
Series previously established and designated, the Trustees may by a majority
vote abolish that Series and the establishment and designation thereof.
All references to Shares in this Trust Instrument shall be deemed to
be Shares of any or all Series, or classes thereof, as the context may require.
All provisions herein relating to the Trust shall apply equally to each Series
of the Trust, and each class thereof, except as the context otherwise requires.
- 4 -
<PAGE>
Each Share of a Series of the Trust shall represent an equal
beneficial interest in the net assets of such Series. Each holder of Shares of a
Series shall be entitled to receive his pro rata share of all distributions made
with respect to such Series. Upon redemption of his Shares, such Shareholder
shall be paid solely out of the funds and property of such Series of the Trust.
Section 2.07 Investment in the Trust. The Trustees shall accept
investments in any Series of the Trust from such persons and on such terms as
they may from time to time authorize. At the Trustees' discretion, such
investments, subject to applicable law, may be in the form of cash or securities
in which the affected Series is authorized to invest, valued as provided in
Article IX, Section 9.03 hereof. Investments in a Series shall be credited to
each Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received or accepted as may be
determined by the Trustees; provided, however, that the Trustees may, in their
sole discretion, (a) fix the Net Asset Value per Share of the initial capital
contribution, (b) impose a sales charge upon investments in the Trust in such
manner and at such time determined by the Trustees or (c) issue fractional
Shares.
Section 2.08 Assets and Liabilities of Series. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever from the
same may be, shall be held and accounted for separately from the other assets of
the Trust and of every other Series and may be referred to herein as "assets
belonging to" that Series. The assets belonging to a particular Series shall
belong to that Series for all purposes, and to no other Series, subject only to
the rights of creditors of that Series. In addition, any assets, income,
earnings, profits or funds, or payments and proceeds with respect thereto, which
are not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more of the Series in such
manner as the Trustees, in their sole discretion, deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes, and such assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto, shall be assets belonging to that
Series. The assets belonging to a particular Series shall be so recorded upon
the books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging to each
particular Series shall be charged with the liabilities of
- 5 -
<PAGE>
that Series and all expenses, costs, charges and reserves attributable to that
Series. Any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any particular Series
shall be allocated and charged by the Trustees between or among any one or more
of the Series in such manner as the Trustees in their sole discretion deem fair
and equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series for all purposes. Without limitation of the foregoing
provisions of this Section 2.08, but subject to the right of the Trustees in
their discretion to allocate general liabilities, expenses, costs, charges or
reserves as herein provided, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
Series shall be enforceable against the assets of such Series only, and not
against the assets of the Trust generally. Notice of this contractual limitation
on inter-Series liabilities may, in the Trustees' sole discretion, be set forth
in the certificate of trust of the Trust (whether originally or by amendment) as
filed or to be filed in the Office of the Secretary of State of the State of
Delaware pursuant to the Delaware Act, and upon the giving of such notice in the
certificate of trust, the statutory provisions of Section 3804 of the Delaware
Act relating to limitations on inter-Series liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the certificate of
trust) shall become applicable to the Trust and each Series. Any person
extending credit to, contracting with or having any claim against any Series may
look only to the assets of that Series to satisfy or enforce any debt,
liability, obligation or expense incurred, contracted for or otherwise existing
with respect to that Series. No Shareholder or former Shareholder of any Series
shall have a claim on or any right to any assets allocated or belonging to any
other Series.
Section 2.09 No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or the Trustees, whether of the same or other
Series.
Section 2.10 No Personal Liability of Shareholder. Each Shareholder
of the Trust and of each Series shall not be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or by or on behalf of any Series. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees
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relating to the Trust or to a Series shall include a recitation limiting the
obligation represented thereby to the Trust or to one or more Series and its or
their assets (but the omission of such a recitation shall not operate to bind
any Shareholder or Trustee of the Trust).
Section 2.11 Assent to Trust Instrument. Every Shareholder, by virtue
of having purchased a Share shall become a Shareholder and shall be held to have
expressly assented and agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
Section 3.01 Management of the Trust. The Trustees shall have
exclusive and absolute control over the Trust Property and over the business of
the Trust to the same extent as if the Trustees were the sole owners of the
Trust Property and business in their own right, but with such powers of
delegation as may be permitted by this Trust Instrument. The Trustees shall have
power to conduct the business of the Trust and carry on its operations in any
and all of its branches and maintain offices both within and without the State
of Delaware, in any and all states of the United States of America, in the
District of Columbia, in any and all commonwealths, territories, dependencies,
colonies, or possessions of the United States of America, and in any foreign
jurisdiction and to do all such other things and execute all such instruments as
they deem necessary, proper or desirable in order to promote the interests of
the Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the Trustees
in good faith shall be conclusive. In construing the provisions of this Trust
Instrument, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid power. The powers of the Trustees may
be exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
In the event that less than a majority of the Trustees holding office have been
elected by Shareholders, the Trustees then in office will call a Shareholders'
meeting for the election of Trustees.
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Section 3.02 Initial Trustees. The initial Trustees shall be the
persons named herein. On a date fixed by the Trustees, the Shareholders shall
elect at least two (2) but not more than fifteen (15) Trustees, as specified by
the Trustees pursuant to Section 3.06 of this Article III.
Section 3.03 Term of Office. The Trustees shall hold office during
the lifetime of this Trust, and until its termination as herein provided; except
(a) that any Trustee may resign his trust by written instrument signed by him
and delivered to the other Trustees, which shall take effect upon such delivery
or upon such later date as is specified therein; (b) that any Trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired or who has died, become physically or mentally incapacitated by reason
of disease or otherwise, or is otherwise unable to serve, may be retired by
written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (d) that a Trustee may be removed at any meeting of
the Shareholders of the Trust by a vote of Shareholders owning at least
two-thirds of the Outstanding Shares.
Section 3.04 Vacancies and Appointments. In case of the declination
to serve, death, resignation, retirement, removal, physical or mental incapacity
by reason of disease or otherwise, or a Trustee is otherwise unable to serve, or
an increase in the number of Trustees, a vacancy shall occur. Whenever a vacancy
in the Board of Trustees shall occur, until such vacancy is filled, the other
Trustees shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy shall be conclusive. In the case of an existing
vacancy, the remaining Trustees shall fill such vacancy by appointing such other
person as they in their discretion shall see fit consistent with the limitations
under the 1940 Act. Such appointment shall be evidenced by a written instrument
signed by a majority of the Trustees in office or by resolution of the Trustees,
duly adopted, which shall be recorded in the minutes of a meeting of the
Trustees, whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in
office in anticipation of a vacancy to occur by reason of retirement,
resignation or increase in number of Trustees effective at a later date,
provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. As soon as any Trustee appointed pursuant to this Section 3.04 shall
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have accepted this trust, the trust estate shall vest in the new Trustee or
Trustees, together with the continuing Trustees, without any further act or
conveyance, and he shall be deemed a Trustee hereunder. The power to appoint a
Trustee pursuant to this section 3.04 is subject to the provisions of Section
16(a) of the 1940 Act.
Section 3.05 Temporary Absence. Any Trustee may, by power of
attorney, delegate his power for a period not exceeding six months at any time
to any other Trustee or Trustees, provided that in no case shall less than two
Trustees personally exercise the other powers hereunder except as herein
otherwise expressly provided.
Section 3.06 Number of Trustees. The number of Trustees shall be at
least two (2), and thereafter shall be such number as shall be fixed from time
to time by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be more than fifteen (15).
Section 3.07 Effect of Ending of a Trustee's Service. The declination
to serve, death, resignation, retirement, removal, incapacity, or inability of
the Trustees, or any one of them, shall not operate to terminate the trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
Section 3.08 Ownership of Assets of the Trust. The assets of the
Trust and of each Series shall be held separate and apart for any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by or in the name of the Trust, or in the name
of any person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or of any Series or any right of
partition or possession thereof, but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest in
the Trust or Series. The Shares shall be personal property giving only the
rights specifically set forth in this Trust Instrument.
ARTICLE IV
POWERS OF THE TRUSTEES
Section 4.01 Powers. The Trustees in all instances shall
act as principals, and are and shall be free from the control of
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the Shareholders. The Trustees shall have full power and authority to do any and
all acts and to make and execute any and all contracts and instruments that they
may consider necessary or appropriate in connection with the management of the
Trust, and to vary the investments of any Series in accordance with the
prospectus applicable to such Series. The Trustees shall not in any way be bound
or limited by present or future laws or customs in regard to trust investments,
but shall have full authority and power to make any and all investments which
they, in their sole discretion, shall deem proper to accomplish the purpose of
this Trust without recourse to any court or other authority. Subject to any
applicable limitation in this Trust Instrument or the Bylaws of the Trust, the
Trustees shall have the power and authority:
(a) To invest and reinvest cash and other property, and to hold cash
or other property uninvested, without in any event being bound or limited by any
present or future law or custom in regard to investments by trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the assets of the Trust;
(b) To operate as and carry on the business of an
investment company, and exercise all the powers necessary and
appropriate to the conduct of such operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other Person and
to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and
terminate such agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that
are members of a national securities exchange or such other entities as the
Commission may permit as custodians of
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any assets of the Trust subject to any conditions set forth in
this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents and shareholder
servicing agents, or both;
(i) To set record dates in the manner provided herein or in
the Bylaws;
(j) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager, custodian,
underwriter or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the
Trust, subject to the provisions of Article XI, subsection
11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities;
(n) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the usual
practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having relative rights, powers and duties as they may provide
consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series or
to apportion the same between or among two or more Series, provided that any
liabilities or expenses incurred by a particular Series shall be payable solely
out of the assets belonging to that Series as provided for in Article II hereof;
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(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy
including, but not limited to, claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner provided herein;
(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or class, and to require the
redemption of the Shares of any Shareholders whose investment is less than such
minimum, or who does not satisfy any other criteria the Trustees may set from
time to time, upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the
powers of the Trustees to said committees and to adopt a committee charter
providing for such responsibilities, membership (including Trustees, officers or
other agents of the Trust therein) and any other characteristics of said
committees as the Trustees may deem proper. Notwithstanding the provisions of
this Article IV, and in addition to such provisions or any other provision of
this Trust Instrument or of the Bylaws, the Trustees may by resolution appoint a
committee consisting of less than the whole number of Trustees then in office,
which committee may be empowered to act for and bind the Trustees and the Trust,
as if the acts of such committee were the acts of all the Trustees then in
office, with respect to the institution, prosecution, dismissal, settlement,
review or investigation of any action, suit or proceeding which shall be pending
or threatened to be brought before any court, administrative agency or other
adjudicatory body;
(v) To interpret the investment policies, practices or
limitations of any Series;
(w) To establish a registered office and have a registered
agent in the state of Delaware; and
(x) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance
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of any power hereinbefore set forth, either alone or in association with others,
and to do every other act or thing incidental or appurtenant to or growing out
of or connected with the aforesaid business or purposes, objects or powers.
The foregoing clauses shall be construed as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees. Any action by one or
more of the Trustees in their capacity as such hereunder shall be deemed an
action on behalf of the Trust or the applicable Series, and not an action in an
individual capacity.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to
make any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
Section 4.02 Issuance and Repurchase of Shares. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, and otherwise deal in Shares and, subject to
the provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
Section 4.03 Trustees and Officers as Shareholders. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of Shares to
the same extent as if he were not a Trustee, officer or agent; and the Trustees
may issue and sell or cause to be issued and sold Shares to and buy such Shares
from any such person or any firm or company in which he is interested, subject
only to the general limitations herein contained as to the sale and purchase of
such Shares; and all subject to any restrictions which may be contained in the
Bylaws.
Section 4.04 Action by the Trustees. Except as otherwise provided
herein or in the Bylaws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of the entire number
of Trustees then in office. The Trustees may adopt Bylaws not inconsistent with
this Declaration
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to provide for the conduct of the business of the Trust and may amend or repeal
such Bylaws to the extent such power is not reserved to the Shareholders.
Section 4.05 Chairman of the Trustees. The Trustees shall appoint one
of their number to be Chairman of the Board of Trustees. The Chairman shall
preside at all meetings of the Trustees, shall be responsible for the execution
of policies established by the Trustees and the administration of the Trust, and
may be (but is not required to be) the chief executive, financial and/or
accounting officer of the Trust.
Section 4.06 Principal Transactions. Except to the extent prohibited
by applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustee
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with any investment
adviser, administrator, distributor or transfer agent for the Trust or with any
Interested Person of such person; and the Trust may employ any such person, or
firm or company in which such person is an Interested Person, as broker, legal
counsel, registrar, investment adviser, administrator, distributor, transfer
agent, dividend disbursing agent, custodian or in any other capacity upon
customary terms.
ARTICLE V
EXPENSES OF THE TRUST
Subject to the provisions of Article II, Section 2.08 hereof, the
Trustees shall be reimbursed from the Trust estate or the assets belonging to
the appropriate Series for their expenses and disbursements, including, without
limitation, interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of shares; certain insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, distributors, custodian,
transfer agent and fund accountant; fees of pricing, interest, dividend, credit
and other reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining corporate
existence; costs of preparing and printing the Trust's prospectuses, statements
of additional information and shareholder reports and delivering them to
existing shareholders; expenses of meetings of shareholders and proxy
solicitations therefore; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trustees;
compensation of the Trust's officers and employees and costs of other personnel
performing
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services for the Trust; costs of Trustee meetings; Securities and Exchange
Commission registration fees and related expenses; state or foreign securities
laws registration fees and related expenses; and for such non-recurring items as
may arise, including litigation to which the Trust (or a Trustee acting as such)
is a party, and for all losses and liabilities by them incurred in administering
the Trust, and for the payment of such expenses, disbursements, losses and
liabilities the Trustees shall have a lien on the assets belonging to the
appropriate Series, or in the case of an expense allocable to more than one
Series, on the assets of each such Series, prior to any rights or interests of
the Shareholders thereto. This section shall not preclude the Trust from
directly paying any of the aforementioned fees and expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
Section 6.01 Investment Adviser. The Trustees may in their
discretion, from time to time, enter into an investment advisory contract or
contracts with respect to the Trust or any Series whereby the other party or
parties to such contract or contracts shall undertake to furnish the Trustees
with such investment advisory, statistical and research facilities and services
and such other facilities and services, if any, all upon such terms and
conditions as may be prescribed in the Bylaws or as the Trustees may in their
discretion determine (such terms and conditions not to be inconsistent with the
provisions of this Trust Instrument or of the Bylaws). Notwithstanding any other
provision of this Trust Instrument, the Trustees may authorize any investment
adviser (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales or exchanges of portfolio
securities, other investment instruments of the Trust, or other Trust Property
on behalf of the Trustees, or may authorize any officer, agent, or Trustee to
effect such purchases, sales or exchanges pursuant to recommendations of the
investment adviser (and all without further action by the Trustees). Any such
purchases, sales and exchanges shall be deemed to have been authorized by all of
the Trustees.
The Trustees may, subject to the requirements of the 1940 Act,
authorize the investment adviser to employ, from time to time, one or more
sub-advisers to perform such of the acts and services of the investment adviser,
and upon such terms and conditions, as may be agreed upon between the investment
adviser and sub-adviser (such terms and conditions not to be inconsistent with
the provisions of this Trust Instrument or of the Bylaws). Any reference in this
Trust Instrument to the investment adviser
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shall be deemed to include such sub-advisers, unless the context
otherwise requires.
Section 6.02 Principal Underwriter. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares, whereby the
Trust may either agree to sell Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws); and such contract may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Trust.
Section 6.03 Administration. The Trustees may in their discretion
from time to time enter into one or more management or administrative contracts
whereby the other party or parties shall undertake to furnish the Trustees with
management or administrative services. The contract or contracts shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
Section 6.04 Transfer Agent. The Trustees may in their discretion
from time to time enter into one or more transfer agency and Shareholder service
contracts whereby the other party or parties shall undertake to furnish the
Trustees with transfer agency and Shareholder services. The contract or
contracts shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws).
Section 6.05 Parties to Contract. Any contract of the character
described in Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or any
contract of the character described in Article VIII hereof may be entered into
with any corporation, firm, partnership, trust or association, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered void or voidable by reason of the
existence of any relationship, nor shall any person holding such relationship be
disqualified from voting on or executing the same in his capacity as Shareholder
and/or Trustee, nor shall any person holding such relationship be liable merely
by reason of such relationship for
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any loss or expense to the Trust under or by reason of said contract or
accountable for any profit realized directly or indirectly therefrom, provided
that the contract when entered into was not inconsistent with the provisions of
this Article VI or Article VIII hereof or of the Bylaws. The same person
(including a firm, corporation, partnership, trust, or association) may be the
other party to contracts entered into pursuant to Sections 6.01, 6.02, 6.03 and
6.04 of this Article VI or pursuant to Article VIII hereof, and any individual
may be financially interested or otherwise affiliated with persons who are
parties to any or all of the contracts mentioned in this Section 6.05.
