Registration No. 33-73244
As filed with the Securities and Exchange Commission on July 31, 1997
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 11 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 194 X
Amendment No. 13 X
(Check appropriate box or boxes)
TEMPLETON GLOBAL INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
700 CENTRAL AVENUE, P.O. BOX 33030, ST. PETERSBURG, FLORIDA 33733-8030
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (813) 823-8712
Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1500 K Street, NW
Washington, DC 20005
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485
X on August 1, 1997 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(1) of Rule 485
on pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of Rule 485
on pursuant to paragraph (a)(2) of Rule 485
this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
- -------------------------------------------------------------------------------
The Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940, nd filed its Rule 24f-2 Notice for the fiscal
year ended March 31, 1997 on May 29, 1997.
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
CROSS-REFERENCE SHEET
FORM N-1A
PART A
TEMPLETON GROWTH AND INCOME FUND
CLASS I AND CLASS II PROSPECTUS
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
1 Cover page Cover Page
2 Synopsis Expense Summary
3 Condensed Financial "Financial Highlights";
Information "How Does the Fund
Measure Performance?"
4 General Description "How Is the Trust Organized?";
of Registrant "How Does the Fund Invest Its Assets?";
"What Are the Fund's Potential Risks?"
5 Management of the Fund "Who Manages the Fund?"
5A Management's Discussion Contained in Registrant's Annual
of Fund Performance Report to Shareholders
6 Capital Stock and Other "How is the Trust Organized?"; "Services
Securities to Help You Manage Your Account"; "What
Distributions Might I Received From the
Fund?"; "How Taxation Affects the Funds
and its Shareholders?"
7 Purchase of Securities "How Do I Buy Shares?"; "May I Exchange
Being Offered Shares for Shares of Another Fund?";
"Transaction Procedures and Special
Requirements"; "Services to Help You Manage
Your Account"; "Who Manages the Fund?" "Useful
Terms and Definitions"
8 Redemption or Repurchase "May I Exchange Shares for Shares of Another
Fund?"; "How Do I Sell Shares?"; "Transaction
Procedures and Special Requirements"? "Services
to Help You Manage Your Account"
9 Pending Legal Procedures Not Applicable
</TABLE>
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
CROSS-REFERENCE SHEET
FORM N-1A
PART A
TEMPLETON GLOBAL INFRASTRUCTURE FUND
CLASS I AND CLASS II PROSPECTUS
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
1 Cover page Cover Page
2 Synopsis Expense Summary
3 Condensed Financial "Financial Highlights";
Information "How Does the Fund
Measure Performance?"
4 General Description "How Is the Trust Organized?";
of Registrant "How Does the Fund Invest Its Assets?";
"What Are the Fund's Potential Risks?"
5 Management of the Fund "Who Manages the Fund?"
5A Management's Discussion Contained in Registrant's Annual
of Fund Performance Report to Shareholders
6 Capital Stock and Other "How is the Trust Organized?"; "Services
Securities to Help You Manage Your Account"; "What
Distributions Might I Received From the
Fund?"; "How Taxation Affects the Funds and
its Shareholders?"
7 Purchase of Securities "How Do I Buy Shares?"; "May I Exchange
Being Offered Shares for Shares of Another Fund?";
"Transaction Procedures and Special
Requirements"; "Services to Help You Manage
Your Account"; "Who Manages the Fund?" "Useful
Terms and Definitions"
8 Redemption or Repurchase "May I Exchange Shares for Shares of Another
Fund?"; "How Do I Sell Shares?"; "Transaction
Procedures and Special Requirements"? "Services
to Help You Manage Your Account"
9 Pending Legal Procedures Not Applicable
</TABLE>
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
CROSS-REFERENCE SHEET
FORM N-1A
PART A
TEMPLETON AMERICAS GOVERNMENT SECURITIES FUND PROSPECTUS
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
1 Cover page Cover Page
2 Synopsis Expense Summary
3 Condensed Financial "Financial Highlights";
Information "How Does the Fund
Measure Performance?"
4 General Description "How Is the Trust Organized?";
of Registrant "How Does the Fund Invest Its Assets?";
"What Are the Fund's Potential Risks?"
5 Management of the Fund "Who Manages the Fund?"
5A Management's Discussion Contained in Registrant's Annual
of Fund Performance Report to Shareholders
6 Capital Stock and Other "How is the Trust Organized?"; "Services
Securities to Help You Manage Your Account"; "What
Distributions Might I Received From the
Fund?"; "How Taxation Affects the Funds and
its Shareholders?"
7 Purchase of Securities "How Do I Buy Shares?"; "May I Exchange
Being Offered Shares for Shares of Another Fund?";
"Transaction Procedures and Special
Requirements"; "Services to Help You Manage
Your Account"; "Who Manages the Fund?" "Useful
Terms and Definitions"
8 Redemption or Repurchase "May I Exchange Shares for Shares of Another
Fund?"; "How Do I Sell Shares?"; "Transaction
Procedures and Special Requirements"? "Services
to Help You Manage Your Account"
9 Pending Legal Procedures Not Applicable
</TABLE>
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
CROSS-REFERENCE SHEET
FORM N-1A
PART A
TEMPLETON REGION FUNDS
CLASS I AND CLASS II PROSPECTUS
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
1 Cover page Cover Page
2 Synopsis Expense Summary
3 Condensed Financial "Financial Highlights";
Information "How Does the Fund
Measure Performance?"
4 General Description "How Is the Trust Organized?";
of Registrant "How Does the Fund Invest Its Assets?";
"What Are the Fund's Potential Risks?"
5 Management of the Fund "Who Manages the Fund?"
5A Management's Discussion Contained in Registrant's Annual
of Fund Performance Report to Shareholders
6 Capital Stock and Other "How is the Trust Organized?"; "Services
Securities to Help You Manage Your Account"; "What
Distributions Might I Received From the
Fund?"; "How Taxation Affects the Funds and it
Shareholders?"
7 Purchase of Securities "How Do I Buy Shares?"; "May I Exchange
Being Offered Shares for Shares of Another Fund?";
"Transaction Procedures and Special
Requirements"; "Services to Help You Manage
Your Account"; "Who Manages the Fund?" "Useful
Terms and Definitions"
8 Redemption or Repurchase "May I Exchange Shares for Shares of Another
Fund?"; "How Do I Sell Shares?"; "Transaction
Procedures and Special Requirements"? "Services
to Help You Manage Your Account"
9 Pending Legal Procedures Not Applicable
</TABLE>
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
CROSS-REFERENCE SHEET
FORM N-1A
PART A
TEMPLETON REGION FUNDS
ADVISOR CLASS PROSPECTUS
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
1 Cover page Cover Page
2 Synopsis Expense Summary
3 Condensed Financial "Financial Highlights";
Information "How Does the Fund
Measure Performance?"
4 General Description "How Is the Trust Organized?";
of Registrant "How Does the Fund Invest Its Assets?";
"What Are the Fund's Potential Risks?"
5 Management of the Fund "Who Manages the Fund?"
5A Management's Discussion Contained in Registrant's Annual
of Fund Performance Report to Shareholders
6 Capital Stock and Other "How is the Trust Organized?"; "Services
Securities to Help You Manage Your Account"; "What
Distributions Might I Received From the
Fund?"; "How Taxation Affects the Funds and it
Shareholders?"
7 Purchase of Securities "How Do I Buy Shares?"; "May I Exchange
Being Offered Shares for Shares of Another Fund?";
"Transaction Procedures and Special
Requirements"; "Services to Help You Manage
Your Account"; "Who Manages the Fund?" "Useful
Terms and Definitions"
8 Redemption or Repurchase "May I Exchange Shares for Shares of Another
Fund?"; "How Do I Sell Shares?"; "Transaction
Procedures and Special Requirements"? "Services
to Help You Manage Your Account"
9 Pending Legal Procedures Not Applicable
</TABLE>
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
CROSS-REFERENCE SHEET
FORM N-1A
PART B
CLASS I AND II SHARES OF
TEMPLETON GROWTH AND INCOME FUND
TEMPLETON GLOBAL INFRASTRUCTURE FUND
TEMPLETON AMERICAS GOVERNMENT SECURITIES FUND
TEMPLETON REGION FUNDS
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
10 Cover Page Cover Page
11 Table of Contents Table of Contents
12 General Information and Not Applicable
History
13 Investment Objectives and "How Do the Funds Invest Their Assets?";
Policies "Investment Restrictions"; "What Are the
Funds' Potential Risks?"
14 Management of the "Officers and Trustees"; "Investment
Registrant Management and Other Services"
15 Control Persons and "Officers and Trustees"; "Investment
Principal Holders of Management and Other Services"; "Miscellaneous
Securities Information"
16 Investment Management and "Investment Management and Other Services";
Other Services "The Funds' Underwriter"
17 Brokerage Allocation and "How Do the Funds Buy Securities
Other Practices For Their Portfolios?"
18 Capital Stock and Other "Miscellaneous Information"; "See Prospectus
Securities "How Is The Trust Organized?"
19 Purchase, Redemption and "How Do I Buy, Sell and Exchange Shares?";
Pricing of Securities "How Are Fund Shares Valued?";
Being Offered "Financial Statements"
20 Tax Status "Additional Information on Distributions
and Taxes"
21 Underwriters "The Funds' Underwriter"
22 Calculation of Performance "How Do the Funds Measure Performance?"
Data
23 Financial Statements Financial Statements
</TABLE>
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
CROSS-REFERENCE SHEET
FORM N-1A
PART B
TEMPLETON REGION FUNDS
ADVISOR CLASS
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
10 Cover Page Cover Page
11 Table of Contents Table of Contents
12 General Information and Not Applicable
History
13 Investment Objectives and "How Do the Funds Invest Their Assets?";
Policies "Investment Restrictions"; "What Are the
Funds' Potential Risks?"
14 Management of the "Officers and Trustees"; "Investment
Registrant Management and Other Services"
15 Control Persons and "Officers and Trustees"; "Investment
Principal Holders of Management and Other Services"; "Miscellaneous
Securities Information"
16 Investment Management and "Investment Management and Other Services";
Other Services "The Funds' Underwriter"
17 Brokerage Allocation and "How Do the Funds Buy Securities
Other Practices For Their Portfolios?"
18 Capital Stock and Other "Miscellaneous Information"; "See Prospectus
Securities "How Is The Trust Organized?"
19 Purchase, Redemption and "How Do I Buy, Sell and Exchange Shares?";
Pricing of Securities "How Are Fund Shares Valued?";
Being Offered "Financial Statements"
20 Tax Status "Additional Information on Distributions
and Taxes"
21 Underwriters "The Funds' Underwriter"
22 Calculation of Performance "How Do the Funds Measure Performance?"
Data
23 Financial Statements Financial Statements
</TABLE>
<PAGE>
TEMPLETON GROWTH AND INCOME FUND
CLASS I AND II PROSPECUTS
<PAGE>
PROSPECTUS & APPLICATION
INVESTMENT STRATEGY: Templeton
GLOBAL GROWTH
AND INCOME Growth and
Income Fund
AUGUST 1, 1997
LOGO
- -------------------------------------------------------------------------------
This prospectus describes Templeton Growth and Income Fund (the "Fund"). It
contains information you should know before investing in the Fund. Please keep
it for future reference.
THE FUND MAY BORROW MONEY FOR INVESTMENT PURPOSES, WHICH MAY INVOLVE GREATER
RISK AND ADDITIONAL COSTS TO THE FUND. IN ADDITION, THE FUND MAY INVEST UP TO
15% OF ITS ASSETS IN ILLIQUID SECURITIES, INCLUDING UP TO 10% OF ITS ASSETS IN
RESTRICTED SECURITIES, WHICH MAY INVOLVE GREATER RISK AND INCREASED FUND
EXPENSES.
The Fund is a diversified series of Templeton Global Investment Trust (the
"Trust"), an open-end management investment company.
The Trust has a Statement of Additional Information ("SAI"), dated August 1,
1997, which may be amended from time to time. It includes more information about
the Fund's procedures and policies. It has been filed with the SEC and is
incorporated by reference into this prospectus. For a free copy or a larger
print version of this prospectus, call 1-800/DIAL BEN or write the Fund at its
address.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TEMPLETON GROWTH
AND INCOME FUND
- --------------------------------------------------------------------------------
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE, JURISDICTION OR COUNTRY IN WHICH THE OFFERING IS NOT AUTHORIZED. NO SALES
REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. FURTHER
INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
TEMPLETON TABLE OF CONTENTS
GROWTH AND ABOUT THE FUND
INCOME FUND Expense Summary..................................... 2
- ----------------------- Financial Highlights................................ 4
August 1, 1997 How Does the Fund Invest Its Assets?................ 5
When reading this What Are the Fund's Potential Risks?................ 12
prospectus, you Who Manages the Fund?............................... 16
will see certain terms How Does the Fund Measure Performance?.............. 19
beginning with capital How Taxation Affects the Fund and Its Shareholders.. 20
letters. This means the How Is the Trust Organized?......................... 20
term is explained in
our glossary section. ABOUT YOUR ACCOUNT
How Do I Buy Shares?................................ 21
May I Exchange Shares for Shares of Another Fund?... 28
How Do I Sell Shares?............................... 32
What Distributions Might I Receive From the Fund?... 36
Transaction Procedures and Special Requirements..... 37
Services to Help You Manage Your Account............ 42
What If I Have Questions About My Account?.......... 44
GLOSSARY
Useful Terms and Definitions........................ 46
</TABLE>
700 Central Avenue
P.O. Box 33030
St. Petersburg, FL
33733-8030
1-800/DIAL BEN
4 - Templeton Growth and Income Fund
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Fund. It is based on the historical expenses of each class, after fee waivers
and expense limitations, for the fiscal year ended March 31, 1997. The Fund's
actual expenses may vary.
<TABLE>
<CAPTION>
CLASS I CLASS II
- --------------------------------------------------------------------- -------------------- --------------------
<S> <C> <C>
A. SHAREHOLDER TRANSACTION EXPENSES(+)
MAXIMUM SALES CHARGE
(as a percentage of Offering Price) 5.75% 1.99%
.........Paid at time of purchase 5.75(++) 1.00(+++)
.........Paid at redemption(++++) None 0.99%
Exchange Fee (per transaction) $5.00* $5.00*
B. ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after fee waiver) 0.00%** 0.00**
Rule 12b-1 Fees 0.35%*** 1.00**
Other Expenses (after fee waiver and expense reimbursement) 0.90%** 0.90**
---- ----
Total Fund Operating Expenses (after fee waiver and expense 1.25%** 1.90**
reimbursement) ==== ====
</TABLE>
C. EXAMPLE
Assume the annual return for each class is 5%, operating expenses are as
described above, and you sell your shares after the number of years shown.
These are the projected expenses for each $1,000 that you invest in the
Fund.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
----------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Class I $ 70**** $ 95 $ 122 $ 200
Class II $ 39 $ 69 $ 112 $ 230
</TABLE>
For the same Class II investment, you would pay projected expenses of
$29 if you did not sell your shares at the end of the first year. Your
projected expenses for the remaining periods would be the same.
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES
OR RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE
SHOWN. The Fund pays its operating expenses. The effects of these
expenses are reflected in the Net Asset Value or dividends of each
class and are not directly charged to your account.
(+)IF YOUR TRANSACTION IS PROCESSED THROUGH YOUR SECURITIES DEALER, YOU MAY BE
CHARGED A FEE BY YOUR SECURITIES DEALER FOR THIS SERVICE.
(++)THERE IS NO FRONT-END SALES CHARGE IF YOU INVEST $1 MILLION OR MORE IN CLASS
I SHARES.
(+++)ALTHOUGH CLASS II HAS A LOWER FRONT-END SALES CHARGE THAN CLASS I, ITS RULE
12B-1 FEES ARE HIGHER. OVER TIME YOU MAY PAY MORE FOR CLASS II SHARES. PLEASE
SEE "HOW DO I BUY SHARES? -- DECIDING WHICH CLASS TO BUY."
(++++)A CONTINGENT DEFERRED SALES CHARGE MAY APPLY TO ANY CLASS II PURCHASE IF
YOU SELL THE SHARES WITHIN 18 MONTHS AND TO CLASS I PURCHASES OF $1 MILLION OR
MORE IF YOU SELL THE SHARES WITHIN ONE YEAR. A CONTINGENT DEFERRED SALES CHARGE
MAY ALSO APPLY TO PURCHASES BY CERTAIN RETIREMENT PLANS THAT QUALIFY TO BUY
CLASS I SHARES WITHOUT A FRONT-END SALES CHARGE. THE CHARGE IS 1% OF THE VALUE
OF THE SHARES SOLD OR THE NET ASSET VALUE AT THE TIME OF PURCHASE, WHICHEVER IS
LESS. THE NUMBER IN THE TABLE SHOWS THE CHARGE AS A PERCENTAGE OF OFFERING
PRICE. WHILE THE PERCENTAGE IS DIFFERENT DEPENDING ON WHETHER THE CHARGE IS
SHOWN BASED ON THE NET ASSET VALUE OR THE OFFERING PRICE, THE DOLLAR AMOUNT PAID
BY YOU WOULD BE THE SAME. SEE "HOW DO I SELL SHARES? -- CONTINGENT DEFERRED
SALES CHARGE" FOR DETAILS.
*$5.00 FEE IS ONLY FOR MARKET TIMERS. WE PROCESS ALL OTHER EXCHANGES WITHOUT
A FEE.
**FOR THE PERIOD SHOWN, GLOBAL ADVISORS AND FT SERVICES HAD AGREED IN ADVANCE TO
WAIVE THEIR RESPECTIVE MANAGEMENT AND ADMINISTRATION FEES AND TO MAKE CERTAIN
PAYMENTS TO REDUCE THE FUND'S EXPENSES. WITHOUT THIS REDUCTION, MANAGEMENT FEES
WOULD HAVE BEEN 0.75%, OTHER EXPENSES WOULD HAVE BEEN 1.14% AND TOTAL OPERATING
EXPENSES WOULD HAVE BEEN 2.24% FOR CLASS I AND 2.89% FOR CLASS II. AFTER JULY
31, 1998, THIS ARRANGEMENT MAY END AT ANY TIME UPON NOTICE TO THE BOARD.
***THE COMBINATION OF FRONT-END SALES CHARGES AND RULE 12B-1 FEES COULD CAUSE
LONG-TERM SHAREHOLDERS TO PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGE PERMITTED UNDER THE NASD'S RULES.
****ASSUMES A CONTINGENT DEFERRED SALES CHARGE WILL NOT APPLY.
<PAGE>
FINANCIAL HIGHLIGHTS
This table summarizes the Fund's financial history. The information has been
audited by McGladrey & Pullen, LLP, the Fund's independent auditors. Their audit
report covering each of the four years since the Fund's commencement of
operations on March 14, 1994, appears in the financial statements in the Fund's
Annual Report to Shareholders for the fiscal year ended March 31, 1997. The
Annual Report to Shareholders also includes more information about the Fund's
performance. For a free copy, please call Fund Information.
<TABLE>
<CAPTION>
CLASS I SHARES
YEAR ENDED MARCH 31 1997 1996 1995 1994(1)
- ------------------------------------------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding
throughout the period)
Net asset value, beginning of period $ 11.39 $ 10.05 $ 10.01 $ 10.00
--------- --------- --------- --------
Income from investment
operations:
Net investment income .22 .29 .16 .009
Net realized and unrealized gain (loss) 1.60 1.54 (.02) .001
--------- --------- --------- --------
Total from investment operations 1.82 1.83 .14 .01
--------- --------- --------- --------
Distributions:
Dividends from net investment income (.22) (.29) (.10) --
Distributions from net realized gains (.04) (.20) -- --
--------- --------- -------- -------
Total distributions (.26) (.49) (.10) --
--------- --------- --------- -------
Change in net asset value 1.56 1.34 .04 .01
--------- --------- --------- --------
Net asset value, end of period $ 12.95 $ 11.39 $ 10.05 $ 10.01
========= ========= ========= ========
TOTAL RETURN(2) 16.19% 18.78% 1.43% 0.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 25,020 $ 11,732 $ 5,953 $ 100
Ratio of expenses to average net assets 2.24% 2.71% 6.11% 32.15%(3)
Ratio of expenses, net of reimbursement, to
average net assets 1.25% 1.25% 1.25% 1.25%(3)
Ratio of net investment income to average
net assets 2.21% 2.98% 2.51% 1.89%(3)
Portfolio turnover rate 20.72% 10.21% 19.33% --
Average commission rate paid (per share) $ .0050 $ .0250
</TABLE>
(1)FOR THE PERIOD MARCH 14, 1994 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1994.
(2)TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
(3)ANNUALIZED.
<TABLE>
<CAPTION>
CLASS II SHARES
YEAR ENDED MARCH 31 1997 1996(1)
- ----------------------------------------------------------------- ---------- -----------
<S> <C> <C>
CLASS II SHARES
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of period $ 11.33 $ 10.19
-------- --------
Income from investment operations:
Net investment income .21 .22
Net realized and unrealized gain 1.52 1.41
-------- --------
Total from investment operations 1.73 1.63
-------- --------
Distributions:
Dividends from net investment income (.18) (.29)
Distributions from net realized gains (.04) (.20)
-------- --------
Total distributions (.22) (.49)
-------- --------
Change in net asset value 1.51 1.14
-------- --------
Net asset value, end of period $ 12.84 $ 11.33
======== ========
TOTAL RETURN(2) 15.35% 16.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 6,017 $ 2,205
Ratio of expenses to average net assets 2.89% 3.31%(3)
Ratio of expenses, net of reimbursement, to average
Ratio of expenses, net of reimbursement, to average
net assets 1.90% 1.90%(3)
Ratio of net investment income to average net assets 1.51% 1.59%(3)
Portfolio turnover rate 20.72% 10.21%
Average commission rate paid (per share) $ .0050 $ .0250
</TABLE>
(1)FOR THE PERIOD MAY 1, 1995 (COMMENCEMENT OF SALES) TO MARCH 31, 1996.
(2)TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS OR THE CONTINGENT DEFERRED
SALES CHARGE. NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
(3)ANNUALIZED.
HOW DOES THE FUND INVEST ITS ASSETS?
THE FUND'S INVESTMENT OBJECTIVE
The Fund's investment objective is high total return, comprising a combination
of income and capital appreciation. The Fund seeks to achieve its objective
through a flexible policy of investing primarily in equity and debt securities
of domestic and foreign companies. The Fund's investment objective and the
investment restrictions set forth under "Investment 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 the Fund's investment objective will be achieved.
TYPES OF SECURITIES IN WHICH THE FUND MAY INVEST
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") as described below. Global Advisors will
select equity investments for the Fund on the basis of fundamental
company-by-company analysis (rather than broader analyses of specific industries
or sectors of the economy). Although Global Advisors will consider historical
value measures, such as price/earnings ratios, operating profit margins and
liquidation values, the primary factor in selecting equity securities will be
the company's current price relative to its long-term earnings potential, as
determined by Global Advisors.
As used in this prospectus, "debt securities" refers to bonds, notes,
debentures, commercial paper, time deposits, bankers' acceptances, and may
include structured investments, which are rated in any rating category by
Moody's or S&P or which are unrated by any rating agency. Such securities may
include high-risk, lower quality debt securities, commonly referred to as "junk
bonds." See "What Are the Fund's Potential Risks?" As an operating policy, which
may be changed by the Board, the Fund will not invest more than 5% of its total
assets in debt securities rated lower than Baa by Moody's or BBB by S&P. Debt
securities are subject to certain market and credit risks. See "How Do the Funds
Invest their Assets? -- Debt Securities" in the SAI for descriptions of debt
securities rated Baa by Moody's and BBB by S&P.
Securities considered for purchase by the Fund may be listed or unlisted, and
may be issued by companies in various industries, with various levels of market
capitalization. Under normal circumstances, the Fund will invest at least 65% of
its total assets in issuers domiciled in at least three different nations (one
of which may be the U.S.). The percentage of the Fund's assets to be invested in
equity and debt securities will vary from time to time, based on Global
Advisors' assessment of the relative total return potential of various
investment vehicles.
The Fund does not emphasize short-term trading profits and usually expects to
have an annual portfolio turnover rate generally not exceeding 50% for the
equity portion of its portfolio. Global Advisors may engage in short-term
trading in the fixed income portion of the Fund's portfolio when it believes it
is consistent with the Fund's investment objective. Also, a security may be sold
and another of comparable quality simultaneously purchased to take advantage of
what Global Advisors believes to be a temporary disparity in the normal yield
relationship between the two securities. As a result of the Fund's investment
policies, under certain market conditions, the portfolio turnover rate for the
fixed income portion of its portfolio may be higher than that of other
investment companies. A higher turnover rate increases transaction costs and may
increase the amount of the Fund's short-term capital gain, which is taxed as
ordinary income when distributed to shareholders.
When Global Advisors believes that market conditions warrant, the Fund may adopt
a temporary defensive position and may invest up to 100% of its total assets in
the following money market securities, denominated in U.S. dollars or in the
currency of any foreign country, 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 Global Advisors; 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. When deemed
appropriate by Global Advisors, the Fund may invest cash balances in repurchase
agreements and other money market investments to maintain liquidity in an amount
to meet expenses or for day-to-day operating purposes.
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 arrange- ments to have its securities traded in the
form of depositary receipts. In unsponsored programs, the issuer may not be
directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from an
issuer that has participated in the creation of a sponsored program.
Accordingly, there may be less information available regarding issuers of
securities underlying unsponsored programs and there may not be a correlation
between such information and the market value of the depositary receipts.
Depositary receipts also involve the risks of other investments in foreign
securities, as discussed below. For purposes of the Fund's investment policies,
the Fund's investments in depositary receipts will be deemed to be investments
in the underlying securities.
