PROSPECTUS
& APPLICATION
LOGO
TEMPLETON REGION FUNDS
TEMPLETON GREATER
EUROPEAN FUND
TEMPLETON LATIN
AMERICA FUND
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JANUARY 1, 1997
INVESTMENT STRATEGY
GLOBAL GROWTH
LOGO
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This prospectus describes the Advisor Class shares of Templeton Greater
European Fund and Templeton Latin America Fund of Templeton Global
Investment Trust. This prospectus contains information you should know
before investing in the Funds. Please keep it for future reference.
INVESTMENTS IN FOREIGN SECURITIES INVOLVE CERTAIN CONSIDERATIONS WHICH
ARE NOT NORMALLY INVOLVED IN INVESTMENT IN SECURITIES OF U.S. COMPANIES,
AND AN INVESTMENT IN THE FUNDS MAY BE CONSIDERED SPECULATIVE. EACH FUND
MAY INVEST WITHOUT LIMIT IN EMERGING MARKET COUNTRIES, BORROW MONEY FOR
INVESTMENT PURPOSES, AND 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 "WHAT
ARE THE FUNDS' POTENTIAL RISKS?"
The Trust's Advisor Class SAI, dated January 1, 1997, as may be amended
from time to time, includes more information about the Fund's procedures
and policies. It has been filed with the SEC and is incorporated by
reference into this prospectus. For a free copy or a larger print
version of this prospectus, call 1-800/DIAL BEN or write the Funds at
the address shown.
Advisor Class shares are only available for purchase by certain persons,
including, among others, certain financial institutions (such as banks,
trust companies, savings institutions and credit unions); government and
tax-exempt entities; certain pension, profit sharing and employee
benefit plans; certain qualified groups, including family trusts,
endowments, foundations and corporations; Franklin Templeton Fund
Allocator Series; and directors, trustees, officers and full time
employees (and their family members) of Franklin Templeton Group and the
Franklin Templeton Group of Funds.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY OF THE U.S. GOVERNMENT. SHARES OF THE FUNDS INVOLVE INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TEMPLETON
REGION FUNDS
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 Distributors.
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This prospectus describes the Templeton Region Funds, which are
the Templeton Greater European Fund ("Greater European Fund")
and the Templeton Latin America Fund ("Latin America Fund")
(each a "Fund" and collectively the "Funds").
The Funds are separate series of Templeton Global Investment Trust
(the "Trust"), an open-end management investment company.
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When reading this prospectus, you will see
certain terms beginning with capital letters.
This means the term is explained
in our glossary section.
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<TABLE>
<S> <C> <C>
TABLE OF CONTENTS
ABOUT THE FUND
Expense Summary ....................2
How Do the Funds Invest Their
Assets? .......4
What Are the Funds' Potential
Risks? ........14
Who Manages the
Funds? ................18
How Do the Funds Measure
Performance? ....20
How Is the Trust
Organized? ..............21
How Taxation Affects You and the
Funds ......22
ABOUT YOUR ACCOUNT
How Do I Buy
Shares? ..................23
May I Exchange Shares for Shares of
Another Fund? ..25
TEMPLETON How Do I Sell
REGION Shares? ...................28
FUNDS What Distributions Might I Receive
From the Funds? ..29
- ------------------------ Transaction Procedures and Special
January 1, 1997 Requirements ...30
Services to Help You Manage Your
700 Central Avenue Account ......34
St. Petersburg, Florida GLOSSARY
33701 Useful Terms and
1-800/DIAL BEN Definitions ................38
</TABLE>
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Advisor Class shares of the Funds. Because Advisor Class shares were not offered
to the public before January 1, 1997, the table is based on the historical
expenses of the Class I shares of the Funds, after fee reductions and expense
limitations, for the fiscal year ended March 31, 1996, and are annualized(+).
Your actual expenses may vary.
<TABLE>
<CAPTION>
Greater European Latin America
Fund Fund
A. Shareholder Transaction Expenses(++) Advisor Class Advisor Class
<S> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases NONE NONE
Exchange Fee (per transaction) $5.00(+++) $5.00(+++)
B. Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management Fees (after fee reduction) 0.00%(++++) 0.00%(++++)
Rule 12b-1 Fees NONE NONE
Other Expenses (audit, legal,
business management, transfer agent
and custodian)(after expense
reimbursement) 1.50% 2.00%
-------
------
Total Fund Operating Expenses (after
expense reimbursement) 1.50%(++++) 2.00%(++++)
-------
------
C. Example
</TABLE>
Assume the annual return for Advisor Class shares is 5% and operating
expenses are as described above. For each $1,000 investment, you would pay
the following projected expenses if you sold your shares after the number of
years shown.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GREATER EUROPEAN FUND $ 15 $47 $ 82 $ 179
LATIN AMERICA FUND $ 20 $63 $108 $ 233
</TABLE>
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Funds pay their operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends paid on Advisor Class shares
and are not directly charged to your account.
(+)Unlike Advisor Class shares, the Class I shares of the Funds have a
front-end sales charge and Rule 12b-1 fees.
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(++)If your transaction is processed through your Securities Dealer you may be
charged a fee by your Securities Dealer for this service.
(+++)$5.00 fee is only for Market Timers. We process all other exchanges
without a fee.
(++++)The Investment Manager and FT Services have agreed in advance to reduce
their respective fees in order to limit Greater European Fund's total expenses
to an annual rate of 1.50% of average daily net assets through August 1, 1997;
and to limit Latin America Fund's total expenses to an annual rate of 2.00% of
average daily net assets through August 1, 1997. If these fee reductions are
insufficient to so limit the Funds' expenses, FT Services has agreed to make
certain payments to reduce the Funds' expenses. Without these reductions,
Greater European Fund's "Other Expenses" would have been 2.11% for Advisor Class
shares and the "Total Fund Operating Expenses" would have been 3.21% for
Advisor Class shares; Latin America Fund's "Other Expenses" would have been
2.17% for Advisor Class shares and the "Total Fund Operating Expenses" would
have been 3.67% for Advisor Class shares. After August 1, 1997, these
agreements may end at any time upon notice to the Board.
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HOW DO THE FUNDS INVEST THEIR ASSETS?
The Funds' Investment Objectives
Greater European Fund's investment objective is long-term capital appreciation.
The Fund seeks to achieve its objective by investing primarily in equity
securities (as defined below) of Greater European Companies. As used in this
prospectus, the term "Greater European Company" means a company (i) that is
organized under the laws of, or with a principal office and domicile in, a
country in Greater Europe, (ii) for which the principal equity securities
trading market is in Greater Europe, or (iii) that derives at least 50% of its
revenues or profits from goods produced or sold, investments made, or services
performed in Greater Europe or that has at least 50% of its assets situated in
Greater Europe. As used in this prospectus, the term "Greater Europe" means
Western, Central and Eastern Europe (including Ukraine, Belarus, Latvia,
Lithuania and Estonia) and Russia. Under normal market conditions, the Fund
will invest at least 75% of its total assets in the equity securities of
Greater European Companies. The balance of the Fund's assets will be invested
in (i) debt securities (as defined below) issued by Greater European Companies
or issued or guaranteed by Greater European government entities, (ii) equity
securities and debt obligations of issuers outside Greater Europe, and (iii)
short-term and medium-term debt securities of the type described below under
"Temporary Investments."