Section 6.06 Provisions and Amendments. Any contract entered into
pursuant to Sections 6.01 or 6.02 of this Article VI shall be consistent with
and subject to the requirements of Section 15 of the 1940 Act, if applicable, or
other applicable Act of Congress hereafter enacted with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 6.01 of this Article VI shall be effective
unless assented to in a manner consistent with the requirements of said Section
15, as modified by any applicable rule, regulation or order of the Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers. The Shareholders shall have power to vote
only (a) for the election of Trustees as provided in Article III, Sections 3.01
and 3.02 hereof, (b) for the removal of Trustees as provided in Article III,
Section 3.03(d) hereof, (c) with respect to any investment advisory contract as
provided in Article VI, Section 6.06 hereof, and (d) with respect to such
additional matters relating to the Trust as may be required by law, by this
Trust Instrument, or the Bylaws or any registration of the Trust with the
Commission or any State, or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares
shall be voted separately by individual Series, except (i) when required by the
1940 Act, Shares shall be voted in the aggregate and not by individual Series;
and (ii) when the Trustees have determined that the matter affects the interests
of more than one Series, then the Shareholders of all such Series shall be
entitled to vote thereon. The Trustees may also determine that a matter affects
only the interests of one or more classes of a Series, in which case any such
matter shall be voted on by such class or classes. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote, and
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each fractional Share shall be entitled to a proportionate fractional vote.
There shall be no cumulative voting in the election of trustees. Shares may be
voted in person or by proxy or in any manner provided for in the Bylaws. A proxy
may be given in writing. The Bylaws may provide that proxies may also, or may
instead, be given by any electronic or telecommunications device or in any other
manner. Notwithstanding anything else herein or in the Bylaws, in the event a
proposal by anyone other than the officers or Trustees of the Trust is submitted
to a vote of the Shareholders of one or more Series or of the Trust, or in the
event of any proxy contest or proxy solicitation or proposal in opposition to
any proposal by the officers or Trustees of the Trust, Shares may be voted only
in person or by written proxy. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required or
permitted by law, this Trust Instrument or any of the Bylaws of the Trust to be
taken by Shareholders.
Section 7.02 Meetings. A meeting of the Shareholders shall be held at
such times, on such day and at such hour as the Trustees may from time to time
determine, either at the principal office of the Trust, or at such other place,
within or without the State of Delaware, as may be designated by the Trustees,
for such purposes as may be specified by the Trustees.
Section 7.03 Quorum and Required Vote. One-third of Shares entitled
to vote in person or by proxy shall be a quorum for the transaction of business
at a Shareholders' meeting, except that where any provision of law or of this
Trust Instrument permits or requires that holders of any Series shall vote as a
Series (or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity Of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series shall vote as a Series (or that the holders of any
class shall vote as a class), then a majority of the Shares present in person or
by proxy of that Series (or class) or, if required by law, a majority of the
Shares of that Series (or class), voted on the matter in person or by proxy
shall decide that matter insofar as that Series (or class) is concerned.
Shareholders may act by unanimous written consent. Actions taken by Series (or
class)
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may be consented to unanimously in writing by Shareholders of
that Series (or class).
ARTICLE VIII
CUSTODIAN
Section 8.01 Appointment and Duties. The Trustees shall at all times
employ a bank, a company that is a member of a national securities exchange, or
a trust company, each having capital, surplus and undivided profits of at least
two million dollars ($2,000,000) and is a member of the Depository Trust Company
as custodian with authority as its agent, but subject to such restrictions,
limitations and other requirements, if any, as may be contained in the Bylaws of
the Trust: (a) to hold the securities owned by the Trust and deliver the same
upon written order or oral order confirmed in writing; (b) to receive and
receipt for any moneys due to the Trust and deposit the same in its own banking
department or elsewhere as the Trustees may direct; and (c) to disburse such
funds upon orders or vouchers.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the Bylaws of the Trust.
Section 8.02 Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, sub-custodians or other agents.
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ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
Section 9.01 Distributions.
(a) The Trustees may from time to time declare and pay dividends or
other distributions with respect to any Series. The amount of such dividends or
distributions and the payment of them and whether they are in cash or any other
Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary
notwithstanding, the Trustees may at any time declare and distribute a stock
dividend pro rata among the Shareholders of a particular Series, or class
thereof, as of the record date of that Series fixed as provided in Subsection
9.01(b) hereof.
Section 9.02 Redemptions. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof, he
may deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.02; and the Shareholder so requesting shall be
entitled to require the Series to purchase, and the Series or the principal
underwriter of the Series shall purchase his said Shares, but only at the Net
Asset Value thereof (as described in Section 9.03 of this Article IX). The
Series shall make payment for any such Shares to be redeemed, as aforesaid, in
cash or property from the assets of that Series and payment for such Shares
shall be made by the Series or the principal underwriter of the Series to the
Shareholder of record within seven (7) days after the date upon which the
request is effective. Upon redemption, shares shall become Treasury shares and
may be re-issued from time to time.
Section 9.03 Determination of Net Asset Value and Valuation
of Portfolio Assets. The term "Net Asset Value" of any Series
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shall mean that amount by which the assets of that Series exceed its
liabilities, all as determined by or under the direction of the Trustees. Such
value shall be determined separately for each Series and shall be determined on
such days and at such times as the Trustees may determine. Such determination
shall be made with respect to securities for which market quotations are readily
available, at the market value of such securities; and with respect to other
securities and assets, at the fair value as determined in good faith by the
Trustees; provided, however, that the Trustees, without Shareholder approval,
may alter the method of valuing portfolio securities insofar as permitted under
the 1940 Act and the rules, regulations and interpretations thereof promulgated
or issued by the Commission or insofar as permitted by any Order of the
Commission applicable to the Series. The Trustees may delegate any of their
powers and duties under this Section 9.03 with respect to valuation of assets
and liabilities. The resulting amount, which shall represent the total Net Asset
Value of the particular Series, shall be divided by the total number of shares
of that Series outstanding at the time and the quotient so obtained shall be the
Net Asset Value per Share of that Series. At any time the Trustees may cause the
Net Asset Value per Share last determined to be determined again in similar
manner and may fix the time when such redetermined value shall become effective.
If, for any reason, the net income of any Series, determined at any time, is a
negative amount, the Trustees shall have the power with respect to that Series
(a) to offset each Shareholder's pro rata share of such negative amount from the
accrued dividend account of such Shareholder, (b) to reduce the number of
Outstanding Shares of such Series by reducing the number of Shares in the
account of each Shareholder by a pro rata portion of that number of full and
fractional Shares which represents the amount of such excess negative net
income, (c) to cause to be recorded on the books of such Series an asset account
in the amount of such negative net income (provided that the same shall
thereupon become the property of such Series with respect to such Series and
shall not be paid to any Shareholder), which account may be reduced by the
amount, of dividends declared thereafter upon the Outstanding Shares of such
Series on the day such negative net income is experienced, until such asset
account is reduced to zero; (d) to combine the methods described in clauses (a)
and (b) and (c) of this sentence; or (e) to take any other action they deem
appropriate, in order to cause (or in order to assist in causing) the Net Asset
Value per Share of such Series to remain at a constant amount per Outstanding
Share immediately after each such determination and declaration. The Trustees
shall also have the power not to declare a dividend out of net income for the
purpose of causing the Net Asset Value per Share to be increased. The Trustees
shall not be required to adopt, but may at any time adopt, discontinue or amend
the
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practice of maintaining the Net Asset Value per Share of the
Series at a constant amount.
Section 9.04 Suspension of the Right of Redemption. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
as permitted under the 1940 Act. Such suspension shall take effect at such time
as the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share next determined after the termination of
the suspension. In the event that any Series is divided into classes, the
provisions of this Section 9.03, to the extent applicable as determined in the
discretion of the Trustees and consistent with applicable law, may be equally
applied to each such class.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.01 Limitation of Liability. A Trustee, when acting in such
capacity, shall not be personally liable to any person other than the Trust or a
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his capacity as Trustee, provided that nothing contained herein or
in the Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder.
Section 10.02 Indemnification.
(a) Subject to the exceptions and limitations contained in
Subsection 10.02(b):
(i) every person who is, or has been, a Trustee or officer
of the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding
in which he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof;
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(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a
Covered Person:
(i) who shall have been adjudicated by a court or body
before which the proceeding was brought (A) to be liable to the Trust
or its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office or (B) not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or
other body approving the settlement; (B) by at least a majority of
those Trustees who are neither Interested Persons of the Trust nor
are parties to the matter based upon a review of readily available
facts (as opposed to a full trial-type inquiry); or (C) by written
opinion of independent legal counsel based upon a review of readily
available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees or by independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or
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proceeding of the character described in Subsection 10.02(a) of this Section
10.02 may be paid by the Trust or Series from time to time prior to final
disposition thereof upon receipt of an undertaking by or on behalf of such
Covered Person that such amount will be paid over by him to the Trust or Series
if it is ultimately determined that he is not entitled to indemnification under
this Section 10.02; provided, however, that either (i) such Covered Person shall
have provided appropriate security for such undertaking, (ii) the Trust is
insured against losses arising out of any such advance payments or (iii) either
a majority of the Trustees who are neither Interested Persons of the Trust nor
parties to the matter, or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe that
such Covered Person will be found entitled to indemnification under Section
10.02.
Section 10.03 Shareholders. In case any Shareholder of any Series
shall be held to be personally liable solely by reason of his being or having
been a Shareholder of such Series and not because of his acts or omissions or
for some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives, or, in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets belonging to the applicable Series to be held
harmless from and indemnified against all loss and expense arising from such
liability. The Trust, on behalf of the affected Series, shall, upon request by
the Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of the Series and satisfy any judgment thereon from
the assets of the Series.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Trust Not A Partnership. It is hereby
expressly declared that a trust and not a partnership is created
hereby; provided, however, that it is acknowledged that, for
federal tax purposes, the trust created hereby may be
characterized as a corporation. No Trustee hereunder shall have
any power to bind personally either the Trust officers or any
Shareholder. All persons extending credit to, contracting with
or having any claim against the Trust or the Trustees shall look
only to the assets of the appropriate Series or (if the Trustees
shall have yet to have established Series) of the Trust for
payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether
past, present or future, shall be personally liable therefor.
Nothing in this Trust Instrument shall protect a Trustee against
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any liability to which the Trustee would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee hereunder.
Section 11.02 Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretion hereunder in
good faith and with reasonable care under the circumstances then prevailing
shall be binding upon everyone interested. Subject to the provisions of Article
X hereof and to Section 11.01 of this Article XI, the Trustees shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and operation of
this Trust Instrument, and subject to the provisions of Article X hereof and
Section 11.01 of this Article XI, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is obtained.
Section 11.03 Establishment of Record Dates. The Trustees
may close the Share transfer books of the Trust for a period not
exceeding sixty (60) days preceding the date of any meeting of
Shareholders, or the date for the payment of any dividends or
other distributions, or the date for the allotment of rights, or
the date when any change or conversion or exchange of Shares
shall go into effect; or in lieu of closing the stock transfer
books as aforesaid, the Trustees may fix in advance a date, not
exceeding sixty (60) days preceding the date of any meeting of
Shareholders, or the date for payment of any dividend or other
distribution, or the date for the allotment of rights, or the
date when any change or conversion or exchange of Shares shall go
into effect, as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such
meeting, or entitled to receive payment of any such dividend or
other distribution, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or
exchange of Shares, and in such case such Shareholders and only
such Shareholders as shall be Shareholders of record on the date
so fixed shall be entitled to such notice of, and to vote at,
such meeting, or to receive payment of such dividend or other
distribution, or to receive such allotment or rights, or to
exercise such rights, as the case may be, notwithstanding any
transfer of any Shares on the books of the Trust after any such
record date fixed as aforesaid.
Section 11.04 Termination of Trust.
(a) This Trust shall continue without limitation of time
but subject to the provisions of Subsection 11.04(b).
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(b) The Trustees may, subject to a Majority Shareholder Vote of each
Series affected by the matter or, if applicable, to a Majority Shareholder Vote
of the Trust, and subject to a vote of a majority of the Trustees,
(i) sell and convey all or substantially all of the assets
of the Trust or any affected Series to another trust, partnership,
association or corporation, or to a separate series of shares
thereof, organized under the laws of any state which trust,
partnership, association or corporation is an open-end management
investment company as defined in the 1940 Act, or is a series
thereof, for adequate consideration which may include the assumption
of all outstanding obligations, taxes and other liabilities, accrued
or contingent, of the Trust or any affected Series, and which may
include shares of beneficial interest, stock or other ownership
interests of such trust, partnership, association or corporation or
of a series thereof; or
(ii) at any time sell and convert into money all of the
assets of the Trust or any affected Series.
Upon making reasonable provision, in the determination of the Trustees, for the
payment of all such liabilities in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) of each Series (or class) ratably among the holders of Shares
of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in Subsection 11.05(b), the Trust or any
affected Series shall terminate and the Trustees and the Trust shall be
discharged of any and all further liabilities and duties hereunder and the
right, title and interest of all parties with respect to the Trust or Series
shall be cancelled and discharged.
Upon termination of the Trust, following completion of winding up of
its business, the Trustees shall cause a certificate of cancellation of the
Trust's certificate of trust to be filed in accordance with the Delaware Act,
which certificate of cancellation may be signed by any one Trustee.
Without limiting the generality of the foregoing, existence of the
Trust shall not be affected by sales or purchases of Shares or status of any
Shareholders.
Section 11.05 Reorganization. Notwithstanding anything
else herein, the Trustees, in order to change the form of
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organization of the Trust, may, without prior Shareholder approval, (a) cause
the Trust to merge or consolidate with or into one or more trusts, partnerships,
associations or corporations so long as the surviving or resulting entity is an
open-end management investment company under the 1940 Act, or is a series
thereof, that will succeed to or assume the Trust's registration under that Act
and which is formed, organized or existing under the laws of a state,
commonwealth, possession or colony of the United States or (b) cause the Trust
to incorporate under the laws of Delaware. Any agreement of merger or
consolidation or certificate of merger may be signed by a majority of Trustees
and facsimile signatures conveyed by electronic or telecommunication means shall
be valid.
Pursuant to and in accordance with the provisions of Section 3815(f)
of the Delaware Act, and notwithstanding anything to the contrary contained in
this Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 11.05 may effect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
Section 11.06 Filing of Copies, References, Headings. The
original or a copy of this Trust Instrument and of each amendment
hereof or Trust Instrument supplemental hereto shall be kept at
the office of the Trust where it may be inspected by any
Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether
or not any such amendments or supplements have been made and as
to any matters in connection with the Trust hereunder, and with
the same effect as if it were the original, may rely on a copy
certified by an officer or Trustee of the Trust to be a copy of
this Trust Instrument or of any such amendment or supplemental
Trust Instrument. In this Trust Instrument or in any such
amendment or supplemental Trust Instrument, references to this
Trust Instrument, and all expressions like "herein," "hereof" and
"hereunder," shall be deemed to refer to this Trust Instrument as
amended or affected by any such supplemental Trust Instrument.
All expressions like "his", "he" and "him", shall be deemed to
include the feminine and neuter, as well as masculine, genders.
Headings are placed herein for convenience of reference only and
in case of any conflict, the text of this Trust Instrument,
rather than the headings, shall control. This Trust Instrument
may be executed in any number of counterparts each of which shall
be deemed an original.
Section 11.07 Applicable Law. The trust set forth in this
instrument is made in the State of Delaware, and the Trust and
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this Trust Instrument, and the rights and obligations of the Trustees and
Shareholders hereunder, are to be governed by and construed and administered
according to the Delaware Act and the laws of said State; provided, however,
that there shall not be applicable to the Trust, the Trustees or this Trust
Instrument (a) the provisions of Section 3540 of Title 12 of the Delaware Code
or (b) any provisions of the laws (statutory or common) of the State of Delaware
(other than the Delaware Act) pertaining to trusts which relate to or regulate
(i) the filing with any court or governmental body or agency of trustee accounts
or schedules of trustee fees and charges, (ii) affirmative requirements to post
bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards of responsibilities or limitations on the acts or powers of
trustees, which are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees set forth or referenced in this Trust
Instrument. The Trust shall be of the type commonly called a "business trust",
and without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust under Delaware law. The Trust
specifically reserves the right to exercise any of the powers or privileges
afforded to trusts or actions that may be engaged in by trusts under the
Delaware Act, and the absence of a specific reference herein to any such power,
privilege or action shall not imply that the Trust may not exercise such power
or privilege or take such actions.
Section 11.08 Amendments. Except as specifically provided
herein, the Trustees may, without shareholder vote, amend or
otherwise supplement this Trust Instrument by making an amendment, a Trust
Instrument supplemental hereto or an amended and restated trust instrument.
Shareholders shall have the right to vote (a) on any amendment which would
affect their right to vote granted in Section 7.01 of Article VII hereof, (b) on
any amendment to this Section 11.08, (c) on any amendment as may be required by
law or by the Trust's registration statement filed with the Commission and (d)
on any amendment submitted to them by the Trustees. Any amendment required or
permitted to be submitted to Shareholders which, as the Trustees determine,
shall affect the Shareholders of one or more Series shall be authorized by vote
of the Shareholders of each Series affected and no vote
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of shareholders of a Series not affected shall be required. Notwithstanding
anything else herein, any amendment to Article X hereof shall not limit the
rights to indemnification or insurance provided therein with respect to action
or omission of Covered Persons prior to such amendment.
Section 11.09 Fiscal Year. The fiscal year of the Trust shall end on
a specified date as set forth in the Bylaws, provided, however, that the
Trustees may, without Shareholder approval, change the fiscal year of the Trust.
Section 11.10 Name Reservation. The Trustees on behalf of the Trust
acknowledge that Templeton Investment Counsel, Inc. ("TICI") has licensed to the
Trust the non-exclusive right to use the name "Templeton" as part of the name of
the Trust, and has reserved the right to grant the non-exclusive use of the name
"Templeton" or any derivative thereof to any other party. In addition, TICI
reserves the right to grant the non-exclusive use of the name Templeton to, and
to withdraw such right from, any other business or other enterprise. TICI
reserves the right to withdraw from the Trust the right to use said name
Templeton and will withdraw such right if the Trust ceases to employ, for any
reason, TICI, an affiliate or any successor as adviser of the Trust.