OTHER INVESTMENT POLICIES OF THE FUND
The Fund is also authorized to use the various securities and investment
techniques described below. Although these strategies are regularly used by some
investment companies and other institutional investors in various markets, some
of these strategies cannot at the present time be used to a significant extent
by the Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
BORROWING. The Fund may borrow up to one-third of the value of its total assets
from banks to increase its holdings of portfolio securities. Under the 1940 Act,
the Fund is required to maintain continuous asset coverage of 300% with respect
to such borrowings and to sell (within three days) sufficient portfolio holdings
to restore such coverage if it should decline to less than 300% due to market
fluctuations or otherwise, even if such liquidations of the Fund's holdings may
be disadvantageous from an investment standpoint. Leveraging by means of
borrowing may exaggerate the effect of any increase or decrease in the value of
portfolio securities on the Fund's Net Asset Value, and money borrowed will be
subject to interest and other costs (which may include commitment fees and/or
the cost of maintaining minimum average balances) which may or may not exceed
the income received from the securities purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of the Fund's total
assets to generate income for the purpose of offsetting operating expenses. Such
loans must be secured by collateral (consisting of any combination of cash, U.S.
government securities or irrevocable letters of credit) in an amount at least
equal (on a daily marked-to-market basis) to the current market value of the
securities loaned. The Fund may terminate the loans at any time and obtain the
return of the securities loaned within five business days. The Fund will
continue to receive any interest or dividends paid on the loaned securities and
will continue to retain any voting rights with respect to the securities. In the
event that the borrower defaults on its obligation to return borrowed
securities, because of insolvency or otherwise, the Fund could experience delays
and costs in gaining access to the collateral and could suffer a loss to the
extent that the value of the collateral falls below the market value of the
borrowed securities.
REPURCHASE AGREEMENTS. For temporary defensive purposes and for cash management
purposes, the Fund may, without limit, enter into repurchase agreements with
U.S. banks and broker-dealers. Under a repurchase agreement, the Fund acquires a
security from a U.S. bank or a registered broker-dealer and simultaneously
agrees to resell the security back to the bank or broker-dealer at a specified
time and price. The repurchase price is in excess of the original purchase price
paid by the Fund by an amount which reflects an agreed-upon rate of return and
which is not tied to any coupon rate on the underlying security. Under the 1940
Act, repurchase agreements are considered to be loans collateralized by the
underlying security and therefore will be fully collateralized. However, if the
bank or broker-dealer should default on its obligation to repurchase the
underlying security, the Fund may experience a delay or difficulties in
exercising its rights to realize upon the security and might incur a loss if the
value of the security declines, as well as incur disposition costs in
liquidating the security.
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest up to 15% of its total
assets in illiquid securities, for which there is a limited trading market and
for which a low trading volume of a particular security may result in abrupt and
erratic price movements. The Fund may be unable to dispose of its holdings in
illiquid securities at then-current market prices and may have to dispose of
such securities over extended periods of time. The Fund may also invest in
securities that are sold (i) in private placement transactions between their
issuers and their purchasers and that are neither listed on an exchange nor
traded over-the-counter, or (ii) in transactions between qualified institutional
buyers pursuant to Rule 144A under the 1933 Act. Such restricted securities are
subject to contractual or legal restrictions on subsequent transfer. As a result
of the absence of a public trading market, such restricted securities may in
turn be less liquid and more difficult to value than publicly traded securities.
Although these securities may be resold in privately negotiated transactions,
the prices realized from the sales could, due to illiquidity, be less than those
originally paid by the Fund or less than their fair value. In addition, issuers
whose securities are not publicly traded may not be subject to the disclosure
and other investor protection requirements that may be applicable if their
securities were publicly traded. If any privately placed or Rule 144A securities
held by the Fund are required to be registered under the securities laws of one
or more jurisdictions before being resold, the Fund may be required to bear the
expenses of registration. The Fund will limit its investment in restricted
securities to 10% of its total assets, except that Rule 144A securities
determined by the Board to be liquid are not subject to this limitation.
OPTIONS ON SECURITIES OR INDICES. The Fund may write (i.e., sell) covered put
and call options and purchase put and call options on securities or securities
indices that are traded on U.S. and foreign exchanges or in the over-the-counter
markets. An option on a security is a contract that permits the purchaser of the
option, in return for the premium paid, the right to buy a specified security
(in the case of a call option) or to sell a specified security (in the case of a
put option) from or to the writer of the option at a designated price during the
term of the option. An option on a securities index permits the purchaser of the
option, in return for the premium paid, the right to receive from the seller
cash equal to the difference between the closing price of the index and the
exercise price of the option. The Fund may write a call or put option only if
the option is "covered." This means that so long as the Fund is obligated as the
writer of a call option, it will own the underlying securities subject to the
call, or hold a call at the same or lower exercise price, for the same exercise
period, and on the same securities as the written call. A put is covered if the
Fund maintains liquid assets with a value equal to the exercise price in a
segregated account, or holds a put on the same underlying securities at an equal
or greater exercise price. The value of the underlying securities on which
options may be written at any one time will not exceed 15% of the total assets
of the Fund. The Fund will not purchase put or call options if the aggregate
premium paid for such options would exceed 5% of its total assets at the time of
purchase.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. The Fund
will normally conduct its foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward contracts to purchase or sell
foreign currencies. The Fund will generally not enter into a forward contract
with a term of greater than one year. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date which
is individually negotiated and privately traded by currency traders and their
customers.
The Fund will generally enter into forward contracts only under two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock in"
the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed to
settle the transaction. Second, when Global Advisors believes that the currency
of a particular foreign country may suffer or enjoy a substantial movement
against another currency, it may enter into a forward contract to sell or buy
the former foreign currency (or another currency which acts as a proxy for that
currency) approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency. This second investment practice
is generally referred to as "cross-hedging." The Fund has no specific limitation
on the percentage of assets it may commit to forward contracts, subject to its
stated investment objective and policies, except that the Fund will not enter
into a forward contract if the amount of assets set aside to cover forward
contracts would impede portfolio management or the Fund's ability to meet
redemption requests. Although forward contracts will be used primarily to
protect the Fund from adverse currency movements, they also involve the risk
that anticipated currency movements will not be accurately predicted.
The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency-denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or
purchased by the Fund are traded on U.S. and foreign exchanges or
over-the-counter.
FUTURES CONTRACTS. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock and bond index futures contracts, foreign
currency futures contracts and options on any of the foregoing. A financial
futures contract is an agreement between two parties to buy or sell a specified
debt security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the difference
between the value of the index at the beginning and at the end of the contract
period. A futures contract on a foreign currency is an agreement to buy or sell
a specified amount of a currency for a set price on a future date.
When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
contract. In addition, when the Fund enters into a futures contract, it will
segregate assets or "cover" its position in accordance with the 1940 Act. See
"How Do the Funds Invest their Assets? -- Futures Contracts" in the SAI. With
respect to positions in futures and related options that do not constitute "bona
fide hedging" positions, the Fund will not enter into a futures contract or
related option contract if, immediately thereafter, the aggregate initial margin
deposits relating to such positions plus premiums paid by it for open futures
option positions, less the amount by which any such options are "in-the-money,"
would exceed 5% of the Fund's total assets.
WHAT ARE THE FUND'S POTENTIAL RISKS?
You should understand that all investments involve risk and there can be no
guarantee against loss resulting from an investment in the Fund, nor can there
be any assurance that the Fund's investment objective will be attained. As with
any investment in securities, the value of, and income from, an investment in
the Fund can decrease as well as increase, depending on a variety of factors
which may affect the values and income generated by the Fund's portfolio
securities, including general economic conditions and market factors. In
addition to the factors which affect the value of individual securities, a
shareholder may anticipate that the value of the shares of the Fund will
fluctuate with movements in the broader equity and bond markets. A decline in
the stock market of any country in which the Fund is invested in equity
securities may also be reflected in declines in the price of shares of the Fund.
Changes in the prevailing rates of interest in any of the countries in which the
Fund is invested in fixed income securities will likely affect the value of such
holdings and thus the value of Fund shares. Increased rates of interest, which
frequently accompany inflation and/or a growing economy are likely to have a
negative effect on the value of Fund shares. In addition, changes in currency
valuations will affect the price of shares of the Fund. History reflects both
decreases and increases in stock markets and interest rates in individual
countries and throughout the world, and in currency valuations, and these may
reoccur unpredictably in the future. Additionally, investment decisions made by
Global Advisors will not always be profitable or prove to have been correct. The
Fund is not intended as a complete investment program.
The Fund has the right to purchase securities in any foreign country, developed
or developing. Investors should consider carefully the substantial risks
involved in investing in securities issued by companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments. There is the possibility of expropriation, nationalization or
confiscatory taxation, taxation of income earned in foreign nations (including,
for example, withholding taxes on interest and dividends) or other taxes imposed
with respect to investments in foreign nations, foreign exchange controls (which
may include suspension of the ability to transfer currency from a given
country), foreign investment controls on daily stock market movements, default
in foreign government securities, political or social instability, or diplomatic
developments which could affect investment in securities of issuers in foreign
nations. Some countries may withhold portions of interest and dividends at the
source. In addition, in many countries there is less publicly available
information about issuers than is available in reports about companies in the
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 Fund may encounter
difficulties or be unable to vote proxies, exercise shareholder rights, pursue
legal remedies, and obtain judgments in foreign courts.
Brokerage commissions, custodial services and other costs relating to investment
in foreign countries are generally more expensive than in the U.S. Foreign
securities markets also have different clearance and settlement procedures, and
in certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of the Fund are uninvested and no return is earned thereon.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
In many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the U.S. There is an increased risk, therefore, of uninsured loss due to
lost, stolen, or counterfeit stock certificates. In addition, the foreign
securities markets of many of the countries in which the Fund may invest may
also be smaller, less liquid, and subject to greater price volatility than those
in the U.S. The Fund may invest in Eastern European countries, which involves
special risks. As an open-end investment company, the Fund is limited in the
extent to which it may invest in illiquid securities. See "What Are the 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.
The Fund usually effects currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign exchange market. However, some
price spread on currency exchange transactions (to cover service charges) will
be incurred when the Fund converts assets from one currency to another.
As a non-fundamental policy, the Fund will limit its investment in Russian
securities to 5% of its total assets. Russian securities involve additional
significant risks, including political and social uncertainty (for example,
regional conflicts and risk of war), currency exchange rate volatility,
pervasiveness of corruption and crime in the Russian economic system, delays in
settling portfolio transactions and risk of loss arising out of Russia's system
of share registration and custody. For more information on these risks and other
risks associated with Russian securities, please see "What Are the Funds'
Potential Risks?" in the SAI.
On July 1, 1997, Hong Kong reverted to the sovereignty of China. As with any
major political transfer of power, this could result in political, social,
economic, market or other developments in Hong Kong, China or other countries
that could affect the value of Fund investments.
Although the Fund's current investment policy is that it will not invest more
than 5% of its total assets in debt securities rated lower than BBB by S&P or
Baa by Moody's, the Board may consider a change in this operating policy if, in
its judgment, economic conditions change such that a higher level of investment
in high-risk, lower quality debt securities would be consistent with the
interests of the Fund and its shareholders. High-risk, lower quality debt
securities, commonly referred to as "junk bonds," are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation and may be in
default. Unrated debt securities are not necessarily of lower quality than rated
securities, but they may not be attractive to as many buyers. Regardless of
rating levels, all debt securities considered for purchase (whether rated or
unrated) will be carefully analyzed by Global Advisors to insure, to the extent
possible, that the planned investment is sound. The Fund may, from time to time,
invest up to 5% of its total assets in defaulted debt securities if, in the
opinion of Global Advisors, the issuer may resume interest payments in the near
future.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of portfolio securities on the Fund's Net Asset Value, and
money borrowed will be subject to interest and other costs (which may include
commitment fees and/or the cost of maintaining minimum average balances) which
may or may not exceed the income received from the securities purchased with
borrowed funds. The use of leverage will significantly increase the Fund's
investment risk.
Option and foreign currency exchange transactions and futures contracts are
commonly referred to as derivative instruments. Successful use of futures
contracts and related options is subject to special risk considerations. A
liquid secondary market for any futures or options contract may not be available
when a futures or options position is sought to be closed. In addition, there
may be an imperfect correlation between movements in the securities or foreign
currency on which the futures or options contract is based and movements in the
securities or currency in the Fund's portfolio. Successful use of futures or
options contracts is further dependent on Global Advisors' ability to correctly
predict movements in the securities or foreign currency markets, and no
assurance can be given that its judgment will be correct. Successful use of
options on securities or stock indices is subject to similar risk
considerations. In addition, by writing covered call options, the Fund gives up
the opportunity, while the option is in effect, to profit from any price
increase in the underlying security above the option exercise price. There are
further risk factors, including possible losses through the holding of
securities in domestic and foreign custodian banks and depositories, described
elsewhere in this prospectus and in the SAI.
WHO MANAGES THE FUND?
THE BOARD. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations. The
Board also monitors the Fund to ensure no material conflicts exist between the
Fund's classes of shares. While none is expected, the Board will act
appropriately to resolve any material conflict that may arise.
INVESTMENT MANAGER. Global Advisors manages the Fund's assets and makes its
investment decisions. Global Advisors also performs similar services for other
funds. It is wholly owned by Resources, a publicly owned company engaged in the
financial services industry through its subsidiaries. Charles B. Johnson and
Rupert H. Johnson, Jr. are the principal shareholders of Resources. Together,
Global Advisors and its affiliates manage over $199 billion in assets. The
Templeton organization has been investing globally since 1940. Global Advisors
and its affiliates have offices in Argentina, Australia, Bahamas, Canada,
France, Germany, Hong Kong, India, Italy, Japan, Korea, Luxembourg, Poland,
Russia, Singapore, South Africa, Taiwan, United Kingdom, U.S., and Vietnam.
Please see "Investment Management and Other Services" and "Miscellaneous
Information" in the SAI for information on securities transactions and a summary
of the Fund's Code of Ethics.
PORTFOLIO MANAGEMENT. The Fund's lead portfolio manager since 1996 is Richard
Sean Farrington. Mr. Farrington is a vice president of Global Advisors. He holds
a BA in economics from Harvard University. Mr. Farrington is a Chartered
Financial Analyst and is a past president of the Bahamas Society of Financial
Analysts. He joined the Templeton organization in 1991 and now manages several
mutual funds. Mr. Farrington's research responsibilities include global coverage
of the electrical equipment industry, as well as non-U.S. electric utilities. He
is also responsible for country coverage of Hong Kong, China and Taiwan.
Mark G. Holowesko and Jeffrey A. Everett have secondary portfolio management
responsibilities for the Fund. Mr. Holowesko is president of Global Advisors. 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
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 Global Advisors and managing several mutual funds. Mr.
Everett is an executive vice president of Global Advisors. He holds a BS in
finance from Pennsylvania State University and is also a Chartered Financial
Analyst. 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. Everett
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 current research responsibilities include real estate and country
coverage of Australia and Italy.
MANAGEMENT FEES. During the fiscal year ended March 31, 1997, management fees,
before any advance waiver, totaled 0.75% of the average daily net assets of the
Fund. Total operating expenses were 2.24% for Class I and 2.89% for Class II.
Under an agreement by Global Advisors to waive its fees, the Fund paid no
(0.00%) management fees and the Fund paid total operating expenses of 1.25% for
Class I and 1.90% for Class II. After July 31, 1998, Global Advisors may end
this arrangement at any time upon notice to the Board.
PORTFOLIO TRANSACTIONS. Global Advisors tries to obtain the best execution on
all transactions. If Global Advisors believes more than one broker or dealer can
provide the best execution, it may consider research and related services and
the sale of Fund shares, as well as shares of other funds in the Franklin
Templeton Group of Funds, when selecting a broker or dealer. Please see "How Do
the Funds Buy Securities for their Portfolios?" in the SAI for more information.
ADMINISTRATIVE SERVICES. Since October 1, 1996, FT Services has provided certain
administrative services and facilities for the Fund. Prior to that date,
Templeton Global Investors, Inc. provided the same services to the Fund. During
the fiscal year ended March 31, 1997, administration fees, before any advance
waiver, totaled 0.15% of the average daily net assets of the Fund. Under an
agreement by the administrators to waive their fees, the Fund paid no (0.00%)
administration fees. Please see "Investment Management and Other Services" in
the SAI for more information.
THE RULE 12B-1 PLANS
Class I and Class II have separate distribution plans or "Rule 12b-1 Plans"
under which they may pay or reimburse Distributors or others for the expenses of
activities that are primarily intended to sell shares of the class. These
expenses may include, among others, distribution or service fees paid to
Securities Dealers or others who have executed a servicing agreement with the
Fund, Distributors or its affiliates; a prorated portion of Distributors'
overhead expenses; and the expenses of printing prospectuses and reports used
for sales purposes; and preparing and distributing sales literature and
advertisements.
Payments by the Fund under the Class I plan may not exceed 0.35% per year of
Class I's average daily net assets. Expenses not reimbursed in any quarter may
be reimbursed in future quarters or years. This includes expenses not reimbursed
because they exceeded the applicable limit under the plan. As of March 31, 1997
expenses under the Class I plan that may be reimbursable in future quarters or
years totaled $920,441, or 3.68% of Class I's net assets. During the first year
after certain Class I purchases made without a sales charge, Distributors may
keep the Rule 12b-1 fees associated with the purchase.
Under the Class II plan, the Fund may pay Distributors up to 0.75% per year of
Class II's average daily net assets to pay Distributors or others for providing
distribution and related services and bearing certain Class II expenses. All
distribution expenses over this amount will be borne by those who have incurred
them. During the first year after a purchase of Class II shares, Distributors
may keep this portion of the Rule 12b-1 fees associated with the purchase.
The Fund may also pay a servicing fee of up to 0.25% per year of Class II's
average daily net assets under the Class II plan. This fee may be used to pay
Securities Dealers or others for, among other things, helping to establish and
maintain customer accounts and records, helping with requests to buy and sell
shares, receiving and answering correspondence, monitoring dividend payments
from the Fund on behalf of customers, and similar servicing and account
maintenance activities.
The Rule 12b-1 fees charged to each class are based only on the fees
attributable to that particular class. For more information, please see "The
Funds' Underwriter" in the SAI.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, each class of the Fund advertises its performance. The more
commonly used measure of performance is total return. Performance figures are
usually calculated using the maximum sales charges, but certain figures may not
include sales charges.
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 Fund calculates its performance figures, please
see "How Do the Funds Measure Performance?" in the SAI.
HOW TAXATION AFFECTS THE FUND AND ITS SHAREHOLDERS
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
The Fund intends to elect to be treated and to qualify each year as a regulated
investment company under Subchapter M of the Code. A regulated investment
company generally is not subject to federal income tax on income and gains
distributed in a timely manner to its shareholders. The Fund intends to
distribute to shareholders substantially all of its net investment income and
net realized capital gains, which generally will be taxable income or capital
gains in their hands. Distributions declared in October, November or December to
shareholders of record on a date in such month and paid during the following
January will be treated as having been received by shareholders on December 31
in the year such distributions were declared. The Fund will inform shareholders
each year of the amount and nature of such income or gains. Sales or other
dispositions of Fund shares generally will give rise to taxable gain or loss.
HOW IS THE TRUST ORGANIZED?
The 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 Delaware
business trust on December 21, 1993, and is registered with the SEC. The Fund
offers two classes of shares: Templeton Growth and Income Fund -- Class I and
Templeton Growth and Income Fund -- Class II. All shares outstanding before the
offering of Class II shares are considered Class I shares. Additional series and
classes of shares may be offered in the future.
Shares of each class represent proportionate interests in the assets of the Fund
and have the same voting and other rights and preferences as any other class of
the Fund for matters that affect the Fund as a whole. For matters that only
affect one class, however, only shareholders of that class may vote. Each class
will vote separately on matters affecting only that class, or expressly required
to be voted on separately by state or federal law. Shares of each class of a
series have the same voting and other rights and preferences as the other
classes and series of the Trust for 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.
The Trust does not intend to hold annual shareholder meetings. The Trust or a
series of the Trust may hold special meetings, however, for matters requiring
shareholder approval. A meeting may also be called by the Board in its
discretion or for the purpose of considering the removal of a Board member if
requested in writing to do so by shareholders holding at least 10% of the
outstanding shares. In certain circumstances, we are required to help you
communicate with other shareholders about the removal of a Board member.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check. PLEASE INDICATE WHICH CLASS OF SHARES YOU WANT TO BUY. IF YOU DO NOT
SPECIFY A CLASS, YOUR PURCHASE WILL BE AUTOMATICALLY INVESTED IN CLASS I SHARES.
<PAGE>
MINIMUM
INVESTMENTS*
- ------------------------------------------------- ------------------
To Open Your Account........................ $ 100
To Add to Your Account...................... $ 25
*We may waive these minimums for retirement plans. We may also refuse any order
to buy shares.
DECIDING WHICH CLASS TO BUY
You should consider a number of factors when deciding which class of shares to
buy. IF YOU PLAN TO BUY $1 MILLION OR MORE IN A SINGLE PAYMENT OR YOU QUALIFY TO
BUY CLASS I SHARES WITHOUT A SALES CHARGE, YOU MAY NOT BUY CLASS II SHARES.
Generally, you should consider buying Class I shares if:
o you expect to invest in the Fund over the long term;
o you qualify to buy Class I shares at a reduced sales charge; or
o you plan to buy $1 million or more over time.
You should consider Class II shares if:
o you expect to invest less than $50,000 in the Franklin Templeton Funds; and
o you plan to sell a substantial number of your shares within approximately six
years or less of your investment.
Class I shares are generally more attractive for long-term investors because of
Class II's higher Rule 12b-1 fees. These may accumulate over time to outweigh
the lower Class II front-end sales charge and result in lower income dividends
for Class II shareholders. If you qualify to buy Class I shares at a reduced
sales charge based upon the size of your purchase or through our Letter of
Intent or cumulative quantity discount programs, but plan to hold your shares
less than approximately six years, you should evaluate whether it is more
economical for you to buy Class I or Class II shares.
For purchases of $1 million or more, it is considered more beneficial for you to
buy Class I shares since there is no front-end sales charge, even though these
purchases may be subject to a Contingent Deferred Sales Charge. Any purchase of
$1 million or more is therefore automatically invested in Class I shares. You
may accumulate more than $1 million in Class II shares through purchases over
time, but if you plan to do this you should determine whether it would be more
beneficial for you to buy Class I shares through a Letter of Intent.
Please consider all of these factors before deciding which class of shares to
buy. There are no conversion features attached to either class of shares.
PURCHASE PRICE OF FUND SHARES
For Class I shares, the sales charge you pay depends on the dollar amount you
invest, as shown in the table below. The sales charge for Class II shares is 1%
and, unlike Class I, does not vary based on the size of your purchase.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE AMOUNT PAID
AS A PERCENTAGE OF TO DEALER AS A
-----------------------------------------
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
- --------------------------------------------- -------------------- -------------------- ------------------------
<S> <C> <C> <C>
CLASS I
Under $50,000........................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.......... 4.50% 4.71% 3.75%
$100,000 but less than $250,000......... 3.50% 3.63% 2.80%
$250,000 but less than $500,000......... 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000............................ 2.00% 2.04% 1.60%
$1,000,000 or more*..................... None None None
CLASS II
Under $1,000,000*....................... 1.00% 1.01% 1.00%
</TABLE>
*A Contingent Deferred Sales Charge of 1% may apply to Class I purchases of $1
million or more and any Class II purchase. Please see "How Do I Sell Shares? --
Contingent Deferred Sales Charge." Please also see "Other Payments to Securities
Dealers" below for a discussion of payments Distributors may make out of its own
resources to Securities Dealers for certain purchases. Purchases of Class II
shares are limited to purchases below $1 million. Please see "Deciding Which
Class to Buy."
SALES CHARGE REDUCTIONS AND WAIVERS
If you qualify to buy shares under one of the sales charge reduction or
waiver categories described below, please include a written statement with
each purchase order explaining which privilege applies. If you don't include
this statement, we cannot guarantee that you will receive the sales charge
reduction or waiver.
CUMULATIVE QUANTITY DISCOUNTS -- CLASS I ONLY. To determine if you may pay a
reduced sales charge, the amount of your current Class I purchase is added to
the cost or current value, whichever is higher, of your existing shares in the
Franklin Templeton Funds, as well as those of your spouse, children under the
age of 21 and grandchildren under the age of 21. If you are the sole owner of a
company, you may also add any company accounts, including retirement plan
accounts. Companies with one or more retirement plans may add together the total
plan assets invested in the Franklin Templeton Funds to determine the sales
charge that applies.
LETTER OF INTENT -- CLASS I ONLY. You may buy Class I shares at a reduced sales
charge by completing the Letter of Intent section of the shareholder
application. A Letter of Intent is a commitment by you to invest a specified
dollar amount during a 13 month period. The amount you agree to invest
determines the sales charge you pay on Class I shares.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
o You authorize Distributors to reserve 5% of your total intended purchase in
Class I shares registered in your name until you fulfill your Letter.
o You give Distributors a security interest in the reserved shares and appoint
Distributors as attorney-in-fact.
o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
o Although you may exchange your shares, you may not sell reserved shares
until you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct. Our policy of reserving shares does not apply to
certain retirement plans.
If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? -- Letter of Intent" in the SAI or
call Shareholder Services.
GROUP PURCHASES -- CLASS I ONLY. If you are a member of a qualified group, you
may buy Class I shares at a reduced sales charge that applies to the group as a
whole. The sales charge is based on the combined dollar value of the group
members' existing investments, plus the amount of the current purchase.