Latin America Fund's investment objective is long-term capital appreciation. The
Fund seeks to achieve its objective by investing primarily in equity and debt
securities of issuers in the following Latin American countries: Argentina,
Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Ecuador, El
Salvador, French Guyana, Guatemala, Guyana, Honduras, Mexico, Nicaragua,
Panama, Paraguay, Peru, Surinam, Trinidad/Tobago, Uruguay, and Venezuela. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in equity and debt securities of issuers in the countries named above. The
balance of the Fund's assets will be invested in (i) equity securities and debt
obligations of companies and government entities of countries other than those
named above, and (ii) short-term and medium-term debt securities of the type
described below under "Temporary Investments."
Information Regarding Both Funds. Each Fund's investment objective and the
investment restrictions set forth under "Investment Restrictions" in the SAI are
fundamental and may not be changed without shareholder approval. All other
investment policies and practices described in this prospectus are not
fundamental, and may be changed by the Board without shareholder approval.
There can be no assurance that either Fund's investment objective will be
achieved.
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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"). For capital appreciation, Greater
European Fund may invest up to 25% of its total assets, and Latin America Fund
may invest without limit, in debt securities (defined as bonds, notes,
debentures, commercial paper, time deposits and bankers' acceptances, and which
may include structured investments) which are rated in any rating category by
Moody's or S&P or which are unrated by any rating agency. Such securities may
include high-risk, lower quality debt securities, commonly referred to as "junk
bonds." See "What Are the Funds' Potential Risks?" As an operating policy,
which may be changed by the Board, neither Fund will invest more than 5% of its
total assets in debt securities rated lower than Baa by Moody's or BBB by S&P.
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 bonds to benefit from increases in the market price
of the securities into which they are convertible. Debt securities are subject
to certain market and credit risks. See "How Do the Funds Invest Their
Assets? - Debt Securities," in the SAI.
Each Fund Investment Manager will select equity investments for the respective
Fund on the basis of fundamental company-by-company analysis (rather than
broader analyses of specific industries or sectors of the economy). Although an
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, or real book value, as
determined by the Investment Manager. Securities considered for purchase by a
Fund may be listed or unlisted, and may be issued by companies in various
industries, with various levels of market capitalization. The Investment
Managers will actively manage the Funds' assets in response to market,
political and general economic conditions, and will seek to adjust each Fund's
investments based on its perception of which investments would best enable the
Fund to achieve its investment objective.
As a diversified investment company, each Fund, with respect to 75% of its total
assets, may invest no more than 5% of its total assets in securities issued by
any
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one company or government, exclusive of U.S. government securities. Although
each Fund may invest up to 25% of its assets in a single industry, the Funds
have no present intention of doing so. Each Fund may not invest more than 5% of
its assets in warrants (exclusive of warrants acquired in units or attached to
securities) or more than 15% of its assets in securities with a limited trading
market.
Each Fund may lend its portfolio securities and borrow money for investment
purposes (i.e., "leverage" its portfolio). In addition, each Fund may enter into
transactions in options on securities, securities indices and foreign
currencies, forward foreign currency contracts, structured investments, 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 an Investment Manager, the respective 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 "How Do the Funds Invest Their Assets?" in the SAI.
When an Investment Manager believes that market conditions warrant, either 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 "Temporary Investments."
The Funds do not emphasize short-term trading profits and usually expect to
have an annual portfolio turnover rate not exceeding 50%.
Brady Bonds. Latin America 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 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, Bulgaria, Costa Rica, the Dominican
Republic, Ecuador, Jordan, Mexico, Nigeria, the Philippines, Uruguay, Venezuela,
Bolivia, Niger, and Poland (collectively, the "Brady Countries"). In addition,
Brazil has concluded a Brady-like plan. It is expected that other countries will
undertake a Brady Plan debt restructuring in the future, including Panama, Peru,
and Poland.
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
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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 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 Brady Countries. There can be no assurance that Brady Bonds in which Latin
America 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.
Types of Securities in which the Funds May Invest
The Funds are authorized to use the various securities and investment techniques
described below. Although these strategies are regularly used by some investment
Templeton Region Funds -
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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
Funds in some of the markets in which the Funds will invest and may not be
available for extensive use in the future.
Temporary Investments. For temporary defensive purposes, each 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 U.S. 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 an 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. Each 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,
each 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 a 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 a 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. Each 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. A Fund may terminate the loans at any time and obtain the
return of the securities loaned within five business days. A 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
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borrower defaults on its obligation to return borrowed securities, because of
insolvency or otherwise, a 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. Each Fund may write (i.e., sell) covered put
and call options and purchase put and call options on securities or securities
indices that are traded on U.S. and foreign exchanges or in the over-the-counter
markets. An option on a security is a contract that permits the purchaser of the
option, in return for the premium paid, the right to buy a specified security
(in the case of a call option) or to sell a specified security (in the case of
a put option) from or to the writer of the option at a designated price during
the term of the option. An option on a securities index permits the purchaser
of the option, in return for the premium paid, the right to receive from the
seller cash equal to the difference between the closing price of the index and
the exercise price of the option. A Fund may write a call or put option only if
the option is "covered." This means that so long as a 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 a
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 a Fund. A 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 Funds
will normally conduct 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 Funds 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 Funds will generally enter into forward contracts only under two
circumstances. First, when a 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
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transaction. Second, when a Fund's 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 Funds have
no specific limitation on the percentage of assets they may commit to forward
contracts, subject to their stated investment objectives and policies, except
that a 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 Funds from adverse currency movements, they also
involve the risk that anticipated currency movements will not be accurately
predicted.
The Funds 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 a 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 a 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 Funds are traded on U.S. and foreign exchanges or over-the-
counter.
Futures Contracts. For hedging purposes only, each 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 a 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
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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 a Fund enters into a futures contract, it will
segregate assets or "cover" its position in accordance with the 1940 Act. See
"How Do the Funds Invest Their Assets? - Futures Contracts," in the SAI.
Repurchase Agreements. For temporary defensive purposes and for cash management
purposes, the Funds may enter into repurchase agreements with U.S. banks and
broker-dealers. Under a repurchase agreement, a 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 a 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, a
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 U.S. corporation. Generally, depositary receipts in registered form
are designed for use in the U.S. securities market and depositary receipts in
bearer form are designed for use in securities markets outside the U.S.
Depositary receipts may not necessarily be denominated in the same currency as
the underlying securities into which they may be converted. Depositary receipts
may be issued pursuant to sponsored or unsponsored programs. In sponsored
programs, an issuer has made arrangements to have its securities traded in the
form of depositary receipts. In unsponsored programs, the issuer may not be
directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from an
issuer that has participated in the creation of a sponsored program.
Accordingly, there may be less information available regarding issuers of
securities underlying unsponsored programs and there may not be a correlation
between such
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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 a 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. Each 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. A 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. A Fund may also invest in
securities that are sold (i) in private placement transactions between their
issuers and their purchasers and that are neither listed on an exchange nor
traded over-the-counter, or (ii) in transactions between qualified
institutional buyers pursuant to Rule 144A under the 1933 Act. Such restricted
securities are subject to contractual or legal restrictions on subsequent
transfer. As a result of the absence of a public trading market, such
restricted securities may in turn be less liquid and more difficult to value
than publicly traded securities. Although these securities may be resold in
privately negotiated transactions, the prices realized from the sales could,
due to illiquidity, be less than those originally paid by a 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 a Fund are required to be
registered under the securities laws of one or more jurisdictions before being
resold, a Fund may be required to bear the expenses of registration. Each 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 a Fund's limitation on investment in illiquid securities.
Structured Investments. Included among the issuers of debt securities in which
the Funds 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
and the issuance by that entity of one or more classes of securities
("structured investments")
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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 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 Funds
anticipate investing typically involve no credit enhancement, their credit risk
will generally be equivalent to that of the underlying instruments.