Section 11.11 Provisions in Conflict With Law. The
provisions of this Trust Instrument are severable, and if the
Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, the regulated
investment company provisions of the Internal Revenue Code or
with other applicable laws and regulations, the conflicting
provision shall be deemed never to have constituted a part of
this Trust Instrument; provided, however, that such determination
shall not affect any of the remaining provisions of this Trust
Instrument or render invalid or improper any action taken or
omitted prior to such determination. If any provision of this
Trust Instrument shall be held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall attach
only to such provision in such jurisdiction and shall not in any
matter affect such provisions in any other jurisdiction or any
other provision of this Trust Instrument in any jurisdiction.
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IN WITNESS WHEREOF, the undersigned, being all of the initial
Trustees of the Trust, have executed this instrument as of date first written
above.
/ s / Thomas M. Mistele
Thomas M. Mistele, as Trustee
and not individually
/ s / Harold F. McElraft
Harold F. McElraft, as Trustee
and not individually
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<PAGE>
BYLAWS
OF
TEMPLETON GLOBAL INVESTMENT TRUST
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS 1
ARTICLE II - OFFICES 1
Section 1. Resident Agent 1
Section 2. Offices 1
ARTICLE III - SHAREHOLDERS 2
Section 1. Meetings 2
Section 2. Notice of Meetings 2
Section 3. Record Date for Meetings
and Other Purposes 2
Section 4. Proxies 3
Section 5. Action without Meeting 4
ARTICLE IV - TRUSTEES 4
Section 1. Meetings of the Trustees 4
Section 2. Quorum and Manner of Acting 6
ARTICLE V - COMMITTEES 6
Section 1. Executive and Other Committees 6
Section 2. Meetings, Quorum and Manner of Acting 7
ARTICLE VI - OFFICERS 8
Section 1. General Provisions 8
Section 2. Term of Office and Qualifications 8
Section 3. Removal 9
Section 4. Powers and Duties of the President 9
Section 5. Powers and Duties of Vice Presidents 9
Section 6. Powers and Duties of the Treasurer 10
Section 7. Powers and Duties of the Secretary 11
Section 8. Powers and Duties of Assistant
Treasurers 11
Section 9. Powers and Duties of Assistant
Secretaries 11
Section 10. Compensation of Officers and Trustees
and Members of the Advisory Board 11
ARTICLE VII - FISCAL YEAR 12
ARTICLE VIII - SEAL 12
ARTICLE IX - WAIVERS OF NOTICE 12
<PAGE>
TABLE OF CONTENTS (continued)
Page
ARTICLE X - CUSTODY OF SECURITIES 13
Section 1. Employment of a Custodian 13
Section 2. Action Upon Termination of
Custodian Agreement 13
Section 3. Provisions of Custodian Agreement 14
Section 4. Central Certificate System 15
Section 5. Acceptance of Receipts in Lieu of
Certificates 15
ARTICLE XI - AMENDMENTS 16
ARTICLE XII - INSPECTION OF BOOKS 16
ARTICLE XIII - MISCELLANEOUS 17
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<PAGE>
BYLAWS
OF
TEMPLETON GLOBAL INVESTMENT TRUST
ARTICLE I
DEFINITIONS
Any terms defined in the Trust Instrument of Templeton
Global Investment Trust dated December 21, 1993, as amended from time to time,
shall have the same meaning when used herein.
ARTICLE II
OFFICES
Section 1. Resident Agent. The Trust shall maintain a
resident agent in the State of Delaware, which agent shall initially be The
Corporation Trust Company, 30 The Green, Dover, Delaware 19901. The Trustees may
designate a successor resident agent, provided, however, that such appointment
shall not become effective until written notice thereof is delivered to the
office of the Secretary of State.
Section 2. Offices. The Trust may have its principal
office and other offices in such places within as well as without the State of
Delaware as the Trustees may from time to time determine.
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<PAGE>
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders
shall be held as provided in the Trust Instrument at such place within or
without the State of Delaware as the Trustees shall designate.
Section 2. Notice of Meetings. Notice of all meetings
of the Shareholders, stating the time, place and purposes of the meeting, shall
be given by the Trustees by mail to each Shareholder at his address as recorded
on the register of the Trust mailed at least ten (10) days and not more than
sixty (60) days before the meeting. Only the business stated in the notice of
the meeting shall be considered at such meeting. Any adjourned meeting may be
held as adjourned without further notice. No notice need be given to any
Shareholder who shall have failed to inform the Trust of his current address or
if a written waiver of notice, executed before or after the meeting by the
Shareholder or his attorney thereunto authorized, is filed with the records of
the meeting.
Section 3. Record Date for Meetings and Other
Purposes. For the purpose of determining the Shareholders who are entitled to
notice of and to vote at any meeting, or to participate in any distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding sixty (60) days, as the
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Trustees may determine; or without closing the transfer books the Trustees may
fix a date not more than sixty (60) days prior to the date of any meeting of
Shareholders or distribution or other action as a record date for the
determinations of the persons to be treated as Shareholders of record for such
purposes, subject to the provisions of the Trust Instrument.
Section 4. Proxies. At any meeting of Shareholders,
any holder of Shares entitled to vote thereat may vote by proxy, provided that
no proxy shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote
shall be taken. Proxies may be solicited in the name of one or more Trustees or
one or more of the officers of the Trust. Only Shareholders of record shall be
entitled to vote. Each whole share shall be entitled to one vote as to any
matter on which it is entitled by the Trust Instrument to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. When any
Share is held jointly by several persons, any one of them may vote at any
meeting in person or by proxy in respect of such Share, but if more than one of
them shall be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Share. A proxy purporting to be
executed by or on behalf of a Shareholder shall
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be deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. If the holder of any such Share
is a minor or legally incompetent, and subject to guardianship or the legal
control of any other person as regards the charge or management of such Share,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.
Section 5. Action Without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of the meetings of Shareholders. Such consents shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may
in their discretion provide for regular or stated meetings of the Trustees.
Notice of regular or stated meetings need not be given. Meetings of the Trustees
other than regular or stated meetings shall be held whenever called by the
President, or by any one of the Trustees, at the time being in office. Notice of
the time and place of each meeting other than regular or stated
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meetings shall be given by the Secretary or an Assistant Secretary or by the
officer or Trustee calling the meeting and shall be mailed to each Trustee at
least two days before the meeting, or shall be telegraphed, cabled, or
wirelessed to each Trustee at his business address, or personally delivered to
him at least one day before the meeting. Such notice may, however, be waived by
any Trustee. Notice of a meeting need not be given to any Trustee if a written
waiver of notice, executed by him before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him. A
notice or waiver of notice need not specify the purpose of any meeting. The
Trustees may meet by means of a telephone conference circuit or similar
communications equipment by means of which all persons participating in the
meeting shall be deemed to have been held at a place designated by the Trustees
at the meeting. Participation in a telephone conference meeting shall constitute
presence in person at such meeting. Any action required or permitted to be taken
at any meeting of the Trustees may be taken by the Trustees without a meeting if
all the Trustees consent to the action in writing and the written consents are
filed with the records of the Trustees' meetings. Such consents shall be treated
as a vote for all purposes.
Section 2. Quorum and Manner of Acting. A majority of
the Trustees shall be present in person at any regular or special
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meeting of the Trustees in order to constitute a quorum for the transaction of
business at such meeting and (except as otherwise required by law, the Trust
Instrument or these Bylaws) the act of a majority of the Trustees present at any
such meeting, at which a quorum is present, shall be the act of the Trustees. In
the absence of a quorum, a majority of the Trustees present may adjourn the
meeting from time to time until a quorum shall be present. Notice of an
adjourned meeting need not be given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The
Trustees by vote of a majority of all the Trustees may elect from their own
number an Executive Committee to consist of not less than three (3) to hold
office at the pleasure of the Trustees, which shall have the power to conduct
the current and ordinary business of the Trust while the Trustees are not in
session, including the purchase and sale of securities and the designation of
securities to be delivered upon redemption of Shares of the Trust, and such
other powers of the Trustees as the Trustees may, from time to time, delegate to
them except those powers which by law, the Trust Instrument or these Bylaws they
are prohibited from delegating. The Trustees may also elect from their own
number other Committees from time to time, the number composing such Committees,
the powers conferred upon the same (subject to
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the same limitations as with respect to the Executive Committee) and the term of
membership on such Committees to be determined by the Trustees. The Trustees may
designate a chairman of any such Committee. In the absence of such designation,
the Committee may elect its own Chairman.
Section 2. Meetings, Quorum and Manner of Acting. The
Trustees may (1) provide for stated meetings of any Committee, (2) specify the
manner of calling and notice required for special meetings of any Committee, (3)
specify the number of members of a Committee required to constitute a quorum and
the number of members of a Committee required to exercise specified powers
delegated to such Committee, (4) authorize the making of decisions to exercise
specified powers by written assent of the requisite number of members of a
Committee without a meeting, and (5) authorize the members of a Committee to
meet by means of a telephone conference circuit.
The Executive Committee shall keep regular minutes of
its meetings and records of decisions taken without a meeting and cause them to
be recorded in a book designated for that purpose and kept in the Office of the
Trust.
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the
Trust shall be a President, a Treasurer and a Secretary, who
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shall be elected by the Trustees. The Trustees may elect or appoint such other
officers or agents as the business of the Trust may require, including one or
more Executive Vice Presidents, one or more Vice Presidents, one or more
Assistant Secretaries, and one or more Assistant Treasurers. The Trustees may
delegate to any officer or Committee the power to appoint any subordinate
officers or agents.
Section 2. Term of Office and Qualifications. Except
as otherwise provided by law, the Trust Instrument or these Bylaws, the
President, the Treasurer and the Secretary shall each hold office until his
successor shall have been duly elected and qualified, and all other officers
shall hold office at the pleasure of the Trustees. The Secretary and Treasurer
may be the same person. A Vice President and the Treasurer or Assistant
Treasurer or a Vice President and the Secretary or Assistant Secretary may be
the same person, but the offices of Vice President and Secretary and Treasurer
shall not be held by the same person. The President shall hold no other office.
Except as above provided, any two offices may be held by the same person. Any
officer may be, but none need be, a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or
special meeting of the Trustees, may remove any officer without
cause, by a vote of a majority of the Trustees then in office.
Any officer or agent appointed by an officer or Committee may be
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removed with or without cause by such appointing officer or
Committee.
Section 4. Powers and Duties of the President. The
President may call meetings of the Trustees and of any Committee thereof when he
deems it necessary and shall preside at all meetings of the Shareholders.
Subject to the control of the Trustees and to the control of any Committees of
the Trustees, within their respective spheres, as provided by the Trustees, he
shall at all times exercise a general supervision and direction over the affairs
of the Trust. He shall have the power to employ attorneys and counsel for the
Trust and to employ such subordinate officers, agents, clerks and employees as
he may find necessary to transact the business of the Trust. He shall also have
the power to grant, issue, execute or sign such powers of attorney, proxies or
other documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust. The President shall have such other powers and duties as
from time to time may be conferred upon or assigned to him by the Trustees.
Section 5. Powers and Duties of Vice Presidents. In
the absence or disability of the President, any Vice President designated by the
Trustees shall perform all the duties and may exercise any of the powers of the
President, subject to the control of the Trustees. Each Vice President shall
perform such other duties as may be assigned to him from time to time by the
Trustees and the President.
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Section 6. Powers and Duties of the Treasurer. The
Treasurer shall be the principal financial and accounting officer of the Trust.
He shall deliver all funds of the Trust which may come into his hands to such
Custodian as the Trustees may employ pursuant to Article X of these Bylaws. He
shall in general perform all the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him by the Trustees.
Section 7. Powers and Duties of the Secretary. The
Secretary shall keep the minutes of all meetings of the Trustees and of the
Shareholders in proper books provided for that purpose; he shall have custody of
the seal of the Trust; he shall have charge of the Share transfer books, lists
and records unless the same are in the charge of the Transfer Agent. He shall
attend to the giving and serving of all notices by the Trust in accordance with
the provisions of these Bylaws and as required by law; and subject to these
Bylaws, he shall in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Trustees.
Section 8. Powers and Duties of Assistant Treasurers.
In the absence or disability of the Treasurer, any Assistant Treasurer
designated by the Trustees shall perform all the duties, and may exercise any of
the powers, of the Treasurer. Each Assistant Treasurer shall perform such other
duties as from time to time may be assigned to him by the Trustees.
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Section 9. Powers and Duties of Assistant Secretaries.
In the absence or disability of the Secretary, any Assistant Secretary
designated by the Trustees shall perform all the duties, and may exercise any of
the powers, of the Secretary. Each Assistant Secretary shall perform such other
duties as from time to time may be assigned to him by the Trustees.
Section 10. Compensation of Officers and Trustees and
Members of the Advisory Board. Subject to any applicable provisions of the Trust
Instrument, the compensation of the officers and Trustees and members of any
Advisory Board shall be fixed from time to time by the Trustees or, in the case
of officers, by any Committee or officer upon whom such power may be conferred
by the Trustees. No officer shall be prevented from receiving such compensation
as such officer by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first
day of April in each year and shall end on the 31st day of March in each year,
provided, however, that the Trustees may from time to time change the fiscal
year.
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ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such
form and shall have such inscription thereon as the Trustees may from time to
time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the
Trust Instrument or these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. A notice shall be deemed to
have been telegraphed, cabled or wirelessed for the purposes of these Bylaws
when it has been delivered to a representative of any telegraph, cable or
wireless company with instructions that it be telegraphed, cabled or wirelessed.
ARTICLE X
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Trust shall
place and at all times maintain in the custody of a Custodian (including any
sub-custodian for the Custodian, which may be a foreign bank which meets
applicable requirements of law) all trusts, securities and similar investments
included in the Trust
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Property. The Custodian (and any sub-custodian) shall be a bank having not less
than $2,000,000 aggregate capital, surplus and undivided profits and shall be
appointed from time to time by the Trustees, who shall fix its remuneration.
Section 2. Action Upon Termination of Custodian
Agreement. Upon termination of a Custodian Agreement or inability of the
Custodian to continue to serve, the Trustees shall promptly appoint a successor
custodian, but in the event that no successor custodian can be found who has the
required qualifications and is willing to serve, the Trustees shall call as
promptly as possible a special meeting of the Shareholders to determine whether
the Trust shall function without a custodian or shall be liquidated. If so
directed by vote of the holders of a majority of the outstanding voting
securities, the Custodian shall deliver and pay over all Trust Property held by
it as specified in such vote.
Section 3. Provisions of Custodian Agreement. The
following provisions shall apply to the employment of a Custodian and to any
contract entered into with the Custodian so employed:
The Trustees shall cause to be delivered to the Custodian
all securities included in the Trust Property or to which
the Trust may become entitled, and shall order the same to
be delivered by the Custodian only in completion of a sale,
exchange, transfer, pledge, loan of portfolio securities to
another person, or other
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disposition thereof, all as the Trustees may generally or
from time to time require or approve or to a successor
Custodian; and the Trustees shall cause all trusts included
in the Trust Property or to which it may become entitled to
be paid to the Custodian, and shall order the same
disbursed only for investment against delivery of the
securities acquired, or the return of cash held as
collateral for loans of portfolio securities, or in payment
of expenses, including management compensation, and
liabilities of the Trust, including distributions to
shareholders, or to a successor Custodian. In connection
with the Trust's purchase or sale of futures contracts, the
Custodian shall transmit, prior to receipt on behalf of the
Trust of any securities or other property, funds from the
Trust's custodian account in order to furnish to and
maintain funds with brokers as margin to guarantee the
performance of the Trust's futures obligations in
accordance with the applicable requirements of commodities
exchanges and brokers. Section 4. Central Certificate
System. Subject
to such rules, regulations and orders as the Commission may adopt, the Trustees
may direct the Custodian to deposit all or any part of the securities owned by
the Trust in a system for the central handling of securities established by a
national
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securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
Section 5. Acceptance of Receipts in Lieu of
Certificates. Subject to such rules, regulations and orders as the Commission
may adopt, the Trustees may direct the Custodian to accept written receipts or
other written evidences indicating purchases of securities held in book-entry
form in the Federal Reserve System in accordance with regulations promulgated by
the Board of Governors of the Federal Reserve System and the local Federal
Reserve Banks in lieu of receipt of certificates representing such securities.
ARTICLE XI
AMENDMENTS
These Bylaws, or any of them, may be altered, amended
or repealed, or new Bylaws may be adopted by (a) vote of a
majority of the Shares outstanding and entitled to vote or (b)
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the Trustees, provided, however, that no Bylaw may be amended, adopted or
repealed by the Trustees if such amendment, adoption or repeal requires,
pursuant to law, the Trust Instrument or these Bylaws, a vote of the
Shareholders.
ARTICLE XII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether
and to what extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust or any of them shall be open to
the inspection of the shareholders; and no shareholder shall have any right of
inspecting any account or book or document of the Trust except as conferred by
laws or authorized by the Trustees or by resolution of the shareholders.
ARTICLE XIII
MISCELLANEOUS
(A) Except as hereinafter provided, no officer or
Trustee of the Trust and no partner, officer, director or shareholder of the
Investment Adviser of the Trust or of the Distributor of the Trust, and no
Investment Adviser or Distributor of the Trust, shall take long or short
positions in the securities issued by the Trust.
(1) The foregoing provisions shall not prevent
the Distributor from purchasing Shares from the Trust
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if such purchases are limited (except for reasonable
allowances for clerical errors, delays and errors of
transmission and cancellation of orders) to purchases for
the purpose of filling orders for such Shares received by
the Distributor, and provided that orders to purchase from
the Trust are entered with the Trust or the Custodian
promptly upon receipt by the Distributor of purchase orders
for such Shares, unless the Distributor is otherwise
instructed by its customer.