A qualified group is one that:
o Was formed at least six months ago,
o Has a purpose other than buying Fund shares
at a discount,
o Has more than 10 members,
o Can arrange for meetings between our
representatives and group members,
o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to
Distributors,
o Agrees to arrange for payroll deduction or
other bulk transmission of investments to
the Fund, and
o Meets other uniform criteria that allow Distributors to achieve cost savings
in distributing shares.
SALES CHARGE WAIVERS. The Fund's front-end sales charge and Contingent Deferred
Sales Charge do not apply to certain purchases. For waiver categories 1, 2 or 3
below: (i) the distributions or payments must be reinvested within 365 days of
their payment date, and (ii) Class II distributions may be reinvested in either
Class I or Class II shares. Class I distributions may only be reinvested in
Class I shares.
The Fund's sales charges do not apply if you are buying Class I shares with
money from the following sources or Class II shares with money from the sources
in waiver categories 1 or 4:
1. Dividend and capital gain distributions from any Franklin Templeton Fund or
a real estate investment trust (REIT) sponsored or advised by Franklin
Properties, Inc.
2. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds.
3. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment option
the Franklin Valuemark Funds, the Templeton Variable Annuity Fund, the Templeton
Variable Products Series Fund, or the Franklin Government Securities Trust. You
should contact your tax advisor for information on any tax consequences that may
apply.
4. Redemptions from any Franklin Templeton Fund if you:
o Originally paid a sales charge on the shares,
o Reinvest the money within 365 days of the redemption date, and
o Reinvest the money in the SAME CLASS of shares.
An exchange is not considered a redemption for this privilege. The
Contingent Deferred Sales Charge will not be waived if the shares were
subject to a Contingent Deferred Sales Charge when sold. We will credit
your account in shares, at the current value, in proportion to the amount
reinvested for any Contingent Deferred Sales Charge paid in connection with
the earlier redemption, but a new Contingency Period will begin.
If you immediately placed your redemption proceeds in a Franklin Bank CD,
you may reinvest them as described above. The proceeds must be reinvested
within 365 days from the date the CD matures, including any rollover.
The Fund's sales charges also do not apply to Class I purchases by:
5. Trust companies and bank trust departments agreeing to invest in Franklin
Templeton Funds over a 13 month period at least $1 million of assets held in a
fiduciary, agency, advisory, custodial or similar capacity and over which the
trust companies and bank trust departments or other plan fiduciaries or
participants, in the case of certain retirement plans, have full or shared
investment discretion. We will accept orders for these accounts by mail
accompanied by a check or by telephone or other means of electronic data
transfer directly from the bank or trust company, with payment by federal funds
received by the close of business on the next business day following the order.
6. Group annuity separate accounts offered to retirement plans
7. Chilean retirement plans that meet the requirements described under
"Retirement Plans" below
8. An Eligible Governmental Authority. Please consult your legal and investment
advisors to determine if an investment in the Fund is permissible and suitable
for you and the effect, if any, of payments by the Fund on arbitrage rebate
calculations.
9. Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs
10. Registered Securities Dealers and their
affiliates, for their investment accounts only
11. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer
12. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies
13. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer
14. Accounts managed by the Franklin Templeton Group
15. Certain unit investment trusts and their
holders reinvesting distributions from the trusts
RETIREMENT PLANS. Retirement plans that (i) are sponsored by an employer with at
least 100 employees, or (ii) have plan assets of $1 million or more, or (iii)
agree to invest at least $500,000 in the Franklin Templeton Funds over a 13
month period may buy Class I shares without a front-end sales charge. Retirement
plans that are not Qualified Retirement Plans or SEPs, such as 403(b) or 457
plans, must also meet the requirements described under "Group Purchases -- Class
I Only" above. For retirement plan accounts opened on or after May 1, 1997, a
Contingent Deferred Sales Charge may apply if the account is closed within 365
days of the retirement plan account's initial purchase in the Franklin Templeton
Funds. Please see "How Do I Sell Shares? -- Contingent Deferred Sales Charge"
for details.
Any retirement plan that does not meet the requirements to buy Class I shares
without a front-end sales charge and that was a shareholder of the Fund on or
before February 1, 1995, may buy shares of the Fund subject to a maximum sales
charge of 4% of the Offering Price, 3.2% of which will be retained by Securities
Dealers.
HOW DO I BUY SHARES IN CONNECTION WITH
RETIREMENT PLANS?
Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need an
application other than the one included in this prospectus. For a retirement
plan brochure or application, call Retirement Plan Services.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
OTHER PAYMENTS TO SECURITIES DEALERS
The payments described below may be made to Securities Dealers who initiate and
are responsible for Class II purchases and certain Class I purchases made
without a sales charge. The payments are subject to the sole discretion of
Distributors, and are paid by Distributors or one of its affiliates and not by
the Fund or its shareholders.
1. Class II purchases -- up to 1% of the purchase
price.
2. Class I purchases of $1 million or more -- up
to 1% of the amount invested.
3. Class I purchases made without a front-end sales charge by certain retirement
plans described under "Sales Charge Reductions and Waivers -- Retirement
Plans" above -- up to 1% of the amount invested. For retirement plan accounts
opened on or after May 1, 1997, a Contingent Deferred Sales Charge will not
apply to the account if the Securities Dealer chooses to receive a payment of
0.25% or less or if no payment is made.
4. Class I purchases by trust companies and bank trust departments, Eligible
Governmental Authorities, and broker-dealers or others on behalf of clients
participating in comprehensive fee programs -- up to 0.25% of the amount
invested.
5. Class I purchases by Chilean retirement plans -- up to 1% of the amount
invested.
A Securities Dealer may receive only one of these payments for each qualifying
purchase. Securities Dealers who receive payments in connection with investments
described in paragraphs 1, 2 or 5 above or a payment of up to 1% for investments
described in paragraph 3 will be eligible to receive the Rule 12b-1 fee
associated with the purchase starting in the thirteenth calendar month after the
purchase.
FOR BREAKPOINTS THAT MAY APPLY AND INFORMATION ON ADDITIONAL COMPENSATION
PAYABLE TO SECURITIES DEALERS IN CONNECTION WITH THE SALE OF FUND SHARES, PLEASE
SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES? -- OTHER PAYMENTS TO SECURITIES
DEALERS" IN THE SAI.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
If you own Class I shares, you may exchange into any of our money funds except
Franklin Templeton Money Fund II ("Money Fund II"). Money Fund II is the only
money fund exchange option available to Class II shareholders. Unlike our other
money funds, shares of Money Fund II may not be purchased directly and no drafts
(checks) may be written on Money Fund II accounts.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment objective
and policies, and its rules and requirements for exchanges. For example, some
Franklin Templeton Funds do not accept exchanges and others may have different
investment minimums. Some Franklin Templeton Funds do not offer Class II shares.
METHOD STEPS TO FOLLOW
- ------------------------- ----------------------------------------------------
BY MAIL 1. Send us written instructions signed by
all account owners
2. Include any outstanding share certificates
for the shares you want to exchange
- ------------------------- ----------------------------------------------------
BY PHONE Call Shareholder Services or TeleFACTS(R)
If you do not want the ability to exchange by
phone to apply to your account, please let us know.
- ------------------------- ----------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ------------------------- ----------------------------------------------------
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable sales
charge of the new fund. If you have never paid a sales charge on your shares
because, for example, they have always been held in a money fund, you will pay
the Fund's applicable sales charge no matter how long you have held your shares.
These charges may not apply if you qualify to buy shares without a sales charge.
We will not impose a Contingent Deferred Sales Charge when you exchange shares.
Any shares subject to a Contingent Deferred Sales Charge at the time of
exchange, however, will remain so in the new fund. See the discussion on
Contingent Deferred Sales Charges below and under "How Do I Sell Shares?"
CONTINGENT DEFERRED SALES CHARGE -- CLASS I. For accounts with Class I shares
subject to a Contingent Deferred Sales Charge, we will first exchange any shares
in your account that are not subject to the charge. If there are not enough of
these to meet your exchange request, we will exchange shares subject to the
charge in the order they were purchased. If you exchange Class I shares into one
of our money funds, the time your shares are held in that fund will not count
towards the completion of any Contingency Period.
CONTINGENT DEFERRED SALES CHARGE -- CLASS II. For accounts with Class II shares
subject to a Contingent Deferred Sales Charge, shares are exchanged into the new
fund proportionately based on the amount of shares subject to a Contingent
Deferred Sales Charge and the length of time the shares have been held. For
example, suppose you own $1,000 in shares that have never been subject to a
Contingent Deferred Sales Charge, such as shares from the reinvestment of
dividends and capital gains ("free shares"), $2,000 in shares that are no longer
subject to a Contingent Deferred Sales Charge because you have held them for
longer than 18 months ("matured shares"), and $3,000 in shares that are still
subject to a Contingent Deferred Sales Charge ("CDSC liable shares"). If you
exchange $3,000 into a new fund, $500 will be exchanged from free shares, $1,000
from matured shares, and $1,500 from CDSC liable shares.
Likewise, CDSC liable shares purchased at different times will be exchanged into
a new fund proportionately. For example, assume you purchased $1,000 in shares 3
months ago, 6 months ago, and 9 months ago. If you exchange $1,500 into a new
fund, $500 will be exchanged from shares purchased at each of these three
different times.
While Class II shares are exchanged proportionately, they are redeemed in the
order purchased. In some cases, this means exchanged shares may be CDSC liable
even though they would not be subject to a Contingent Deferred Sales Charge if
they were sold. The tax consequences of a sale or exchange are determined by the
Code and not by the method used by the Fund to transfer shares.
If you exchange your Class II shares for shares of Money Fund II, the time your
shares are held in that fund will count towards the completion of any
Contingency Period.
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
o You may only exchange shares within the SAME CLASS, except as noted below.
o The accounts must be identically registered. You may, however, exchange shares
from a Fund account requiring two or more signatures into an identically
registered money fund account requiring only one signature for all transactions.
PLEASE NOTIFY US IN WRITING IF YOU DO NOT WANT THIS OPTION TO BE AVAILABLE ON
YOUR ACCOUNT. Additional procedures may apply. Please see "Transaction
Procedures and Special Requirements."
o Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact Retirement Plan Services for information on exchanges within
these plans.
o The fund you are exchanging into must be eligible for sale in your state.
o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
o Your exchange may be restricted or refused if you have: (i) requested an
exchange out of the Fund within two weeks of an earlier exchange request,
(ii) exchanged shares out of the Fund more than twice in a calendar quarter,
or (iii) exchanged shares equal to at least $5 million, or more than 1% of
the Fund's net assets. Shares under common ownership or control are combined
for these limits. If you have exchanged shares as described in this
paragraph, you will be considered a Market Timer. Each exchange by a Market
Timer, if accepted, will be charged $5.00. Some of our funds do not allow
investments by Market Timers.
Because excessive trading can hurt Fund performance, operations and
shareholders, we may refuse any exchange purchase if (i) we believe the Fund
would be harmed or unable to invest effectively, or (ii) the Fund receives or
anticipates simultaneous orders that may significantly affect the Fund.
LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES
Certain funds in the Franklin Templeton Funds offer classes of shares not
offered by the Fund, such as "Advisor Class" or "Class Z" shares. Because the
Fund does not currently offer an Advisor Class, you may exchange Advisor Class
shares of any Franklin Templeton Fund for Class I shares of the Fund at Net
Asset Value. If you do so and you later decide you would like to exchange into a
fund that offers an Advisor Class, you may exchange your Class I shares for
Advisor Class shares of that fund. Certain shareholders of Class Z shares of
Franklin Mutual Series Fund Inc. may also exchange their Class Z shares for
Class I shares of the Fund at Net Asset Value.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
METHOD STEPS TO FOLLOW
- ------------------------ -----------------------------------------------------
BY MAIL 1. Send us written instructions
signed by all account owners. If you would
like your redemption proceeds wired to a
bank account, your instructions should
include:
o The name, address and telephone number
of the bank where you want the proceeds
sent
o Your bank account number
o The Federal Reserve ABA routing number
o If you are using a savings and loan or
credit union, the name of the
corresponding bank and the account number
2. Include any outstanding share certificates
for the shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts
may need to send additional documents.
Accounts under court jurisdiction may have
other requirements.
- ------------------------ -----------------------------------------------------
BY PHONE Call Shareholder Services. If you would like
your redemption proceeds wired to a bank
account, other than an escrow account, you
must first sign up for the wire feature. To
sign up, send us written instructions, with a
signature guarantee. To avoid any delay in
processing, the instructions should include
the items listed in "By Mail" above.
Telephone requests will be accepted:
o If the request is $50,000 or less.
Institutional accounts may exceed $50,000
by completing a separate agreement. Call
Institutional Services to receive a copy.
o If there are no share certificates issued
for the shares you want to sell or you
have already returned them to the Fund
o Unless you are selling shares in a Trust
Company retirement plan account
o Unless the address on your account was
changed by phone within the last 15 days
- ------------------------ -----------------------------------------------------
If you do not want the ability to
redeem by phone to apply to your account,
please let us know.
- ------------------------ -----------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ------------------------ -----------------------------------------------------
We will send your redemption check within seven days after we receive your
request in proper form. If you would like the check sent to an address other
than the address of record or made payable to someone other than the registered
owners on the account, send us written instructions signed by all account
owners, with a signature guarantee. We are not able to receive or pay out cash
in the form of currency.
The wiring of redemption proceeds is a special service that we make available
whenever possible for redemption requests of $1,000 or more. If we receive your
request in proper form before 4:00 p.m. Eastern time, your wire payment will be
sent the next business day. For requests received in proper form after 4:00 p.m.
Eastern time, the payment will be sent the second business day. By offering this
service to you, the Fund is not bound to meet any redemption request in less
than the seven day period prescribed by law. Neither the Fund nor its agents
shall be liable to you or any other person if, for any reason, a redemption
request by wire is not processed as described in this section.
If you sell shares you recently purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call Retirement Plan Services.
CONTINGENT DEFERRED SALES CHARGE
For Class I purchases, if you did not pay a front-end sales charge because you
invested $1 million or more or agreed to invest $1 million or more under a
Letter of Intent, a Contingent Deferred Sales Charge may apply if you sell all
or a part of your investment within the Contingency Period. Once you have
invested $1 million or more, any additional Class I investments you make without
a sales charge may also be subject to a Contingent Deferred Sales Charge if they
are sold within the Contingency Period. For any Class II purchase, a Contingent
Deferred Sales Charge may apply if you sell the shares within the Contingency
Period. The charge is 1% of the value of the shares sold or the Net Asset Value
at the time of purchase, whichever is less.
Certain retirement plan accounts opened on or after May 1, 1997, and that
qualify to buy Class I shares without a front-end sales charge may also be
subject to a Contingent Deferred Sales Charge if the retirement plan account is
closed within 365 days of the account's initial purchase in the Franklin
Templeton Funds.
We will first redeem any shares in your account that are not subject to the
charge. If there are not enough of these to meet your request, we will redeem
shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated dollar amount, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated number of shares, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.
WAIVERS. We waive the Contingent Deferred Sales Charge for:
o Exchanges
o Account fees
o Sales of shares purchased pursuant to a sales charge waiver
o Sales of shares purchased without a front-end sales charge by certain
retirement plan accounts if (i) the account was opened before May 1, 1997,
or (ii) the Securities Dealer of record received a payment from Distributors
of 0.25% or less, or (iii) Distributors did not make any payment in
connection with the purchase, as described under "How Do I Buy Shares? --
Other Payments to Securities Dealers"
o Redemptions by the Fund when an account falls below the minimum required
account size
o Redemptions following the death of the shareholder or beneficial owner
o Redemptions through a systematic withdrawal plan set up before February 1,
1995
o Redemptions through a systematic withdrawal plan set up on or after February
1, 1995, at a rate of up to 1% a month of an account's Net Asset Value. For
example, if you maintain an annual balance of $1 million in Class I shares,
you can redeem up to $120,000 annually through a systematic withdrawal plan
free of charge. Likewise, if you maintain an annual balance of $10,000 in
Class II shares, $1,200 may be redeemed annually free of charge.
o Distributions from individual retirement plan accounts due to death or
disability or upon periodic distributions based on life expectancy
o Tax-free returns of excess contributions from employee benefit plans
o Redemptions by Trust Company employee benefit plans or employee benefit plans
serviced by ValuSelect(R)
o Participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee benefit
plans
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
The Fund intends to pay a dividend at least annually representing substantially
all of its net investment income and any net realized capital gains.
Dividends and capital gains are calculated and distributed the same way for each
class. The amount of any income dividends per share will differ, however,
generally due to the difference in the Rule 12b-1 fees of Class I and Class II.
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution and you will then receive a portion of the price you paid back in
the form of a taxable distribution.
DISTRIBUTION OPTIONS
You may receive your distributions from the Fund in any of these ways:
1. BUY ADDITIONAL SHARES OF THE FUND -- You may buy additional shares of the
same class of the Fund (without a sales charge or imposition of a Contingent
Deferred Sales Charge) by reinvesting capital gain distributions, dividend
distributions, or both. If you own Class II shares, you may also reinvest your
distributions in Class I shares of the Fund. This is a convenient way to
accumulate additional shares and maintain or increase your earnings base.
2. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS -- You may direct your
distributions to buy the same class of shares of another Franklin Templeton Fund
(without a sales charge or imposition of a Contingent Deferred Sales Charge). If
you own Class II shares, you may also direct your distributions to buy 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 SECTIONS 6 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE SAME CLASS
OF THE FUND. You may change your distribution option at any time by notifying us
by mail or phone. Please allow at least seven days before the record date for us
to process the new option. For Trust Company retirement plans, special forms are
required to receive distributions in cash.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
SHARE PRICE
When you buy shares, you pay the Offering Price. This is the Net Asset Value per
share of the class you wish to purchase, plus any applicable sales charges. When
you sell shares, you receive the Net Asset Value per share minus any applicable
Contingent Deferred Sales Charges.
The Net Asset Value we use when you buy or sell shares is the one next
calculated after we receive your transaction request in proper form. If you buy
or sell shares through your Securities Dealer, however, we will use the Net
Asset Value next calculated after your Securities Dealer receives your request,
which is promptly transmitted to the Fund. Your redemption proceeds will not
earn interest between the time we receive the order from your dealer and the
time we receive any required documents.
HOW AND WHEN SHARES ARE PRICED
The Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share 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 the
Fund, determined by the value of the shares of each class. Each class, however,
bears the Rule 12b-1 fees payable under its Rule 12b-1 plan. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. The Fund's assets are
valued as described under "How Are Fund Shares Valued?" in the SAI.
PROPER FORM
An order to buy shares is in proper form when we receive your signed shareholder
application and check. Written requests to sell or exchange shares are in proper
form when we receive written instructions signed by all registered owners, with
a signature guarantee if necessary. We must also receive any outstanding share
certificates for those shares.
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
o Your name,
o The Fund's name,
o The class of shares,
o A description of the request,
o For exchanges, the name of the fund you are exchanging into,
o Your account number,
o The dollar amount or number of shares, and
the evening if preferred.e we may reach you during the day, or in
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You should be
able to obtain a signature guarantee from a bank, broker, credit union, savings
association, clearing agency, or securities exchange or association. A NOTARIZED
SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed, you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form and to send the certificate and assignment form in separate
envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We may also record calls. We will not be
liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or not
implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send us written
instructions, as described elsewhere in this prospectus. If you are unable to
execute a transaction by phone, we will not be liable for any loss.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS. We cannot accept instructions to sell
shares or change distribution options on Trust Company retirement plans by
phone. While you may exchange shares of Trust Company IRA and 403(b) retirement
accounts by phone, certain restrictions may be imposed on other retirement
plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call Retirement Plan Services.
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, ALL owners must sign instructions to process transactions and changes to
the account. Even if the law in your state says otherwise, we cannot accept
instructions to change owners on the account unless all owners agree in writing.
If you would like another person or owner to sign for you, please send us a
current power of attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
TRUSTS. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- --------------------------------- ---------------------------------------------
CORPORATION Corporate Resolution
- --------------------------------- ---------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement
that identify the general partners, or
2. A certification for a partnership
agreement
- --------------------------------- ---------------------------------------------
TRUST 1. The pages from the trust document that
identify the trustees, or
2. A certification for trust
- --------------------------------- ---------------------------------------------
STREET OR NOMINEE ACCOUNTS. If you have Fund shares held in a "street" or
"nominee" name account with your Securitie Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we cannot process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
IMPORTANT INFORMATION IF YOU HAVE AN INVESTMENT REPRESENTATIVE
If there is a Securities Dealer or other representative of record on your
account, we are authorized: (1) to provide confirmations, account statements and
other information about your account directly to your dealer and/or
representative; and (2) to accept telephone and electronic instructions directly
from your dealer or representative, including instructions to exchange or redeem
your shares. Electronic instructions may be processed through established
electronic trading systems and programs used by the Fund. Telephone instructions
directly from your representative will be accepted unless you have let us know
that you do not want telephone privileges to apply to your account.
TAX IDENTIFICATION NUMBER
The IRS requires us to have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the shareholder application included with this
prospectus or contact your investment representative. The market value of the
Fund's shares may fluctuate and a systematic investment plan such as this will
not assure a profit or protect against a loss. You may discontinue the program
at any time by notifying Investor Services by mail or phone.
SYSTEMATIC WITHDRAWAL PLAN
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum payment
amount for each withdrawal must be at least $50. For retirement plans subject to
mandatory distribution requirements, the $50 minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account. Once your plan is established, any
distributions paid by the Fund will be automatically reinvested in your account.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
To avoid paying sales charges on money you plan to withdraw within a short
period of time, you may not want to set up a systematic withdrawal plan if you
plan to buy shares on a regular basis. Shares sold under the plan may also be
subject to a Contingent Deferred Sales Charge. Please see "Contingent Deferred
Sales Charge" under "How Do I Sell Shares?"
You may discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us in writing at
least seven business days before the end of the month preceding a scheduled
payment. Please see "How Do I Buy, Sell and Exchange Shares? -- Systematic
Withdrawal Plan" in the SAI for more information.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS(R) system (day or night) at
1-800/247-1753 to:
o obtain information about your account;
o obtain price and performance information about any Franklin Templeton Fund;
o exchange shares between identically registered Franklin accounts; and
o request duplicate statements and deposit slips for Franklin accounts.
You will need the code number for each class to use TeleFACTS(R). The code
number is 414 for Class I and 514 for Class II.
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
o Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
o Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. Institutional investors may also be
required to complete an institutional account application. For more information,
call Institutional Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor Services
at 700 Central Avenue, P.O. Box 33030, St. Petersburg, Florida 33733-8030. The
Fund and Distributors are also located at this address. Global Advisors is
located at P.O. Box N-7759, Lyford Cay, Nassau, Bahamas. You may also contact us
by phone at one of the numbers listed below.
<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
- ------------------------------------------ ---------------------- ---------------------------------
<S> <C> <C>
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
(1-800/342-5236) 9:30 a.m. to 5:30 p.m. (Saturday)
Retirement Plan Services 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
<PAGE>
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1933 ACT -- Securities Act of 1933, as amended
1940 ACT -- Investment Company Act of 1940, as amended
BOARD -- The Board of Trustees of the Trust
CD -- Certificate of deposit
CLASS I AND CLASS II -- The Fund offers two classes of shares, designated "Class
I" and "Class II." The two classes have proportionate interests in the Fund's
portfolio. They differ, however, primarily in their sales charge structures and
Rule 12b-1 plans.
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., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
ELIGIBLE GOVERNMENTAL AUTHORITY -- Any state or local government or any
instrumentality, department, authority or agency thereof that has determined the
Fund is a legally permissible investment and that can only buy shares of the
Fund without paying sales charges.
FRANKLIN TEMPLETON FUNDS -- The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Franklin Government Securities Trust, Templeton Capital Accumulator Fund,
Inc., Templeton Variable Annuity Fund, and Templeton Variable Products Series
Fund
FRANKLIN TEMPLETON GROUP -- Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS -- All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds
FT SERVICES -- Franklin Templeton Services, Inc., the Fund's administrator
GLOBAL ADVISORS -- Templeton Global Advisors Limited, the Fund's investment
manager
INVESTOR SERVICES -- Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS -- Internal Revenue Service
LETTER -- Letter of Intent
MARKET TIMERS -- Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange shares
based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.
MOODY'S -- Moody's Investors Service, Inc.
NASD -- National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) -- The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NSCC -- National Securities Clearing Corporation
NYSE -- New York Stock Exchange
OFFERING PRICE -- The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge. The maximum
front-end sales charge is 5.75% for Class I and 1% for Class II.
QUALIFIED RETIREMENT PLANS -- An employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
RESOURCES -- Franklin Resources, Inc.
SAI -- Statement of Additional Information
S&P -- Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc.