The Funds are 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 a 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 a Fund's assets that may be used for borrowing activities.
Certain issuers of structured investments may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, a Fund's investment in these
structured investments may be limited by the restrictions contained in the 1940
Act described below under "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
"Types of Securities in Which the Funds May Invest" above and in the SAI under
"Investment Restrictions."
Investment Companies. Each Fund may invest in other investment companies,
except those for which its Investment Manager serves as investment adviser or
sponsor, which invest principally in securities in which the Fund is authorized
to invest. Under the 1940 Act, each Fund may invest a maximum of 10% of its
total assets in the securities of other investment companies and not more than
5% of the Fund's 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 a Fund invests in other investment companies, a Fund's shareholders will
incur certain duplicative fees and expenses, including investment advisory
fees. A Fund's investment in certain investment companies will result in
special U.S. federal income tax consequences described under "Additional
Information on Distributions and Taxes" in the SAI.
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WHAT ARE THE FUNDS' POTENTIAL RISKS?
You should understand that all investments involve risk and there can be no
guarantee against loss resulting from an investment in the Funds, 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 a
Fund can decrease as well as increase, depending on a variety of factors which
may affect the values and income generated by a 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 a Fund will fluctuate with movements
in the broader equity and bond markets. A decline in the stock market of any
country in which a 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 a 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 also affect the
price of shares of the Funds. 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 an Investment Manager will
not always be profitable or prove to have been correct. Neither Fund is
intended as a complete investment program.
Foreign Currency Exchange. Since the Funds are 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 respective portfolios 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 a Fund's yield on assets denominated in currencies
other than the U.S. dollar. The Funds usually effect currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign exchange market or through entering into forward contracts. However,
some price spread on currency exchange transactions (to cover service charges)
will be incurred when a Fund converts assets from one currency to another. Many
of the currencies of the countries in which the Funds may invest have
experienced devaluations relative to the U.S. dollar, and may be more highly
volatile than currencies of other more established markets.
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Foreign Investments. The Funds have 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. Each Fund's performance is closely tied to
economic and political conditions within the geographic area of its respective
investments. Some of the countries in which the Funds may invest are considered
emerging markets, in which the risks generally associated with foreign
investments are heightened. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations (including, for example, withholding taxes on interest and dividends)
or other taxes imposed with respect to investments in foreign nations, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country), foreign investment controls on daily stock
market movements, default in foreign government securities, political or social
instability, or diplomatic developments which could affect investment in
securities of issuers in foreign nations. Some countries may withhold portions
of interest and dividends at the source. In addition, in many countries there
is less publicly available information about issuers than is available in
reports about companies in the U.S. Foreign companies are not generally subject
to uniform accounting, auditing and financial reporting standards, and auditing
practices and requirements may not be comparable to those applicable to U.S.
companies. The Funds may encounter difficulties or be unable to vote proxies,
exercise shareholder rights, pursue legal remedies, and obtain judgments in
foreign courts.
Brokerage commissions, custodial services, and other costs relating to
investments in foreign countries are generally more expensive than in the U.S.
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 a Fund are uninvested and no return is earned
thereon. The inability of a 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
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than in the U.S. There is an increased risk, therefore, of uninsured loss due to
lost, stolen, or counterfeit stock certificates. In addition, the foreign
securities markets of many of the countries in which a Fund may invest may also
be smaller, less liquid, and subject to greater price volatility than those in
the U.S. As an open-end investment company, each Fund is limited in the extent
to which it may invest in illiquid securities. The foregoing risks may be
heightened for investments in Eastern Europe and/or Latin America, and there
are further risks specific to investments in those regions. See "What Are the
Funds' Potential Risks?" 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.
As a non-fundamental policy, each Fund will limit its investment in Russian
securities to 5% of its total assets. Russian securities involve additional
significant risks, including political and social uncertainty (for example,
regional conflicts and risk of war), currency exchange rate volatility,
pervasiveness of corruption and crime in the Russian economic system, delays in
settling portfolio transactions and risk of loss arising out of Russia's system
of share registration and custody. For more information on these risks and
other risks associated with Russian securities, please see "What Are the Funds'
Potential Risks?" in the SAI.
High-Risk Debt Securities. The Funds are 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 "How Do the Funds Invest Their Assets? - Debt
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Securities." in the SAI. As an operating policy, which may be changed by the
Board without shareholder approval, a 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 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 a Fund
and its shareholders. See "How Do the Funds Invest Their Assets? - Debt
Securities." in the SAI for descriptions of debt securities rated BBB by S&P and
Baa by Moody's. High-risk, lower quality debt securities, commonly referred to
as "junk bonds," are regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation and may be in default. Unrated debt
securities are not necessarily of lower quality than rated securities, but they
may not be attractive to as many buyers. Regardless of rating levels, all debt
securities considered for purchase (whether rated or unrated) will be carefully
analyzed by each Investment Manager to insure, to the extent possible, that the
planned investment is sound. Each Fund may, from time to time, invest up to 5%
of its total assets in defaulted debt securities if, in the opinion of the
Investment Manager, the issuer may resume interest payments in the near future.
Leverage. Leveraging by means of borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities on a 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 may significantly increase a
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 a Fund's portfolio. Successful use of futures or
options contracts is further dependent on an 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, a Fund gives up the opportunity,
while
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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.
WHO MANAGES THE FUNDS?
The Board. The Board oversees the management of the Funds and elects the
Trust's officers. The officers are responsible for the Funds' day-to-day
operations. The Board also monitors the Funds to ensure that no material
conflicts exist among the classes of shares. While none is expected, the Board
will act appropriately to resolve any material conflict that may arise.
Investment Managers. Investment Managers manage the Funds' assets and make the
Funds' investment decisions. Investment Managers also perform similar services
for other funds. The Investment Managers are wholly owned by Resources, a
publicly owned company engaged in the financial services industry through its
subsidiaries. Charles B. Johnson and Rupert H. Johnson, Jr. are the principal
shareholders of Resources. Together, the Investment Managers and their
affiliates manage over $172 billion in assets. The Templeton organization has
been investing globally since 1940. The Investment Managers and their affiliates
have offices in Argentina, Australia, Bahamas, Canada, France, Germany, Hong
Kong, India, Italy, Luxembourg, Poland, Russia, Scotland, Singapore, South
Africa, U.S., and Vietnam. Please see "Investment Management and Other
Services" and "Miscellaneous Information" in the SAI for information on
securities transactions and a summary of the Trust's Code of Ethics.
Portfolio Management. Greater European Fund is managed by Jeffrey A. Everett,
Richard Sean Farrington and Mark G. Holowesko since 1996. Mr. Everett is an
executive vice president of the Investment Manager. He holds a BS in finance
from Pennsylvania State University and is also a Chartered Financial Analyst. He
joined the Templeton organization in 1989 and is responsible for managing
several offshore accounts at Templeton, as well as several Templeton funds. Mr.