(2) The foregoing provision shall not prevent the
Distributor from purchasing Shares of the Trust as agent for the
account of the Trust.
(3) The foregoing provision shall not prevent the purchase
from the Trust or from the Distributor of Shares issued by the
Trust, by any officer, or Trustee of the Trust or by any partner,
officer, director or shareholder of the Investment Adviser of the
Trust or of the Distributor of the Trust at the price available
to the public generally at the moment of such purchase, or as
described in the then currently effective Prospectus for the
Series of such Shares.
(4) The foregoing shall not prevent the Distributor, or any
affiliate thereof, of the Trust from purchasing Shares prior to
the effectiveness of the first
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registration statement relating to the Shares under the
Securities Act of 1933.
(B) The Trust shall not lend assets of the Trust to any
officer or Trustee of the Trust, or to any partner, officer, director or
shareholder of, or person financially interested in, the Investment Adviser of
the Trust, or the Distributor of the Trust, or to the Investment Adviser of the
Trust or to the Distributor of the Trust.
(C) The Trust shall not impose any restrictions upon the transfer
of the Shares of the Trust except as provided in the Trust Instrument, but this
requirement shall not prevent the charging of customary transfer agent fees.
(D) The Trust shall not permit any officer or Trustee of the
Trust, or any partner, officer or director of the Investment Adviser or
Distributor of the Trust to deal for or on behalf of the Trust with himself as
principal or agent, or with any partnership, association or corporation in which
he has a financial interest; provided that the foregoing provisions shall not
prevent (a) officers and Trustees of the Trust or partners, officers or
directors of the Investment Adviser or Distributor of the Trust from buying,
holding or selling shares in the Trust, or from being partners, officers or
directors or otherwise financially interested in the Investment Adviser or
Distributor of the Trust; (b) purchases or sales of securities or other property
by the Trust from or to an affiliated person or to the
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Investment Adviser or Distributor of the Trust if such transaction is exempt
from the applicable provisions of the 1940 Act; (c) purchases of investments for
the portfolio of any Series of the Trust or sales of investments owned by any
Series of the Trust through a security dealer who is, or one or more of whose
partners, shareholders, officers or directors is, an officer or Trustee of the
Trust, or a partner, officer or director of the Investment Adviser or
Distributor of the Trust, if such transactions are handled in the capacity of
broker only and commissions charged do not exceed customary brokerage charges
for such services; (d) employment of legal counsel, registrar, Transfer Agent,
dividend disbursing agent or Custodian who is, or has a partner, shareholder,
officer, or director who is, an officer or Trustee of the Trust, or a partner,
officer or director of the Investment Adviser or Distributor of the Trust, if
only customary fees are charged for services to the Trust; (e) sharing
statistical research, legal and management expenses and office hire and expenses
with any other investment company in which an officer or Trustee of the Trust,
or a partner, officer or director of the Investment Adviser or Distributor of
the Trust, is an officer or director or otherwise financially interested.
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INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of the 27th day of June, 1994, and
amended and restated the 25th day of May, 1995, between TEMPLETON GLOBAL
INVESTMENT TRUST (hereinafter referred to as the "Trust"), on behalf of
Templeton Americas Government Securities Fund (the "Fund"), and TEMPLETON
INVESTMENT COUNSEL, INC., on behalf of the Templeton Global Bond Managers
division (hereinafter referred to as the "Investment Manager").
In consideration of the mutual agreements herein made,
the Trust on behalf of the Fund and the Investment Manager
understand and agree as follows:
(1) The Investment Manager shall manage the investment
and reinvestment of the Fund's assets consistent with the provisions of the
Trust Instrument of the Trust and the investment policies adopted and declared
by the Trust's Board of Trustees. In pursuance of the foregoing, the Investment
Manager shall make all determinations with respect to the investment of the
Fund's assets and the purchase and sale of its investment securities, and shall
take such steps as may be necessary to implement those determinations. Such
determinations and services shall include determining the manner in which any
voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's investment securities shall be exercised, subject to
guidelines adopted by the Board of Trustees.
(2) The Investment Manager is not required to furnish
any personnel, overhead items or facilities for the Fund,
<PAGE>
including trading desk facilities or daily pricing of the Fund's
portfolio.
(3) The Investment Manager shall be responsible for
selecting members of securities exchanges, brokers and dealers (such members,
brokers and dealers being hereinafter referred to as "brokers") for the
execution of the Fund's portfolio trans-actions consistent with the Trust's
brokerage policies and, when applicable, the negotiation of commissions in
connection therewith.
All decisions and placements shall be made in
accordance with the following principles:
A. Purchase and sale orders will usually be placed
with brokers which are selected by the Investment
Manager as able to achieve "best execution" of
such orders. "Best execution" shall mean prompt
and reliable execution at the most favorable
security price, taking into account the other
provisions hereinafter set forth. The
determination of what may constitute best
execution and price in the execution of a
securities transaction by a broker involves a
number of considerations, including, without
limitation, the overall direct net economic result
to the Fund (involving both price paid or received
and any commissions and other costs paid), the
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efficiency with which the transaction is
effected, the ability to effect the transaction
at all where a large block is involved,
availability of the broker to stand ready to
execute possibly difficult transactions in the
future, and the financial strength and stability
of the broker. Such considerations are judgmental
and are weighed by the Investment Manager in
determining the overall reasonableness of
brokerage commissions.
B. In selecting brokers for portfolio transactions,
the Investment Manager shall take into account
its past experience as to brokers qualified to
achieve "best execution," including brokers who
specialize in any foreign securities held by the
Fund.
C. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services
are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for the
Fund and/or other accounts, if any, for which the
Investment Manager exercises investment discretion
(as defined in Section 3(a)(35) of the 1934 Act)
and, as to transactions for which fixed minimum
commission rates are not applicable, to cause the
Fund to pay a commission for effecting a
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securities transaction in excess of the amount
another broker would have charged for effecting
that transaction, if the Investment Manager
determines in good faith that such amount of
commission is reasonable in relation to the value
of the brokerage and research services provided
by such broker, viewed in terms of either that
particular transaction or the Investment
Manager's overall responsibilities with respect
to the Fund and the other accounts, if any, as to
which it exercises investment discretion. In
reaching such determination, the Investment
Manager will not be required to place or attempt
to place a specific dollar value on the research
or execution services of a broker or on the
portion of any commission reflecting either of
said services. In demonstrating that such
determinations were made in good faith, the
Investment Manager shall be prepared to show that
all commissions were allocated and paid for
purposes contemplated by the Trust's brokerage
policy; that the research services provide lawful
and appropriate assistance to the Investment
Manager in the performance of its investment
decision-making responsibilities; and that the
commissions paid were within a
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reasonable range. Whether commissions were within
a reasonable range shall be based on any
available information as to the level of
commission known to be charged by other brokers
on comparable transactions, but there shall be
taken into account the Trust's policies that (i)
obtaining a low commission is deemed secondary to
obtaining a favorable securities price, since it
is recognized that usually it is more beneficial
to the Fund to obtain a favorable price than to
pay the lowest commission; and (ii) the quality,
comprehensiveness and frequency of research
studies that are provided for the Investment
Manager are useful to the Investment Manager in
performing its advisory services under this
Agreement. Research services provided by brokers
to the Investment Manager are considered to be in
addition to, and not in lieu of, services
required to be performed by the Investment
Manager under this Agreement. Research furnished
by brokers through which the Fund effects
securities transactions may be used by the
Investment Manager for any of its accounts, and
not all research may be used by the Investment
Manager for the Fund. When execution of portfolio
transactions is
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allocated to brokers trading on exchanges with
fixed brokerage commission rates, account may be
taken of various services provided by the broker.
D. Purchases and sales of portfolio securities
within the United States other than on a
securities exchange shall be executed with
primary market makers acting as principal, except
where, in the judgment of the Investment Manager,
better prices and execution may be obtained on a
commission basis or from other sources.
E. Sales of the Fund's shares (which shall be deemed
to include also shares of other registered
investment companies which have either the same
adviser or an investment adviser affiliated with
the Investment Manager) by a broker are one factor
among others to be taken into account in deciding
to allocate portfolio transactions (including
agency transactions, principal transactions,
purchases in underwritings or tenders in response
to tender offers) for the account of the Fund to
that broker; provided that the broker shall
furnish "best execution," as defined in
subparagraph A above, and that such allocation
shall be within the scope of the Trust's policies
as stated above; provided further, that in every
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allocation made to a broker in which the sale of
Fund shares is taken into account, there shall be
no increase in the amount of the commissions or
other compensation paid to such broker beyond a
reasonable commission or other compensation
determined, as set forth in subparagraph C above,
on the basis of best execution alone or best
execution plus research services, without taking
account of or placing any value upon such sale of
the Fund's shares.
(4) The Fund agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of 0.60% of the Fund's average daily
net assets, payable at the end of each calendar month. The Investment Manager
may waive all or a portion of its fees provided for hereunder and such waiver
shall be treated as a reduction in purchase price of its services. The
Investment Manager shall be contractually bound hereunder by the terms of any
publicly announced waiver of its fee, or any limitation of the Fund's expenses,
as if such waiver or limitation were fully set forth herein.
Notwithstanding the foregoing, if the total expenses of
the Fund (including the fee to the Investment Manager) in any fiscal year of the
Trust exceed any expense limitation imposed by applicable State law, the
Investment Manager shall reimburse the Fund for such excess in the manner and to
the extent required by
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applicable State law. The term "total expenses," as used in this paragraph, does
not include interest, taxes, litigation expenses, distribution expenses,
brokerage commissions or other costs of acquiring or disposing of any of the
Fund's portfolio securities or any costs or expenses incurred or arising other
than in the ordinary and necessary course of the Fund's business. When the
accrued amount of such expenses exceeds this limit, the monthly payment of the
Investment Manager's fee will be reduced by the amount of such excess, subject
to adjustment month by month during the balance of the Trust's fiscal year if
accrued expenses thereafter fall below the limit.
(5) This Agreement shall become effective on June 27,
1994 and shall continue in effect until July 31, 1995. If not sooner terminated,
this Agreement shall continue in effect for successive periods of 12 months each
thereafter, provided that each such continuance shall be specifically approved
annually by the vote of a majority of the Trust's Board of Trustees who are not
parties to this Agreement or "interested persons" (as defined in Investment
Company Act of 1940 (the "1940 Act")) of any such party, cast in person at a
meeting called for the purpose of voting on such approval and either the vote of
(a) a majority of the outstanding voting securities of the Fund, as defined in
the 1940 Act, or (b) a majority of the Trust's Board of Trustees as a whole.
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(6) Notwithstanding the foregoing, this Agreement may
be terminated by either party at any time, without the payment of any penalty,
on sixty (60) days' written notice to the other party, provided that termination
by the Trust is approved by vote of a majority of the Trust's Board of Trustees
in office at the time or by vote of a majority of the outstanding voting
securities of the Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the
1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the Fund, the
Investment Manager reserves the right to withdraw from the Fund the use of the
name "Templeton" or any name misleadingly implying a continuing relationship
between the Fund and the Investment Manager or any of its affiliates.
(9) Except as may otherwise be provided by the 1940
Act, neither the Investment Manager nor its officers, directors, employees or
agents shall be subject to any liability for any error of judgment, mistake of
law, or any loss arising out of any investment or other act or omission in the
performance by the Investment Manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians, or
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securities depositories, or from any war or political act of any foreign
government to which such assets might be exposed, or for failure, on the part of
the custodian or otherwise, timely to collect payments, except for any
liability, loss or damage resulting from willful misfeasance, bad faith or gross
negligence on the Investment Manager's part or by reason of reckless disregard
of the Investment Manager's duties under this Agreement. It is hereby understood
and acknowledged by the Trust that the value of the investments made for the
Fund may increase as well as decrease and are not guaranteed by the Investment
Manager. It is further understood and acknowledged by the Trust that investment
decisions made on behalf of the Fund by the Investment Manager are subject to a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions, market
factors and currency exchange rates, and that investment decisions made by the
Investment Manager will not always be profitable or prove to have been correct.
(10) It is understood that the services of the Investment Manager
are not deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Manager, or any affiliate thereof, from providing similar services to
other investment companies and other clients, including clients which may invest
in the same types of securities as the Fund, or, in providing such services,
from using information furnished by
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others. When the Investment Manager determines to buy or sell the same security
for the Fund that the Investment Manager or one or more of its affiliates has
selected for clients of the Investment Manager or its affiliates, the orders for
all such security transactions shall be placed for execution by methods
determined by the Investment Manager, with approval by the Trust's Board of
Trustees, to be impartial and fair.
(11) This Agreement shall be construed in accordance with the
laws of the State of Delaware, provided that nothing herein shall be construed
as being inconsistent with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(12) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting
the Investment Manager an agent of the Trust.
(14) It is understood and expressly stipulated that neither the
holders of shares of the Fund nor any Trustee, officer, agent or employee of the
Trust shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation hereunder, but
the Trust only shall be liable.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON GLOBAL INVESTMENT TRUST
By:______________________________
TEMPLETON INVESTMENT COUNSEL, INC.
By:______________________________
- 12 -
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of the 14th day of March, 1994, and
amended and restated the 25th day of May, 1995, between TEMPLETON GLOBAL
INVESTMENT TRUST (hereinafter referred to as the "Trust"), on behalf of
TEMPLETON GLOBAL RISING DIVIDENDS FUND (the "Fund"), and TEMPLETON, GALBRAITH &
HANSBERGER LTD. (hereinafter referred to as the "Investment Manager").
In consideration of the mutual agreements herein made,
the Trust on behalf of the Fund and the Investment Manager
understand and agree as follows:
(1) The Investment Manager shall manage the investment
and reinvestment of the Fund's assets consistent with the provisions of the
Trust Instrument of the Trust and the investment policies adopted and declared
by the Trust's Board of Trustees. In pursuance of the foregoing, the Investment
Manager shall make all determinations with respect to the investment of the
Fund's assets and the purchase and sale of its investment securities, and shall
take such steps as may be necessary to implement those determinations. Such
determinations and services shall include determining the manner in which any
voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's investment securities shall be exercised, subject to
guidelines adopted by the Board of Trustees. It is understood that all acts of
the Investment Manager in performing this Agreement are performed by it outside
the United States.
<PAGE>
(2) The Investment Manager is not required to furnish
any personnel, overhead items or facilities for the Fund, including trading desk
facilities or daily pricing of the Fund's portfolio.
(3) The Investment Manager shall be responsible for
selecting members of securities exchanges, brokers and dealers (such members,
brokers and dealers being hereinafter referred to as "brokers") for the
execution of the Fund's portfolio trans-actions consistent with the Trust's
brokerage policies and, when applicable, the negotiation of commissions in
connection therewith.
All decisions and placements shall be made in
accordance with the following principles:
A. Purchase and sale orders will usually be placed
with brokers which are selected by the Investment
Manager as able to achieve "best execution" of
such orders. "Best execution" shall mean prompt
and reliable execution at the most favorable
security 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
- 2 -
<PAGE>
to the Fund (involving both price paid or
received and any commissions and other costs
paid), the efficiency with which the transaction
is effected, the ability to effect the
transaction at all where a large block is
involved, availability of the broker to stand
ready to execute possibly difficult transactions
in the future, and the financial strength and
stability of the broker. Such considerations are
judgmental and are weighed by the Investment
Manager in determining the overall reasonableness
of brokerage commissions.
B. In selecting brokers for portfolio transactions,
the Investment Manager shall take into account
its past experience as to brokers qualified to
achieve "best execution," including brokers who
specialize in any foreign securities held by the
Fund.
C. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services
are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for the
Fund and/or other accounts, if any, for which the
Investment Manager exercises investment discretion
(as defined in Section 3(a)(35) of the 1934 Act)
and, as to transactions for which fixed minimum
- 3 -
<PAGE>
commission rates are not applicable, to cause the
Fund to pay a commission for effecting a
securities transaction in excess of the amount
another broker would have charged for effecting
that transaction, if the Investment Manager
determines in good faith that such amount of
commission is reasonable in relation to the value
of the brokerage and research services provided
by such broker, viewed in terms of either that
particular transaction or the Investment
Manager's overall responsibilities with respect
to the Fund and the other accounts, if any, as to
which it exercises investment discretion. In
reaching such determination, the Investment
Manager will not be required to place or attempt
to place a specific dollar value on the research
or execution services of a broker or on the
portion of any commission reflecting either of
said services. In demonstrating that such
determinations were made in good faith, the
Investment Manager shall be prepared to show that
all commissions were allocated and paid for
purposes contemplated by the Trust's brokerage
policy; that the research services provide lawful
and appropriate assistance to the Investment
Manager in the performance of
- 4 -
<PAGE>
its investment decision-making responsibilities;
and that the commissions paid were within a
reasonable range. Whether commissions were within
a reasonable range shall be based on any
available information as to the level of
commission known to be charged by other brokers
on comparable transactions, but there shall be
taken into account the Trust's policies that (i)
obtaining a low commission is deemed secondary to
obtaining a favorable securities price, since it
is recognized that usually it is more beneficial
to the Fund to obtain a favorable price than to
pay the lowest commission; and (ii) the quality,
comprehensiveness and frequency of research
studies that are provided for the Investment
Manager are useful to the Investment Manager in
performing its advisory services under this
Agreement. Research services provided by brokers
to the Investment Manager are considered to be in
addition to, and not in lieu of, services
required to be performed by the Investment
Manager under this Agreement. Research furnished
by brokers through which the Fund effects
securities transactions may be used by the
Investment Manager for any of its accounts, and
not all research may
- 5 -
<PAGE>
be used by the Investment Manager for the Fund.