SEC -- U.S. Securities and Exchange Commission
SECURITIES DEALER -- A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
SEP -- An employer sponsored simplified employee pension plan established under
section 408(k) of the Code
TELEFACTS(R) -- FRANKLIN TEMPLETON'S AUTOMATED CUSTOMER SERVICING SYSTEM
TRUST COMPANY -- Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. -- United States
WE/OUR/US -- Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
<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>
o Individual Individual o Trust, Estate, Trust, Estate, or
or Pension Plan Trust
Pension Plan
Trust
- ----------------------- ------------------ ----------------------- ------------------------------
o Joint Individual Owner who o Corporation, Corporation,
will be Partnership, Partnership, or
paying tax or other other organization
or organization
first-named
individual
- ----------------------- ------------------ ----------------------- ------------------------------
o Unif. Gift/ Minor o Broker nominee Broker nominee
Transfer to Minor
- ----------------------- ------------------ ----------------------- ------------------------------
o Sole Proprietor Owner of
business
- ----------------------- ------------------ ----------------------- ------------------------------
o Legal Guardian Ward,
Minor, or
Incompetent
- ----------------------- ------------------ ----------------------- ------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient" box
if you are an exempt recipient. Exempt recipients include:
<PAGE>
A corporation A real estate investment trust
A financial institution A common trust fund operated
by a bank under section 584(a)
An organization exempt from An exempt charitable remainder
tax under section 501(a), or trust or a non-exempt trust
an individual retirement plan described in section 4947(a)(1)
A registered dealer in An entity registered at all
securities or commodities times under the Investment
registered in the U.S. or a Company Act of 1940
U.S. possession
<PAGE>
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject to
an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your federal income tax
return, you will be treated as negligent and subject to an IRS 20% penalty on
any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith. If
you falsify information on this form or make any other false statement resulting
in no backup withholding on an account which should be subject to backup
withholding, you may be subject to an IRS $500 penalty and certain criminal
penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as a
non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. You are an "Exempt
Foreign Person" if you are not (1) a citizen or resident of the U.S., or (2) a
U.S. corporation, partnership, estate, or trust. In the case of an individual,
an "Exempt Foreign Person" is one who has been physically present in the U.S.
for less than 31 days during the current calendar year. An individual who is
physically present in the U.S. for at least 31 days during the current calendar
year will still be treated as an "Exempt Foreign Person," provided that the
total number of days physically present in the current calendar year and the two
preceding calendar years does not exceed 183 days (counting all of the days in
the current calendar year, only one-third of the days in the first preceding
calendar year and only one-sixth of the days in the second preceding calendar
year). In addition, lawful permanent residents or green card holders may not be
treated as "Exempt Foreign Persons." If you are an individual or an entity, you
must not now be, or at this time expect to be, engaged in a U.S. trade or
business with respect to which any gain derived from transactions effected by
the Fund/Payer during the calendar year is effectively connected to the U.S. (or
your transactions are exempt from U.S. taxes under a tax treaty).
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual, provide
your permanent address. If you are a partnership or corporation, provide the
address of your principal office. If you are an estate or trust, provide the
address of your permanent residence or the principal office of any fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and backup
withholding may also begin unless you certify to the Fund/Payer that (1) the
taxpayer identification number you have given is correct, and (2) the Internal
Revenue Service has not notified you that you are subject to backup withholding
because you failed to report certain interest or dividend income. You may use
Form W-9, "Payer's Request for Taxpayer Identification Number and
Certification," to make these certifications. If an account is no longer active,
you do not have to notify a Fund/Payer or broker of your change in status unless
you also have another account with the same Fund/Payer that is still active. If
you receive interest from more than one Fund/Payer or have dealings with more
than one broker or barter exchange, file a certificate with each. If you have
more than one account with the same Fund/Payer, the Fund/Payer may require you
to file a separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for three
calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
<PAGE>
RESOLUTION SUPPORTING AUTHORITY OF
CORPORATE /ASSOCIATION SHAREHOLDER
- -----------------------------------------------------
INSTRUCTION:
It will be necessary for corporate/association shareholders to provide a
certified copy of a resolution or other certificate of authority supporting the
authority of designated officers of the corporation/association to issue oral
and written instruction on behalf of the corporation/association for the
purchase, sale (redemption), transfer and/or exchange of Franklin Templeton Fund
shares. You may use the following form of resolution or you may prefer to use
your own.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
________________ of --------------- a _______________ organized under the laws
Title Corporate Name Type of Organization
of the State of __________________ and that the following is a true and
State
correct copy of a resolution adopted by the Board of Directors by unanimous
written consent (a copy of which is attached) or at a meeting duly
called and held on _______________, 19__.
"RESOLVED, that ----------------------------------
Name of Corporation/Association
(the "Company") is authorized to invest the Company's assets in one
or more investment companies (mutual funds) whose shares are distributed
by Franklin/Templeton Distributors, Inc. ("Distributors"). Each such
investment company, or series thereof, is referred to as a "Franklin
Templeton Fund" or "Fund."
FURTHER RESOLVED, that any (enter number) _____________ of the following
officers of this Company (acting alone, if one, or acting together, if more
than one) is/are authorized to issue oral or written instructions (including
the signing of drafts in the case of draft accessed money fund accounts) on
behalf of the Company for the purchase, sale (redemption), transfer and/or
exchange of Fund shares and to execute any Fund application(s) and
agreements pertaining to Fund shares registered or to be registered to the
Company (referred to as a "Company Instruction"); and, that this authority
shall continue until Franklin/Templeton Investor Services, Inc. ("Investor
Services") receives written notice of revocation or amendment delivered by
registered mail. The Company's officers authorized to act on behalf of the
Company under this resolution are (enter officer titles
only):____________________________________________________________________
--------------------------------------------------------------------------
(referred to as the "Authorized Officers").
FURTHER RESOLVED, that Investor Services may rely on the most recently
provided incumbency certificate delivered by the Company to Investor
Services to identify those individuals who are the incumbent Authorized
Officers and that Investor Services shall have no independent duty to
determine if there has been any change in the individuals serving as
incumbent Authorized Officers.
FURTHER RESOLVED, that the Company ("Indemnitor") undertakes and agrees to
indemnify and hold harmless Distributors, each affiliate of Distributors,
each Franklin Templeton Fund and their officers, employees and agents
(referred to hereafter collectively as the "Indemnitees") from and against
any and all liability, loss, suits, claims, costs, damages and expenses of
whatever amount and whatever nature (including without limitation reasonable
attorneys' fees, whether for consultation and advice or representation in
litigation at both the trial and appellate level) any indemnitee may sustain
or incur by reason of, in consequence of, or arising from or in connection
with any action taken or not taken by an Indemnitee in good faith reliance
on a Company Instruction given as authorized under this resolution."
The undersigned further certifies that the below named persons, whose signatures
appear opposite their names, are the incumbent Authorized Officers (as that term
is defined in the above resolution) who have been duly elected to the office
identified beside their name(s) (attach additional list if necessary).
X
- ---------------------------------- -------------------------------------
Name/title (please print or type) Signature
X
- ----------------------------------- -------------------------------------
Name/title (please print or type) Signature
X
- ----------------------------------- -------------------------------------
Name/title (please print or type) Signature
X
- ----------------------------------- -------------------------------------
Name/title (please print or type) Signature
Certified from minutes
X
- -----------------------------------
Signatur
- -------------------------------------------------------------------------------
Name/title (please print or type)
CORPORATE SEAL (if appropriate)
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FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST E CALL 1-800/DIAL BEN (1-800/342-5236) today for a free
descriptive brochure and prospectus on any of the funds listed below. The
prospectus contains more complete information, including fees, charges and
expenses, and should be read carefully before investing or sending money.
<PAGE>
GLOBAL GROWTH
Franklin Global Health Care Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller
Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton
Global Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High
Income Currency Fund
Templeton Americas
Government Securities Fund
GROWTH
Franklin Blue Chip Fund Franklin California Growth Fund Franklin DynaTech Fund
Franklin Equity Fund Franklin Gold Fund Franklin Growth Fund Franklin MidCap
Growth Fund Franklin Small Cap Growth Fund Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund Franklin Convertible Securities Fund Franklin Equity Income
Fund Franklin Income Fund Franklin MicroCap Value Fund Franklin Natural
Resources Fund Franklin Real Estate Securities Fund Franklin Rising Dividends
Fund Franklin Strategic Income Fund Franklin Utilities Fund Franklin Value Fund
Mutual Beacon Fund Mutual Qualified Fund Mutual Shares Fund Templeton American
Trust, Inc.
FUND ALLOCATOR SERIES
Franklin Templeton
Conservative Target Fund
Franklin Templeton
Moderate Target Fund
Franklin Templeton
Growth Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment
Grade Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR CORPORATIONS
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES+
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
<PAGE>
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal
securities.
+Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC.
FGF02/97 [LOGO]Printed on recycled paperTL414 P 08/97
<PAGE>
TEMPLETON GLOBAL GROWTH
AND INCOME Bulk Rate
P.O. Box 33031 U.S. Postage
St. Petersburg, FL 33733-8031 PAID
- ----------------------------- So. San
Francisco, CA
Permit No. 655
----------------
TL414 08/97 [LOGO] Printed on recycled paper
<PAGE>
TEMPLETON GLOBAL INFRASTRUCTURE FUND
CLASS I AND II PROSPECTUS
<PAGE>
PROSPECTUS & APPLICATION
INVESTMENT STRATEGY: Templeton
GLOBAL GROWTH Global
Infrastructure Fund
AUGUST 1, 1997
This prospectus describes Templeton Global Infrastructure Fund (the "Fund"). It
contains information you should know before investing in the Fund. Please keep
it for future reference.
THE FUND MAY BORROW MONEY FOR INVESTMENT PURPOSES, WHICH MAY INVOLVE GREATER
RISK AND ADDITIONAL COSTS TOTHE FUND. IN ADDITION, THE FUND MAY INVEST UP TO
15% OF ITS ASSETS IN ILLIQUID SECURITIES, INCLUDING UP TO 10% OF ITS ASSETS IN
RESTRICTED SECURITIES, WHICH MAY INVOLVE GREATER RISK AND INCREASED FUND
EXPENSES. SEE "WHAT ARE THE FUND'S POTENTIAL RISKS?"
The Fund is a diversified series of Templeton Global Investment Trust (the
"Trust"), an open-end management investment company.
The Trust has a Statement of Additional Information ("SAI") dated August 1,
1997, which may be amended from time to time. It includes more information about
the Fund's procedures and policies. It has been filed with the SEC and is
incorporated by reference into this prospectus. For a free copy or a larger
print version of this prospectus, call 1-800/DIAL BEN or write the Fund at its
address.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TEMPLETON GLOBAL
INFRASTRUCTURE FUND
- ------------------------------------------------------------------------------
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE, JURISDICTION OR COUNTRY IN WHICH THE OFFERING IS NOT AUTHORIZED. NO SALES
REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. FURTHER
INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
TEMPLETON TABLE OF CONTENTS
GLOBAL ABOUT THE FUND
INFRASTRUCTURE Expense Summary.................................. 2
FUND Financial Highlights.............................. 4
----------------------------------
How Does the Fund Invest Its Assets?............... 5
August 1, 1997 What Are the Fund's Potential Risks?............... 13
When reading this prospectus, you Who Manages the Fund?.............................. 17
will see certain terms beginning How Does the Fund Measure Performance?............. 20
with capital letters. This means How Taxation Affects the Fund and Its
the term is explained in our Shareholders...................................... 20
glossary section. How Is the Trust Organized?........................ 21
ABOUT YOUR ACCOUNT
How Do I Buy Shares?.............................. 22
May I Exchange Shares for Shares of Another Fund?. 29
How Do I Sell Shares?.............................. 33
What Distributions Might I Receive From the Fund?.. 37
Transaction Procedures and Special Requirements.... 38
Services to Help You Manage Your Account........... 43
What If I Have Questions About My Account?......... 46
GLOSSARY
Useful Terms and Definitions....................... 47
</TABLE>
700 Central Avenue
P.O. Box 33030
St. Petersburg, FL 33733-8030
1-800/DIAL BEN
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Fund. It is based on the historical expenses of each class for the fiscal year
ended March 31, 1997. The Fund's actual expenses may vary.
<TABLE>
<CAPTION>
CLASS I CLASS II
------------------------------------------------------ --------- ---------
<S> <C> <C>
A. SHAREHOLDER TRANSACTION EXPENSES+
Maximum Sales Charge
(as a percentage of Offering Price) 5.75% 1.99%
Paid at time of purchase 5.75%++ 1.00%+++
Paid at redemption++++ NONE 0.99%
Exchange Fee (per transaction) $5.00* $5.00*
B. ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.75% 0.75%
Rule 12b-1 Fees 0.35%** 1.00%**
Other Expenses 0.98% 0.98%
--------- ---------
Total Fund Operating Expenses 2.08% 2.73%
========= =========
C. EXAMPLE
</TABLE>
Assume the Fund's annual return is 5%, operating expenses are as described
above, and you sell your shares after the number of years shown. These are
the projected expenses for each $1,000 that you invest in the Fund.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
--------- ------------ ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Class I $77*** $119 $163 $285
Class II $47 $ 94 $153 $313
</TABLE>
For the same Class II investment, you would pay projected expenses of $37 if
you did not sell your shares at the end of the first year. Your projected
expenses for the remaining periods would be the same.
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends of each class and are not
directly charged to your account.
+IF YOUR TRANSACTION IS PROCESSED THROUGH YOUR SECURITIES DEALER, YOU MAY BE
CHARGED A FEE BY YOUR SECURITIES DEALER FOR THIS SERVICE.
++THERE IS NO FRONT-END SALES CHARGE IF YOU INVEST $1 MILLION OR MORE IN CLASS
I SHARES.
+++ALTHOUGH CLASS II HAS A LOWER FRONT-END SALES CHARGE THAN CLASS I, ITS RULE
12B-1 FEES ARE HIGHER. OVER TIME YOU MAY PAY MORE FOR CLASS II SHARES. PLEASE
SEE "HOW DO I BUY SHARES? -- DECIDING WHICH CLASS TO BUY."
++++A CONTINGENT DEFERRED SALES CHARGE MAY APPLY TO ANY CLASS II PURCHASE IF
YOU SELL THE SHARES WITHIN 18 MONTHS AND TO CLASS I PURCHASES OF $1 MILLION OR
MORE IF YOU SELL THE SHARES WITHIN ONE YEAR. A CONTINGENT DEFERRED SALES
CHARGE MAY ALSO APPLY TO PURCHASES BY CERTAIN RETIREMENT PLANS THAT QUALIFY TO
BUY CLASS I SHARES WITHOUT A FRONT-END SALES CHARGE. THE CHARGE IS 1% OF THE
VALUE OF THE SHARES SOLD OR THE NET ASSET VALUE AT THE TIME OF PURCHASE,
WHICHEVER IS LESS. THE NUMBER IN THE TABLE SHOWS THE CHARGE AS A PERCENTAGE OF
OFFERING PRICE. WHILE THE PERCENTAGE IS DIFFERENT DEPENDING ON WHETHER THE
CHARGE IS SHOWN BASED ON THE NET ASSET VALUE OR THE OFFERING PRICE, THE DOLLAR
AMOUNT PAID BY YOU WOULD BE THE SAME. SEE "HOW DO I SELL SHARES? -- CONTINGENT
DEFERRED SALES CHARGE" FOR DETAILS.
*$5.00 FEE IS ONLY FOR MARKET TIMERS. WE PROCESS ALL OTHER EXCHANGES
WITHOUT A FEE.
**THE COMBINATION OF FRONT-END SALES CHARGES AND RULE 12B-1 FEES COULD CAUSE
LONG-TERM SHAREHOLDERS TO PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGE PERMITTED UNDER THE NASD'S RULES.
***ASSUMES A CONTINGENT DEFERRED SALES CHARGE WILL NOT APPLY.
<PAGE>
FINANCIAL HIGHLIGHTS
This table summarizes the Fund's financial history. The information has been
audited by McGladrey & Pullen, LLP, the Fund's independent auditors. Their audit
report covering each of the four years since the Fund's commencement of
operations on March 14, 1994, appears in the financial statements in the Fund's
Annual Report to Shareholders for the fiscal year ended March 31, 1997. The
Annual Report to Shareholders also includes more information about the Fund's
performance. For a free copy, please call Fund Information.
<TABLE>
<CAPTION>
CLASS I SHARES
YEAR ENDED MARCH 31 1997 1996 1995 1994/1/
------------------------------------ --------- --------- ---------- ----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout
the period)
Net asset value, beginning of $ 10.04 $ 9.43 $ 10.01 $ 10.00
-------- -------- -------- --------
period
Income from investment operations:
Net investment income .17 .04 .07 .009
Net realized and unrealized 1.45 1.03 (.61) .001
-------- -------- -------- --------
gain (loss)
Total from investment operations 1.62 1.07 (.54) .01
-------- -------- -------- --------
Distributions:
Dividends from net investment (.07) (.05) (.04) --
income
Distributions from net realized (.05) (.41) -- --
-------- -------- ------- --------
gains
Total distributions (.12) (.46) (.04) --
-------- -------- -------- -------
Change in net asset value 1.50 .61 (.58) .01
-------- -------- -------- -------
Net asset value, end of period $ 11.54 $ 10.04 $ 9.43 $ 10.01
======== ======== ======== ========
TOTAL RETURN /2/ 16.22% 11.79% (5.41)% .10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 28,011 $ 21,590 $ 18,717 $ 101
Ratio of expenses to average net 2.08% 2.37% 3.25% 32.02%/3/
assets
Ratio of expenses, net of
reimbursement, to
average net assets 2.08% 2.32% 1.25% 1.25%/3/
Ratio of net investment income to
average net assets 1.59% .40% 1.38% 1.89%/3/
Portfolio turnover rate 23.52% 38.22% 3.21% --
Average commission rate paid
(per share) $ .0015 $.0083
</TABLE>
1 FOR THE PERIOD MARCH 14, 1994 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1994.
2 TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
3 ANNUALIZED.
<TABLE>
<CAPTION>
CLASS II SHARES
YEAR ENDED MARCH 31 1997 1996/1/
----------------------------------------------- --------- ----------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the
period)
Net asset value, beginning of period $ 9.99 $ 9.73
-------- --------
Income from investment operations:
Net investment income (loss) .11 (.02)
Net realized and unrealized gain 1.43 .73
-------- --------
Total from investment operations 1.54 .71
-------- --------
Distributions:
Dividends from net investment income (.02) (.04)
Distributions from net realized gains (.05) (.41)
-------- --------
Total distributions (.07) (.45)
-------- --------
Change in net asset value 1.47 .26
-------- --------
Net asset value, end of period $ 11.46 $ 9.99
======== ========
TOTAL RETURN /2/ 15.48% 7.66%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 2,844 $ 1,379
Ratio of expenses to average net assets 2.73% 2.97%/3/
Ratio of net investment income (loss) to .98% (.88)%/3/
average net assets
Portfolio turnover rate 23.52% 38.22%
Average commission rate paid (per share) $ .0015 $ .0083
</TABLE>
1 FOR THE PERIOD MAY 1, 1995 (COMMENCEMENT OF SALES) TO MARCH 31, 1996.
2 TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
3 ANNUALIZED.
HOW DOES THE FUND INVEST ITS ASSETS?
THE FUND'S INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital growth, which it seeks to
achieve through investing at least 65% of its total assets in securities of
domestic and foreign companies that are principally engaged in or related to the
development, operation or rehabilitation of the physical and social
infrastructures of various nations throughout the world. The Fund's investment
objective and the investment restrictions set forth under "Investment
Restrictions" in the SAI are fundamental and may not be changed without
shareholder approval. All other investment policies and practices described in
this prospectus are not fundamental and may be changed by the Board without
shareholder approval. Of course, there is no assurance that the Fund's objective
will be achieved.
The Fund's investment manager believes that the development of the physical and
social infrastructures of world economies is essential for economic growth and
must be undertaken by all countries to achieve and maintain competitive
industrial bases. A company is "principally engaged in or related to the
development, operation or rehabilitation of physical and social infrastructures
of various nations throughout the world" if at least 50% of its assets (marked-
to-market), gross income or net profits are attributable to activities related
to the following industries, among others: communications; production of
building materials; power generation; public utilities; distribution of goods
and services; toll road operation and development; manufacturing of steel and
other metals; air, sea, land and rail transportation; rail, aircraft and
seacraft manufacturing and rehabilitation; port ownership and operation;
operation of water utilities and waste water treatment facilities; industrial
fabrication; bridge erection; heating, ventilation and air conditioning (HVAC)
manufacturing and installation; manufacturing and operation of pollution control
equipment; operation of medical facilities; development and construction of
housing; operation of broadcast media; and manufacturing, operation,
installation and maintenance of technology-related infrastructure such as local
and wide-area network software and other essential components in the movement of
information. Companies providing construction materials or equipment, or
engineering, construction and contracting services, would also be included, as
would companies providing funding or expertise necessary for the completion of
infrastructure projects.
The evolving long-term international trend favoring more market-oriented
economies challenges countries with developing markets to upgrade their national
economies in order to compete in the international marketplace. This trend may
be facilitated by local or international political, economic or financial
developments that could benefit companies engaged in the development of these
countries' national economies. Certain of these countries, particularly
countries such as Mexico and the countries of the Pacific Basin, have
experienced relatively high rates of economic growth in recent years. The
development of the local infrastructures in these countries is a crucial element
in their continued growth. For example, China, Hong Kong, Singapore, Taiwan,
South Korea, Thailand, Malaysia, Indonesia and the Philippines have all recently
made substantial, long-term commitments to the development of their
infrastructures. While there exists much information indicating that foreign
capital markets may experience growth as a result of a renewed international
commitment to the development of economic infrastructures, there can be no
assurance, of course, that such growth will occur or that the securities
purchased by the Fund will provide long-term capital growth.
TYPES OF SECURITIES IN WHICH THE FUND MAY INVEST
The Fund will seek to allocate investment risk among the capital markets of a
number of countries. Under normal circumstances, the Fund will invest at least
65% of its total assets in issuers domiciled in at least three different nations
(one of which may be the U.S.). The Fund will not necessarily seek to diversify
investments on a geographical basis or on the basis of the level of economic
development of any particular country.
Consistent with its investment objective, the Fund expects to invest at least
65% of its total assets in securities of issuers listed on U.S. or foreign
securities exchanges or the NASDAQ system, that are principally engaged in or
related to infrastructure industries. The Fund will generally invest in equity
securities of such issuers. 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") as described below.
The Fund may also invest in debt securities of issuers involved in or related to
infrastructure industries. As used in this prospectus, "debt securities" refers
to bonds, notes, debentures, commercial paper, time deposits and bankers'
acceptances, and may include structured investments. There is no limitation on
the percentage of the Fund's assets that may be invested in debt securities,
subject to the Fund's investment objective. Debt securities purchased by the
Fund may be rated in any category by Moody's or S&P, or may be unrated by any
rating agency. Such securities may include highrisk, lower quality debt
securities, commonly referred to as "junk bonds." See "What are the Fund's
Potential Risks?" As an operating policy, which may be changed by the Board, the
Fund will not invest more than 5% of its total assets in debt securities rated
lower than Baa by Moody's or BBB by S&P. See "How Do the Funds Invest Their
Assets? -- Debt Securities" in the SAI for descriptions of debt securities rated
Baa by Moody's and 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.
The Fund invests for long-term growth of capital and does not emphasize
short-term trading profits. Accordingly, the Fund expects to have an annual
portfolio turnover rate not exceeding 50%.
DEPOSITARY RECEIPTS. ADRs are depositary receipts typically issued by a U.S.
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. EDRs and GDRs are typically issued by foreign banks or
trust companies, although they also may be issued by U.S. banks or trust
companies, and evidence ownership of underlying securities issued by either a
foreign or a U.S. corporation. Generally, depositary receipts in registered form
are designed for use in the U.S. securities market and depositary receipts in
bearer form are designed for use in securities markets outside the U.S.
Depositary receipts may not necessarily be denominated in the same currency as
the underlying securities into which they may be converted. Depositary receipts
may be issued pursuant to sponsored or unsponsored programs. In sponsored
programs, an issuer has made arrangements to have its securities traded in the
form of depositary receipts. In unsponsored programs, the issuer may not be
directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from an
issuer that has participated in the creation of a sponsored program.
Accordingly, there may be less information available regarding issuers of
securities underlying unsponsored programs and there may not be a correlation
between such information and the market value of the depositary receipts.
Depositary receipts also involve the risks of other investments in foreign
securities, as discussed below. For purposes of the Fund's investment policies,
the Fund's investments in depositary receipts will be deemed to be investments
in the underlying securities.
OTHER INVESTMENT POLICIES OF THE FUND
The Fund is also authorized to use the various securities and investment
techniques described below. Although these strategies are regularly used by some
investment companies and other institutional investors in various markets, some
of these strategies cannot at the present time be used to a significant extent
by the Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
TEMPORARY INVESTMENTS. When Investment Counsel believes that market conditions
warrant, the Fund may adopt a temporary defensive position and may invest up to
100% of its total assets in the following money market securities, denominated
in U.S. dollars or in the currency of any foreign country, issued by entities
organized in the U.S. or any foreign country: debt obligations issued or
guaranteed by the U.S. government or the governments of foreign countries, their
agencies or instrumentalities; short-term time deposits with banks; repurchase
agreements with banks and broker-dealers with respect to U.S. government
obligations; and finance company and corporate commercial paper, and other
short-term corporate obligations, in each case rated Prime-1 by Moody's or A or
better by S&P or, if unrated, of comparable quality as determined by Investment
Counsel. When deemed appropriate by Investment Counsel, the Fund may invest cash
balances in repurchase agreements and other money market investments to maintain
liquidity in an amount to meet expenses or for day-to-day operating purposes.