Everett's global research responsibilities encompass industry coverage for
broadcasting, advertising, publishing and real estate, and country
responsibilities for Italy and Australia. Prior to joining the Templeton
organization, Mr. Everett was an investment officer at First Pennsylvania
Investment Research, a division of First Pennsylvania Corporation, where he
analyzed equity and convertible securities. He also coordinated research for
Centre Square Investment Group, the pension management subsidiary of First
Pennsylvania Corporation. Mr. Farrington is a vice president of the Investment
Manager. He holds a BA in
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economics from Harvard University. Mr. Farrington is a Chartered Financial
Analyst and is currently the president of the Bahamas Society of Financial
Analysts. He joined the Templeton organization in 1991 and is currently a
research analyst and portfolio manager. Mr. Farrington's current research
responsibilities include global industry coverage of the electrical equipment
industries, as well as non-U.S. electric utilities. He is also responsible for
country coverage of Hong Kong, China and Taiwan. Mr. Holowesko is president of
the Investment Manager. He holds a BA in economics from Holy Cross College and
an MBA from Babson College. He is a Chartered Financial Analyst, Chartered
Investment Counselor, and a director and founding member of the International
Society of Financial Analysts. Prior to joining the Templeton organization, Mr.
Holowesko worked with RoyWest Trust Corporation (Bahamas) Limited as an
investment analyst. His duties at RoyWest included managing trust and
individual accounts, as well as equity market research worldwide. Mr. Holowesko
is responsible for coordinating equity research worldwide for the Investment
Manager and managing several mutual funds.
The lead portfolio manager of Latin America Fund since July 1996 is Stephen S.
Oler. Mr. Oler is vice president of Latin America Fund's Investment Manager. He
holds a BA in American history from the University of Pennsylvania and a master
of philosophy in international relations from King's College at Cambridge
University. Mr. Oler is a Chartered Financial Analyst and a member of the
Association for Investment Management and Research. Prior to joining the
Templeton organization in March 1996, Mr. Oler was a global portfolio manager
and senior vice president of Baring Asset Management, Inc. During his 11 years
with Baring Asset Management, Inc., Mr. Oler managed several Latin American
funds and Latin American portions of global emerging markets funds. His current
research responsibilities include industry coverage of global non-life
insurance, as well as the markets of Mexico and Greece.
Mark R. Beveridge and Howard S. Leonard exercise secondary portfolio management
responsibilities for Latin America Fund. Mr. Beveridge is senior vice president
of Latin America Fund's Investment Manager. He holds a BBA in finance from the
University of Miami. He is a Chartered Financial Analyst, a Chartered
Investment Counselor and a member of the South Florida Society of Financial
Analysts and the International Society of Financial Analysts. Before joining
the Templeton organization in 1985 as a security analyst, Mr. Beveridge was a
principal with a financial accounting software firm based in Miami, Florida. He
is currently a portfolio manager and research analyst with responsibility for
the industrial component and appliances/household durables industries. He also
has market coverage of Argentina, Thailand and Denmark.
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Mr. Leonard is executive vice president of Latin America Fund's Investment
Manager. He holds a BBA degree in finance and economics from the Temple
University. He is a Chartered Financial Analyst and a member of the Financial
Analysts of Philadelphia, the Financial Analysts Federation and the
International Society of Security Analysts. Before joining the Templeton
organization in 1989, Mr. Leonard was director of investment research at First
Pennsylvania Bank, where he was responsible for equity and fixed-income
research activities. Mr. Leonard also worked previously at Provident National
Bank as a security analyst covering a variety of industries. He currently
manages both institutional and mutual fund accounts of global and international
mandates. Mr. Leonard has research responsibility for the global forest
products and money managers industries and is responsible for country coverage
of Indonesia, Switzerland, Brazil and India.
Management Fees. For the fiscal year ended March 31, 1996, the Funds paid no
management fees (0.00% of average daily net assets). The Investment Managers
voluntarily agreed to reduce their fees in order to limit total expenses of the
Funds. Without this voluntary agreement, management fees would have been 0.75%
of Greater European Fund's average daily net assets and 1.25% of Latin America
Fund's average daily net assets. After August 1, 1997, these agreements may end
at any time upon notice to the Board.
Portfolio Transactions. The Investment Managers try to obtain the best execution
on all transactions. If an Investment Manager believes more than one broker or
dealer can provide the best execution, consistent with internal policies it may
consider research and related services and the sale of Fund shares, as well as
shares of other funds in the Franklin Templeton Group of Funds, when selecting
a broker or dealer. Please see "How Do the Funds Buy Securities For Their
Portfolios?" in the SAI for more information.
Administrative Services. FT Services (and, prior to October 1, 1996, Templeton
Global Investors, Inc.) provides certain administrative services and facilities
for the Funds. For the fiscal year ended March 31, 1996, the Funds paid no
(0.00%) administrative services fees. Templeton Global Investors, Inc. (and
beginning October 1, 1996, FT Services) voluntarily agreed to reduce its fees
in order to limit total expenses of the Funds. Without this voluntary agreement,
administrative services fees would be 0.15% of the average daily net assets of
the funds included in the Trust (the Funds, Templeton Americas Governments
Securities Fund, Templeton Growth and Income Fund and Templeton Global
Infrastructure Fund). After August 1, 1997, this agreement may end at any
time upon notice to be the Board. Please see "Investment Management and Other
Services" in the SAI for more information.
HOW DO THE FUNDS MEASURE PERFORMANCE?
From time to time, each class of each Fund advertises its performance. The more
commonly used measure of performance is total return. Performance figures are
usually calculated using the maximum sales charge, if applicable. Certain
performance figures may not include any applicable sales charge or Rule 12b-1
fees.
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Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested.
The investment results of each class will vary. Performance figures are always
based on past performance and do not guarantee future results. For a more
detailed description of how the Funds calculate their performance figures,
please see "How Do the Funds Measure Performance?" in the SAI.
HOW IS THE TRUST ORGANIZED?
Each Fund is a diversified series of the Trust, an open-end management
investment company, commonly called a mutual fund. The Trust was organized as a
business trust under the laws of Delaware on December 21, 1993, and is
registered with the SEC under the 1940 Act. In addition to the Funds, the Trust
has three other series of shares: Templeton Americas Government Securities
Fund, a non-diversified fund, and Templeton Growth and Income Fund and
Templeton Global Infrastructure Fund, both diversified funds. Prospectuses for
Templeton Americas Government Securities Fund, Templeton Growth and Income Fund
and Templeton Global Infrastructure Fund are available upon request and without
charge from Distributors. Each Fund discussed in this prospectus has three
classes of shares of beneficial interest with a par value of $.01: Greater
European Fund - Class I, Greater European Fund - Class II, and Greater European
Fund Advisor Class; Latin America Fund - Class I, Latin America Fund - Class
II, and Latin America Fund - Advisor Class. The Trust began offering Advisor
Class shares of each Fund on January 1, 1997. Class I, Class II and Advisor
Class shares differ as to sales charges, expenses and services. Different fees
and expenses will affect performance. Additional classes and series may be
offered in the future. A further description of Class I and Class II is set
forth below.
Each class will vote separately on matters (1) affecting only that class, (2)
expressly required to be voted on separately by state law, or (3) required to
be voted on separately by the 1940 Act. Shares of each class of a series
represent proportionate interests in the assets of the series and have the same
voting and other rights and preferences as any other class and series of the
Trust on matters that affect the Trust as a whole.
The Trust has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the members of the Board. If
this happens, holders of the remaining shares voting will not be able to elect
anyone to the Board.
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The Trust does not intend to hold annual shareholder meetings. It may hold a
special meeting of a series, however, for matters requiring shareholder approval
under the 1940 Act. 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 1940 Act requires that we help you communicate
with other shareholders in connection with electing or removing members of the
Board.
Class I and Class II. Class I and Class II shares of the Funds are described in
a separate prospectus relating only to those classes. You may buy Class I and
Class II shares through your investment representative or directly by contacting
the Trust. If you would like a prospectus relating to the Funds' Class I and
Class II shares, contact your investment representative or Distributors.