When execution of portfolio transactions is
allocated to brokers trading on exchanges with
fixed brokerage commission rates, account may be
taken of various services provided by the broker.
D. Purchases and sales of portfolio securities
within the United States other than on a
securities exchange shall be executed with
primary market makers acting as principal, except
where, in the judgment of the Investment Manager,
better prices and execution may be obtained on a
commission basis or from other sources.
E. Sales of the Fund's shares (which shall be deemed
to include also shares of other registered
investment companies which have either the same
adviser or an investment adviser affiliated with
the Investment Manager) by a broker are one factor
among others to be taken into account in deciding
to allocate portfolio transactions (including
agency transactions, principal transactions,
purchases in underwritings or tenders in response
to tender offers) for the account of the Fund to
that broker; provided that the broker shall
furnish "best execution," as defined in
subparagraph A above, and that such allocation
- 6 -
<PAGE>
shall be within the scope of the Trust's policies
as stated above; provided further, that in every
allocation made to a broker in which the sale of
Fund shares is taken into account, there shall be
no increase in the amount of the commissions or
other compensation paid to such broker beyond a
reasonable commission or other compensation
determined, as set forth in subparagraph C above,
on the basis of best execution alone or best
execution plus research services, without taking
account of or placing any value upon such sale of
the Trust's shares.
(4) The Fund agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of 0.75% of the Fund's average daily
net assets, payable at the end of each calendar month. The Investment Manager
may waive all or a portion of its fees provided for hereunder and such waiver
shall be treated as a reduction in purchase price of its services. The
Investment Manager shall be contractually bound hereunder by the terms of any
publicly announced waiver of its fee, or any limitation of the Fund's expense,
as if such waiver or limitation were fully set forth herein.
Notwithstanding the foregoing, if the total expenses of
the Fund (including the fee to the Investment Manager) in any
fiscal year of the Trust exceed any expense limitation imposed by
- 7 -
<PAGE>
applicable State law, the Investment Manager shall reimburse the Fund for such
excess in the manner and to the extent required by applicable State law. The
term "total expenses," as used in this paragraph, does not include interest,
taxes, litigation expenses, distribution expenses, brokerage commissions or
other costs of acquiring or disposing of any of the Fund's portfolio securities
- 8 -
<PAGE>
or any costs or expenses incurred or arising other than in the ordinary and
necessary course of the Fund's business. When the accrued amount of such
expenses exceeds this limit, the monthly payment of the Investment Manager's fee
will be reduced by the amount of such excess, subject to adjustment month by
month during the balance of the Trust's fiscal year if accrued expenses
thereafter fall below the limit.
(5) This Agreement shall become effective on March 14,
1994 and shall continue in effect until July 31, 1995. If not sooner terminated,
this Agreement shall continue in effect for successive periods of 12 months each
thereafter, provided that each such continuance shall be specifically approved
annually by the vote of a majority of the Trust's Board of Trustees who are not
parties to this Agreement or "interested persons" (as defined in Investment
Company Act of 1940 (the "1940 Act")) of any such party, cast in person at a
meeting called for the purpose of voting on such approval and either the vote of
(a) a majority of the outstanding voting securities of the Fund, as defined in
the 1940 Act, or (b) a majority of the Trust's Board of Trustees as a whole.
(6) Notwithstanding the foregoing, this Agreement may
be terminated by either party at any time, without the payment of any penalty,
on sixty (60) days' written notice to the other party, provided that termination
by the Trust is approved by vote of a majority of the Trust's Board of Trustees
in office at the
- 9 -
<PAGE>
time or by vote of a majority of the outstanding voting securities of the Fund
(as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the
1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the Fund, the
Investment Manager reserves the right to withdraw from the Fund the use of the
name "Templeton" or any name misleadingly implying a continuing relationship
between the Fund and the Investment Manager or any of its affiliates.
(9) Except as may otherwise be provided by the 1940
Act, neither the Investment Manager nor its officers, directors, employees or
agents shall be subject to any liability for any error of judgment, mistake of
law, or any loss arising out of any investment or other act or omission in the
performance by the Investment Manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians, or securities depositories, or from any
war or political act of any foreign government to which such assets might be
exposed, or for failure, on the part of the custodian or otherwise, timely to
collect payments, except for any liability, loss or damage resulting from
willful misfeasance, bad faith or gross negligence
- 10 -
<PAGE>
on the Investment Manager's part or by reason of reckless disregard of the
Investment Manager's duties under this Agreement. It is hereby understood and
acknowledged by the Trust that the value of the investments made for the Fund
may increase as well as decrease and are not guaranteed by the Investment
Manager. It is further understood and acknowledged by the Trust that investment
decisions made on behalf of the Fund by the Investment Manager are subject to a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions, market
factors and currency exchange rates, and that investment decisions made by the
Investment Manager will not always be profitable or prove to have been correct.
(10) It is understood that the services of the Investment Manager
are not deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Manager, or any affiliate thereof, from providing similar services to
other investment companies and other clients, including clients which may invest
in the same types of securities as the Fund, or, in providing such services,
from using information furnished by others. When the Investment Manager
determines to buy or sell the same security for the Fund that the Investment
Manager or one or more of its affiliates has selected for clients of the
Investment Manager or its affiliates, the orders for all such security
transactions shall be placed for execution by methods
- 11 -
<PAGE>
determined by the Investment Manager, with approval by the Trust's Board of
Trustees, to be impartial and fair.
(11) This Agreement shall be construed in accordance with the
laws of the State of Delaware, provided that nothing herein shall be construed
as being inconsistent with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(12) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting
the Investment Manager an agent of the Trust.
(14) It is understood and expressly stipulated that neither the
holders of shares of the Fund nor any Trustee, officer, agent or employee of the
Trust shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation hereunder, but
the Trust only shall be liable.
- 12 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers and their respective
corporate seals to be hereunto duly affixed and attested.
TEMPLETON GLOBAL INVESTMENT TRUST
By:_______________________________
John R. Kay
Vice President
ATTEST:
- ------------------------------
Thomas M. Mistele
Secretary
TEMPLETON, GALBRAITH & HANSBERGER LTD.
By:_________________________________
Mark G. Holowesko
Executive Vice President
ATTEST:
- ------------------------------
- 13 -
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of the 14th day of March, 1994, and amended
and restated the 25th day of May, 1995, between TEMPLETON GLOBAL INVESTMENT
TRUST (hereinafter referred to as the "Trust"), on behalf of Templeton Global
Infrastructure Fund (the "Fund"), and TEMPLETON INVESTMENT COUNSEL, INC.
(hereinafter referred to as the "Investment Manager").
In consideration of the mutual agreements herein made, the
Trust on behalf of the Fund and the Investment Manager understand and agree as
follows:
(1) The Investment Manager shall manage the investment and
reinvestment of the Fund's assets consistent with the provisions of the Trust
Instrument of the Trust and the investment policies adopted and declared by the
Trust's Board of Trustees. In pursuance of the foregoing, the Investment Manager
shall make all determinations with respect to the investment of the Fund's
assets and the purchase and sale of its investment securities, and shall take
such steps as may be necessary to implement those determinations. Such
determinations and services shall include determining the manner in which any
voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's investment securities shall be exercised, subject to
guidelines adopted by the Board of Trustees.
(2) The Investment Manager is not required to furnish
any personnel, overhead items or facilities for the Fund,
<PAGE>
including trading desk facilities or daily pricing of the Fund's
portfolio.
(3) The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as "brokers") for the execution of the
Fund's portfolio transactions consistent with the Trust's brokerage policies
and, when applicable, the negotiation of commissions in connection therewith.
All decisions and placements shall be made in accordance with
the following principles:
A. Purchase and sale orders will usually be placed
with brokers which are selected by the Investment
Manager as able to achieve "best execution" of
such orders. "Best execution" shall mean prompt
and reliable execution at the most favorable
security price, taking into account the other
provisions hereinafter set forth. The
determination of what may constitute best
execution and price in the execution of a
securities transaction by a broker involves a
number of considerations, including, without
limitation, the overall direct net economic result
to the Fund (involving both price paid or received
and any commissions and other costs paid), the
- 2 -
<PAGE>
efficiency with which the transaction is effected,
the ability to effect the transaction at all where a
large block is involved, availability of the broker
to stand ready to execute possibly difficult
transactions in the future, and the financial
strength and stability of the broker. Such
considerations are judgmental and are weighed by the
Investment Manager in determining the overall
reasonableness of brokerage commissions.
B. In selecting brokers for portfolio transactions, the
Investment Manager shall take into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by the Fund.
C. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services
are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for the
Fund and/or other accounts, if any, for which the
Investment Manager exercises investment discretion
(as defined in Section 3(a)(35) of the 1934 Act)
and, as to transactions for which fixed minimum
commission rates are not applicable, to cause the
Fund to pay a commission for effecting a
- 3 -
<PAGE>
securities transaction in excess of the amount
another broker would have charged for effecting that
transaction, if the Investment Manager determines in
good faith that such amount of commission is
reasonable in relation to the value of the brokerage
and research services provided by such broker, viewed
in terms of either that particular transaction or the
Investment Manager's overall responsibilities with
respect to the Fund and the other accounts, if any,
as to which it exercises investment discretion. In
reaching such determination, the Investment Manager
will not be required to place or attempt to place a
specific dollar value on the research or execution
services of a broker or on the portion of any
commission reflecting either of said services. In
demonstrating that such determinations were made in
good faith, the Investment Manager shall be prepared
to show that all commissions were allocated and paid
for purposes contemplated by the Trust's brokerage
policy; that the research services provide lawful and
appropriate assistance to the Investment Manager in
the performance of its investment decision-making
responsibilities; and that the commissions paid were
within a
- 4 -
<PAGE>
reasonable range. Whether commissions were within a
reasonable range shall be based on any available
information as to the level of commission known to be
charged by other brokers on comparable transactions,
but there shall be taken into account the Trust's
policies that (i) obtaining a low commission is
deemed secondary to obtaining a favorable securities
price, since it is recognized that usually it is more
beneficial to the Fund to obtain a favorable price
than to pay the lowest commission; and (ii) the
quality, comprehensiveness and frequency of research
studies that are provided for the Investment Manager
are useful to the Investment Manager in performing
its advisory services under this Agreement. Research
services provided by brokers to the Investment
Manager are considered to be in addition to, and not
in lieu of, services required to be performed by the
Investment Manager under this Agreement. Research
furnished by brokers through which the Fund effects
securities transactions may be used by the Investment
Manager for any of its accounts, and not all research
may be used by the Investment Manager for the Fund.
When execution of portfolio transactions is
- 5 -
<PAGE>
allocated to brokers trading on exchanges with fixed
brokerage commission rates, account may be taken of
various services provided by the broker.
D. Purchases and sales of portfolio securities within
the United States other than on a securities exchange
shall be executed with primary market makers acting
as principal, except where, in the judgment of the
Investment Manager, better prices and execution may
be obtained on a commission basis or from other
sources.
E. Sales of the Fund's shares (which shall be deemed
to include also shares of other registered
investment companies which have either the same
adviser or an investment adviser affiliated with
the Investment Manager) by a broker are one factor
among others to be taken into account in deciding
to allocate portfolio transactions (including
agency transactions, principal transactions,
purchases in underwritings or tenders in response
to tender offers) for the account of the Fund to
that broker; provided that the broker shall
furnish "best execution," as defined in
subparagraph A above, and that such allocation
shall be within the scope of the Trust's policies
as stated above; provided further, that in every
- 6 -
<PAGE>
allocation made to a broker in which the sale of Fund
shares is taken into account, there shall be no
increase in the amount of the commissions or other
compensation paid to such broker beyond a reasonable
commission or other compensation determined, as set
forth in subparagraph C above, on the basis of best
execution alone or best execution plus research
services, without taking account of or placing any
value upon such sale of the Fund's shares.
(4) The Fund agrees to pay to the Investment Manager a monthly
fee in dollars at an annual rate of 0.75% of the Fund's average daily net
assets, payable at the end of each calendar month. The Investment Manager may
waive all or a portion of its fees provided for hereunder and such waiver shall
be treated as a reduction in purchase price of its services. The Investment
Manager shall be contractually bound hereunder by the terms of any publicly
announced waiver of its fee, or any limitation of the Fund's expense, as if such
waiver or limitation were fully set forth herein.
Notwithstanding the foregoing, if the total expenses of the
Fund (including the fee to the Investment Manager) in any fiscal year of the
Trust exceed any expense limitation imposed by applicable State law, the
Investment Manager shall reimburse the Fund for such excess in the manner and to
the extent required by
- 7 -
<PAGE>
applicable State law. The term "total expenses," as used in this paragraph, does
not include interest, taxes, litigation expenses, distribution expenses,
brokerage commissions or other costs of acquiring or disposing of any of the
Fund's portfolio securities or any costs or expenses incurred or arising other
than in the ordinary and necessary course of the Fund's business. When the
accrued amount of such expenses exceeds this limit, the monthly payment of the
Investment Manager's fee will be reduced by the amount of such excess, subject
to adjustment month by month during the balance of the Trust's fiscal year if
accrued expenses thereafter fall below the limit.
(5) This Agreement shall become effective on March 14, 1994
and shall continue in effect until July 31, 1995. If not sooner terminated, this
Agreement shall continue in effect for successive periods of 12 months each
thereafter, provided that each such continuance shall be specifically approved
annually by the vote of a majority of the Trust's Board of Trustees who are not
parties to this Agreement or "interested persons" (as defined in Investment
Company Act of 1940 (the "1940 Act")) of any such party, cast in person at a
meeting called for the purpose of voting on such approval and either the vote of
(a) a majority of the outstanding voting securities of the Fund, as defined in
the 1940 Act, or (b) a majority of the Trust's Board of Trustees as a whole.
- 8 -
<PAGE>
(6) Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination by
the Trust is approved by vote of a majority of the Trust's Board of Trustees in
office at the time or by vote of a majority of the outstanding voting securities
of the Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the
1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the Fund, the
Investment Manager reserves the right to withdraw from the Fund the use of the
name "Templeton" or any name misleadingly implying a continuing relationship
between the Fund and the Investment Manager or any of its affiliates.
(9) Except as may otherwise be provided by the 1940 Act,
neither the Investment Manager nor its officers, directors, employees or agents
shall be subject to any liability for any error of judgment, mistake of law, or
any loss arising out of any investment or other act or omission in the
performance by the Investment Manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians, or
- 9 -
<PAGE>
securities depositories, or from any war or political act of any foreign
government to which such assets might be exposed, or for failure, on the part of
the custodian or otherwise, timely to collect payments, except for any
liability, loss or damage resulting from willful misfeasance, bad faith or gross
negligence on the Investment Manager's part or by reason of reckless disregard
of the Investment Manager's duties under this Agreement. It is hereby understood
and acknowledged by the Trust that the value of the investments made for the
Fund may increase as well as decrease and are not guaranteed by the Investment
Manager. It is further understood and acknowledged by the Trust that investment
decisions made on behalf of the Fund by the Investment Manager are subject to a
variety of factors which may affect the values and income generated by the
Fund's portfolio securities, including general economic conditions, market
factors and currency exchange rates, and that investment decisions made by the
Investment Manager will not always be profitable or prove to have been correct.
(10) It is understood that the services of the Investment Manager
are not deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Manager, or any affiliate thereof, from providing similar services to
other investment companies and other clients, including clients which may invest
in the same types of securities as the Fund, or, in providing such services,
from using information furnished by
- 10 -
<PAGE>
others. When the Investment Manager determines to buy or sell the same security
for the Fund that the Investment Manager or one or more of its affiliates has
selected for clients of the Investment Manager or its affiliates, the orders for
all such security transactions shall be placed for execution by methods
determined by the Investment Manager, with approval by the Trust's Board of
Trustees, to be impartial and fair.
(11) This Agreement shall be construed in accordance with the laws
of the State of Delaware, provided that nothing herein shall be construed as
being inconsistent with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(12) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting
the Investment Manager an agent of the Trust.
(14) It is understood and expressly stipulated that neither the
holders of shares of the Fund nor any Trustee, officer, agent or employee of the
Trust shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation hereunder, but
the Trust only shall be liable.
- 11 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON GLOBAL INVESTMENT TRUST
By:_______________________________
John R. Kay
Vice President
ATTEST:
- ------------------------------
Thomas M. Mistele
Secretary
TEMPLETON INVESTMENT COUNSEL, INC.
By:_________________________________
Donald F. Reed
President
ATTEST:
- ------------------------------
- 12 -
<PAGE>
SUB-ADVISORY AGREEMENT
AGREEMENT made at St. Petersburg, Florida as of the 27th day of June,
1994 between TEMPLETON INVESTMENT COUNSEL, INC., on behalf of the Templeton
Global Bond Managers division (hereinafter referred to as the "Manager") and
FRANKLIN ADVISERS, INC. (hereinafter referred to as the "Sub-Adviser" or
"Franklin").
WHEREAS, the Manager has entered into an Investment Management
Agreement (the "Management Agreement") dated as of June 27, 1994 with Templeton
Global Investment Trust (the "Trust"), a registered open-end investment company,
pursuant to which it acts as investment manager to a series of the Trust,
Templeton Americas Government Securities Fund (the "Fund").
WHEREAS, the Manager wishes to enter into a Sub-Advisory Agreement with
Franklin to avail itself of Franklin's investment management and advisory
services.