BORROWING. The Fund may borrow up to one-third of the value of its total assets
from banks to increase its holdings of portfolio securities. Under the 1940 Act,
the Fund is required to maintain continuous asset coverage of 300% with respect
to such borrowings and to sell (within three days) sufficient portfolio holdings
to restore such coverage if it should decline to less than 300% due to market
fluctuations or otherwise, even if such liquidations of the Fund's holdings may
be disadvantageous from an investment standpoint. Leveraging by means of
borrowing may exaggerate the effect of any increase or decrease in the value of
portfolio securities on the Fund's Net Asset Value, and money borrowed will be
subject to interest and other costs (which may include commitment fees and/or
the cost of maintaining minimum average balances) which may or may not exceed
the income received from the securities purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of its total assets
to generate income for the purpose of offsetting operating expenses. Such loans
must be secured by collateral (consisting of any combination of cash, U.S.
government securities or irrevocable letters of credit) in an amount at least
equal (on a daily marked-to-market basis) to the current market value of the
securities loaned. The Fund may terminate the loans at any time and obtain the
return of the securities loaned within five business days. The Fund will
continue to receive any interest or dividends paid on the loaned securities and
will continue to retain any voting rights with respect to the securities. In the
event that the borrower defaults on its obligation to return borrowed
securities, because of insolvency or otherwise, the Fund could experience delays
and costs in gaining access to the collateral and could suffer a loss to the
extent that the value of the collateral falls below the market value of the
borrowed securities.
REPURCHASE AGREEMENTS. For temporary defensive purposes and for cash management
purposes, the Fund may, without limit, enter into repurchase agreements with
U.S. banks and broker-dealers. Under a repurchase agreement, the Fund acquires a
security from a U.S. bank or a registered broker-dealer and simultaneously
agrees to resell the security back to the bank or broker-dealer at a specified
time and price. The repurchase price is in excess of the purchase price by an
amount which reflects an agreed-upon rate of return, which is not tied to the
coupon rate on the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the underlying security
and therefore will be fully collateralized. However, if the seller should
default on its obligation to repurchase the underlying security, the Fund may
experience delay or difficulty in exercising its rights to realize upon the
security and might incur a loss if the value of the security declines, as well
as incur disposition costs in liquidating the security.
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest up to 15% of its total
assets in illiquid securities, for which there is a limited trading market and
for which a low trading volume of a particular security may result in abrupt and
erratic price movements. The Fund may be unable to dispose of its holdings in
illiquid securities at then-current market prices and may have to dispose of
such securities over extended periods of time. The Fund may also invest in
securities that are sold (i) in private placement transactions between their
issuers and their purchasers and that are neither listed on an exchange nor
traded over-the-counter, or (ii) in transactions between qualified institutional
buyers pursuant to Rule 144A under the 1933 Act. Such restricted securities are
subject to contractual or legal restrictions on subsequent transfer. As a result
of the absence of a public trading market, such restricted securities may in
turn be less liquid and more difficult to value than publicly traded securities.
Although these securities may be resold in privately negotiated transactions,
the prices realized from the sales could, due to illiquidity, be less than those
originally paid by the Fund or less than their fair value. In addition, issuers
whose securities are not publicly traded may not be subject to the disclosure
and other investor protection requirements that may be applicable if their
securities were publicly traded. If any privately placed or Rule 144A securities
held by the Fund are required to be registered under the securities laws of one
or more jurisdictions before being resold, the Fund may be required to bear the
expenses of registration. The Fund will limit its investment in restricted
securities to 10% of its total assets, except that Rule 144A securities
determined by the Board to be liquid are not subject to this limitation.
OPTIONS ON SECURITIES OR INDICES. To increase its return or to hedge all or a
portion of its portfolio investments, the Fund may write (i.e., sell) covered
put and call options and purchase put and call options on securities or
securities indices that are traded on U.S. and foreign exchanges or in the
over-the-counter markets. An option on a security is a contract that permits the
purchaser of the option, in return for the premium paid, the right to buy a
specified security (in the case of a call option) or to sell a specified
security (in the case of a put option) from or to the writer of the option at a
designated price during the term of the option. An option on a securities index
permits the purchaser of the option, in return for the premium paid, the right
to receive from the seller cash equal to the difference between the closing
price of the index and the exercise price of the option. The Fund may write a
call or put option only if the option is "covered." This means that so long as
the Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the call, or hold a call at the same or lower exercise
price, for the same exercise period, and on the same securities as the written
call. A put is covered if the Fund maintains liquid assets with a value equal to
the exercise price in a segregated account, or holds a put on the same
underlying securities at an equal or greater exercise price. The value of the
underlying securities on which options may be written at any one time will not
exceed 15% of the total assets of the Fund. The Fund will not purchase put or
call options if the aggregate premium paid for such options would exceed 5% of
its total assets at the time of purchase.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. The Fund
may enter into forward foreign currency exchange contracts ("forward contracts")
to attempt to minimize the risk to the Fund from adverse changes in the
relationship between the U.S. dollar and foreign currencies. A forward contract
is an obligation to purchase or sell a specific currency for an agreed price at
a future date which is individually negotiated and privately traded by currency
traders and their customers.
The Fund will enter into forward contracts only under two circumstances. First,
when the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock in" the U.S. dollar
price of the security in relation to another currency by entering into a forward
contract to buy the amount of foreign currency needed to settle the transaction.
Second, when Investment Counsel believes that the currency of a particular
foreign country may suffer or enjoy a substantial movement against another
currency, it may enter into a forward contract to sell or buy the amount of the
former foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. The second investment
practice is generally referred to as "cross-hedging." The Fund has no specific
limitation on the percentage of assets it may commit to forward contracts,
subject to its stated investment objective and policies, except that the Fund
will not enter into a forward contract if the amount of assets set aside to
cover forward contracts would impede portfolio management or the Fund's ability
to meet redemption requests. Although forward contracts will be used primarily
to protect the Fund from adverse currency movements, they also involve the risk
that anticipated currency movements will not be accurately predicted.
The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency-denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, the Fund may forfeit the entire amount of the
premium plus related transaction costs. Options on foreign currencies to be
written or purchased by the Fund are traded on U.S. and foreign exchanges or
over-the-counter.
FUTURES CONTRACTS. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock and bond index futures contracts, foreign
currency futures contracts and options on any of the foregoing. A financial
futures contract is an agreement between two parties to buy or sell a specified
debt security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the difference
between the value of the index at the beginning and at the end of the contract
period. A futures contract on a foreign currency is an agreement to buy or sell
a specified amount of a currency for a set price on a future date.
When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
contract. In addition, when the Fund enters into a futures contract, it will
segregate assets or "cover" its position in accordance with the 1940 Act. (See
"How Do the Funds Invest their Assets? -- Futures Contracts" in the SAI.) With
respect to positions in futures and related options that do not constitute "bona
fide hedging" positions, the Fund will not enter into a futures contract or
related option contract if, immediately thereafter, the aggregate initial margin
deposits relating to such positions plus premiums paid by it for open futures
option positions, less the amount by which any such options are "in-the-money,"
would exceed 5% of the Fund's total assets.
OTHER POLICIES AND RESTRICTIONS. The Fund has a number of additional investment
restrictions that limit its activities to some extent. Some of these
restrictions may only be changed with shareholder approval. For a list of these
restrictions and more information about the Fund's investment policies, please
see "How Do the Funds Invest their Assets?" and "Investment Restrictions" in the
SAI.
Each of the Fund's policies and restrictions discussed in this prospectus and in
the SAI is considered at the time the Fund makes an investment. The Fund is
generally not required to sell a security because of a change in circumstances.
WHAT ARE THE FUND'S POTENTIAL RISKS?
You should understand that all investments involve risk and there can be no
guarantee against loss resulting from an investment in the Fund, nor can there
be any assurance that the Fund's investment objective will be attained. As with
any investment in securities, the value of, and income from, an investment in
the Fund can decrease as well as increase, depending on a variety of factors
which may affect the values and income generated by the Fund's portfolio
securities, including general economic conditions and market factors. In
addition to the factors which affect the value of individual securities, you may
anticipate that the value of the shares of the Fund will fluctuate with
movements in the broader equity and bond markets. A decline in the stock market
of any country in which the Fund is invested may also be reflected in declines
in the price of shares of the Fund. Changes in currency valuations will also
affect the price of shares of the Fund. History reflects both decreases and
increases in worldwide stock markets and currency valuations, and these may
reoccur unpredictably in the future. The value of debt securities held by the
Fund generally will vary inversely with changes in prevailing interest rates.
Additionally, investment decisions made by Investment Counsel will not always be
profitable or prove to have been correct. The Fund is not intended as a complete
investment program.
FOREIGN INVESTMENTS. The Fund has the right to purchase securities in any
foreign country, developed or developing. You should consider carefully the
substantial risks involved in investing in securities issued by companies and
governments of foreign nations, which are in addition to the usual risks
inherent in domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations (including, for example, withholding taxes on interest and dividends) or
other taxes imposed with respect to investments in foreign nations, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country), foreign investment controls on daily stock
market movements, default in foreign government securities, political or social
instability, or diplomatic developments which could affect investment in
securities of issuers in foreign nations. Some countries may withhold portions
of interest and dividends at the source. In addition, in many countries there is
less publicly available information about issuers than is available in reports
about companies in the 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 Fund may encounter difficulties or be unable to vote proxies,
exercise shareholder rights, pursue legal remedies, and obtain judgments in
foreign courts.
Brokerage commissions, custodial services and other costs relating to investment
in foreign countries are generally more expensive than in the U.S. Foreign
securities markets also have different clearance and settlement procedures, and
in certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of the Fund are uninvested and no return is earned thereon.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
In many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the U.S. There is an increased risk, therefore, of uninsured loss due to
lost, stolen, or counterfeit stock certificates. In addition, the foreign
securities markets of many of the countries in which the Fund may invest may
also be smaller, less liquid, and subject to greater price volatility than those
in the U.S. The Fund may invest in Eastern European countries, which involves
special risks. As an open-end investment company, the Fund is limited in the
extent to which it may invest in illiquid securities. See "What Are the 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.
The Fund usually effects currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign exchange market. However, some
price spread on currency exchange transactions (to cover service charges) will
be incurred when the Fund converts assets from one currency to another.
As a non-fundamental policy, the Fund will limit its investment in Russian
securities to 5% of its total assets. Russian securities involve additional
significant risks, including political and social uncertainty (for example,
regional conflicts and risk of war), currency exchange rate volatility,
pervasiveness of corruption and crime in the Russian economic system, delays in
settling portfolio transactions and risk of loss arising out of Russia's system
of share registration and custody. For more information on these risks and other
risks associated with Russian securities, please see "What Are the Funds'
Potential Risks?" in the SAI.
On July 1, 1997, Hong Kong reverted to the sovereignty of China. As with any
major political transfer of power, this could result in political, social,
economic, market or other developments in Hong Kong, China or other countries
that could affect the value of Fund investments.
HIGH-RISK DEBT SECURITIES. Although the Fund's current investment policy is that
it will not invest more than 5% of its total assets in debt securities rated
lower than BBB by S&P or Baa by Moody's, the Board may consider a change in this
operating policy if, in its judgment, economic conditions change such that a
higher level of investment in high-risk, lower quality debt securities would be
consistent with the interests of the Fund and its shareholders. High-risk, lower
quality debt securities, commonly referred to as "junk bonds," are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation
and may be in default. Unrated debt securities are not necessarily of lower
quality than rated securities, but they may not be attractive to as many buyers.
Regardless of rating levels, all debt securities considered for purchase
(whether rated or unrated) will be carefully analyzed by Investment Counsel to
insure, to the extent possible, that the planned investment is sound. The Fund
may, from time to time, invest up to 5% of its total assets in defaulted debt
securities if, in the opinion of Investment Counsel, the issuer may resume
interest payments in the near future.
LEVERAGE. Leveraging by means of borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities on the Fund's Net
Asset Value, and money borrowed will be subject to interest and other costs
(which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the income received from the
securities purchased with borrowed funds.
FUTURES CONTACTS AND RELATED OPTIONS. Option and foreign currency exchange
transactions and futures contracts are commonly referred to as derivative
instruments. Successful use of futures contracts and related options is subject
to special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation between
movements in the securities or foreign currency on which the futures or options
contract is based and movements in the securities or currency in the Fund's
portfolio. Successful use of futures or options contracts is further dependent
on Investment Counsel's ability to correctly predict movements in the securities
or foreign currency markets, and no assurance can be given that its judgment
will be correct. Successful use of options on securities or stock indices is
subject to similar risk considerations. In addition, by writing covered call
options, the Fund gives up the opportunity, while the option is in effect, to
profit from any price increase in the underlying security above the option
exercise price.
There are further risk factors, including possible losses through the holding of
securities in domestic and foreign custodian banks and depositories, described
elsewhere in this prospectus and in the SAI.
WHO MANAGES THE FUND?
THE BOARD. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations. The
Board also monitors the Fund to ensure no material conflicts exist between the
Fund's classes of shares. While none is expected, the Board will act
appropriately to resolve any material conflict that may arise.
INVESTMENT MANAGER. Investment Counsel manages the Fund's assets and makes its
investment decisions. Investment Counsel also performs similar services for
other funds. It is wholly owned by Resources, a publicly owned company engaged
in the financial services industry through its subsidiaries. Charles B. Johnson
and Rupert H. Johnson, Jr. are the principal shareholders of Resources.
Together, Investment Counsel and its affiliates manage over $199 billion in
assets. The Templeton organization has been investing globally since 1940.
Investment Counsel and its affiliates have offices in Argentina, Australia,
Bahamas, Canada, France, Germany, Hong Kong, India, Italy, Japan, Korea,
Luxembourg, Poland, Russia, Singapore, South Africa, Taiwan, United Kingdom,
U.S., and Vietnam. Please see "Investment Management and Other Services" and
"Miscellaneous Information" in the SAI for information on securities
transactions and a summary of the Fund's Code of Ethics.
PORTFOLIO MANAGEMENT. The Fund's lead portfolio manager since 1995 is Gary R.
Clemons. Mr. Clemons is a senior vice president of Investment Counsel. He holds
a BS from the University of Nevada -- Reno and an MBA with emphases in finance
and investment banking from the University of Wisconsin -- Madison. He joined
Investment Counsel in 1993. Prior to that time he was a research analyst at
Templeton Quantitative Advisors, Inc. in New York, where he was also responsible
for management of a small capitalization fund. As a portfolio manager and
research analyst with Templeton, Mr. Clemons has responsibility for the
telecommunications industry and country coverage of Colombia, Norway, Peru and
Sweden.
Peter A. Nori and Mark R. Beveridge have secondary portfolio management
responsibilities for the Fund. Mr. Nori is a vice president of Investment
Counsel. He holds a BS in finance and an MBA with an emphasis in finance from
the University of San Francisco. He is a Chartered Financial Analyst and a
member of the Association for Investment Management and Research. Mr. Nori
completed Franklin's management training program before moving into portfolio
research in 1990 as an equity analyst and co-portfolio manager of the Franklin
Convertible Securities Fund. He joined the Templeton organization in 1994. As a
portfolio manager and research analyst, Mr. Nori currently manages several
separate accounts and a variable annuity product. He has global research
responsibilities for the steel and data processing industries, and country
coverage of Austria. Mr. Beveridge is a senior vice president of Investment
Counsel. He holds a BBA in finance from the University of Miami. He is a
Chartered Financial Analyst and a Chartered Investment Counselor, as well as 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 appliances and household durables,
industrial components, waste management and business and public services. He
also has country coverage of Argentina.
MANAGEMENT FEES. During the fiscal year ended March 31, 1997, management fees
totaling 0.75% of the average daily net assets of the Fund were paid to
Investment Counsel. Total operating expenses, including fees paid to Investment
Counsel, were 2.08% for Class I and 2.73% for Class II.
PORTFOLIO TRANSACTIONS. Investment Counsel tries to obtain the best execution on
all transactions. If Investment Counsel believes more than one broker or dealer
can provide the best execution, it may consider research and related services
and the sale of Fund shares, as well as shares of other funds in the Franklin
Templeton Group of Funds, when selecting a broker or dealer. Please see "How Do
the Funds Buy Securities for their Portfolio?" in the SAI for more information.
ADMINISTRATIVE SERVICES. Since October 1, 1996, FT Services has provided certain
administrative services and facilities for the Fund. Prior to that date,
Templeton Global Investors, Inc. provided the same services to the Fund. During
the fiscal year ended March 31, 1997, administration fees totaled 0.15% of the
average daily net assets of the Fund. These fees are included in the amount of
total expenses shown above. Please see "Investment Management and Other
Services" in the SAI for more information.
THE RULE 12B-1 PLANS
Class I and Class II have separate distribution plans or "Rule 12b-1 Plans"
under which they may pay or reimburse Distributors or others for the expenses of
activities that are primarily intended to sell shares of the class. These
expenses may include, among others, distribution or service fees paid to
Securities Dealers or others who have executed a servicing agreement with the
Fund, Distributors or its affiliates; a prorated portion of Distributors'
overhead expenses; and the expenses of printing prospectuses and reports used
for sales purposes, and preparing and distributing sales literature and
advertisements.
Payments by the Fund under the Class I plan may not exceed 0.35% per year of
Class I's average daily net assets. Expenses not reimbursed in any quarter may
be reimbursed in future quarters or years. This includes expenses not reimbursed
because they exceeded the applicable limit under the plan. As of March 31, 1997,
expenses under the Class I plan that may be reimbursable in future quarters or
years totaled $1,311,440, or 4.68% of Class I's net assets. During the first
year after certain Class I purchases made without a sales charge, Distributors
may keep the Rule 12b-1 fees associated with the purchase.
Under the Class II plan, the Fund may pay Distributors up to 0.75% per year of
Class II's average daily net assets to pay Distributors or others for providing
distribution and related services and bearing certain Class II expenses. All
distribution expenses over this amount will be borne by those who have incurred
them. During the first year after a purchase of Class II shares, Distributors
may keep this portion of the Rule 12b-1 fees associated with the purchase.
The Fund may also pay a servicing fee of up to 0.25% per year of Class II's
average daily net assets under the Class II plan. This fee may be used to pay
Securities Dealers or others for, among other things, helping to establish and
maintain customer accounts and records, helping with requests to buy and sell
shares, receiving and answering correspondence, monitoring dividend payments
from the Fund on behalf of customers, and similar servicing and account
maintenance activities.
The Rule 12b-1 fees charged to each class are based only on the fees
attributable to that particular class. For more information, please see "The
Funds' Underwriter" in the SAI.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, each class of the Fund advertises its performance. The more
commonly used measure of performance is total return. Performance figures are
usually calculated using the maximum sales charges, but certain figures may not
include sales charges.
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 Fund calculates its performance figures, please
see "How Do the Funds Measure Performance?" in the SAI.
HOW TAXATION AFFECTS THE FUND AND ITS SHAREHOLDERS
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
The Fund intends to elect to be treated and to qualify each year as a regulated
investment company under Subchapter M of the Code. A regulated investment
company generally is not subject to federal income tax on income and gains
distributed in a timely manner to its shareholders. The Fund intends to
distribute to shareholders substantially all of its net investment income and
net realized capital gains, which generally will be taxable income or capital
gains in their hands. Distributions declared in October, November or December to
shareholders of record on a date in such month and paid during the following
January will be treated as having been received by shareholders on December 31,
in the year such distributions were declared. The Fund will inform you 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.
HOW IS THE TRUST ORGANIZED?
The 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 on December 21, 1993, and is registered with the SEC. The Fund offers two
classes of shares: Templeton Global Infrastructure Fund -- Class I and Templeton
Global Infrastructure Fund -- Class II. All shares outstanding before the
offering of Class II shares are considered Class I shares. Additional series and
classes of shares may be offered in the future.
Shares of each class represent proportionate interests in the assets of the Fund
and have the same voting and other rights and preferences as any other class of
the Fund for matters that affect the Fund as a whole. For matters that only
affect one class, however, only shareholders of that class may vote. Each class
will vote separately on matters affecting only that class, or expressly required
to be voted on separately by state or federal law. Shares of each class of a
series have the same voting and other rights and preferences as the other
classes and series of the Trust for 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.
The Trust does not intend to hold annual shareholder meetings. The Trust or a
series of the Trust may hold special meetings, however, for matters requiring
shareholder approval. A meeting may also be called by the Board in its
discretion or for the purpose of considering the removal of a Board member if
requested in writing to do so by shareholders holding at least 10% of the
outstanding shares. In certain circumstances, we are required to help you
communicate with other shareholders about the removal of a Board member.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check. PLEASE INDICATE WHICH CLASS OF SHARES YOU WANT TO BUY. IF YOU DO NOT
SPECIFY A CLASS, YOUR PURCHASE WILL BE AUTOMATICALLY INVESTED IN CLASS I SHARES.
MINIMUM
INVESTMENTS*
------------------------------ -----------------
To Open Your Account......... $100
To Add to Your Account...... $ 25
*We may waive these minimums for retirement plans. We may also refuse any order
to buy shares.
DECIDING WHICH CLASS TO BUY
You should consider a number of factors when deciding which class of shares to
buy. IF YOU PLAN TO BUY $1 MILLION OR MORE IN A SINGLE PAYMENT OR YOU QUALIFY TO
BUY CLASS I SHARES WITHOUT A SALES CHARGE, YOU MAY NOT BUY CLASS II SHARES.
Generally, you should consider buying Class I shares if:
o you expect to invest in the Fund over the long term;
o you qualify to buy Class I shares at a reduced sales charge; or
o you plan to buy $1 million or more over time.
You should consider Class II shares if:
o you expect to invest less than $50,000 in the Franklin Templeton Funds; and
o you plan to sell a substantial number of your shares within approximately six
years or less of your investment.
Class I shares are generally more attractive for long-term investors because of
Class II's higher Rule 12b-1 fees. These may accumulate over time to outweigh
the lower Class II front-end sales charge and result in lower income dividends
for Class II shareholders. If you qualify to buy Class I shares at a reduced
sales charge based upon the size of your purchase or through our Letter of
Intent or cumulative quantity discount programs, but plan to hold your shares
less than approximately six years, you should evaluate whether it is more
economical for you to buy Class I or Class II shares.
For purchases of $1 million or more, it is considered more beneficial for you to
buy Class I shares since there is no front-end sales charge, even though these
purchases may be subject to a Contingent Deferred Sales Charge. Any purchase of
$1 million or more is therefore automatically invested in Class I shares. You
may accumulate more than $1 million in Class II shares through purchases over
time, but if you plan to do this you should determine whether it would be more
beneficial for you to buy Class I shares through a Letter of Intent.
Please consider all of these factors before deciding which class of shares to
buy. There are no conversion features attached to either class of shares.
PURCHASE PRICE OF FUND SHARES
For Class I shares, the sales charge you pay depends on the dollar amount you
invest, as shown in the table below. The sales charge for Class II shares is 1%
and, unlike Class I, does not vary based on the size of your purchase.
<PAGE>
<TABLE>
TOTAL SALES CHARGE AMOUNT PAID
AS A PERCENTAGE OF TO DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
- --------------------------------------- ------------------ ----------------- --------------------
<S> <C> <C> <C>
CLASS I
Under $50,000..................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.... 4.50% 4.71% 3.75%
$100,000 but less than $250,000... 3.50% 3.63% 2.80%
$250,000 but less than $500,000... 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.60%
$1,000,000 or more*............... None None None
CLASS II
Under $1,000,000*................. 1.00% 1.01% 1.00%
</TABLE>
*A Contingent Deferred Sales Charge of 1% may apply to Class I purchases of $1
million or more and any Class II purchase. Please see "How Do I Sell Shares? --
Contingent Deferred Sales Charge." Please also see "Other Payments to Securities
Dealers" below for a discussion of payments Distributors may make out of its own
resources to Securities Dealers for certain purchases. Purchases of Class II
shares are limited to purchases below $1 million. Please see "Deciding Which
Class to Buy."
SALES CHARGE REDUCTIONS AND WAIVERS
SYMBOL 39 \f "WP IconicSymbolsB" \s 10IF YOU QUALIFY TO BUY SHARES UNDER ONE OF
THE SALES CHARGE REDUCTION OR WAIVER CATEGORIES DESCRIBED BELOW, PLEASE INCLUDE
A WRITTEN STATEMENT WITH EACH PURCHASE ORDER EXPLAINING WHICH PRIVILEGE APPLIES.
If you don't include this statement, we cannot guarantee that you will receive
the sales charge reduction or waiver.
CUMULATIVE QUANTITY DISCOUNTS -- CLASS I ONLY. To determine if you may pay a
reduced sales charge, the amount of your current Class I purchase is added to
the cost or current value, whichever is higher, of your existing shares in the
Franklin Templeton Funds, as well as those of your spouse, children under the
age of 21 and grandchildren under the age of 21. If you are the sole owner of a
company, you may also add any company accounts, including retirement plan
accounts. Companies with one or more retirement plans may add together the total
plan assets invested in the Franklin Templeton Funds to determine the sales
charge that applies.
LETTER OF INTENT -- CLASS I ONLY. You may buy Class I shares at a reduced sales
charge by completing the Letter of Intent section of the shareholder
application. A Letter of Intent is a commitment by you to invest a specified
dollar amount during a 13 month period. The amount you agree to invest
determines the sales charge you pay on Class I shares.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
o You authorize Distributors to reserve 5% of your total intended purchase in
Class I shares registered in your name until you fulfill your Letter.
o You give Distributors a security interest in the reserved shares and appoint
Distributors as attorney-in-fact.
o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
o Although you may exchange your shares, you may not sell reserved shares until
you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct. ur policy of reserving shares does not apply to
certain retirement plans.
If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? -- Letter of Intent" in the SAI or
call Shareholder Services.
GROUP PURCHASES -- CLASS I ONLY. If you are a member of a qualified group, you
may buy Class I shares at a reduced sales charge that applies to the group as a
whole. The sales charge is based on the combined dollar value of the group
members' existing investments, plus the amount of the current purchase.
A qualified group is one that:
o Was formed at least six months ago,
o Has a purpose other than buying Fund shares at a discount,
o Has more than 10 members,
o Can arrange for meetings between our representatives and group members,
o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to Distributors,
o Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and
o Meets other uniform criteria that allow Distributors to achieve cost savings
in distributing shares.