Class I and Class II shares of the Funds have sales charges and Rule 12b-1
charges that may affect performance. Class I shares have a front-end sales
charge of 5.75% (6.10% of the net amount invested) which is reduced on certain
transactions of $50,000 or more. Class I shares are subject to Rule 12b-1 fees
up to a maximum of 0.35% per year of Class I's average daily net assets. Class
II shares have a front-end sales charge of 1.00% (1.01% of the net amount
invested) and are subject to Rule 12b-1 fees up to a maximum of 1.00% per year
of Class II's average daily net assets. Shares of Class I may be subject to, and
shares of Class II are generally subject to, a Contingent Deferred Sales Charge
upon redemption.
HOW TAXATION AFFECTS YOU AND THE FUNDS
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Funds and their shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
Each Fund intends to elect to be treated and to qualify each year as a regulated
investment company under Subchapter M of the Code. A regulated investment
company generally is not subject to federal income tax on income and gains
distributed in a timely manner to its shareholders. Each 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 Trust 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.
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ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
Opening Your Account
You may buy Advisor Class shares if you are making a minimum initial investment
of $5 million (in the aggregate) in one or more Advisor Class shares of the
Franklin Templeton Funds ($25 for subsequent investments) or if you are an
investor in one of the following categories:
(a) Broker-dealers, qualified registered investment advisors or certified
financial planners, who have entered into a supplemental agreement with
Distributors for clients participating in comprehensive fee programs;
(b) Qualified registered investment advisors or registered certified financial
planners who have clients invested in Mutual Series on October 31, 1996;
(c) Qualified registered investment advisors or registered certified financial
planners who did not have clients invested in Mutual Series on October 31,
1996 may buy through a broker-dealer or service agent who has entered into
an agreement with Distributors;
(d) Employer stock, bonus, pension or profit-sharing plans that meet the
requirements for qualification under Section 401 of the Code, including
salary reduction plans qualified under Section 401(k) of the Code (if they
have 5,000 or more employees or the plan has assets of $50 million or more);
(e) Effective on or about February 1, 1997, participants in Franklin Templeton's
401(k) and any Franklin Templeton Group Company Profit Sharing Plans;
(f) Trust companies and bank trust departments initially investing in any of the
Franklin Templeton Funds at least $1 million of assets held in a fiduciary,
agency, advisory, custodial or similar capacity and over which the trust
companies, bank trust departments or other plan fiduciaries or participants,
in the case of certain retirement plans, have full or shared investment
discretion;
(g) Governments, municipalities and tax-exempt entities that meet the
requirements for qualification under Section 501 of the Code (subject to an
initial investment in Advisor Class of $1 million);
(h) Any other investor, including a private investment vehicle such as a family
trust or foundation, who is a member of a qualified group may also
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purchase Advisor Class shares of the Funds if the group as a whole meets the
required minimum initial investment of $5 million;
(i) Directors, trustees, officers and full-time employees (and members of their
immediate families) of Franklin Templeton Group and Franklin Templeton Group
of Funds who invest $100 or more;
(j) Accounts managed by the Franklin Templeton Group;
(k) Class I shareholders of the Funds who qualify under one of the above
categories, may have their existing Class I shares invested into the Funds'
Advisor Class by sending written instructions indicating that they wish to do
so, by June 30, 1997. Instructions should be addressed to Investor Services.
Generally, for federal income tax purposes, there will be no recognition of
gain or loss associated with such a transaction. You may wish to consult with
your tax advisor to determine whether there are any state income tax
consequences to such a transaction.
(l) Each series of Franklin Templeton Fund Allocator Series that invests $1,000
or more.
The qualified group referred to in Item (h) above, is one that:
- - Was formed at least six months ago,
- - Has a purpose other than buying Fund shares at a discount,
- - Has more than 10 members,
- - Can arrange for meetings between our representatives and group members,
- - Agrees to include sales and other Franklin Templeton Fund materials in
publications and mailings to its members at reduced or no cost to
Distributors,
- - Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and
- - Meets other uniform criteria that allow Distributors to achieve cost savings
in distributing shares.
If you are subject to the $5 million minimum investment requirement, the cost
or current value (whichever is higher) of your investment in other funds in the
Franklin Templeton Funds will be included for purposes of determining
compliance with the required minimum investment amount, provided that at least
$1 million is invested in Advisor Class shares of the Franklin Templeton Funds.
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The minimum for subsequent investments in Advisor Class shares is $25 for most
purchases of Advisor Class shares of the Funds and for purchases by directors,
trustees, officers and full-time employees (and members of their immediate
family) of Franklin Templeton Group and Franklin Templeton Funds; and $1,000
for each series of Franklin Templeton Fund Allocator Series.
Purchase Price of Fund Shares
Advisor Class shares are purchased at Net Asset Value without a sales charge.
Securities Dealers may receive compensation up to 0.25% of the amount invested
from Distributors or an affiliated company.
How Do I Buy Shares in Connection with Retirement Plans?
Your individual or employer-sponsored retirement plan may invest in the Funds.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee. Trust Company can
provide you with brochures containing important information about its plans. To
establish a Trust Company retirement plan, you will need an application other
than the one included in this prospectus. For a retirement plan brochure or
application, please call our Retirement Plans Department.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund and its rules and
requirements for exchanges. For example, some Franklin Templeton Funds do not
accept exchanges and others may have different investment minimums. Some
Franklin Templeton Funds do not offer Advisor Class shares.
Templeton Region Funds -
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<PAGE>
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- --------------------------------------------------------------------------
<S> <C>
BY MAIL 1. Send us written instructions signed by all
account owners
2. Include any outstanding share certificates for
the shares you're exchanging
- --------------------------------------------------------------------------
BY PHONE Call Shareholder Services
(If you do not want the ability to exchange by
phone to apply to your account, please let us
know.)
- --------------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- --------------------------------------------------------------------------
</TABLE>
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
How We Process Your Exchange
If you are exchanging your Advisor Class shares of the Fund you may:
- - exchange into any of our money funds except Franklin Templeton Money Fund II.
- - exchange into the other Advisor Class shares of the Franklin Templeton Funds
(excluding Templeton Developing Markets Trust, Templeton Foreign Fund and
Templeton Growth Fund, Inc., except as described below), Mutual Series Class
Z shares and Templeton Institutional Funds, Inc., if you meet the investment
requirements of the fund to be acquired.
- - exchange into the Advisor Class shares of Templeton Developing Markets Trust,
Templeton Foreign Fund and Templeton Growth Fund, Inc. only if you fall into
one of the following categories: (i) you are a broker-dealer or a qualified
registered investment advisor who has entered into a special agreement with
Distributors for your clients who are participating in comprehensive fee
programs; (ii) you are a qualified registered investment advisor or certified
financial planner who has clients invested in Mutual Series on October 31,
1996; (iii) qualified registered investment advisors or registered certified
financial planners who did not have clients invested in Mutual Series on
October 31, 1996 may buy through a broker-dealer or service agent who has
entered into an agreement with Distributors; (iv) you are a director, trustee,
officer or full-time employee (or a family member) of the Franklin Templeton
Group or the Franklin Templeton Funds; (v) you are a participant in Franklin
Templeton's 401(k) or Franklin Templeton's Profit Sharing Plans; (vi) the
exchanging shareholder is an account managed by the Franklin Templeton
- Templeton Region Funds
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<PAGE>
Group; or (vii) the exchanging shareholder is a series of the Franklin
Templeton Fund Allocator Series.
- - If the fund you are exchanging into does not offer Advisor Class shares, you
may exchange into the Class I shares of the fund at Net Asset Value.