In consideration of the mutual agreements herein made, the Manager and
the Sub-Adviser understand and agree as follows:
1. Franklin agrees to provide, subject to the Manager's discretion, a
portion of the investment advisory services for which the Manager is responsible
pursuant to the Management Agreement, including supplying research services.
Research services provided by Franklin may include information, analytical
reports, computer screening studies, statistical data and factual resumes
pertaining to securities throughout the world. All research supplied by Franklin
will be subject to analysis by the Manager before being incorporated into the
investment advisory process.
2. As compensation for the services to be rendered, the
Manager shall pay to the Sub-Adviser a fee payable monthly in
U.S. dollars at an annual rate of 0.25% of the Fund's average
daily net assets.
3. With respect to the Fund's assets which the Manager may delegate to
the Sub-Adviser to manage, the Sub-Adviser shall be responsible for selecting
brokers and dealers for the execution of the Fund's portfolio transactions
consistent with the Trust's brokerage policies and when applicable, the
regulations of the Securities and Exchange Commission and the Commodities
Futures Trading Commission in connection therewith. All decisions and placements
shall be made in accordance with the principles set forth in the Management
Agreement.
4. It is understood that the services provided by the Sub-Adviser are
not to be deemed exclusive and nothing in this Agreement shall preclude the
Sub-Adviser from providing similar services to other investment companies and
other clients,
<PAGE>
including clients which may invest in the same type of securities as the Fund
or, in providing such services, from using information furnished by others. When
Franklin determines to recommend or to buy or sell the same security for the
Fund that it has selected for other investment companies or other clients, the
orders for all securities transactions shall be placed for execution by methods
determined by it, with approval by the Trust's Board of Trustees, to be
impartial and fair.
5. During the term of this Agreement, Franklin will pay all expenses
incurred by it, its staff and their activities, in connection with the services
to be provided by it under this Agreement.
6. Nothing herein shall be construed as constituting the
Sub-Adviser or the Manager as agent of the other or of the Trust.
7. This Agreement shall become effective on June 27, 1994 and shall
continue in effect until July 31, 1995. If not sooner terminated, this Agreement
shall continue in effect for successive periods of 12 months each thereafter,
provided that each such continuance shall be specifically approved annually by
the vote of a majority of the Trust's Board of Trustees who are not parties to
this Agreement or "interested persons" (as defined in Investment Company Act of
1940 (the "1940 Act") of any such party, cast in person at a meeting called for
the purpose of voting on such approval, and either the vote of (a) a majority of
the outstanding voting securities of the Trust, as defined in the 1940 Act, or
(b) a majority of the Trust's Board of Trustees as a whole.
8. Notwithstanding the foregoing, this Agreement may be terminated by
either party at any time, without the payment of any penalty, on sixty (60)
days' written notice to the other party. In addition, this Agreement may be
terminated by the Trust on sixty (60) days' written notice to the Investment
Manager and to the Sub-Adviser, provided that such termination by the Trust is
approved by the vote of a majority of the Trust's Board of Trustees in office at
the time or by vote of a majority of the outstanding voting securities of the
Fund.
9. This Agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).
10. This Agreement shall be construed in accordance with the laws of
the State of Florida. As used herein, the terms "interested persons,"
"assignment" and "vote of a majority of the outstanding voting securities" shall
have the meaning set forth in the 1940 Act.
- 2 -
<PAGE>
11. The Sub-Adviser may rely on information reasonably believed by it
to be accurate and reliable. Except as may otherwise be provided by the 1940
Act, neither the Sub-Adviser nor its officers, directors, employees or agents
shall be subject to any liability for any error of judgment, mistake of law, or
any loss arising out of any investment or other act or omission in the
performance by the Sub-Adviser of its duties under this Agreement or for any
loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Trust's assets, or
from acts or omissions of custodians or securities depositories, or from any war
or political act of any foreign government to which such assets might be
exposed, except for any liability, loss or damage resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's part or by
reason of reckless disregard of the Sub-Adviser's duties under this Agreement.
- 3 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers and their respective corporate
seals to be hereunto duly affixed and attested.
Templeton Investment Counsel, Inc.
By _______________________________
Franklin Advisers, Inc.
By _______________________________
- 4 -
<PAGE>
SPECIMEN
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
DEALER AGREEMENT
Effective: XXXXX YY, 1995
Dear Securities Dealer:
Franklin/Templeton Distributors, Inc. ("we" or "us") invites you to
participate in the distribution of shares of the mutual funds in the Franklin
Templeton Group of Funds (the "Funds") for which we now or in the future serve
as principal underwriter, subject to the terms of this Agreement. We will notify
you from time to time of the Funds which are eligible for distribution and the
terms of compensation under this Agreement. This Agreement supersedes any prior
dealer agreements between us, under paragraph 18, below.
1. Licensing.
(a) You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and are presently licensed
to the extent necessary by the appropriate regulatory agency of each state
in which you will offer and sell shares of the Funds. You agree that
termination or suspension of such membership with the NASD, or of your
license to do business by any state or federal regulatory agency, at any
time shall terminate or suspend this Agreement forthwith and shall require
you to notify us in writing of such action. If you are not a member of the
NASD but are a dealer subject to the laws of a foreign country, you agree
to conform to the rules of fair practice of such association. This
Agreement is in all respects subject to Rule 26 of the Rules of Fair
Practice of the NASD which shall control any provision to the contrary in
this Agreement.
(b) You agree to notify us immediately in writing if at any time you are
not a member in good standing of the Securities Investor Protection
Corporation ("SIPC").
2. Sales of Fund Shares. You may offer and sell shares of each Fund and
class only at the public offering price which shall be applicable to, and
in effect at the time of, each transaction. The procedures relating to all
orders and the handling of them shall be subject to the terms of the then
current prospectus and statement of additional information (hereafter, the
"prospectus") and new account application, including amendments, for each
such Fund, and our written instructions from time to time. This Agreement
is not exclusive, and either party may enter into similar agreements with
third parties.
3. Duties of Dealer: In General. You agree:
(a) To act as principal, or as agent on behalf of your
customers, in all transactions in shares of the Funds except
as provided in paragraph 4 hereof. You shall not have any
<PAGE>
SPECIMEN
authority to act as agent for the issuer (the Funds), for the Principal
Underwriter, or for any other dealer in any respect, nor will you represent
to any third party that you have such authority or are acting in such
capacity.
(b) To purchase shares only from us or from your customers.
(c) To enter orders for the purchase of shares of the Funds only from us
and only for the purpose of covering purchase orders you have already
received from your customers or for your own bona fide investment.
(d) To maintain records of all sales and redemptions of shares made through
you and to furnish us with copies of such records on request.
(e) To distribute prospectuses and reports to your customers in compliance
with applicable legal requirements, except to the extent that we expressly
undertake to do so on your behalf.
(f) That you will not withhold placing customers' orders for shares so as
to profit yourself as a result of such withholding or place orders for
shares in amounts just below the point at which sales charges are reduced
so as to benefit from a higher sales charge applicable to an amount below
the breakpoint.
(g) That if any shares confirmed to you hereunder are repurchased or
redeemed by any of the Funds within seven business days after such
confirmation of your original order, you shall forthwith refund to us the
full concession allowed to you on such orders. We shall forthwith pay to
the appropriate Fund our share, if any, of the "charge" on the original
sale and shall also pay to such Fund the refund from you as herein
provided. We shall notify you of such repurchase or redemption within a
reasonable time after settlement. Termination or cancellation of this
Agreement shall not relieve you or us from the requirements of this
subparagraph.
(h) That if payment for the shares purchased is not received within the
time customary or the time required by law for such payment, the sale may
be canceled forthwith without any responsibility or liability on our part
or on the part of the Funds, or at our option, we may sell the shares which
you ordered back to the Funds, in which latter case we may hold you
responsible for any loss to the Fund or loss of profit suffered by us
resulting from your failure to make payment as aforesaid. We shall have no
liability for any check or other item returned unpaid to you after you have
paid us on behalf of a purchaser. We may refuse to liquidate the investment
unless we receive the purchaser's signed authorization for the liquidation.
<PAGE>
SPECIMEN
(i) That you shall assume responsibility for any loss to a Fund(s) caused
by a correction made subsequent to trade date, provided such correction was
not based on any error, omission or negligence on our part, and that you
will immediately pay such loss to the Fund(s) upon notification.
(j) That if on a redemption which you have ordered, instructions in proper
form, including outstanding certificates are not received within the time
customary or the time required by law, the redemption may be canceled
forthwith without any responsibility or liability on our part or on the
part of any Fund, or at our option, we may buy the shares redeemed on
behalf of the Fund, in which latter case we may hold you responsible for
any loss to the Fund or loss of profit suffered by us resulting from your
failure to settle the redemption.
4. Duties of Dealer: Retirement Accounts. In connection with orders for
the purchase of shares on behalf of an Individual Retirement Account,
Self-Employed Retirement Plan or other retirement accounts, by mail,
telephone, or wire, you shall act as agent for the custodian or trustee of
such plans (solely with respect to the time of receipt of the application
and payments) and shall not place such order until you have received from
your customer payment for such purchase and, if such purchase represents
the first contribution to such a plan, the completed documents necessary to
establish the plan. You agree to indemnify us and Franklin Templeton Trust
Company and/or Templeton Funds Trust Company as applicable for any claim,
loss, or liability resulting from incorrect investment instructions
received from you which cause a tax liability or other tax penalty.
5. Conditional Orders; Certificates. We will not accept from you any
conditional orders for shares of any of the Funds. Delivery of certificates
for shares purchased shall be made by the Funds only against constructive
receipt of the purchase price, subject to deduction for your concession and
our portion of the sales charge, if any, on such sale. No certificates will
be issued unless specifically requested.
6. Dealer Compensation.
(a) On each purchase of shares by you from us, the total sales charges and
your dealer concessions shall be as stated in each Fund's then current
prospectus, subject to NASD rules and applicable state and federal laws.
Such sales charges and dealer concessions are subject to reductions under a
variety of circumstances as described in the Funds' prospectuses. To obtain
these reductions, we must be notified when the sale takes place which would
qualify for the reduced charge. If you fail to notify us of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither we nor any of the Funds will be liable for amounts
necessary to
<PAGE>
SPECIMEN
reimburse any investor for the reduction which should have
been effected.
(b) In accordance with the Funds' prospectuses, we or our affiliates may,
but are not obligated to, make payments to dealers from our own resources
as compensation for certain sales which are made at net asset value and are
not subject to any contingent deferred sales charges ("Qualifying Sales").
If you notify us of a Qualifying Sale, we may make a contingent advance
payment up to the maximum amount available for payment on the sale. If any
of the shares purchased in a Qualifying Sale are redeemed within twelve
months of the end of the month of purchase, we shall be entitled to recover
any advance payment attributable to the redeemed shares by reducing any
account payable or other monetary obligation we may owe to you or by making
demand upon you for repayment in cash. We reserve the right to withhold
advances to any dealer, if for any reason we believe that we may not be
able to recover unearned advances from such dealer.
7. Redemptions. Redemptions or repurchases of shares will be made at the
net asset value of such shares, less any applicable deferred sales or
redemption charges, in accordance with the applicable prospectuses. Except
as permitted by applicable law, you agree not to purchase any shares from
your customers at a price lower than the redemption or repurchase prices
then computed by the Funds. You shall, however, be permitted to sell shares
for the account of the record owner to the Funds at the repurchase price
then currently in effect for such shares and may charge the owner a fair
commission for handling the transaction.
8. Exchanges. Telephone exchange orders will be effective only for
shares in plan balance (uncertificated shares) or for which share
certificates have been previously deposited and may be subject to any fees
or other restrictions set forth in the applicable prospectuses. You may
charge the shareholder a fair commission for handling an exchange
transaction. Exchanges from a Fund sold with no sales charge to a Fund
which carries a sales charge, and exchanges from a Fund sold with a sales
charge to a Fund which carries a higher sales charge may be subject to a
sales charge in accordance with the terms of each Fund's prospectus. You
will be obligated to comply with any additional exchange policies described
in each Fund's prospectus, including without limitation any policy
restricting or prohibiting "Timing Accounts" as therein defined.
9. Transaction Processing. All orders are subject to
acceptance by us and by the Fund or its transfer agent, and
become effective only upon confirmation by us. If required by
law, each transaction shall be confirmed in writing on a fully
disclosed basis and if confirmed by us, a copy of each
confirmation shall be sent simultaneously to you if you so
request. All sales are made subject to receipt of shares by us
from the Funds. We reserve the right in our discretion, without
<PAGE>
SPECIMEN
notice, to suspend the sale of shares or withdraw the offering of shares
entirely. Telephone orders will be effected at the price(s) next computed
on the day they are received from you if, as set forth in each Fund's
current prospectus, they are received prior to the time the price of its
shares is calculated. Orders received after that time will be effected at
the price(s) computed on the next business day. All orders must be
accompanied by payment in U.S. dollars. Orders payable by check must be
drawn payable in U.S. dollars on a U.S. bank, for the full amount of the
investment.
10. Multiple Classes. We may from time to time provide to you written
compliance guidelines or standards relating to the sale or distribution of
Funds offering multiple classes of shares with different sales charges and
distribution-related operating expenses. In addition, you will be bound by
any applicable rules or regulations of government agencies or
self-regulatory organizations generally affecting the sale or distribution
of mutual funds offering multiple classes of shares.
11. Rule 12b-1 Plans. You are also invited to participate in
all Plans adopted by the Funds (the "Plan Funds") pursuant to
Rule 12b-1 under the 1940 Act.
To the extent you provide administrative and other services, including,
but not limited to, furnishing personal and other services and assistance
to your customers who own shares of a Plan Fund, answering routine
inquiries regarding a Fund, assisting in changing account designations and
addresses, maintaining such accounts or such other services as a Fund may
require, to the extent permitted by applicable statutes, rules, or
regulations, we shall pay you a Rule 12b-1 servicing fee. To the extent
that you participate in the distribution of Fund shares which are eligible
for a Rule 12b-1 distribution fee, we shall also pay you a Rule 12b-1
distribution fee. All Rule 12b-1 servicing and distribution fees shall be
based on the value of shares attributable to customers of your firm and
eligible for such payment, and shall be calculated on the basis and at the
rates set forth in the compensation schedule then in effect. Without prior
approval by a majority of the outstanding shares of a Fund, the aggregate
annual fees paid to you pursuant to each Plan shall not exceed the amounts
stated as the "annual maximums" in each Fund's prospectus, which amount
shall be a specified percent of the value of the Fund's net assets held in
your customers' accounts which are eligible for payment pursuant to this
Agreement (determined in the same manner as each Fund uses to compute its
net assets as set forth in its effective Prospectus).
You shall furnish us and each Fund with such information as shall
reasonably be requested by the Boards of Directors, Trustees or Managing
General Partners (hereinafter referred to as "Directors") of such Funds
with respect to the fees paid to you pursuant to the Schedule. We shall
furnish to the Boards of
<PAGE>
SPECIMEN
Directors of the Plan Funds, for their review on a quarterly basis, a
written report of the amounts expended under the Plans and the purposes for
which such expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such
persons who are not interested persons of the Plan Funds and who have no
financial interest in the Plans or any related agreement ("Rule 12b-1
Directors"). The Plans or the provisions of this Agreement relating to such
Plans may be terminated at any time by the vote of a majority of the Plan
Funds' Boards of Directors, including Rule 12b-1 Directors, or by a vote of
a majority of the outstanding shares of the Plan Funds, on sixty (60) days'
written notice, without payment of any penalty. The Plans or the provisions
of this Agreement may also be terminated by any act that terminates the
Underwriting Agreement between us and the Plan Funds, and/or the management
or administration agreement between Franklin Advisers, Inc. or Templeton
Investment Counsel, Inc. or their affiliates and the Plan Funds. In the
event of the termination of the Plans for any reason, the provisions of
this Agreement relating to the Plans will also terminate.
Continuation of the Plans and provisions of this Agreement relating to
such Plans are conditioned on Rule 12b-1 Directors being ultimately
responsible for selecting and nominating any new Rule 12b-1 Directors.
Under Rule 12b-1, Directors of any of the Plan Funds have a duty to request
and evaluate, and persons who are party to any agreement related to a Plan
have a duty to furnish, such information as may reasonably be necessary to
an informed determination of whether the Plan or any agreement should be
implemented or continued.
Parties to this Agreement who provide services to Plan Funds in the
promotion of shares of such Funds should be aware that under Rule 12b-1
Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based
on certain legal considerations, the board is able to conclude that the
Plans will benefit the Plan Funds. Absent such yearly determination the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a
Fund pursuant to this Agreement shall be limited in all cases to the assets
of such Fund and no person shall seek satisfaction thereof from
shareholders of a Fund.
You agree to waive payment of any amounts payable to you by us under a
Fund's Plan of Distribution pursuant to Rule 12b-1 until such time as we
are in receipt of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and us,
insofar as they relate to Plans, shall control over the provisions of this
Agreement in the event of any inconsistency.
<PAGE>
SPECIMEN
12. Registration of Shares. Upon request, we shall notify you of the states
or other jurisdictions in which Fund shares are currently registered or
qualified for sale to the public. We shall have no obligation to register
or qualify, or to maintain registration or qualification of, Fund shares in
any state or other jurisdiction. We shall have no responsibility, under the
laws regulating the sale of securities in any U.S. or foreign jurisdiction,
for the qualification or status of persons selling Fund shares or for the
manner of sale of Fund shares. Except as stated in this paragraph, we shall
not, in any event, be liable or responsible for the issue, form, validity,
enforceability and value of such shares or for any matter in connection
therewith, and no obligation not expressly assumed by us in this Agreement
shall be implied. Nothing in this Agreement, however, shall be deemed to be
a condition, stipulation or provision binding any person acquiring any
security to waive compliance with any provision of the Securities Act of
1933, or of the rules and regulations of the Securities and Exchange
Commission, or to relieve the parties hereto from any liability arising
under the Securities Act of 1933.