SALES CHARGE WAIVERS. The Fund's front-end sales charge and Contingent Deferred
Sales Charge do not apply to certain purchases. For waiver categories 1, 2 or 3
below: (i) the distributions or payments must be reinvested within 365 days of
their payment date, and (ii) Class II distributions may be reinvested in either
Class I or Class II shares. Class I distributions may only be reinvested in
Class I shares.
The Fund's sales charges do not apply if you are buying Class I shares with
money from the following sources or Class II shares with money from the sources
in waiver categories 1 or 4:
1. Dividend and capital gain distributions from any Franklin Templeton Fund or a
real estate investment trust (REIT) sponsored or advised by Franklin Properties,
Inc.
2. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds
3. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment option
the Franklin Valuemark Funds, the Templeton Variable Annuity Fund, the Templeton
Variable Products Series Fund, or the Franklin Government Securities Trust. You
should contact your tax advisor for information on any tax consequences that may
apply.
4. Redemptions from any Franklin Templeton Fund if you:
o Originally paid a sales charge on the shares,
o Reinvest the money within 365 days of the redemption date, and
o Reinvest the money in the SAME CLASS of shares.
An exchange is not considered a redemption for this privilege. The Contingent
Deferred Sales Charge will not be waived if the shares were subject to a
Contingent Deferred Sales Charge when sold. We will credit your account in
shares, at the current value, in proportion to the amount reinvested for any
Contingent Deferred Sales Charge paid in connection with the earlier redemption,
but a new Contingency Period will begin.
If you immediately placed your redemption proceeds in a Franklin Bank CD, you
may reinvest them as described above. The proceeds must be reinvested within 365
days from the date the CD matures, including any rollover.
The Fund's sales charges also do not apply to Class I purchases by:
5. Trust companies and bank trust departments agreeing to invest in Franklin
Templeton Funds over a 13 month period at least $1 million of assets held in a
fiduciary, agency, advisory, custodial or similar capacity and over which the
trust companies and bank trust departments or other plan fiduciaries or
participants, in the case of certain retirement plans, have full or shared
investment discretion. We will accept orders for these accounts by mail
accompanied by a check or by telephone or other means of electronic data
transfer directly from the bank or trust company, with payment by federal funds
received by the close of business on the next business day following the order.
6. Group annuity separate accounts offered to retirement plans.
7. Chilean retirement plans that meet the requirements described under
"Retirement Plans" below.
8. An Eligible Governmental Authority. Please consult your legal and
investment advisors to determine if an investment in the Fund is
permissible and suitable for you and the effect, if any, of payments by the
Fund on arbitrage rebate calculations.
9. Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs
10. Registered Securities Dealers and their affiliates, for their investment
accounts only
11. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer
12. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies
13. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer
14. Accounts managed by the Franklin Templeton Group
15. Certain unit investment trusts and their holders reinvesting distributions
from the trusts
RETIREMENT PLANS. Retirement plans that (i) are sponsored by an employer with at
least 100 employees, or (ii) have plan assets of $1 million or more, or (iii)
agree to invest at least $500,000 in the Franklin Templeton Funds over a 13
month period may buy Class I shares without a front-end sales charge. Retirement
plans that are not Qualified Retirement Plans or SEPs, such as 403(b) or 457
plans, must also meet the requirements described under "Group Purchases -- Class
I Only" above. For retirement plan accounts opened on or after May 1, 1997, a
Contingent Deferred Sales Charge may apply if the account is closed within 365
days of the retirement plan account's initial purchase in the Franklin Templeton
Funds. Please see "How Do I Sell Shares? -- Contingent Deferred Sales Charge"
for details.
Any retirement plan that does not meet the requirements to buy Class I shares
without a front-end sales charge and that was a shareholder of the Fund on or
before February 1, 1995, may buy shares of the Fund subject to a maximum sales
charge of 4% of the Offering Price, 3.2% of which will be retained by Securities
Dealers.
HOW DO I BUY SHARES IN CONNECTION WITH RETIREMENT PLANS?
Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need an
application other than the one included in this prospectus. For a retirement
plan brochure or application, call Retirement Plan Services.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
OTHER PAYMENTS TO SECURITIES DEALERS
The payments described below may be made to Securities Dealers who initiate and
are responsible for Class II purchases and certain Class I purchases made
without a sales charge. The payments are subject to the sole discretion of
Distributors, and are paid by Distributors or one of its affiliates and not by
the Fund or its shareholders.
1. Class II purchases -- up to 1% of the purchase price.
2. Class I purchases of $1 million or more -- up to 1% of the amount invested.
3. Class I purchases made without a front-end sales charge by certain retirement
plans described under "Sales Charge Reductions and Waivers -- Retirement Plans"
above-- up to 1% of the amount invested. For retirement plan accounts opened on
or after May 1, 1997, a Contingent Deferred Sales Charge will not apply to the
account if the Securities Dealer chooses to receive a payment of 0.25% or less
or if no payment is made.
4. Class I purchases by trust companies and bank trust departments, Eligible
Governmental Authorities, and broker-dealers or others on behalf of clients
participating in comprehensive fee programs-- up to 0.25% of the amount
invested.
5. Class I purchases by Chilean retirement plans -- up to 1% of the amount
invested.
A Securities Dealer may receive only one of these payments for each qualifying
purchase. Securities Dealers who receive payments in connection with investments
described in paragraphs 1, 2 or 5 above or a payment of up to 1% for investments
described in paragraph 3 will be eligible to receive the Rule 12b-1 fee
associated with the purchase starting in the thirteenth calendar month after the
purchase.
FOR BREAKPOINTS THAT MAY APPLY AND INFORMATION ON ADDITIONAL COMPENSATION
PAYABLE TO SECURITIES DEALERS IN CONNECTION WITH THE SALE OF FUND SHARES, PLEASE
SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES? -- OTHER PAYMENTS TO SECURITIES
DEALERS" IN THE SAI.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
If you own Class I shares, you may exchange into any of our money funds except
Franklin Templeton Money Fund II ("Money Fund II"). Money Fund II is the only
money fund exchange option available to Class II shareholders. Unlike our other
money funds, shares of Money Fund II may not be purchased directly and no drafts
(checks) may be written on Money Fund II accounts. Before making an exchange,
please read the prospectus of the fund you are interested in. This will help you
learn about the fund, its investment objective and policies, and its rules and
requirements for exchanges. For example, some Franklin Templeton Funds do not
accept exchanges and others may have different investment minimums. Some
Franklin Templeton Funds do not offer Class II shares.
METHOD STEPS TO FOLLOW
----------------------- ---------------------------------------
BY MAIL 1. Send us written instructions
signed by all account owners
2. Include any outstanding share
certificates for the shares you
want to exchange
----------------------- ---------------------------------------
BY PHONE Call Shareholder Services or TeleFACTS(R)
If you do not want the ability to
exchange by phone to apply to your
account, please let us know.
----------------------- ---------------------------------------
THROUGH YOUR DEALER Call your investment representative
----------------------- ---------------------------------------
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable sales
charge of the new fund. If you have never paid a sales charge on your shares
because, for example, they have always been held in a money fund, you will pay
the Fund's applicable sales charge no matter how long you have held your shares.
These charges may not apply if you qualify to buy shares without a sales charge.
We will not impose a Contingent Deferred Sales Charge when you exchange shares.
Any shares subject to a Contingent Deferred Sales Charge at the time of
exchange, however, will remain so in the new fund. See the discussion on
Contingent Deferred Sales Charges below and under "How Do I Sell Shares?"
CONTINGENT DEFERRED SALES CHARGE -- CLASS I. For accounts with Class I shares
subject to a Contingent Deferred Sales Charge, we will first exchange any shares
in your account that are not subject to the charge. If there are not enough of
these to meet your exchange request, we will exchange shares subject to the
charge in the order they were purchased. If you exchange Class I shares into one
of our money funds, the time your shares are held in that fund will not count
towards the completion of any Contingency Period. CONTINGENT DEFERRED SALES
CHARGE -- CLASS II. For accounts with Class II shares subject to a Contingent
Deferred Sales Charge, shares are exchanged into the new fund proportionately
based on the amount of shares subject to a Contingent Deferred Sales Charge and
the length of time the shares have been held. For example, suppose you own
$1,000 in shares that have never been subject to a Contingent Deferred Sales
Charge, such as shares from the reinvestment of dividends and capital gains
("free shares"), $2,000 in shares that are no longer subject to a Contingent
Deferred Sales Charge because you have held them for longer than 18 months
("matured shares"), and $3,000 in shares that are still subject to a Contingent
Deferred Sales Charge ("CDSC liable shares"). If you exchange $3,000 into a new
fund, $500 will be exchanged from free shares, $1,000 from matured shares, and
$1,500 from CDSC liable shares.
Likewise, CDSC liable shares purchased at different times will be exchanged into
a new fund proportionately. For example, assume you purchased $1,000 in shares 3
months ago, 6 months ago, and 9 months ago. If you exchange $1,500 into a new
fund, $500 will be exchanged from shares purchased at each of these three
different times.
While Class II shares are exchanged proportionately, they are redeemed in the
order purchased. In some cases, this means exchanged shares may be CDSC liable
even though they would not be subject to a Contingent Deferred Sales Charge if
they were sold. The tax consequences of a sale or exchange are determined by the
Code and not by the method used by the Fund to transfer shares.
If you exchange your Class II shares for shares of Money Fund II, the time your
shares are held in that fund will count towards the completion of any
Contingency Period.
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
o You may only exchange shares within the SAME CLASS, except as noted below.
o The accounts must be identically registered. You may, however, exchange shares
from a Fund account requiring two or more signatures into an identically
registered money fund account requiring only one signature for all transactions.
PLEASE NOTIFY US IN WRITING IF YOU DO NOT WANT THIS OPTION TO BE AVAILABLE ON
YOUR ACCOUNT. Additional procedures may apply. Please see "Transaction
Procedures and Special Requirements."
o Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact Retirement Plan Services for information on exchanges within
these plans.
o The fund you are exchanging into must be eligible for sale in your state.
o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
o Your exchange may be restricted or refused if you have: (i) requested an
exchange out of the Fund within two weeks of an earlier exchange request,
(ii) exchanged shares out of the Fund more than twice in a calendar quarter,
or (iii) exchanged shares equal to at least $5 million, or more than 1% of
the Fund's net assets. Shares under common ownership or control are combined
for these limits. If you have exchanged shares as described in this
paragraph, you will be considered a Market Timer. Each exchange by a Market
Timer, if accepted, will be charged $5.00. Some of our funds do not allow
investments by Market Timers.
Because excessive trading can hurt Fund performance, operations and
shareholders, we may refuse any exchange purchase if (i) we believe the Fund
would be harmed or unable to invest effectively, or (ii) the Fund receives or
anticipates simultaneous orders that may significantly affect the Fund.
LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES
Certain funds in the Franklin Templeton Funds offer classes of shares not
offered by the Fund, such as "Advisor Class" or "Class Z" shares. Because the
Fund does not currently offer an Advisor Class, you may exchange Advisor Class
shares of any Franklin Templeton Fund for Class I shares of the Fund at Net
Asset Value. If you do so and you later decide you would like to exchange into a
fund that offers an Advisor Class, you may exchange your Class I shares for
Advisor Class shares of that fund. Certain shareholders of Class Z shares of
Franklin Mutual Series Fund Inc. may also exchange their Class Z shares for
Class I shares of the Fund at Net Asset Value.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
METHOD STEPS TO FOLLOW
- ------------------- ------------------------------------------
BY MAIL 1. Send us written instructions signed by
all account owners. If you would like
your redemption proceeds wired to a
bank account, yourinstructions should
include:
o The name, address and telephone number
of the bank where you want the proceeds
sent
o Your bank account number
o The Federal Reserve ABA routing
number
o If you are using a savings and loan
or credit union, the name of the
corresponding bank and the account number
2. Include any outstanding share certificates
for the shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts
may need to send additional documents.
Accounts under court jurisdiction may have
account owners other requirements.
- ------------------- ------------------------------------------
Y PHONE Call Shareholder Services. If you would
like your redemption proceeds wired to a
bank account, other than an escrow account,
you must first sign up for the wire feature.
To sign up, send us written instructions,
with a signature guarantee. To avoid any delay
in processing, the instructions should
include the items listed in "By Mail" above.
Telephone requests will be accepted:
o If the request is $50,000 or less.
Institutional accounts may exceed
$50,000 bycompleting a separate agreement.
Call Institutional Services to receive a
copy.
o If there are no share certificates
issued for the shares you want to
sell or you have already returned
them to the Fund.
o Unless you are selling shares in a Trust
Company retirement plan account.
o Unless the address on your account was
changed by phone within the last 15 days.
If you do not want the ability to
redeem by phone to apply to your
account, please let us know.
------------------- ------------------------------------------
THROUGH YOUR Call your investment representative
DEALER
- ------------------- ------------------------------------------
We will send your redemption check within seven days after we receive your
request in proper form. If you would like the check sent to an address other
than the address of record or made payable to someone other than the registered
owners on the account, send us written instructions signed by all account
owners, with a signature guarantee. We are not able to receive or pay out cash
in the form of currency.
The wiring of redemption proceeds is a special service that we make available
whenever possible for redemption requests of $1,000 or more. If we receive your
request in proper form before 4:00 p.m. Eastern time, your wire payment will be
sent the next business day. For requests received in proper form after 4:00 p.m.
Eastern time, the payment will be sent the second business day. By offering this
service to you, the Fund is not bound to meet any redemption request in less
than the seven day period prescribed by law. Neither the Fund nor its agents
shall be liable to you or any other person if, for any reason, a redemption
request by wire is not processed as described in this section.
If you sell shares you recently purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call Retirement Plan Services.
CONTINGENT DEFERRED SALES CHARGE
For Class I purchases, if you did not pay a front-end sales charge because you
invested $1 million or more or agreed to invest $1 million or more under a
Letter of Intent, a Contingent Deferred Sales Charge may apply if you sell all
or a part of your investment within the Contingency Period. Once you have
invested $1 million or more, any additional Class I investments you make without
a sales charge may also be subject to a Contingent Deferred Sales Charge if they
are sold within the Contingency Period. For any Class II purchase, a Contingent
Deferred Sales Charge may apply if you sell the shares within the Contingency
Period. The charge is 1% of the value of the shares sold or the Net Asset Value
at the time of purchase, whichever is less.
Certain retirement plan accounts opened on or after May 1, 1997, and that
qualify to buy Class I shares without a front-end sales charge may also be
subject to a Contingent Deferred Sales Charge if the retirement plan account is
closed within 365 days of the account's initial purchase in the Franklin
Templeton Funds.
We will first redeem any shares in your account that are not subject to the
charge. If there are not enough of these to meet your request, we will redeem
shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated NUMBER OF SHARES, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.
WAIVERS. We waive the Contingent Deferred Sales Charge for:
o Exchanges
o Account fees
o Sales of shares purchased pursuant to a sales charge waiver
o Sales of shares purchased without a front-end sales charge by certain
retirement plan accounts if (i) the account was opened before May 1, 1997, or
(ii) the Securities Dealer of record received a payment from Distributors of
0.25% or less, or (iii) Distributors did not make any payment in connection
with the purchase, as described under "How Do I Buy Shares? -- Other Payments
to Securities Dealers"
o Redemptions by the Fund when an account falls below the minimum required
account size
o Redemptions following the death of the shareholder or beneficial owner
o Redemptions through a systematic withdrawal plan set up before
February 1,1995
o Redemptions through a systematic withdrawal plan set up on or after February
1, 1995, at a rate of up to 1% a month of an account's Net Asset Value. For
example, if you maintain an annual balance of $1 million in Class I shares,
you can redeem up to $120,000 annually through a systematic withdrawal plan
free of charge. Likewise, if you maintain an annual balance of $10,000 in
Class II shares, $1,200 may be redeemed annually free of charge
o Distributions from individual retirement plan accounts due to death or
disability or upon periodic distributions based on life expectancy
o Tax-free returns of excess contributions from employee benefit plans
o Redemptions by Trust Company employee benefit plans or employee benefit
plans serviced by ValuSelect(R)
o Participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee benefit
plans
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
The Fund intends to pay a dividend at least annually representing substantially
all of its net investment income and any net realized capital gains.
Dividends and capital gains are calculated and distributed the same way for each
class. The amount of any income dividends per share will differ, however,
generally due to the difference in the Rule 12b-1 fees of Class I and Class II.
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution and you will then receive a portion of the price you paid back in
the form of a taxable distribution.
DISTRIBUTION OPTIONS
You may receive your distributions from the Fund in any of these ways:
1. BUY ADDITIONAL SHARES OF THE FUND -- You may buy additional shares of the
same class of the Fund (without a sales charge or imposition of a Contingent
Deferred Sales Charge) by reinvesting capital gain distributions, dividend
distributions, or both. If you own Class II shares, you may also reinvest your
distributions in Class I shares of the Fund. This is a convenient way to
accumulate additional shares and maintain or increase your earnings base.
2. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS -- You may direct your
distributions to buy the same class of shares of another Franklin Templeton Fund
(without a sales charge or imposition of a Contingent Deferred Sales Charge). If
you own Class II shares, you may also direct your distributions to buy 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 SECTIONS 6 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE SAME CLASS
OF THE FUND. You may change your distribution option at any time by notifying us
by mail or phone. Please allow at least seven days before the record date for us
to process the new option. For Trust Company retirement plans, special forms are
required to receive distributions in cash.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
SHARE PRICE
When you buy shares, you pay the Offering Price. This is the Net Asset Value per
share of the class you wish to purchase, plus any applicable sales charges. When
you sell shares, you receive the Net Asset Value per share minus any applicable
Contingent Deferred Sales Charges.
The Net Asset Value we use when you buy or sell shares is the one next
calculated after we receive your transaction request in proper form. If you buy
or sell shares through your Securities Dealer, however, we will use the Net
Asset Value next calculated after your Securities Dealer receives your request,
which is promptly transmitted to the Fund. Your redemption proceeds will not
earn interest between the time we receive the order from your dealer and the
time we receive any required documents.
HOW AND WHEN SHARES ARE PRICED
The Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share 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 the
Fund, determined by the value of the shares of each class. Each class, however,
bears the Rule 12b-1 fees payable under its Rule 12b-1 plan. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. The Fund's assets are
valued as described under "How Are Fund Shares Valued?" in the SAI.
PROPER FORM
An order to buy shares is in proper form when we receive your signed shareholder
application and check. Written requests to sell or exchange shares are in proper
form when we receive written instructions signed by all registered owners, with
a signature guarantee if necessary. We must also receive any outstanding share
certificates for those shares.
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
o Your name,
o The Fund's name,
o The class of shares,
o A description of the request,
o For exchanges, the name of the fund you are exchanging into,
o Your account number,
o The dollar amount or number of shares, and
o A telephone number where we may reach you during the day, or in the evening if
preferred.
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
3) The proceeds are not being sent to the address of record, preauthorized
bank account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You should be
able to obtain a signature guarantee from a bank, broker, credit union, savings
association, clearing agency, or securities exchange or association. A NOTARIZED
SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed, you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form and to send the certificate and assignment form in separate
envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We may also record calls. We will not be
liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or not
implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send us written
instructions, as described elsewhere in this prospectus. If you are unable to
execute a transaction by phone, we will not be liable for any loss. TRUST
COMPANY RETIREMENT PLAN ACCOUNTS. We cannot accept instructions to sell shares
or change distribution options on Trust Company retirement plans by phone. While
you may exchange shares of Trust Company IRA and 403(b) retirement accounts by
phone, certain restrictions may be imposed on other retirement plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call Retirement Plan Services.
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, ALL owners must sign instructions to process transactions and changes to
the account. Even if the law in your state says otherwise, we cannot accept
instructions to change owners on the account unless all owners agree in writing.
If you would like another person or owner to sign for you, please send us a
current power of attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
TRUSTS. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
TYPE OF ACCOUNT DOCUMENTS REQUIRED
---------------------- ------------------------------------------------
CORPORATION Corporate Resolution
---------------------- ------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement
that identify the general partners, or
2. A certification for a partnership
agreement
---------------------- --------------------------------------------------
TRUST 1. The pages from the trust document that
identify the trustees, or
2. A certification for trust
---------------------- --------------------------------------------------
STREET OR NOMINEE ACCOUNTS. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we cannot process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
IMPORTANT INFORMATION IF YOU HAVE AN INVESTMENT REPRESENTATIVE
If there is a Securities Dealer or other representative of record on your
account, we are authorized: (1) to provide confirmations, account statements and
other information about your account directly to your dealer and/or
representative; and (2) to accept telephone and electronic instructions directly
from your dealer or representative including instructions to exchange or redeem
your shares. Electronic instructions may be processed through established
electronic trading systems and programs used by the Fund. Telephone instructions
directly from your representative will be accepted unless you have let us know
that you do not want telephone privileges to apply to your account.
TAX IDENTIFICATION NUMBER
The IRS requires us to have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the shareholder application included with this
prospectus or contact your investment representative. The market value of the
Fund's shares may fluctuate and a systematic investment plan such as this will
not assure a profit or protect against a loss. You may discontinue the program
at any time by notifying Investor Services by mail or phone.
SYSTEMATIC WITHDRAWAL PLAN
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum payment
amount for each withdrawal must be at least $50. For retirement plans subject to
mandatory distribution requirements, the $50 minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account. Once your plan is established, any
distributions paid by the Fund will be automatically reinvested in your account.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
To avoid paying sales charges on money you plan to withdraw within a short
period of time, you may not want to set up a systematic withdrawal plan if you
plan to buy shares on a regular basis. Shares sold under the plan may also be
subject to a Contingent Deferred Sales Charge. Please see "Contingent Deferred
Sales Charge" under "How Do I Sell Shares?"
You may discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us in writing at
least seven business days before the end of the month preceding a scheduled
payment. Please see "How Do I Buy, Sell and Exchange Shares? -- Systematic
Withdrawal Plan" in the SAI for more information.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS(R) system (day or night) at
1-800/247-1753 to:
o obtain information about your account;
o obtain price and performance information about any Franklin Templeton Fund;
o exchange shares between identically registered Franklin accounts; and
o request duplicate statements and deposit slips for Franklin accounts.
You will need the code number for each class to use TeleFACTS(R). The code
number is 413 for Class I and 513 for Class II.
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
o Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
o Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. Institutional investors may also be
required to complete an institutional account application. For more information,
call Institutional Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor
Services, P.O. Box 33030, St. Petersburg, Florida 33733-8030. The Fund and
Distributors are also located at this address. Investment Counsel is located at
500 East Broward Boulevard, Ft. Lauderdale, Florida 33394-3091. You may also
contact us by phone at one of the numbers listed below.
<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
<S> <C> <C>
- ---------------------- ------------------ ------------------------------------
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
(1-800/342-5236) 9:30 a.m. to 5:30 p.m.(Saturday)
Retirement Plan 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Services
Institutional 1-800/321-8563 9:00 a.m. to 8:00 p.m.
Services
TDD (hearing 1-800/851-0637 8:30 a.m. to 8:00 p.m.
impaired)
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
<PAGE>
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1933 ACT -- Securities Act of 1933, as amended.
1940 ACT -- Investment Company Act of 1940, as amended.
BOARD -- The Board of Trustees of the Trust
CD -- Certificate of deposit
CLASS I AND CLASS II -- The Fund offers two classes of shares, designated "Class
I" and "Class II." The two classes have proportionate interests in the Fund's
portfolio. They differ, however, primarily in their sales charge structures and
Rule 12b-1 plans.
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., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
ELIGIBLE GOVERNMENTAL AUTHORITY -- Any state or local government or any
instrumentality, department, authority or agency thereof that has determined the
Fund is a legally permissible investment and that can only buy shares of the
Fund without paying sales charges.
FRANKLIN TEMPLETON FUNDS -- The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Franklin Government Securities Trust, Templeton Capital Accumulator Fund,
Inc., Templeton Variable Annuity Fund, and Templeton Variable Products Series
Fund
FRANKLIN TEMPLETON GROUP -- Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS -- All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds
FT SERVICES -- Franklin Templeton Services, Inc., the Fund's administrator
INVESTMENT COUNSEL -- Templeton Investment Counsel, Inc., the Fund's investment
manager
INVESTOR SERVICES -- Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS -- Internal Revenue Service
LETTER -- Letter of Intent
MARKET TIMERS -- Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange shares
based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.
MOODY'S -- Moody's Investors Service, Inc.
NASD -- National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) -- The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NSCC -- National Securities Clearing Corporation
NYSE -- New York Stock Exchange
OFFERING PRICE -- The public offering price is based on the Net Asset Value per
share of the class and includes the frontend sales charge. The maximum front-end
sales charge is 5.75% for Class I and 1% for Class II.
QUALIFIED RETIREMENT PLANS -- An employer sponsored pension or profit--sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
RESOURCES -- Franklin Resources, Inc.
SAI -- Statement of Additional Information
S&P -- Standard & Poor's Ratings Service, a division of The McGraw--Hill
Companies, Inc.
SEC -- U.S. Securities and Exchange Commission
SECURITIES DEALER -- A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
SEP -- An employer sponsored simplified employee pension plan established under
section 408(k) of the Code
TELEFACTS(R) -- Franklin Templeton's automated customer servicing system
TRUST COMPANY -- Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. -- United States
WE/OUR/US -- Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
<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>
------------------------------ ------------------- ------------------------- -------------------------------
o Individual Individual o Trust, Estate, Trust, Estate, or
or Pension Plan Pension Plan Trust
Trust
------------------------------- ------------------- ------------------------- -------------------------------
o Joint Individual Owner who o Corporation, Corporation,
will be Partnership, or Partnership, or
paying tax other organization other organization
or
first-named
individual
------------------------------- ------------------- ------------------------- -------------------------------
o Unif. Gift/ Minor o Broker nominee Broker nominee
WTransfer to Minor
------------------------------- ------------------- ------------------------- -------------------------------
o Sole Proprietor Owner of
business
------------------------------- ------------------- ------------------------- -------------------------------
o Legal Guardian Ward,
Minor, or
Incompetent
------------------------------- ------------------- ------------------------- -------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient" box
if you are an exempt recipient. Exempt recipients include:
A corporation
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)
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.