Please be aware that the following restrictions may apply to exchanges:
- - The accounts must be identically registered. You may exchange shares from a
Fund account requiring two or more signatures into an identically registered
money fund account requiring only one signature for all transactions. Please
notify us in writing if you do not want this option to be available on your
account(s). Additional procedures may apply. Please see "Transaction
Procedures and Special Requirements."
- - Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact our Retirement Plans Department for information on exchanges
within these plans.
- - The fund you are exchanging into must be eligible for sale in your state.
- - We may modify or discontinue our exchange policy upon 60 days' written notice.
- - Your exchange may be restricted or refused if you: (i) request an exchange out
of the Funds within two weeks of an earlier exchange request, (ii) exchange
shares out of the Funds more than twice in a calendar quarter, or (iii)
exchange shares equal to at least $5 million, or more than 1% of the
Fund's net assets. Shares under common ownership or control are combined for
these limits. If you exchange shares as described in this paragraph, you will
be considered a Market Timer. Each exchange by a Market Timer, if accepted,
will be charged $5.00. Some of our funds do not allow investments by Market
Timers.
Because excessive trading can hurt Fund performance and shareholders, we may
refuse any exchange purchase if (i) we believe the Fund would be harmed or
unable to invest effectively, or (ii) the Fund receives or anticipates
simultaneous orders that may significantly affect the Fund.
Templeton Region Funds -
27
<PAGE>
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ----------------------------------------------------------------------
<S> <C>
BY MAIL 1. Send us written instructions signed by all
account owners.
2. Include any outstanding share certificates
for the shares you are selling.
3. Provide a signature guarantee if required.
4. Corporate, partnership and trust accounts
may need to send additional documents.
Accounts under court jurisdiction may have
additional requirements.
- ----------------------------------------------------------------------
BY PHONE Call Shareholder Services
(Only available if you have completed and sent to us the telephone
redemption agreement included with this prospectus)
Telephone requests will be accepted:
- If the request is $50,000 or less.
Institutional accounts may exceed $50,000 by
completing a separate agreement. Call
Institutional Services to receive a copy.
- If there are no share certificates issued
for the shares you want to sell or you have
already returned them to the respective Fund.
- Unless you are selling shares in a Trust
Company retirement plan account.
- Unless the address on your account was
changed by phone within the last 30 days.
Beginning on or about May 1, 1997, you will be
able to redeem shares by telephone without
completing a telephone redemption agreement.
Please notify us if you do not want this
option to be available on your account. If you
later decide you would like this option, send
us written instructions signed by all account
owners.
- ----------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative.
- ----------------------------------------------------------------------
</TABLE>
We will send your redemption check within seven days after we receive your
request in proper form. If you sell your shares by phone, the check may only be
- Templeton Region Funds
28
<PAGE>
made payable to all registered owners on the account and sent to the address of
record. We are not able to receive or pay out cash in the form of currency.
If you sell shares you just purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
Trust Company Retirement Plan Accounts
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call our Retirement Plans Department.
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUNDS?
Dividends and capital gains are calculated and distributed the same way for each
class of each Fund. The amount of any income dividends per share will differ,
however, generally due to the difference in the applicable Rule 12b-1 fees of
any class. Advisor Class shares are not subject to Rule 12b-1 fees.
Each Fund intends to pay a dividend at least annually representing substantially
all of its net investment income and any net realized capital gains. Dividend
payments are not guaranteed, are subject to the Board's discretion and may vary
with each payment. FUNDS DO NOT PAY "INTEREST" OR GUARANTEE ANY FIXED RATE OF
RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of a Fund's shares by the amount of the
distribution.
Distribution Options
You may receive your distributions from a Fund in any of these ways:
1. Buy additional shares of a Fund - You may buy additional shares of the same
class of a Fund by reinvesting capital gain distributions, dividend
distributions, or both. This is a convenient way to accumulate additional
shares and maintain or increase your earnings base.
Templeton Region Funds -
29
<PAGE>
2. Buy shares of other Franklin Templeton Funds - You may direct your
distributions to buy Advisor Class shares or Class I shares of another Franklin
Templeton Fund. Many shareholders find this a convenient way to diversify their
investments.
3. Receive distributions in cash - You may receive capital gain distributions,
dividend distributions, or both in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee.
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE THE SHAREHOLDER APPLICATION
INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT REPRESENTATIVE WHICH
OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL AUTOMATICALLY
REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE ADVISOR CLASS SHARES OF
THE RESPECTIVE FUND. For Trust Company retirement plans, special forms are
required to receive distributions in cash. You may change your distribution
option at any time by notifying us by mail or phone. Please allow at least seven
days prior to the record date for us to process the new option.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
How and When Shares Are Priced
Each Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share of each class as of the scheduled close of the NYSE,
generally 4:00 p.m. Eastern time. You can find the prior day's closing Net Asset
Value and Offering Price for each class in many newspapers.
The Net Asset Value of all outstanding shares of each class is calculated on a
pro rata basis. It is based on each class' proportionate participation in a
Fund, determined by the value of the shares of each class. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. Each Fund's assets
are valued as described under "How Are Fund Shares Valued?" in the SAI.
The Price We Use When You Buy or Sell Shares
You buy shares of Advisor Class at the Net Asset Value per share. We calculate
it to two decimal places using standard rounding criteria. You also sell shares
at Net Asset Value.
We will use the Net Asset Value next calculated after we receive your
transaction request in proper form. If you buy or sell shares through your
Securities Dealer, however, we will use the Net Asset Value next calculated
after your Securities Dealer receives your request, which is promptly
transmitted to a Fund. Your
- Templeton Region Funds
30
<PAGE>
redemption proceeds will not earn interest between the time we receive the order
from your dealer and the time we receive any required documents.
Proper Form
An order to buy shares is in proper form when we receive your signed
shareholder application and check. Written requests to sell or exchange shares
are in proper form when we receive written instructions signed by all registered
owners, with a signature guarantee if necessary. We must also receive any
outstanding share certificates for those shares.
Written Instructions
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
- - Your name,
- - The respective Fund's name,
- - The class of shares,
- - A description of the request,
- - For exchanges, the name of the fund you're exchanging into,
- - Your account number,
- - The dollar amount or number of shares, and
- - A telephone number where we may reach you during the day, or in the evening
if preferred.
Signature Guarantees
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
Templeton Region Funds -
31
<PAGE>
A signature guarantee verifies the authenticity of your signature and may be
obtained from certain banks, brokers or other eligible guarantors. YOU SHOULD
VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR PRIOR TO SIGNING. A
NOTARIZED SIGNATURE IS NOT SUFFICIENT.
Share Certificates
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate
is lost, stolen or destroyed, you may have to pay an insurance premium of up to
2% of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the respective Fund if
you want to sell or exchange those shares or if you would like to start a
systematic withdrawal plan. The certificates should be properly endorsed. You
can do this either by signing the back of the certificate or by completing a
share assignment form. For your protection, you may prefer to complete a share
assignment form. In this case, you should send the certificate and assignment
form in separate envelopes.
Telephone Transactions
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We will also record calls. We will not be
liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or not
implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.
Trust Company Retirement Plan Accounts. You may not sell shares or change
distribution options on Trust Company retirement plans by phone. While you may
exchange shares of Trust Company IRA and 403(b) retirement accounts by phone,
certain restrictions may be imposed on other retirement plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call our Retirement Plans Department.