13. Additional Registrations. If it is necessary to register or qualify
the shares in any foreign jurisdictions in which you intend to offer the
shares, it will be your responsibility to arrange for and to pay the costs
of such registration or qualification; prior to any such registration or
qualification you will notify us of your intent and of any limitations that
might be imposed on the Funds and you agree not to proceed with such
registration or qualification without the written consent of the Funds and
of ourselves.
14. Fund Information. No person is authorized to give any information or
make any representations concerning shares of the Funds except those
contained in the current prospectus, or statement of additional information
issued by the Fund or by us as information supplemental to such prospectus
or statement of additional information. We will supply prospectuses,
reasonable quantities of supplemental sale literature, sales bulletins, and
additional information as issued. You agree not to use other advertising or
sales material relating to the Funds except that which (a) conforms to the
requirements of any applicable laws or regulations of any government or
authorized agency in the U.S. or any other country, having jurisdiction
over the offering or sale of shares of the Funds, and (b) is approved in
writing by us in advance of such use. Such approval may be withdrawn by us
in whole or in part upon notice to you, and you shall, upon receipt of such
notice, immediately discontinue the use of such sales literature, sales
material and advertising. You are not authorized to modify or translate any
such materials without our prior written consent.
15. Indemnification. You further agree to indemnify, defend
and hold harmless the Principal Underwriter, the Funds, their
officers, directors and employees from any and all losses,
<PAGE>
SPECIMEN
claims, liabilities and expenses, whether or not resulting in any liability
to any of the parties indemnified under this subparagraph, arising out of
(1) any alleged violation of any statute or regulation (including without
limitation the securities laws and regulations of the United States or any
state or foreign country) or any alleged tort or breach of contract, in or
related to the offer and sale by you of shares of the Funds pursuant to
this Agreement (except to the extent that our negligence or failure to
follow correct instructions received from you is the cause of such loss,
claim, liability or expense), (2) any redemption or exchange pursuant to
telephone instructions received from you or your agent or employees, or (3)
the breach by you of any of the terms and conditions of this Agreement.
16. Termination; Succession; Amendment. Each party to this Agreement may
cancel its participation in this Agreement by giving written notice to the
other parties. Such notice shall be deemed to have been given and to be
effective on the date on which it was either delivered personally to the
other parties or any officer or member thereof, or was mailed postpaid or
delivered to a telegraph office for transmission to the other parties'
Chief Legal Officers at the addresses shown herein or in the most recent
NASD Manual. This Agreement shall terminate immediately upon the
appointment of a Trustee under the Securities Investor Protection Act or
any other act of insolvency by you. The termination of this Agreement by
any of the foregoing means shall have no effect upon transactions entered
into prior to the effective date of termination. A trade placed by you
subsequent to your voluntary termination of this Agreement will not serve
to reinstate the Agreement. Reinstatement, except in the case of a
temporary suspension of a dealer will only be effective upon written
notification by us. Unless terminated, this Agreement shall be binding upon
each party's successors or assigns. This Agreement may be amended by us at
any time by written notice to you and your placing of an order or
acceptance of payments of any kind after the effective date and receipt of
notice of any such Amendment shall constitute your acceptance of such
Amendment.
17. Setoff; Dispute Resolution. Should any of your concession accounts
with us have a debit balance, we may offset and recover the amount owed
from any other account you have with us, without notice or demand to you.
In the event of a dispute concerning any provision of this Agreement,
either party may require the dispute to be submitted to binding arbitration
under the commercial arbitration rules of the NASD or the American
Arbitration Association. Judgment upon any arbitration award may be entered
by any state or federal court having jurisdiction. This Agreement shall be
construed in accordance with the laws of the State of California, not
including any provision which would require the general application of the
law of another jurisdiction.
<PAGE>
SPECIMEN
18. Acceptance; Cumulative Effect. This Agreement is cumulative and
supersedes any agreement previously in effect. It shall be binding upon the
parties hereto when signed by us and accepted by you. If you have a current
dealer agreement with us, your first trade or acceptance of payments from
us after receipt of this Agreement, as it may be amended pursuant to
paragraph 16, above, shall constitute your acceptance of its terms.
Otherwise, your signature below shall constitute your acceptance of its
terms.
Date:
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
(Signature)
Name: Greg Johnson
Title: President
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
700 Central Avenue
St. Petersburg, Florida 33701-3628
KEY PHONE NUMBERS FOR FRANKLIN TEMPLETON FUNDS
<TABLE>
<CAPTION>
Department Name Telephone No. Hours of Operation (Pacific
time) (Monday through
Friday
<S> <C> <C>
Shareholder Services 1-800/632-2301 6:00 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 6:00 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 6:00 a.m. to 8:00 p.m., 8:30
a.m. to 5:00 p.m. (Saturday)
Retirement Plans 1-800/527-2020 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 6:00 a.m. to 5:00 p.m.
</TABLE>
<PAGE>
SPECIMEN
<PAGE>
SPECIMEN
[Note to Graphics: Please put this on a different page with some
marking to indicate that it's part of one agreement. Our idea is
to send only the part above the page break to current dealers,
and to attach a signature page for new dealers.]
[DEALER NAME]
By:
(Signature)
Name:
Title:
Address:
Attention: Chief Legal Officer
Telephone:
NASD CRD #
- ------------------------------------------------------------------------
Franklin Templeton Dealer # _________________________________
(Internal Use Only)
- -------------------------------------------------------------------------
<PAGE>
SUB-TRANSFER AGENT SERVICES AGREEMENT
AGREEMENT made as of March 1, 1992 by and between (i) each of the investment
companies listed herein (collectively the "FUNDS"); (ii) Templeton Funds Trust
Company ("TFTC"); and (iii) THE SHAREHOLDER SERVICES GROUP, INC. ("TSSG").
WITNESSETH
WHEREAS, the FUNDS are investment companies registered under the
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the FUNDS have engaged TFTC to act as their transfer agent,
dividend disbursing agent and shareholder servicing agent; and
WHEREAS, the FUNDS and TFTC have entered into a separate agreements
pursuant to which TFTC agreed to arrange for the performance of certain
administrative services for shareholders of the FUNDS who maintain shares of
such Funds; and
WHEREAS, TSSG, a transfer agent registered under the Securities
Exchange Act of 1934, has presented to the FUNDS the various shareholder
administrative services that may be performed by TSSG; and
WHEREAS, the FUNDS desire to retain TSSG in a sub-transfer agent
capacity to perform such services and TSSG is willing and able to furnish such
services on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees, as follows:
1. TSSG agrees to perform the shareholder administrative services and
functions specified in Exhibit A hereto (the "Services") for the benefit of the
shareholders of the FUNDS who maintain shares of any such FUND in brokerage
accounts with Shearson Lehman Brothers (the "Broker"), where the shareholders'
shares are included in the master account referred to in Exhibit A
(collectively, the "Broker Customers").
2. TSSG agrees that it will maintain and preserve all records as
required by law to be maintained and preserved in connection with providing the
services, and will otherwise comply with the law, rules and regulations
applicable to the services. Upon the written authorization of the Broker and the
FUND, TSSG shall provide copies of all the historical records relating to
transactions involving the FUNDS and Broker Customers, data formats for written
communication regarding that FUND to or from such customers and other materials,
in each case as may reasonably be requested to enable the FUND or its
representatives, including without limitation its auditors, investment advisor,
transfer agent
<PAGE>
or successor transfer agent or distributor, to monitor and review the Services,
or to copmly with any request of the board of directors, trustees or general
partners (collectively, the "Directors") of the FUNDS or of a governmental body,
self-regulatory organization or a shareholder. TSSG agrees that it will permit
the FUNDS to have reasonable access to its personnel and records in order to
facilitate the monitoring of the quality of the services. It is understood that
notwithstanding anything herein to the contrary, TSSG shall not be required to
provide the names, addresses and account numbers of Broker Customers to the
TFTC, the FUNDS or their representatives, unless applicable laws or regulations
otherwise require.
3. TSSG may contract with or establish relationships with third
parties, including, without limitation, the Broker, for the provision of
services or activities of TSSG required by the Agreement.
4. TSSG hereby agrees to notify promptly TFTC and the FUNDS if for any
reason TSSG is unable to perform fully and promptly any of its obligations under
this Agreement.
5. The provisions of this Agreement shall in no way limit the authority
of any of the FUNDS to take such actions as it may deem appropriate or advisable
in connection with all matters relating to the operations of such FUND and/or
sale of its shares.
6. In consideration of the performance of the services by TSSG,
hereunder, the FUNDS severally agree to compensate TSSG at the rate specified in
Schedule A, which rate may change pursuant to a written amendment to this
Agreement executed by and among the parties hereto. Payment shall be made
monthly based upon the number of shareholders of a FUND who hold shares of such
FUND in a broker's account for any part of the subject month. This number shall
be certified each year by independent public accountants of TSSG. The FUNDS also
agree to reimburse TSSG or its designated agent for postage and handling
expenses associated with teh distribution of proxies, prospectuses, reports and
other communications to shareholders prepared by the FUNDS or necessitated by
the actions of the FUNDS.
7. TSSG shall indemnify and hold harmless TFTC and the FUNDS from and
against any and all losses or liabilities that any one or more of them may
incur, including without limitation reasonable attorneys' fees, expenses and
cost, arising out of or related to the perofrmance or non-performance of TSSG of
its responsibilities under this Agreement, excluding, however, any such claims,
suits, loss, damage or cost caused by, materially contributed to or arising from
any noncompliance by TFTC or a FUND with its obligations under this Agreement,
as to which TFTC and each of the FUNDS shall indemnify, hold harmless and defend
TSSG on the same basis as set forth above.
8. This Agreement may be terminated at any time by each of
<PAGE>
TSSG, TFTC or by any FUNDS as to itself upon 30 days written notice to TSSG. The
provisions of paragraphs 2 and 7 shall continue in full force and effect after
termination of this Agreement. Notwithstanding the foregoing, this Agreement
shall not require TSSG to preserve any records relating to this Agreement beyond
the time periods otherwise required by the laws to which TSSG is subject.
9. Any other investment company affiliated with the FUNDS may become a
party to this Agreement by giving written notice to TSSG that it has elected to
become a party hereto and by having this Agreement executed on its behalf.
10. TSSG understands and agrees that the obligations of each FUND under
this Agreement are not binding upon any shareholder of the FUND personally, but
bind only each FUND and each FUND'S property; TSSG represents that it has notice
of the provisions of the Declaration of Trust, if applicable, of each FUND
disclaiming shareholder liability for acts or obligations of the FUNDS.
11. The parties agree that they are independent contractors
and not partners or co-venturers.
12. No amendment of any provision of this Agreement shall in any event
be effective unless the same shall be in writing and signed by both parties. Any
failure of any party to comply with any obligation, agreement or condition
hereunder may only be waived in writing by the other party, but such waiver
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. No failure by any party to take any action against any breach of
this Agreement of default by any other party shall constitute a waiver of such
party's right to enforce any provision hereof or to take such action.
13. All notices, demands and other communications hereunder shall be in
writing and shall be sent by personal delivery or registered or certified mail,
postage prepaid, or by telecopier confirmed in writing within three business
days as follows:
(a) if to the FUNDS:
Templeton Funds Management, Inc.
700 Central Avenue
St. Petersburg, FL 33701
Attention: President
(b) if to TFTC:
Templeton Funds Trust Company
700 Central Avenue
St. Petersburg, FL 33701
Attention: President
(c) if to TSSG:
The Shareholder Services Group, Inc.
One Exchange Place
<PAGE>
Boston, Massachusetts 02109
Attention: President
With a copy to:
The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Attention: General Counsel
Any party may change its address for receiving notices by written notice given
to the others named above. All notices shall be effective upon the earlier of
actual delivery or when deposited in the mail addressed as set forth above.
14. This agreement shall be governed by and construed in accordance
with the law of the State of New York, without regard to its conflicts of laws
doctrine, and the parties hereby consent to the jurisdiction of New York courts
over all matter relating to this Agreement and irrevocably waive any objection,
including without limitation, any objection of the laying of venue or based on
the grounds of forum non conveniens, which they may now have or may hereafter
have to bringing of any action or proceeding in such jurisdiction.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
agreement as of the date first above written.
THE SHAREHOLDER SERVICES GROUP, INC.
By:________________________________
Title:_____________________________
Templeton Funds Trust Company Templeton Income
Templeton Growth Fund, Inc.
Templeton Smaller Companies Growth
Fund, Inc.
Templeton Foreign Fund
Templeton World Fund
Templeton Real Estate Securities Fund
Templeton Global Opportunities Trust
Templeton Insured Tax Free Fund
Templeton Value Fund, Inc.
Templeton American Trust, Inc.
Templeton Developing Markets Trust
By:_______________________ By:________________________
Print Name: Harold F. McElraft Print Name:________________
Title:____________________ Title:_____________________
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, TSSG shall,
upon the effective date of this Agreement, perform or cause to be performed, the
following services, as well as telephonic and personal shareholder services
related to the following services:
1. Transmit to TFTC purchase and redemption order placements and
registration instructions. Collect and remit to TFTC payments for all purchase
orders placed on behalf of Broker Customers.
2. Maintain separate records for each shareholder of any of the FUNDS
who hold shares of a FUND in a brokerage account with Broker Customers, which
records shall reflect shares purchased and redeemed, as well as account and
share balances. Process transactions versus master accounts maintained by TFTC
on behalf of Broker Customers and such account shall be in the name of the
Broker or its nominee as the record owner of the shares owned by such customers.
3. Disburse or credit to the Broker Customers all proceeds of
redemptions of shares of the FUNDS and all dividends and other distributions not
reinvested in shares of the FUNDS.
4. Prepare and transmit to Broker Customers:
(a) Periodic account statements which show the total number of FUND
shares owned by the Broker Customer in that account as of the closing date, as
well as purchases, redemption dividends (cash and reinvested) and other
distributions in the account during the period covered by the statement;
(b) Proxy materials and reports and other information received by TSSG
or its agent from any of the FUNDS and required to be sent to shareholders under
the federal securities laws, and, upon request of TFTC transmit to Broker
Customers material fund communications deemed by the FUND, through its Directors
or other similar governing body, to be necessary and proper for receipt by all
FUND beneficial shareholders.
(c) Provide to TFTC, or the FUNDS, or any of the agents designated by
any of them, such information as shall reasonably conclude is necessary to
enable any of the FUNDS and its distributor to comply with State Blue Sky
requirements.
(d) All tax information reports or statements required to be furnished
to shareholders of the FUNDS with respect to their FUND shares by the Internal
Revenue Code and the Regulations promulgated thereunder.
The following fees shall be billed by TSSG monthly in arrears
<PAGE>
on a prorated basis of 1/12 of the annualized fee for all accounts that are open
during such month.
Upon execution of this Agreement, the FUND shall pay TSSG an annualized
fee of $6.00 for each Broker Customer account in the FUND that is open during
any monthly period effective March 1, 1992.
<PAGE>
SHAREHOLDER SUB-ACCOUNTING SERVICES AGREEMENT
Agreement made as of the 1st day of May, 1991 by and between (i) each
of the investment companies listed (collectively the "Templeton Funds"), as such
Schedule may be amended from time to time; (ii) Templeton Funds Trust Company
("Templeton Funds Trust Company"); (iii) Financial Data Service, Inc. ("FDS"), a
New Jersey corporation; and (iv) Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a Delaware corporation.
WITNESSETH:
WHEREAS, the Templeton Funds are investment companies registered under
the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Templeton Funds Trust Company, is the transfer agent, dividend
disbursing agent and shareholder servicing agent for the Templeton Funds; and
WHEREAS, Templeton Funds and Templeton Funds Trust Company have entered
into a separate agreement pursuant to which Templeton Funds Trust Company agreed
to arrange for the performance of certain administrative services for
shareholders of the Templeton Funds who maintain shares of any such Funds in a
brokerage account with MLPF&S, a broker-dealer affiliated with FDS; and
WHEREAS, FDS, a transfer agent registered under the Securities Exchange
Act of 1934, has presented to Templeton Funds Trust Company the various
administrative services that may be performed by MLPF&S; and
WHEREAS, Templeton Funds Trust Company desires to retain MLPF&S to
perform such services and MLPF&S is willing and able to furnish such services on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agree, as follows:
1. MLPF&S agrees to perform the administrative services and functions
specified in Exhibit A hereto (the "Services") for the benefit of the
shareholders of the Templeton Funds who maintain shares of any of such Funds in
brokerage accounts with MLPF&S and whose shares are included in the master
account referred to in paragraph 1 to Exhibit A (collectively, the "MLPF&S
customers").
2. MLPF&S agrees that it will maintain and preserve all records as
required by law to be maintained and preserved in connection with providing the
services, and will other wise comply with all law, rules and regulations
applicable to the services. Upon the request of Templeton Funds Trust Company,
MLPF&S shall provide copies of all the historical records relating to
transactions involving any Templeton Fund and MLPF&S customers, written
communication regarding that Fund to or from such customers and other materials,
in each case as may reasonably be requested to enable any of the Funds or its
representatives, including without limitation its auditors, investment adviser,
Templeton Funds Trust Company or successor transfer agent or distributor, to
monitor and review the Services, or to comply with any request of the board of
directors, trustees or general partners (collectively, the "Directors") of
Templeton Funds or of a governmental body,
<PAGE>
self-regulatory organization or a shareholder. MLPF&S agrees that it will permit
Templeton Funds Trust Company, and any Templeton Fund or their representatives
to have reasonable access to its personnel and records in order to facilitate
the monitoring of the quality of the services. It is understood that
notwithstanding anything herein to the contrary, neither FDS nor MLPF&S shall be
required to provide the names and addresses of MLPF&S customers to Templeton
Funds Trust Company, any Templeton Fund of their representatives, unless
applicable laws otherwise require.