<PAGE>
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as a
non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. You are an "Exempt
Foreign Person" if you are not (1) a citizen or resident of the U.S., or (2) a
U.S. corporation, partnership, estate, or trust. In the case of an individual,
an "Exempt Foreign Person" is one who has been physically present in the U.S.
for less than 31 days during the current calendar year. An individual who is
physically present in the U.S. for at least 31 days during the current calendar
year will still be treated as an "Exempt Foreign Person," provided that the
total number of days physically present in the current calendar year and the two
preceding calendar years does not exceed 183 days (counting all of the days in
the current calendar year, only one-third of the days in the first preceding
calendar year and only one-sixth of the days in the second preceding calendar
year). In addition, lawful permanent residents or green card holders may not be
treated as "Exempt Foreign Persons." If you are an individual or an entity, you
must not now be, or at this time expect to be, engaged in a U.S. trade or
business with respect to which any gain derived from transactions effected by
the Fund/Payer during the calendar year is effectively connected to the U.S. (or
your transactions are exempt from U.S. taxes under a tax treaty).
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual, provide
your permanent address. If you are a partnership or corporation, provide the
address of your principal office. If you are an estate or trust, provide the
address of your permanent residence or the principal office of any fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and backup
withholding may also begin unless you certify to the Fund/Payer that (1) the
taxpayer identification number you have given is correct, and (2) the Internal
Revenue Service has not notified you that you are subject to backup withholding
because you failed to report certain interest or dividend income. You may use
Form W-9, "Payer's Request for Taxpayer Identification Number and
Certification," to make these certifications. If an account is no longer active,
you do not have to notify a Fund/Payer or broker of your change in status unless
you also have another account with the same Fund/Payer that is still active. If
you receive interest from more than one Fund/Payer or have dealings with more
than one broker or barter exchange, file a certificate with each. If you have
more than one account with the same Fund/Payer, the Fund/Payer may require you
to file a separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for three
calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
<PAGE>
RESOLUTION SUPPORTING AUTHORITY OF
CORPORATE /ASSOCIATION SHAREHOLDER
- --------------------------------------------------------------------------
INSTRUCTION:
It will be necessary for corporate/association shareholders to provide a
certified copy of a resolution or other certificate of authority supporting the
authority of designated officers of the corporation/association to issue oral
and written instruction on behalf of the corporation/association for the
purchase, sale (redemption), transfer and/or exchange of Franklin Templeton Fund
shares. You may use the following form of resolution or you may prefer to use
your own.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
____________ of ______________ a ________________
Title Corporate Name Type of Organization organized under the laws of the State
of ________________ and that the following is a true and correct copy of a
resolution adopted State copy of a resolution adopted by the Board of Directors
by unanimous written consent (a copy of which is attached) or at a meeting duly
called and held on _______________________, 19___.
"RESOLVED, that
Name of Corporation/Association (the "Company") is authorized to invest the
Company's assets in one or more investment companies (mutual funds) whose shares
are distributed by Franklin/Templeton Distributors, Inc. ("Distributors"). Each
such investment company, or series thereof, is referred to as a "Franklin
Templeton Fund" or "Fund."
FURTHER RESOLVED, that any (enter number) _____________ of the following
officers of this Company (acting alone, if one, or acting together, if more
than one) is/are authorized to issue oral or written instructions (including
the signing of drafts in the case of draft accessed money fund accounts) on
behalf of the Company for the purchase, sale (redemption), transfer and/or
exchange of Fund shares and to execute any Fund application(s) and
agreements pertaining to Fund shares registered or to be registered to the
Company (referred to as a "Company Instruction"); and, that this authority
shall continue until Franklin/Templeton Investor Services, Inc. ("Investor
Services") receives written notice of revocation or amendment delivered by
registered mail. The Company's officers authorized to act on behalf of the
Company under this resolution are (enter officer titles only):
______________________________(referred to as the "Authorized Officers").
FURTHER RESOLVED, that Investor Services may rely on the most recently
provided incumbency certificate delivered by the Company to Investor
Services to identify those individuals who are the incumbent Authorized
Officers and that Investor Services shall have no independent duty to
determine if there has been any change in the individuals serving as
incumbent Authorized Officers.
FURTHER RESOLVED, that the Company ("Indemnitor") undertakes and agrees to
indemnify and hold harmless Distributors, each affiliate of Distributors,
each Franklin Templeton Fund and their officers, employees and agents
(referred to hereafter collectively as the "Indemnitees") from and against
any and all liability, loss, suits, claims, costs, damages and expenses of
whatever amount and whatever nature (including without limitation reasonable
attorneys' fees, whether for consultation and advice or representation in
litigation at both the trial and appellate level) any indemnitee may sustain
or incur by reason of, in consequence of, or arising from or in connection
with any action taken or not taken by an Indemnitee in good faith reliance
on a Company Instruction given as authorized under this resolution."
The undersigned further certifies that the below named persons, whose signatures
appear opposite their names, are the incumbent Authorized Officers (as that term
is defined in the above resolution) who have been duly elected to the office
identified beside their name(s) (attach additional list if necessary).
<PAGE>
X
Name/title (please print or type) Signature
X
Name/title (please print or type) Signature
X
Name/title (please print or type) Signature
X
Name/title (please print or type) Signature
Certified from minutes
X
Signature
Name/title (please print or type)
CORPORATE SEAL (if appropriate)
<PAGE>
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<PAGE>
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<PAGE>
FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST -- 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.
- ----------------------------------------------------------------------------
GLOBAL GROWTH
- -------------------------------------------------------------------------------
Franklin Global Health Care Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller
Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton
Global Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High
Income Currency Fund
Templeton Americas
Government Securities Fund
GROWTH
Franklin Blue Chip Fund Franklin California Growth Fund Franklin DynaTech Fund
Franklin Equity Fund Franklin Gold Fund Franklin Growth Fund Franklin MidCap
Growth Fund Franklin Small Cap Growth Fund Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund Franklin Convertible Securities Fund Franklin Equity Income
Fund Franklin Income Fund Franklin MicroCap Value Fund Franklin Natural
Resources Fund Franklin Real Estate Securities Fund Franklin Rising Dividends
Fund Franklin Strategic Income Fund Franklin Utilities Fund Franklin Value Fund
Mutual Beacon Fund Mutual Qualified Fund Mutual Shares Fund Templeton American
Trust, Inc.
FUND ALLOCATOR SERIES
Franklin Templeton
Conservative Target Fund
Franklin Templeton
Moderate Target Fund
Franklin Templeton
Growth Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment
Grade Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR CORPORATIONS
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
- -----------------------------------------------------------------------------
+3
- ----------------------------------------------------------------------------
Franklin Valuemark(R)
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.
+Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC.
[LOGO] Printed on recycled paper
<PAGE>
TEMPLETON GLOBAL
INFRASTRUCTURE FUND
P.O. Box 33031
ST. PETERSBURG, FL 33733-8031
-----------------------------
[LOGO] Printed on recycled paper
<PAGE>
TEMPLETON AMERICAS GOVERNMENT SECURITIES FUND
PROSPECTUS
<PAGE>
PROSPECTUS & APPLICATION
INVESTMENT STRATEGY: Templeton
GLOBAL INCOME Americas
Government
Securities Fund
- ---------------------------------------------------------
AUGUST 1, 1997
[LOGO]
This prospectus describes Templeton Americas Government Securities Fund (the
"Fund"). It contains information you should know before investing in the Fund.
Please keep it for future reference.
THE FUND MAY ENGAGE IN VARIOUS INVESTMENT TECHNIQUES (SUCH AS BORROWING MONEY
FOR INVESTMENT PURPOSES AND INVESTING UP TO 15% OF ITS ASSETS IN ILLIQUID
SECURITIES, INCLUDING UP TO 10% OF ITS ASSETS IN RESTRICTED SECURITIES) WHICH
MAY INVOLVE SIGNIFICANT RISKS AND INCREASED FUND EXPENSES. YOU SHOULD CAREFULLY
CONSIDER THESE RISKS BEFORE INVESTING. SUBSTANTIALLY ALL THE FUND'S ASSETS AT
ANY ONE TIME MAY BE INVESTED IN NON-INVESTMENT GRADE DEBT INSTRUMENTS (I.E.,
JUNK BONDS) THAT INVOLVE GREATER RISKS, INCLUDING THE RISK OF DEFAULT, AND THAT
ARE PREDOMINANTLY SPECULATIVE. YOU SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE
INVESTING. THE FUND MAY NOT BE SUITABLE FOR ALL INVESTORS. PLEASE SEE "WHAT ARE
THE FUND'S POTENTIAL RISKS?"
The Fund is a non-diversified series of Templeton Global Investment Trust (the
"Trust"), an open-end management investment company.
The Trust has a Statement of Additional Information ("SAI") dated August 1,
1997, which may be amended from time to time. It includes more information about
the Fund's procedures and policies. It has been filed with the SEC and is
incorporated by reference into this prospectus. For a free copy or a larger
print version of this prospectus, call 1-800/DIAL BEN or write the Fund at its
address.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TEMPLETON AMERICAS
GOVERNMENT SECURITIES
FUND
- --------------------------------------------------------------------------------
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE, JURISDICTION OR COUNTRY IN WHICH THE OFFERING IS NOT AUTHORIZED. NO
SALES REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. FURTHER INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.
<TABLE>
<CAPTION>
<S> <C> <C>
TABLE OF CONTENTS
TEMPLETON
AMERICAS ABOUT THE FUND
GOVERNMENT
Securities Fund Expense Summary............................ 2
-----------------------
Financial Highlights....................... 3
August 1, 1997
How Does the Fund Invest Its Assets?....... 3
When reading this
prospectus, you What Are the Fund's Potential Risks?....... 18
will see certain terms
beginning with capital Who Manages the Fund?...................... 25
letters. This means the
term is explained in How Does the Fund Measure Performance?..... 27
our glossary section.
How Taxation Affects the Fund and Its Shareholders .. 28
How Is the Trust Organized?................ 28
ABOUT YOUR ACCOUNT
How Do I Buy Shares?....................... 29
May I Exchange Shares for Shares of Another Fund? 35
How Do I Sell Shares?...................... 38
What Distributions Might I Receive From the Fund? 42
Transaction Procedures and Special Requirements 43
Services to Help You Manage Your Account... 48
What If I Have Questions About My Account?. 50
GLOSSARY
Useful Terms and Definitions............... 51
APPENDIX
Corporate Bond Ratings..................... 54
</TABLE>
700 Central Avenue
P.O. Box 33030
St. Petersburg, FL
33733-8030
1-800/DIAL BEN
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Fund. It is based on the Fund's historical expenses, after fee waivers and
expense limitations, for the fiscal year ended March 31, 1997. The Fund's actual
expenses may vary.
<TABLE>
<CAPTION>
A. SHAREHOLDER TRANSACTION EXPENSES(+)
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of Offering Price) 4.25%(++)
Deferred Sales Charge NONE (+++)
Exchange Fee (per transaction) $5.00*
B. ANNUAL FUND OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after fee waiver) 0.00%**
Rule 12b-1 Fees 0.35%***
Other Expenses (after fee waiver and expense
reimbursement) 0.90%**
----
Total Fund Operating Expenses (after fee waiver
and expense reimbursement) 1.25%**
-----
C. EXAMPLE
</TABLE>
Assume the Fund's annual return is 5%, operating expenses are as described
above, and you sell your shares after the number of years shown. These are
the projected expenses for each $1,000 that you invest in the Fund.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C>
------------ -------------- -------------- ------------
$55**** $ 80 $ 108 $ 187
</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
Fund pays its operating expenses. The effects of these expenses are reflected in
its Net Asset Value or dividends and are not directly charged to your account.
(+)IF YOUR TRANSACTION IS PROCESSED THROUGH YOUR SECURITIES DEALER, YOU MAY BE
CHARGED A FEE BY YOUR SECURITIES DEALER FOR THIS SERVICE.
(++)THERE IS NO FRONT-END SALES CHARGE IF YOU INVEST $1 MILLION OR MORE.
(+++)A CONTINGENT DEFERRED SALES CHARGE OF 1% MAY APPLY TO PURCHASES OF $1
MILLION OR MORE IF YOU SELL THE SHARES WITHIN ONE YEAR. A CONTINGENT DEFERRED
SALES CHARGE MAY ALSO APPLY TO PURCHASES BY CERTAIN RETIREMENT PLANS THAT
QUALIFY TO BUY SHARES WITHOUT A FRONT-END SALES CHARGE. SEE "HOW DO I SELL
SHARES? -- CONTINGENT DEFERRED SALES CHARGE" FOR DETAILS.
*$5.00 FEE IS ONLY FOR MARKET TIMERS. WE PROCESS ALL OTHER EXCHANGES WITHOUT A
FEE.
**FOR THE PERIOD SHOWN, INVESTMENT COUNSEL AND FT SERVICES HAD AGREED IN ADVANCE
TO WAIVE THEIR RESPECTIVE MANAGEMENT AND ADMINISTRATION FEES AND TO MAKE CERTAIN
PAYMENTS TO REDUCE THE FUND'S EXPENSES. WITHOUT THIS REDUCTION, MANAGEMENT FEES
WOULD HAVE BEEN 0.60%, OTHER EXPENSES WOULD HAVE BEEN 1.84% AND TOTAL FUND
OPERATING EXPENSES WOULD HAVE BEEN 2.79%. AFTER JULY 31, 1998, THIS ARRANGEMENT
MAY END AT ANY TIME UPON NOTICE TO THE BOARD.
***THE COMBINATION OF FRONT-END SALES CHARGES AND RULE 12B-1 FEES COULD CAUSE
LONG-TERM SHAREHOLDERS TO PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGE PERMITTED UNDER THE NASD'S RULES.
****ASSUMES A CONTINGENT DEFERRED SALES CHARGE WILL NOT APPLY.
<PAGE>
FINANCIAL HIGHLIGHTS
This table summarizes the Fund's financial history. The information has been
audited by McGladrey & Pullen, LLP, the Fund's independent auditors. Their audit
report covering each of the three years since the Fund's commencement of
operations on June 27, 1994, appears in the financial statements in the Fund's
Annual Report to Shareholders for the fiscal year ended March 31, 1997. The
Annual Report to Shareholders also includes more information about the Fund's
performance. For a free copy, please call Fund Information.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 1997 1996 1995(1)
- -------------------------------------------------------- -------------- --------------- ----------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the
period)
Net Asset Value, beginning of period $ 10.20 $ 9.59 $ 10.00
--------- --------- --------
Income from investment operations:
Net investment income .74 .75 .30
Net realized and unrealized gain (loss) .85 .71 (.43)
--------- --------- --------
Total from investment operations 1.59 1.46 (.13)
--------- --------- --------
Distributions:
Dividends from net investment income (.77) (.69) (.28)
Distributions from net realized gains (.38) (.16) --
--------- --------- -------
Total distributions (1.15) (.85) (.28)
--------- --------- --------
Change in net asset value .44 .61 (.41)
--------- --------- --------
Net asset value, end of period $ 10.64 $ 10.20 $ 9.59
========= ========= ========
TOTAL RETURN(2) 16.23% 15.49% (1.33)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 5,627 $ 3,540 $ 2,826
Ratio of expenses to average net assets 2.79% 4.98% 6.49%(3)
Ratio of expenses, net of reimbursement, to
average net assets 1.25% 1.25% 1.25%(3)
Ratio of net investment income to average
net assets 7.16% 7.47% 5.07%(3)
Portfolio turnover rate 275.02% 163.57% --
</TABLE>
(1)FOR THE PERIOD JUNE 27, 1994 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1995.
(2)TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
(3)ANNUALIZED.
HOW DOES THE FUND INVEST ITS ASSETS?
THE FUND'S INVESTMENT OBJECTIVES
The primary investment objective of the Fund is a high level of current income.
Total return is a secondary objective. The Fund seeks to achieve its objectives
by investing at least 65% of its total assets in debt securities issued or
guaranteed by governments, government agencies, political subdivisions, and
other government entities ("Government Entities") of countries located in the
Western Hemisphere (i.e., North, South and Central America and the surrounding
waters). The Fund's investment objectives 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 the
Fund's investment objectives will be achieved.
TYPES OF SECURITIES IN WHICH THE FUND MAY INVEST
Investment Counsel and Advisers will actively manage the Fund's assets in
response to market, political and general economic conditions, and will seek to
adjust the Fund's investments based on their perception of which investments
would best enable the Fund to achieve its investment objectives. In their
analysis, Investment Counsel and Advisers will consider various factors,
including their views regarding interest and currency exchange rate changes and
credit risks. Such professional investment management may be attractive to
investors, particularly individuals, who lack the time, information, capability
or inclination to effect such an investment strategy directly.
The Fund's investments in debt obligations of Government Entities will consist
of (i) fixed income or floating rate bonds, notes, bills and debentures issued
or guaranteed by governments, governmental agencies or instrumentalities, or
government owned, controlled or sponsored entities (including central banks
located in the Western Hemisphere), including warrants for any such obligations,
and (ii) debt obligations issued by entities organized and operated for the
purpose of restructuring the investment characteristics of securities issued by
any of the entities described above, including indexed or currency-linked
securities. Such obligations may be issued in either registered or bearer form.
Many of these securities are trading at substantial discounts to their par value
and it is expected that initially a significant portion of the Fund's assets
will be invested in securities purchased at a discount to par value. Such
securities involve special tax considerations which may adversely affect the
Fund. See "What Are the Fund's Potential Risks? -- Tax Considerations."
The Fund may invest up to 35% of its total assets in securities of corporations
and financial institutions in countries located in the Western Hemisphere,
including corporate and commercial obligations such as medium-term notes and
commercial paper, which may be indexed to foreign currency exchange rates.
Indexed notes and commercial paper typically provide that the principal amount
is adjusted upwards or downwards (but not below zero) at maturity to reflect
fluctuations in the exchange rate between two currencies during the period the
obligation is outstanding, depending on the terms of the specific security. In
selecting the two currencies, Investment Counsel will consider the correlation
and relative yields of various currencies. The Fund will purchase an indexed
obligation using the currency in which it is denominated and, at maturity, will
receive interest and principal payments thereon in that currency. The amount of
principal payable by the issuer at maturity, however, will vary (i.e., increase
or decrease) in response to the change (if any) in the exchange rate between the
two specified currencies during the period from the date the instrument is
issued to its maturity date. The potential for realizing gains as a result of
changes in foreign currency exchange rates may enable the Fund to hedge the
currency in which the obligation is denominated (or to effect cross-hedges
against other currencies) against a decline in the U.S. dollar value of
investments denominated in foreign currencies while generating interest income
on the obligation. Indexed notes, however, involve the risk of loss (i.e.,
reduced principal payable on the note) in the event that exchange rate movements
are not accurately predicted. Such obligations may be deemed liquid investments
if they can be disposed of promptly in the ordinary course of business at a
value reasonably close to that used in the calculation of the Fund's Net Asset
Value per share; otherwise, they will be deemed illiquid investments subject to
the restrictions set forth in the SAI under "Investment Restrictions."
The Fund may invest in securities denominated in or indexed to the currency of
one country in the Western Hemisphere although issued by a governmental entity,
corporation or financial institution of another such country. For example, the
Fund may invest in a Mexican peso denominated obligation issued by a U.S.
corporation. Such investments involve credit risks associated with the issuer
and currency risks associated with the currency in which the obligation is
denominated.
The Fund also may invest in participations in, or bonds and notes backed by,
pools of mortgage, credit card, automobile or other types of receivables. These
investments are described more fully below under "Mortgage-Backed and
Asset-Backed Securities." Because of liquidity and valuation concerns relating
to investments in certain derivative mortgage-backed securities, investments in
such securities will be restricted as discussed below under "Derivative
Mortgage-Backed Securities."
The Fund may invest a portion of its assets in debt instruments issued by
Western Hemisphere companies engaged in the financial services industry,
including banks, thrift institutions, insurance companies, securities firms and
holding companies of any of the foregoing. Such investments may include CDs,
time deposits, bankers' acceptances, and other obligations issued by such
entities, as well as repurchase agreements entered into with such entities.
The Fund has established no rating criteria for the debt securities in which it
may invest and such securities may not be rated at all for creditworthiness.
Investments in debt securities rated in the medium to lower rating categories of
nationally recognized statistical rating organizations such as S&P and Moody's
or in unrated securities of comparable quality involve special risks which are
described more fully below under "What Are the Fund's Potential Risks? --
High-Risk Debt Securities." See the Appendix for a description of the various
bond rating categories.
The Fund does not emphasize short-term trading profits and usually expects to
have an annual portfolio turnover rate generally not exceeding 300%. The Fund's
portfolio turnover rate for the fiscal year ended March 31, 1997 was 275.02%. As
a result of its sensitivity to U.S. Treasury price movements, the emerging
market debt of the Latin American countries in which the Fund is invested
experienced rate volatility during this period. Investment Counsel responded to
this volatility by adjusting the overall duration of the Fund's portfolio which
resulted in a high turnover rate. High portfolio turnover increases transaction
costs and may increase the amount of the Fund's short-term capital gain, which
is taxed as ordinary income when distributed to shareholders. See "Additional
Information on Distributions and Taxes" in the SAI.
When Investment Counsel believes that market conditions warrant, the Fund may
adopt a temporary defensive position and may invest up to 100% of its total
assets in the following money market securities, denominated in U.S. dollars or
in the currency of any foreign country, 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 Investment Counsel; obligations (including CDs, time deposits and
bankers' acceptances) of banks; and repurchase agreements with banks and
broker-dealers with respect to such securities. When deemed appropriate by
Investment Counsel, the Fund may invest cash balances in repurchase agreements
and other money market investments to maintain liquidity in an amount to meet
expenses or for day-to-day operating purposes.
BRADY BONDS. The Fund may invest a portion of its assets 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 Plan debt restructurings have been implemented in a number of countries to
date including Argentina, Bolivia, Brazil, Bulgaria, Costa Rica, Croatia, the
Dominican Republic, Ecuador, Ivory Coast, Jordan, the former Yugoslav Republic
of Macedonia, Mexico, Nigeria, Panama, Peru, the Philippines, Poland, Russia,
Slovenia, Uruguay, Venezuela and Vietnam (collectively, the "Brady Countries").
In addition, some countries have reached an agreement in principle to
restructure their bank debt according to a Brady Plan and other countries are
expected to negotiate similar restructurings in the future. In some cases
countries have restructured or are planning to restructure their external bank
debt into new loans or promissory notes.
Many of the Brady Bonds have been issued relatively recently, and, accordingly,
do not have a long payment history. They may be collateralized or
uncollateralized and issued in various currencies (although most are U.S.
dollar-denominated) and they have been actively traded in the over-the-counter
secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate par
bonds or floating rate discount bonds, are generally collateralized in full as
to principal by U.S. Treasury zero coupon bonds which have the same maturity as
the Brady Bonds. Interest payments on these Brady Bonds generally are
collateralized on a one-year or longer rolling-forward basis by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of interest payments or, in the case of floating rate bonds,
initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest
payments. 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"). There can be no
assurance that Brady Bonds in which the Fund may invest will not be subject to
restructuring arrangements or to requests for new credit, which may cause the
Fund to suffer a loss of interest or principal on any of its holdings.
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 Venezuelan Brady Bonds
and 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.
In light of the residual risk of Brady Bonds and, among other factors, the
history of defaults with respect to commercial bank loans by public and private
entities of countries issuing Brady Bonds, investments in Brady Bonds are
generally considered speculative. In addition, many Brady Bonds currently are
rated below investment grade.
OTHER DEBT SECURITIES OF GOVERNMENT ENTITIES. In addition to Brady Bonds, the
Fund may invest in debt obligations of Government Entities, including, but not
limited to, restructured external debt that has not undergone a Brady-style debt
exchange, and internal government debt such as Mexican Treasury Bills known as
Certificados de Tesoreria ("CETES"), Argentine Bonos del Tesoro ("BOTE") and
Bonos de Inversion y Crecimiento-Quinta Serie ("BIC V"), and Venezuelan zero
coupon notes.
STRUCTURED INVESTMENTS. Included among the issuers of Western Hemisphere debt
securities in which the Fund may invest are entities organized and operated
solely for the purpose of restructuring the investment characteristics of
various securities. These entities are typically organized by investment banking
firms which receive fees in connection with establishing each entity and
arranging for the placement of its securities. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, of specified instruments (such as Brady Bonds) and the issuance by that
entity of one or more classes of securities ("structured investments") backed
by, or representing interests in, the underlying instruments. The cash flow on
the underlying instruments may be apportioned among the newly issued structured
investments to create securities with different investment characteristics such
as varying maturities, payment priorities or interest rate provisions. The
extent of the payments made with respect to structured investments is dependent
on the extent of the cash flow on the underlying instruments. Because structured
investments of the type in which the Fund anticipates investing typically
involve no credit enhancement, their credit risk will generally be equivalent to
that of the underlying instruments.
The Fund is permitted to invest in a class of structured investments that is
either subordinated or unsubordinated to the right of payment of another class.