Account Registrations and Required Documents
When you open an account, you need to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
- Templeton Region Funds
32
<PAGE>
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
Joint Ownership. If you open an account with two or more owners, we register
the account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or
more owners, all owners must sign instructions to process transactions and
changes to the account. Even if the law in your state says otherwise, you will
not be able to change owners on the account unless all owners agree in writing.
If you would like another person or owner to sign for you, please send us a
current power of attorney.
Gifts and Transfers to Minors. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
Trusts. If you register your account as a trust, you should have a valid written
trust document to avoid future disputes or possible court action over who owns
the account.
Required Documents. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
<TABLE>
<CAPTION>
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- -----------------------------------------------------------------------
<S> <C>
CORPORATION Corporate Resolution
- -----------------------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement that
identify the general partners, or
2. A certification for a partnership agreement
- -----------------------------------------------------------------------
TRUST 1. The pages from the trust document that
identify the trustees, or
2. A certification for trust
- -----------------------------------------------------------------------
</TABLE>
Street or Nominee Accounts. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both
dealers must have an agreement with Distributors or we will not process the
transfer. Contact your Securities Dealer to initiate the transfer. We will
process the transfer after we receive authorization in proper form from your
delivering
Templeton Region Funds -
33
<PAGE>
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
Electronic Instructions. If there is a Securities Dealer or other
representative of record on your account, we are authorized to use and execute
electronic instructions received directly from your dealer or representative
without further inquiry. Electronic instructions may be processed through the
services of the NSCC, which currently include the NSCC's "Networking,"
"Fund/SERV," and "ACATS" systems, or through Franklin/Templeton's PCTrades
II(TM) System.
Tax Identification Number
For tax reasons, we must have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies a Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
Keeping Your Account Open
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is $50 or less, except for investors in
categories (d), (e), (j) and (l) under "Opening Your Account." We will only do
this if the value of your account falls below this minimum because you
voluntarily sold your shares and your account has been inactive (except for the
reinvestment of distributions) for at least six months. Before we close your
account, we will notify you and give you 30 days to increase the value of your
account to the required minimum amount of at least $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
Automatic Investment Plan
Our automatic investment plan offers a convenient way to invest in a Fund.
Under the plan, you can have money transferred automatically from your checking
account to the respective Fund each month to buy additional shares. If
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34
<PAGE>
you are interested in this program, please refer to the account application
included with this prospectus or contact your investment representative. The
market value of a Fund's shares may fluctuate and a systematic investment plan
such as this will not assure a profit or protect against a loss. You may
discontinue the program at any time by notifying Investor Services by mail or
phone.
Systematic Withdrawal Plan
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum
payment amount for each withdrawal must be at least $50. For retirement plans
subject to mandatory distribution requirements, the $50 minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us in
writing at least seven business days before the end of the month preceding a
scheduled payment. Please see "How Do I Buy, Sell and Exchange Shares? -
Systematic Withdrawal Plan" in the SAI for more information.
Statements and Reports to Shareholders
We will send you the following statements and reports on a regular basis:
- - Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. Please verify the
accuracy of your statements when you receive them.
- - Financial reports of each Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of a Fund's financial report or an interim quarterly
report.
Templeton Region Funds -
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<PAGE>
Brokers and Dealers and Plan Administrators
You may buy and sell Fund shares through registered broker-dealers. The Funds
do not impose a sales or service charge but your broker-dealer may charge you a
transaction fee. Transaction fees and services may vary among broker-dealers,
and your broker-dealer may impose higher initial or subsequent investment
requirements than those established by the Funds. Services provided by broker-
dealers may include allowing you to establish a margin account and borrow on
the value of a Fund's shares in that account. If your broker-dealer receives
your order before pricing on a given day, the broker-dealer is required to
forward the order to the Fund before pricing closes on that day. A
broker-dealer's failure to timely forward an order may give rise to a claim by
the investor against the broker.
Third party plan administrators of tax-qualified retirement plans and other
entities may provide sub-transfer agent services to a Fund. In such cases, the
Fund may pay the third party an annual sub-transfer agency fee that is not
greater than the Fund otherwise would have paid for such services.
Institutional Accounts
Institutional investors will likely be required to complete an institutional
account application. There may be additional methods of opening accounts and
purchasing, redeeming or exchanging shares of the Funds available for
institutional accounts. To obtain an institutional application or additional
information regarding institutional accounts, contact Franklin Templeton
Institutional Services at 1-800/321-8563 Monday through Friday, from 9:00 a.m.
to 5:00 p.m. Eastern time.
Availability of These Services
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Funds may not be able to offer these services directly to
you. Please contact your investment representative.
What If I Have Questions About My Account?
If you have any questions about your account, you may write to Investor
Services at P.O. Box 33030, St. Petersburg, FL 33733-8030. Each Fund and
Distributors are also located at this address. You may also contact us by phone
at one of the numbers listed below.
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<PAGE>
<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN
TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
- ------------------------------------------------------------------------
<S> <C> <C>
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
9:30 a.m. to 5:30 p.m.
(1-800/342-5236) (Saturday)
Retirement Plans 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
Templeton Region Funds -
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<PAGE>
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1933 Act - Securities Act of 1933, as amended
1940 Act - Investment Company Act of 1940, as amended
Board - The Board of Trustees of the Trust
CD - Certificate of deposit
Class I, Class II and Advisor Class - Each Fund offers three classes of shares,
designated "Class I," "Class II" and "Advisor Class." The three classes have
proportionate interests in the respective Fund's portfolio. Class I and Class II
differ, however, primarily in their sales charge structures and Rule 12b-1
plans. Advisor Class shares are purchased without a sales charge and do not
have a Rule 12b-1 plan.
Code - Internal Revenue Code of 1986, as amended
Contingency Period - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the
contingency period is 18 months. Regardless of when during the month you
purchased shares, they will age one month on the last day of that month and
each following month.
Contingent Deferred Sales Charge (CDSC) - A sales charge of 1% that may apply
if you sell your shares within the Contingency Period.
Distributors - Franklin/Templeton Distributors, Inc., each Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
Franklin Funds - the mutual funds in the Franklin Group of Funds except
Franklin Valuemark Funds and the Franklin Government Securities Trust
Franklin Templeton Funds - The Franklin Funds and the Templeton Funds.
Franklin Templeton Group - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries.
Franklin Templeton Group of Funds - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds.
FT Services - Franklin Templeton Services, Inc., each Fund's administrator.
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<PAGE>
Investment Manager - Templeton Global Advisors Limited, P.O. Box N-7759, Lyford
Cay, Nassau, Bahamas for Greater European Fund or Templeton Investment Counsel,
Inc., Broward Financial Centre, Fort Lauderdale, FL 33394-3091 for Latin
America Fund (collectively, the "Investment Managers.")
Investor Services - Franklin/Templeton Investor Services, Inc., each Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
Market Timer(s) - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.
Moody's - Moody's Investors Service, Inc.
Mutual Series - Franklin Mutual Series Fund Inc., a member of the Franklin
Group of Funds, formerly the Mutual Series Fund Inc. Each series of Mutual
Series began offering three classes of shares on November 1, 1996, Class I,
Class II and Class Z. All shares sold before that time are designated Class Z
shares.
NASD - National Association of Securities Dealers, Inc.
Net Asset Value (NAV) - the value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of a Fund by the
number of shares outstanding.
NSCC - National Securities Clearing Corporation
NYSE - New York Stock Exchange, Inc.
Offering Price - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge, if applicable. The
maximum front-end sales charge is 5.75% for Class I and 1% for Class II.
Advisor Class has no front-end sales charge.
Resources - Franklin Resources, Inc.