3. MLPF&S may contract with or establish relationships with FDS or
other parties for the provision of services or activities of MLPF&S required
by the Agreement.
4. Each of MLPF&S and FDS hereby agrees to notify promptly Templeton
Funds Trust Company if for any reason either of them is unable to perform fully
and promptly any of its obligations under this Agreement.
5. Each of MLPF&S and FDS hereby represent that neither of them now
owns or holds with power to vote any shares of the Templeton Funds which are
registered in the name of MLPF&S or the name of its nominee and which are
maintained in MLPF&S brokerage accounts.
6. The provisions of the Agreement shall in no way limit the authority
of Templeton Funds Trust Company or any Templeton Fund to take such action as it
may deem appropriate or advisable in connection with all matters relating to the
operations of such Fund and/or sale of it shares.
7. In consideration of the performance of the services by MLPF&S and
FDS, hereunder, each Templeton Fund severally agrees to compensate FDS at the
rate of $6.00 annually per shareholder account which rate may change pursuant to
a written amendment to this Agreement executed by and among the parties hereto.
Payment shall be made monthly based upon the number of shareholders of a Fund
who hold shares of such Fund in a MLPF&S brokerage account for any part of the
subject month. MLPF&S agrees that, notwithstanding anything herein to the
contrary, it will not request any increase in it compensation hereunder prior to
May 3, 1993. In the event MLPF&S or FDS as it's agent were to mail any such
Fund's proxy materials, reports, prospectuses, and other information to
shareholders of any Templeton Fund who are Merrill Lynch customers pursuant to
paragraph 4 of Exhibit A, Templeton Funds Trust Company or any such Templeton
Fund agrees to reimburse MLPF&S or FDS, as the case may be, for postage,
handling fees and reasonable costs of supplies used by it in such mailings in an
amount to be determined in accordance with the rates set forth in Rule 451.90 of
the New York Stock Exchange, Inc.
The accuracy of the account charges and the expenses for postage, handling fees
and reasonable costs of supplies billed pursuant to this paragraph shall be
certified once each year by independent public accountants of MLPF&S as of a
month selected by Templeton Funds Trust Company, such certification to be at the
expense of MLPF&S.
8. FDS shall indemnify and hold harmless each Templeton Fund and
Templeton Funds Trust Company, from and against any and all losses or
liabilities that any one or more of them may incur, including without
<PAGE>
limitation reasonable attorneys' fees, expense and cost, arising out of or
related to the performance or non-performance of MLPF&S or FDS of its
responsibilities under this Agreement, excluding, however, any such claims,
suits, loss, damage or cost caused by, contributed to or arising from any
noncompliance by Templeton Funds Trust company or any of the Templeton Funds
with its obligations under this Agreement, as to which Templeton Funds Trust
Company and the Templeton Funds shall indemnify, hold harmless and defend FDS
and MLPF&S on the same basis as set forth above.
9. This Agreement may be terminated at any time by each of MLPF&S, FDS
and Templeton Funds Trust Company or by any Templeton Funds as to itself upon 30
days written notice to FDS. This Agreement may also be terminated at any time
without penalty upon 30 days written notice to FDS that a majority of the
Directors of any Templeton Fund have determined to terminate its agreement(s)
with Templeton Funds Trust Company pertaining to the services hereunder. The
provisions of paragraph 2 and 8 shall continue in full force and effect after
termination of this Agreement. Notwithstanding the foregoing, this Agreement
shall require MLPF&S to preserve any records relating to this Agreement beyond
the time periods otherwise required by the laws to which MLPF&S is subject.
10. Any other Templeton Fund for which Templeton Funds Trust Company
serves as transfer agent may become a party to this Agreement by giving written
notice to MLPF&S or FDS that it has elected to become a party hereto and by
having this Agreement executed on its behalf.
11. Each of MLPF&S and FDS understand and agree that the obligations of
the Templeton Funds under this Agreement are not binding upon any shareholder of
any of the Funds personally, but bind only each Fund and each Fund's property;
each of MLPF&S and FDS represents that it has notice of the provisions of the
Declaration of trust of each of the Templeton Funds disclaiming shareholder
liability for acts or obligations of the Fund.
12. It is understood and agreed that in performing the services under
this Agreement, neither MLPF&S nor FDS shall be acting as an agent for any of
the Templeton Funds.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH, PIERCE, FENNER FINANCIAL DATA SERVICES, INC.
& SMITH INC.
By: By:
Print Name: Harry P. Allex Print Name: Robert C. Doan
Title: Sr. Vice President Title: President
Templeton Funds Trust Company Templeton Income
Templeton Growth Fund, Inc.
Templeton Smaller Companies Growth Fund
<PAGE>
Templeton Foreign Fund
Templeton World Fund
Templeton Real Estate Securities Fund
Templeton Global Opportunities Tr.
Templeton Tax Free Insured Fund
Templeton Value Fund, Inc.
Templeton American Trust, Inc.
By: By:
Print Name: Print Name:
Title: President Title: Vice President
<PAGE>
MCGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated April 28, 1995 on the
financial statements of Templeton Growth and Income Fund (formerly Templeton
Global Rising Dividends Fund), Templeton Global Infrastructure Fund and
Templeton Americas Government Securities Fund, series of Templeton Global
Investment Trust, referred to therein, which appear in the 1995 Annual Reports
to Shareholders and which are incorporated herein by reference, in
Post-Effective Amendment No. 7 to the Registration Statement on Form N-1A, File
No. 33-73244 as filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus under
the caption "Financial Highlights" and in the Statement of Additional
Information under the caption "Independent Accountants".
/s/ McGladrey & Pullen, LLP
New York, New York
July 5, 1995
<PAGE>
DISTRIBUTION PLAN
WHEREAS, Templeton Global Investment Trust (the "Trust") is
registered as an open-end diversified management investment company under the
Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Trust on behalf of Templeton Americas Government
Securities Fund (the "Fund") and Franklin/Templeton Distributors, Inc. (the
"Selling Company"), a wholly owned subsidiary of Franklin Resources, Inc. and a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Selling Company will act as
principal underwriter of Shares of the Fund for sale to the public; and
WHEREAS, the Board of Trustees of the Trust has determined to
adopt this Distribution Plan (the "Plan"), in accordance with the requirements
of the 1940 Act and has determined that there is a reasonable likelihood that
the Plan will benefit the Fund and its Shareholders.
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts
the Plan on the following terms and conditions:
1. The Fund will reimburse the Selling Company for
costs and expenses incurred in connection with the distribution
<PAGE>
and marketing of Shares of the Fund. Such distribution costs and expenses may
include: (a) payments to broker-dealers who provide certain services of value to
the Fund's Shareholders (sometimes referred to as a "trail fee"); (b)
reimbursement of expenses relating to selling and servicing efforts or of
organizing and conducting sales seminars; (c) payments to employees or agents of
the Selling Company who engage in or support distribution of Shares; (d) payment
of the costs of preparing, printing and distributing prospectuses and reports to
prospective investors and of printing and advertising expenses; (e) payment of
dealer commissions and wholesaler compensation in connection with sales of Fund
Shares exceeding $1 million (for which the Trust imposes no sales charge) and
interest or carrying charges in connection therewith; and (f) such other similar
services as the Trust's Board of Trustees determines to be reasonably calculated
to result in the sale of Shares.
The Selling Company will be reimbursed for such costs,
expenses or payments on a monthly basis, subject to a limit of 0.35% per annum
of the Fund's average daily net assets. Payments made out of or charged against
the assets of the Fund must be in reimbursement for costs and expenses in
connection with any activity which is primarily intended to result in the sale
of Fund Shares. The costs and expenses not reimbursed in any one given month
(including costs and expenses not reimbursed because
-2-
<PAGE>
they exceeded the limit of 0.35% per annum of the Fund's average daily net
assets) may be reimbursed in subsequent months or years.
2. The Plan shall not take effect with respect to the Fund
until it has been approved by a vote of at least a majority (as defined in the
1940 Act) of the outstanding voting Shares of the Fund. With respect to the
submission of the Plan for such a vote, it shall have been effectively approved
with respect to the Fund if a majority of the outstanding voting Shares of the
Fund votes for approval of the Plan.
3. The Plan shall not take effect until it has been approved,
together with any related agreements and supplements, by votes of a majority of
both (a) the Board of Trustees of the Trust, and (b) those Trustees of the Trust
who are not "interested persons" (as defined in the 1940 Act) and have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to it (the "Plan Trustees"), cast in person at a meeting (or meetings)
called for the purpose of voting on the Plan and such related agreements.
4. The Plan shall continue in effect so long as such
continuance is specifically approved at least annually in the manner provided
for approval of the Plan in paragraph 3.
-3-
<PAGE>
5. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to the Plan or any related agreement shall
provide to the Trust's Board of Trustees, and the Board shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
6. Any agreement related to the Plan shall be in writing and
shall provide: (a) that such agreement may be terminated at any time as to the
Fund, without payment of any penalty, by vote of a majority of the Plan Trustees
or by vote of a majority of the outstanding voting Shares of the Fund, on not
more than sixty days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
7. The Plan may be terminated at any time with respect to the
Fund, without payment of any penalty, by vote of a majority of the Plan
Trustees, or by vote of a majority of the outstanding voting Shares of the Fund.
8. The Plan may be amended at any time with respect to the
Fund by the Trust's Board of Trustees, provided that (a) any amendment to
increase materially the costs which the Fund may bear for distribution pursuant
to the Plan shall be effective
-4-
<PAGE>
only upon approval by a vote of a majority of the outstanding voting Shares of
the Fund, and (b) any material amendments of the terms of the Plan shall become
effective only upon approval as provided in paragraph 3 hereof.
9. While the Plan is in effect, the selection and nomination
of Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust shall be committed to the discretion of the Trustees who are not
interested persons.
10. The Trust shall preserve copies of the Plan, any related
agreement and any report made pursuant to paragraph 5 hereof, for a period of
not less than six years from the date of the Plan, such agreement or report, as
the case may be, the first two years of which shall be in an easily accessible
place.
11. It is understood and expressly stipulated that neither the
holders of Shares of the Fund nor any Trustee, officer, agent or employee of the
Trust shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation hereunder, but
the Trust only shall be liable.
-5-
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this Distribution
Plan on this 27th day of June 1994.
TEMPLETON GLOBAL INVESTMENT TRUST
on behalf of TEMPLETON AMERICAS
GOVERNMENT SECURITIES FUND
By:_______________________________
-6-
<PAGE>
EXHIBIT 16
COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)
Templeton Growth and Income Fund
Total Return for One year Ending 3/31/95
$1,000 (1 + T) = 956.00
1 + T = .956
T = <.0440>
T = <4.40>%
<PAGE>
EXHIBIT 16
COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)
Templeton Global Infrastructure Fund
Total Return for One year Ending 3/31/95
$1,000 (1 + T) = 891.60
1 + T = .8916
T = <.1084>
T = <10.84>%
<PAGE>
EXHIBIT 16
COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)
Templeton Americas Government Securities Fund
Total Return Since Inception on 6/27/94 - .7589 Years
$1,000 (1 - .0575)(1 + T)0.7589 = 958.05
(1 + T).7589 = .958054
1 + T = .9451
T = <.0549>
T = <5.49>%
Yield for the 30-day Period Ended 3/31/95
Yield = 2 [(a-b +1)6 - 1]
cd
Yield = 2 (16,160 - 726/(296,849,254)(9.59) + 1) = 1.0054
Yield = (1.0054)6 =1.003
Yield = 2(1.003-1) = 6.60%
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
ASSISTANT SECRETARY'S CERTIFICATE
The undersigned, being the duly elected Assistant Secretary of
Templeton Global Investment Trust, a Delaware business trust (the "Trust"),
hereby certifies that the following resolution has been duly adopted by the
Trust's Board of Trustees, and that said resolution remains in effect on the
date hereof.
RESOLVED, that the officers and Trustees of the Trust be, and they
hereby are, authorized in the name and on behalf of the Trust to
execute, or grant power of attorney to counsel to execute, a
Notification of Registration on Form N-8A under the Investment Company
Act of 1940, to offer and sell an unlimited number of shares of
beneficial interest of the Trust; to execute, or grant power of
attorney to counsel to execute, any amendments thereto in such form as
may be approved by counsel; to file or authorize the filing of such
documents with the Securities and Exchange Commission; and to designate
agents for service of process.
Dated: April 19, 1994
/s/ Jeffrey L. Steele
Jeffrey L. Steele
Assistant Secretary
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE TEMPLETON
GLOBAL RISING DIVIDENDS FUND MARCH 31, 1995 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000916488
<NAME> TEMPLETON GLOBAL RISING DIVIDENDS FUND
<SERIES>
<NUMBER> 2
<NAME> TEMPLETON GLOBAL RISING DIVIDENDS FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 6763789
<INVESTMENTS-AT-VALUE> 6612106
<RECEIVABLES> 335972
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 63173
<TOTAL-ASSETS> 7011251
<PAYABLE-FOR-SECURITIES> 936367
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 121525
<TOTAL-LIABILITIES> 1057892
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5942327
<SHARES-COMMON-STOCK> 592172
<SHARES-COMMON-PRIOR> 10022
<ACCUMULATED-NII-CURRENT> 38177
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 124538
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (151683)
<NET-ASSETS> 5953359
<DIVIDEND-INCOME> 39708
<INTEREST-INCOME> 90347
<OTHER-INCOME> 0
<EXPENSES-NET> 43284
<NET-INVESTMENT-INCOME> 86771
<REALIZED-GAINS-CURRENT> 124538
<APPREC-INCREASE-CURRENT> (151711)
<NET-CHANGE-FROM-OPS> 59598
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (48682)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 648511
<NUMBER-OF-SHARES-REDEEMED> (70865)
<SHARES-REINVESTED> 4504
<NET-CHANGE-IN-ASSETS> 5853023
<ACCUMULATED-NII-PRIOR> 88
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25969
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 211644
<AVERAGE-NET-ASSETS> 3462721
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> (.02)
<PER-SHARE-DIVIDEND> (.10)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.05
<EXPENSE-RATIO> 1.25<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>THE EXPENSE RATIO PER THE TEMPLETON GLOBAL RISING DIVIDENDS FUND ANNUAL
REPORT MARCH 31, 1995 WITHOUT REIMBURSEMENT EQUALED 6.11%.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON GLOBAL INVESTMENT TRUST MARCH 31, 1995 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> TEMPLETON GLOBAL INFRASTRUCTURE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 19917891
<INVESTMENTS-AT-VALUE> 18534875
<RECEIVABLES> 365439
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 64461
<TOTAL-ASSETS> 18964775
<PAYABLE-FOR-SECURITIES> 112675
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 135573
<TOTAL-LIABILITIES> 248248
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20100321
<SHARES-COMMON-STOCK> 1984085
<SHARES-COMMON-PRIOR> 10072
<ACCUMULATED-NII-CURRENT> 71514
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (72292)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1383016)
<NET-ASSETS> 18716527
<DIVIDEND-INCOME> 104525
<INTEREST-INCOME> 160363
<OTHER-INCOME> 0
<EXPENSES-NET> 126111
<NET-INVESTMENT-INCOME> 138777
<REALIZED-GAINS-CURRENT> (72292)
<APPREC-INCREASE-CURRENT> (1383044)
<NET-CHANGE-FROM-OPS> (1316559)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (67351)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2174807
<NUMBER-OF-SHARES-REDEEMED> (207180)
<SHARES-REINVESTED> 6386
<NET-CHANGE-IN-ASSETS> 18615687
<ACCUMULATED-NII-PRIOR> 88
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 75663
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 327594
<AVERAGE-NET-ASSETS> 10088885
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> .07
<PER-SHARE-GAIN-APPREC> (.61)
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.43
<EXPENSE-RATIO> 1.25 <FN>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN> EXPENSE RATIO WITHOUT REIMBURSEMENT EQUALED TO 3.25%.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXRACTED FROM THE
TEMPLETON GLOBAL INVESTMENT TRUST MARCH 31, 1995 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> AMERICAS GOVERNMENT SECURITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 2828223
<INVESTMENTS-AT-VALUE> 2725045
<RECEIVABLES> 36438
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 100091
<TOTAL-ASSETS> 2861574
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35513
<TOTAL-LIABILITIES> 35513
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2941511
<SHARES-COMMON-STOCK> 294735
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (11430)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (104020)
<NET-ASSETS> 2826061
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 74075
<OTHER-INCOME> 0
<EXPENSES-NET> 14655
<NET-INVESTMENT-INCOME> 59420
<REALIZED-GAINS-CURRENT> (18703)
<APPREC-INCREASE-CURRENT> (104020)
<NET-CHANGE-FROM-OPS> (63303)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (52147)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 334587
<NUMBER-OF-SHARES-REDEEMED> (45062)
<SHARES-REINVESTED> 5210
<NET-CHANGE-IN-ASSETS> 2826061
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7036
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 76138
<AVERAGE-NET-ASSETS> 1620989
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> (.43)
<PER-SHARE-DIVIDEND> (.28)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.59
<EXPENSE-RATIO> 1.25 <FN>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN> Expense ratio without reimbursement equaled 6.49%.
</TABLE>