SAI - Statement of Additional Information
S&P - Standard & Poor's Corporation
SEC - U.S. Securities and Exchange Commission
Templeton Region Funds -
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<PAGE>
Securities Dealer - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with a Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
Templeton Funds - The U.S. registered mutual funds in the Templeton Group of
Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund
Trust Company - Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. - United States
We/Our/Us - Unless the context indicates a different meaning, these terms refer
to the Funds and/or Investor Services, Distributors, or other wholly-owned
subsidiaries of Resources.
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<PAGE>
INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
General. Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
Obtaining a Number. If you do not have a Social Security Number/Taxpayer
Identification Number or you do not know your SSN/TIN, you must obtain Form
SS-5 or Form SS-4 from your local Social Security or IRS office and apply for
one. If you have checked the "Awaiting TIN" box and signed the certification,
withholding will apply to payments relating to your account unless you provide
a certified TIN within 60 days.
What SSN/TIN to Give. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE EMPLOYER ID # OF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- -Individual Individual -Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- --------------------------------------------------------------------------------
- -Joint Individual Owner who will -Corporation, Corporation,
be paying tax Partnership, or Partnership, or
or first-named other organization other organization
individual
- --------------------------------------------------------------------------------
- -Unif. Gift/ Minor -Broker nominee Broker nominee
Transfer to Minor
- --------------------------------------------------------------------------------
- -Sole Proprietor Owner of
business
- --------------------------------------------------------------------------------
- -Legal Guardian Ward, Minor,
or Incompetent
- --------------------------------------------------------------------------------
</TABLE>
Exempt Recipients. Please provide your TIN and check the "Exempt Recipient" box
if you are an exempt recipient. Exempt recipients include:
A corporation
A financial institution
An organization exempt from tax under section 501(a), or an individual
retirement plan
A registered dealer in securities or commodities registered in the U.S. or a
U.S. possession
A real estate investment trust
A common trust fund operated by a bank under section 584(a)
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An exempt charitable remainder trust or a non-exempt trust described in section
4947(a)(1)
An entity registered at all times under the Investment Company Act of 1940
IRS Penalties. If you do not supply us with your SSN/TIN, you will be subject to
an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith. If
you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
Exempt Foreign Person. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. You are an "Exempt
Foreign Person" if you are not (1) a citizen or resident of the U.S., or (2) a
U.S. corporation, partnership, estate, or trust. In the case of an individual,
an "Exempt Foreign Person" is one who has been physically present in the U.S.
for less than 31 days during the current calendar year. An individual who is
physically present in the U.S. for at least 31 days during the current calendar
year will still be treated as an "Exempt Foreign Person," provided that the
total number of days physically present in the current calendar year and the two
preceding calendar years does not exceed 183 days (counting all of the days in
the current calendar year, only one-third of the days in the first preceding
calendar year and only one-sixth of the days in the second preceding calendar
year). In addition, lawful permanent residents or green card holders may not be
treated as "Exempt Foreign Persons." If you are an individual or an entity, you
must not now be, or at this time expect to be, engaged in a U.S. trade or
business with respect to which any gain derived from transactions effected by
the Fund/Payer during the calendar year is effectively connected to the U.S.
(or your transactions are exempt from U.S. taxes under a tax treaty).
Permanent Address. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual, provide
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your permanent address. If you are a partnership or corporation, provide the
address of your principal office. If you are an estate or trust, provide the
address of your permanent residence or the principal office of any fiduciary.
Notice of Change in Status. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that (1)
the taxpayer identification number you have given is correct, and (2) the
Internal Revenue Service has not notified you that you are subject to backup
withholding because you failed to report certain interest or dividend income.
You may use Form W-9, "Payer's Request for Taxpayer Identification Number and
Certification," to make these certifications. If an account is no longer active,
you do not have to notify a Fund/Payer or broker of your change in status
unless you also have another account with the same Fund/Payer that is still
active. If you receive interest from more than one Fund/Payer or have dealings
with more than one broker or barter exchange, file a certificate with each. If
you have more than one account with the same Fund/Payer, the Fund/Payer may
require you to file a separate certificate for each account.
When to File. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years.
How Often You Must File. This certificate generally remains in effect for three
calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
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FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of a
resolution or other certificate of authority to authorize the purchase as well
as sale (redemption) of shares and withdrawals by checks or drafts. You may use
the following form of resolution or you may prefer to use your own. It is
understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
of
Title Corporate Name
a _______________________________ organized under the laws of the State of
Type of Organization
___________________ and that the following is a true and correct copy
State
of a resolution adopted by the Board of Directors at a meeting duly called and
held on __________________________
Date
RESOLVED, that the
Officers' Titles
of this 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 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
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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.)
<TABLE>
<S> <C>
- --------------------------------------- ---------------------------------------
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
</TABLE>
Certified from minutes
Name and Title
CORPORATE SEAL (if appropriate)
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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 Funds' 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 now automatically available to
Franklin Templeton Fund shareholders, please sign and return this authorization
to Franklin/Templeton Investor Services, Inc. ("Investor 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
Franklin Templeton (a "Franklin Templeton Fund" or a "Fund"), now open or
opened at a later date, holding shares registered as follows:
- --------------------------------------------------------------------------------
Print name(s) as shown in registration (called "Shareholder")
- --------------------------------------------------------------------------------
Account number(s)
I/We authorize each Fund and Investor Services to honor and act upon telephone
requests, given as provided in this agreement, to redeem shares from any
Shareholder account.
- -------------------------------------
- -------------------------------------
Signature(s) of all registered owners and date
- -------------------------------------
- -------------------------------------
Printed name (and title/capacity, if applicable)
Verification Procedures: I/We understand and agree that: (1) each Fund and
Investor 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 Investor 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
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initiated by telephone; and (3) as long as the Fund and Investor 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 authorize each Fund and Investor 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
Investor 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
Investor Services by registered mail, return receipt requested, or by a Fund or
Investor Services upon receipt of any information that causes a Fund or
Investor 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 Investor
Services immediately upon the death of any of the undersigned.
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 Investor Services that the Shareholder has the
authority to enter into this agreement and that each of us are 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
Investor Services may honor a telephone redemption request given by ANY officer/
partner/member/administrator or agent of Shareholder ACTING ALONE.
Restricted Accounts: Telephone redemptions and dividend option changes may not
be accepted on Franklin Templeton Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin/Templeton Investor Services, Inc.
P.O. Box 33030
St. Petersburg, FL 33733-8030
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FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST E Call 1-800/DIAL BEN (1-800/342-5236) today for a free
descriptive brochure and prospectus on any of the funds listed below. The
prospectus contains more complete information, including fees, charges and
expenses, and should be read carefully before investing or sending money.
INTERNATIONAL GROWTH
Franklin Global Health Care Fund
Franklin International Equity Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Global Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller
Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
INTERNATIONAL GROWTH
AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton
Global Currency Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
INTERNATIONAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High
Income Currency Fund
Templeton Americas
Government Securities Fund
GROWTH
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
GROWTH AND INCOME
Franklin Balance Sheet
Investment Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural Resources Fund
Franklin Premier Return Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Templeton American Trust, Inc.
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin AGE High Income Fund
Franklin Investment
Grade Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR NON-U.S. INVESTORS:
Franklin Tax-Advantaged
High Yield Securities Fund
Franklin Tax-Advantaged
International Bond Fund
Franklin Tax-Advantaged U.S.
Government Securities Fund
FOR CORPORATIONS:
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES
Franklin Valuemark(SM)
Franklin Templeton Valuemark
Income Plus (an immediate annuity)
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal securities.
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