Subordinated structured investments typically have higher yields and present
greater risks than unsubordinated structured investments. Although the Fund's
purchase of subordinated structured investments would have a similar economic
effect to that of borrowing against the underlying securities, the purchase will
not be deemed to be leverage for purposes of the limitations placed on the
extent of the Fund's assets that may be used for borrowing activities. See
"Borrowing."
Certain issuers of structured investments may be deemed to be "investment
companies" as defined in the 1940 Act. The Fund's investment in these structured
investments may be limited by investment restrictions contained in the SAI.
Structured investments are typically sold in private placement transactions, and
there currently is no active trading market for structured investments.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Fund may invest without limit
in mortgage-backed securities issued or guaranteed by Government Entities, and
may invest up to 35% of its total assets in privately issued mortgage-backed and
asset-backed securities. Mortgage-backed securities are securities that directly
or indirectly represent an interest in, or are backed by and payable from,
mortgage loans secured by real property. Asset-backed securities generally
consist of structures similar to mortgage-backed securities, except that the
underlying asset pools are comprised of other types of financial assets such as
credit card, automobile or other types of receivables and commercial loans.
Mortgage-backed and asset-backed securities are issued in structured financing
wherein the sponsor securitizes the underlying mortgage loans or financial
assets in order to liquify the underlying assets or to achieve certain other
financial goals. The special considerations and risks inherent in investments in
mortgage-backed and asset-backed securities are discussed more fully below.
The mortgage-backed securities in which the Fund may invest will primarily be
guaranteed by the Government National Mortgage Association ("GNMA") or issued by
the Federal National Mortgage Association ("FNMA") or the Federal Home Loan
Mortgage Corporation ("FHLMC"). Certain of the asset-backed securities in which
the Fund will invest may be guaranteed by the Small Business Administration
("SBA") or issued in programs originated by the Resolution Trust Corporation
("RTC"). GNMA, FNMA, FHLMC, SBA and RTC are agencies or instrumentalities of the
U.S.
Certain of the mortgage-backed and asset-backed securities in which the Fund may
invest will be issued by private issuers. Private issuers include originators of
or investors in mortgage loans and receivables such as savings and loan
associations, mortgage bankers, commercial banks, investment banks, finance
companies and special purpose finance subsidiaries of any of the above.
Securities issued by private issuers may be subject to certain types of credit
enhancements issued in respect of those securities. Such credit enhancements may
include insurance policies, bank letters of credit, guarantees by third parties
or protections afforded by the structure of a particular transaction (e.g., the
use of reserve funds, over-collateralization or the issuance of subordinated
securities as protection for more senior securities being purchased by the
Fund). In purchasing securities for the Fund, Investment Counsel and Advisers
will take into account not only the creditworthiness of the issuer of the
securities but also the creditworthiness of the provider of any external credit
enhancement of the securities.
The Fund may invest in pass-through mortgage-backed securities that represent
ownership interests in a pool of mortgages on single-family or multi-family
residences. Such securities represent interests in pools of residential mortgage
loans originated by U.S. governmental or private lenders and guaranteed, to the
extent provided in such securities, by the U.S. government, one of its agencies
or instrumentalities or by private guarantors. Such securities, which are
ownership interests in the underlying mortgage loans, differ from conventional
debt securities, which provide for periodic payment of interest in fixed amounts
(usually semiannually) and principal payments at maturity or on specified call
dates. Mortgage pass-through securities provide for monthly payments that
"pass-through" the monthly interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans, net
of any fees paid to the guarantor of such securities and the servicer of the
underlying mortgage loans. The Fund may also invest in collateralized mortgage
obligations ("CMOs") which are debt obligations collateralized by mortgage loans
or mortgage pass-through securities.
The yield characteristics of mortgage-backed and asset-backed securities differ
from traditional corporate debt securities. Among the major differences are that
interest and principal payments are made more frequently, usually monthly, and
that principal may be prepaid at any time because the underlying mortgage loans
or other assets generally may be prepaid at any time. As a result, if the Fund
purchases such a security at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity.
Conversely, if the Fund purchases these securities at a discount, faster than
expected prepayments will increase, while slower than expected prepayments will
reduce, yield to maturity.
Prepayments on a pool of mortgage loans are influenced by a variety of economic,
geographic, social and other factors, including changes in mortgagors' housing
needs, job transfers, unemployment, mortgagors' net equity in the mortgaged
properties and servicing decisions. Generally, however, prepayments on fixed
rate mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Accordingly, amounts
available for reinvestment by the Fund are likely to be greater during a period
of declining interest rates and, as a result, likely to be reinvested at lower
interest rates than during a period of rising interest rates. Although
asset-backed securities generally are less likely to experience substantial
prepayments than are mortgage-backed securities, certain of the factors that
affect the rate of prepayments on mortgage-backed securities also affect the
rate of prepayments on asset-backed securities. However, during any particular
period, the predominant factors affecting prepayment rates on mortgage-backed
and asset-backed securities may be different. Mortgage-backed and asset-backed
securities may decrease in value as a result of increases in interest rates and
may benefit less than other fixed income securities from declining interest
rates because of the risk of prepayment.
The Fund's yield will also be affected by the yields on instruments in which the
Fund is able to reinvest the proceeds of payments and prepayments. Accelerated
prepayments on securities purchased by the Fund at a premium also impose a risk
of loss of principal because the premium may not have been fully amortized at
the time the principal is repaid in full.
DERIVATIVE MORTGAGE-BACKED SECURITIES. The Fund may invest up to 25% of its
total assets in various derivative mortgage-backed securities, which are
synthetic securities designed to be highly sensitive to certain types of
interest rate and principal prepayment scenarios. Investment Counsel and
Advisers will seek to manage these risks (and potential benefits) by investing
in a variety of such securities and may seek to hedge such investments with the
use of financial futures contracts. See below under "Futures Contracts." These
derivative securities primarily consist of some form of stripped mortgage-backed
securities ("SMBS") that commonly involve different classes of securities that
receive disproportionate amounts of the interest and principal distributions on
a pool of mortgage assets.
SMBSs are typically issued by the same types of issuers as are mortgage-backed
securities. The structure of SMBSs, however, is different. A common variety of
SMBS involves a class (the principal-only or PO class) that receives some of the
interest and most of the principal from the underlying assets, while the other
class (the interest-only or IO class) receives most of the interest and the
remainder of the principal. In the most extreme case, the IO class receives only
interest, while the PO class receives only principal. The yield to maturity on
an IO class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying assets, and a rapid rate of principal
payments in excess of that considered in pricing the securities will have a
material adverse effect on an IO security's yield to maturity. If the underlying
mortgage assets experience greater than anticipated payments of principal, the
Fund may fail to recoup fully its initial investment in IOs. In addition, there
are certain types of IOs which represent the interest portion of a particular
class as opposed to the interest portion of the entire pool. The sensitivity of
these types of IOs to interest rate fluctuations may be increased because of the
characteristics of the principal portion to which they relate. The impact of IOs
on the Fund's portfolio may be offset to some degree by investments in
mortgage-backed securities and inverse floaters (floating rate securities the
interest rate of which is adjusted up or down inversely to changes in a
specified index). As interest rates fall, presenting a greater risk of
unanticipated prepayments of principal, the negative effect on the Fund because
of its holdings of IOs should be diminished somewhat because of the increased
yield on the inverse floating rate CMOs or the increased appreciation on the
fixed rate securities. Under certain interest rate scenarios, the Fund may
decide to retain investments in IOs or inverse floaters yielding less than
prevailing interest rates in order to avoid capital losses on the sale of such
investments.
The Fund may also combine IOs and IO-related derivative mortgage products with
LIBOR-based inverse floaters (LIBOR being the London interbank offered rate). A
LIBOR-based inverse floater is a floating rate security the interest rate of
which is adjusted up or down inversely to changes in LIBOR; as LIBOR decreases,
the interest rate paid by the inverse floater would increase, and vice versa.
Depending on the amount of leverage built into the inverse floater, the yield
could vary in excess of the change in LIBOR because of the leverage built into
the inverse floater formula. The yield on an inverse floater varies inversely
with interest rates because as LIBOR decreases, the interest payable on the
inverse floater increases. The converse is true, of course, when LIBOR
increases. When an inverse floater is combined with an IO or IO-type derivative
product, the result is a synthetic security that tends to provide a somewhat
less volatile yield over a wide range of interest rate and prepayment rate
scenarios.
New types of mortgage-backed and asset-backed securities, derivative securities
and hedging instruments are developed and marketed from time to time. Consistent
with its investment objectives, policies and restrictions, the Fund may, upon
disclosure to shareholders, invest in such new types of securities and
instruments that Investment Counsel and/or Advisers believe may assist the Fund
in achieving its investment objectives.
The staff of the SEC has taken the position (which has been adopted as an
investment policy of the Fund) that the determination of whether a particular
U.S. government issued IO or PO that is backed by fixed-rate mortgages is liquid
may be made by Investment Counsel or Advisers under guidelines and standards
established by the Trust's Board. Such a security may be deemed liquid if it can
be disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of the Fund's Net Asset Value per share.
The SEC's staff also has taken the position that all other IOs and POs are
illiquid securities which are subject to the Fund's limitation on investments in
illiquid securities, as set forth in the SAI under "Investment Restrictions."
OTHER INVESTMENT POLICIES OF THE FUND
The Fund is also authorized to use the various securities and investment
techniques described below. Although these strategies are regularly used by some
investment companies and other institutional investors in various markets, some
of these strategies cannot at the present time be used to a significant extent
by the Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
BORROWING. The Fund may borrow up to one-third of the value of its total assets
from banks to increase its holdings of portfolio securities. Under the 1940 Act,
the Fund is required to maintain continuous asset coverage of 300% with respect
to such borrowings and to sell (within three days) sufficient portfolio holdings
to restore such coverage if it should decline to less than 300% due to market
fluctuations or otherwise, even if such liquidations of the Fund's holdings may
be disadvantageous from an investment standpoint. Leveraging by means of
borrowing may exaggerate the effect of any increase or decrease in the value of
portfolio securities on the Fund's Net Asset Value, and money borrowed will be
subject to interest and other costs (which may include commitment fees and/or
the cost of maintaining minimum average balances) which may or may not exceed
the income received from the securities purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of the Fund's total
assets to generate income for the purpose of offsetting operating expenses. Such
loans must be secured by collateral (consisting of any combination of cash, U.S.
government securities or irrevocable letters of credit) in an amount at least
equal (on a daily marked-to-market basis) to the current market value of the
securities loaned. The Fund may terminate the loans at any time and obtain the
return of the securities loaned within five business days. The Fund will
continue to receive any interest or dividends paid on the loaned securities and
will continue to retain any voting rights with respect to the securities. In the
event that the borrower defaults on its obligation to return borrowed
securities, because of insolvency or otherwise, the Fund could experience delays
and costs in gaining access to the collateral and could suffer a loss to the
extent that the value of the collateral falls below the market value of the
borrowed securities.
REPURCHASE AGREEMENTS. For temporary defensive purposes and for cash management
purposes, the Fund may enter into repurchase agreements with U.S. banks and
broker-dealers. Under a repurchase agreement, the Fund acquires a security from
a U.S. bank or a registered broker-dealer and simultaneously agrees to resell
the security back to the bank or broker-dealer at a specified time and price.
The repurchase price is in excess of the original purchase price paid by the
Fund by an amount which reflects an agreed-upon rate of return and which is not
tied to any coupon rate on the underlying security. Under the 1940 Act,
repurchase agreements are considered to be loans collateralized by the
underlying security and therefore will be fully collateralized. However, if the
bank or broker-dealer should default on its obligation to repurchase the
underlying security, the Fund may experience a delay or difficulties in
exercising its rights to realize upon the security and might incur a loss if the
value of the security declines, as well as incur disposition costs in
liquidating the security.
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest up to 15% of its total
assets in illiquid securities, for which there is a limited trading market and
for which a low trading volume of a particular security may result in abrupt and
erratic price movements. The Fund may be unable to dispose of its holdings in
illiquid securities at then-current market prices and may have to dispose of
such securities over extended periods of time. The Fund may also invest in
securities that are sold (i) in private placement transactions between their
issuers and their purchasers and that are neither listed on an exchange nor
traded over-the-counter, or (ii) in transactions between qualified institutional
buyers pursuant to Rule 144A under the 1933 Act. Such restricted securities are
subject to contractual or legal restrictions on subsequent transfer. As a result
of the absence of a public trading market, such restricted securities may in
turn be less liquid and more difficult to value than publicly traded securities.
Although these securities may be resold in privately negotiated transactions,
the prices realized from the sales could, due to illiquidity, be less than those
originally paid by the Fund or less than their fair value. In addition, issuers
whose securities are not publicly traded may not be subject to the disclosure
and other investor protection requirements that may be applicable if their
securities were publicly traded. If any privately placed or Rule 144A securities
held by the Fund are required to be registered under the securities laws of one
or more jurisdictions before being resold, the Fund may be required to bear the
expenses of registration. The Fund will limit its investment in restricted
securities other than Rule 144A securities to 10% of its total assets, and will
limit its investment in all restricted securities, including Rule 144A
securities, to 15% of its total assets. Restricted securities, other than Rule
144A securities determined by the Board to be liquid, are considered to be
illiquid and are subject to the Fund's limitation on investment in illiquid
securities.
OPTIONS ON SECURITIES OR INDICES. The Fund may write (i.e., sell) covered put
and call options and purchase put and call options on securities or securities
indices that are traded on U.S. and foreign exchanges or in the over-the-counter
markets. An option on a security is a contract that permits the purchaser of the
option, in return for the premium paid, the right to buy a specified security
(in the case of a call option) or to sell a specified security (in the case of a
put option) from or to the writer of the option at a designated price during the
term of the option. An option on a securities index permits the purchaser of the
option, in return for the premium paid, the right to receive from the seller
cash equal to the difference between the closing price of the index and the
exercise price of the option.
The Fund may write a call or put option only if the option is "covered." This
means that so long as the Fund is obligated as the writer of a call option, it
will own the underlying securities subject to the call, or hold a call at the
same or lower exercise price, for the same exercise period, and on the same
securities as the written call. A put is covered if the Fund maintains liquid
assets with a value equal to the exercise price in a segregated account, or
holds a put on the same underlying securities at an equal or greater exercise
price. The value of the underlying securities on which options may be written at
any one time will not exceed 15% of the total assets of the Fund. The Fund will
not purchase put or call options if the aggregate premium paid for such options
would exceed 5% of its total assets at the time of purchase.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. The Fund
will normally conduct its foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward contracts to purchase or sell
foreign currencies. The Fund will generally not enter into a forward contract
with a term of greater than one year. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date which
is individually negotiated and privately traded by currency traders and their
customers.
The Fund will generally enter into forward contracts only under two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock in"
the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed to
settle the transaction. Second, when Investment Counsel believes that the
currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, it may enter into a forward contract to sell
or buy the former foreign currency (or another currency which acts as a proxy
for that currency) approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." The Fund has no
specific limitation on the percentage of assets it may commit to forward
contracts, subject to its stated investment objectives and policies, except that
the Fund will not enter into a forward contract if the amount of assets set
aside to cover forward contracts would impede portfolio management or the Fund's
ability to meet redemption requests. Although forward contracts will be used
primarily to protect the Fund from adverse currency movements, they also involve
the risk that anticipated currency movements will not be accurately predicted.
The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or
purchased by the Fund are traded on U.S. and foreign exchanges or
over-the-counter.
FUTURES CONTRACTS. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock and bond index futures contracts, foreign
currency futures contracts and options on any of the foregoing. A financial
futures contract is an agreement between two parties to buy or sell a specified
debt security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the difference
between the value of the index at the beginning and at the end of the contract
period. A futures contract on a foreign currency is an agreement to buy or sell
a specified amount of a currency for a set price on a future date.
When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
contract. In addition, when the Fund enters into a futures contract, it will
segregate assets or "cover" its position in accordance with the 1940 Act. See
"How Do the Funds Invest Their Assets? -- Futures Contracts" in the SAI.
WHAT ARE THE FUND'S POTENTIAL RISKS?
You should understand that all investments involve risk and there can be no
guarantee against loss resulting from an investment in the Fund, nor can there
be any assurance that the Fund's investment objectives will be attained. As with
any investment in securities, the value of, and income from, an investment in
the Fund can decrease as well as increase, depending on a variety of factors,
which may affect the values and income generated by the Fund's portfolio
securities, including general economic conditions and market factors. In
addition to the factors which affect the value of individual securities, a
shareholder may anticipate that the value of the shares of the Fund will
fluctuate with movements in the broader equity and bond markets. Changes in the
prevailing rates of interest in any of the countries in which the Fund is
invested will likely affect the value of the Fund's holdings and thus the value
of the shares of the Fund. Increased rates of interest which frequently
accompany inflation and/or a growing economy are likely to have a negative
effect on the value of Fund shares. In addition, changes in currency valuations
will impact the price of the shares of the Fund. History reflects both increases
and decreases in interest rates in individual countries and throughout the
world, and in currency valuations, and these may reoccur unpredictably in the
future. Additionally, investment decisions made by Investment Counsel will not
always be profitable or prove to have been correct. The Fund is not intended as
a complete investment program.
FOREIGN CURRENCY EXCHANGE. Since the Fund is authorized to invest in securities
denominated or quoted in currencies other than the U.S. dollar, changes in
foreign currency exchange rates relative to the U.S. dollar will affect the
value of securities in the portfolio and the unrealized appreciation or
depreciation of investments insofar as U.S. investors are concerned. Changes in
foreign currency exchange rates relative to the U.S. dollar will also affect the
Fund's yield on assets denominated in currencies other than the U.S. dollar.
SOVEREIGN DEBT. The debt obligations ("sovereign debt") issued or guaranteed by
Latin American governmental entities in which the Fund may invest involve great
risk and are deemed to be the equivalent in terms of quality to high risk, low
rated securities (i.e., junk bonds, as discussed below) and are subject to many
of the same risks as such securities. Similarly, the Fund may have difficulty
disposing of certain sovereign debt obligations because there may be a thin
trading market for such securities.
Certain Latin American countries are among the largest debtors to commercial
banks and foreign governments. The issuer or governmental authority that
controls the repayment of sovereign debt may not be willing or able to repay the
principal and/or pay interest when due in accordance with the terms of such
obligations. A Government Entity's willingness or ability to repay principal and
pay interest due in a timely manner may be affected by, among other factors, its
cash flow situation, and, in the case of a government debtor, the extent of its
foreign reserves, the availability of sufficient foreign exchange on the date a
payment is due, the relative size of the debt service burden to the economy as a
whole, the Government Entity's dependence on expected disbursements from third
parties, the Government Entity's policy toward the International Monetary Fund
and the political constraints to which a Government Entity may be subject.
Government Entities may default on their sovereign debt and may also be
dependent on expected disbursements from foreign governments, multilateral
agencies and others abroad to reduce principal and interest arrearages on their
debt. The commitment on the part of these governments, agencies and others to
make such disbursements may be conditioned on a debtor's implementation of
economic reforms or economic performance and the timely service of such debtor's
obligations. Failure to implement such reforms, achieve such levels of economic
performance or repay principal or interest when due may result in the
cancellation of such third parties' commitments to lend funds to the government
debtor, which may further impair such debtor's ability or willingness to timely
service its debts. Holders of sovereign debt (including the Fund) may be
requested to participate in the rescheduling of such debt and to extend further
loans to Government Entities.
As a result of the foregoing, a government obligor may default on its
obligations. If such an event occurs, the Fund may have limited legal recourse
against the issuer and guarantor. Remedies must, in some cases, be pursued in
the courts of the defaulting party itself, and the ability of the holder of
foreign government debt securities to obtain recourse may be subject to the
political climate in the relevant country. In addition, no assurance can be
given that the holders of commercial bank debt will not contest payments to the
holders of other foreign government debt obligations in the event of default
under their commercial bank loan agreements.
Government obligors in developing and emerging market countries are among the
world's largest debtors to commercial banks, other governments, international
financial organizations and other financial institutions. The issuers of the
government debt securities in which the Fund expects to invest have in the past
experienced substantial difficulties in servicing their external debt
obligations, which led to defaults on certain obligations and the restructuring
of certain indebtedness. Restructuring arrangements have included, among other
things, reducing and rescheduling interest and principal payments by negotiating
new or amended credit agreements or converting outstanding principal and unpaid
interest to Brady Bonds, and obtaining new credit to finance interest payments.
Holders of certain foreign government debt securities may be requested to
participate in the restructuring of such obligations and to extend further loans
to their issuers. There can be no assurance that the Brady Bonds and other
foreign government debt securities in which the Fund may invest will not be
subject to similar restructuring arrangements or to requests for new credit
which may adversely affect the Fund's holdings. Furthermore, certain
participants in the secondary market for such debt may be directly involved in
negotiating the terms of these arrangements and may therefore have access to
information not available to other market participants.
FOREIGN INVESTMENTS. The Fund has the right to purchase securities in any
foreign country, developed or developing. You should consider carefully the
substantial risks involved in investing in securities issued by companies and
governments of foreign nations, which are in addition to the usual risks
inherent in domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations (including, for example, withholding taxes on interest and dividends) or
other taxes imposed with respect to investments in foreign nations, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country), foreign investment controls on daily stock
market movements, political or social instability or diplomatic developments
which could affect investment in securities of issuers in foreign nations. Some
countries may withhold portions of interest and dividends at the source. In
addition, in many countries there is less publicly available information about
issuers than is available in reports about companies in the U.S. Foreign
companies are not generally subject to uniform accounting, auditing and
financial reporting standards, and auditing practices and requirements may not
be comparable to those applicable to U.S. companies. Further, the Fund may
encounter difficulties or be unable to vote proxies, exercise shareholder
rights, pursue legal remedies, and obtain judgments in foreign courts.
Commission rates in foreign countries, which are sometimes fixed rather than
subject to negotiation as in the U.S., are likely to be higher. Foreign
securities markets also have different clearance and settlement procedures, and
in certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of the Fund are uninvested and no return is earned thereon.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
In many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the U.S. There is an increased risk, therefore, of uninsured loss due to
lost, stolen, or counterfeit stock certificates. In addition, the foreign
securities markets of many of the countries in which the Fund may invest may
also be smaller, less liquid, and subject to greater price volatility than those
in the U.S. As an open-end investment company, the Fund is limited in the extent
to which it may invest in illiquid securities. See "Investment Restrictions" in
the SAI.
Prior governmental approval of foreign investments may be required under certain
circumstances in some developing countries, and the extent of foreign investment
in domestic companies may be subject to limitation in other developing
countries. Foreign ownership limitation also may be imposed by the charters of
individual companies in developing countries to prevent, among other concerns,
violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade.
HIGH-RISK DEBT SECURITIES. The Fund has established no rating criteria for the
debt securities in which it may invest, and such securities may not be rated at
all for creditworthiness. Although they may offer higher yields than do higher
rated securities, high-risk, low rated debt securities (commonly referred to as
"junk bonds") and unrated debt securities generally involve greater volatility
of price and risk of principal and income, including the possibility of default
by, or bankruptcy of, the issuers of the securities. In addition, the markets in
which low rated and unrated debt securities are traded are more limited than
those in which higher rated securities are traded. The existence of limited
markets for particular securities may diminish the Fund's ability to sell the
securities at fair value either to meet redemption requests or to respond to a
specific economic event such as a deterioration in the creditworthiness of the
issuer. Reduced secondary market liquidity for certain low rated or unrated debt
securities also may make it more difficult for the Fund to obtain accurate
market quotations for purposes of valuing the Fund's portfolio. Market
quotations are generally available on many low rated or unrated securities only
from a limited number of dealers and may not necessarily represent firm bids of
such dealers or prices for actual sales.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of low rated debt securities,
especially in a thinly traded market. Analysis of the creditworthiness of
issuers of low rated debt securities may be more complex than for issuers of
higher rated securities, and the ability of the Fund to achieve its investment
objective may, to the extent of investment in low rated debt securities, be more
dependent upon such creditworthiness analysis than would be the case if the Fund
were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of low rated debt securities have been found to be less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interest rates, for example, could
cause a decline in low rated debt securities prices because the advent of a
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of low
rated debt securities defaults, the Fund may incur additional expenses seeking
recovery.
Based upon the monthly weighted average ratings of debt securities held during
the Fund's most recent fiscal year, the Fund had 83.7% of its total assets
invested in debt securities that received a rating from Moody's and/or S&P, and
8.1% of its total assets invested in debt securities that were not so rated. The
Fund had the following percentages of its total assets invested in rated
securities: AAA and/or Aaa: 37.2%, BBB and/or Baa: 1.3%, BB and/or Ba: 38.2%,
and B: 7.0%. Included under the 8.1% unrated category are securities that have
been determined by Investment Counsel to be comparable to securities rated BB
and/or Ba or below.
TAX CONSIDERATIONS. The Fund may accrue and report interest income on debt
securities, such as zero coupon bonds, pay-in-kind securities or debt securities
issued or acquired at a discount, even though it receives no cash interest until
the security's maturity or payment date. In order to qualify for beneficial tax
treatment afforded regulated investment companies, and to generally be relieved
of federal tax liabilities, the Fund must distribute all of its net income and
gains to shareholders (see "How Taxation Affects the Fund and Its Shareholders")
generally on an annual basis. The Fund may have to dispose of portfolio
securities under disadvantageous circumstances to generate cash or leverage
itself by borrowing cash in order to satisfy the distribution requirement.
If, as a result of exchange controls or other foreign laws or restrictions
regarding repatriation of capital, the Fund were unable to distribute an amount
equal to substantially all of its investment company taxable income (as
determined for U.S. tax purposes) within applicable time periods, the Fund would
not qualify for the favorable federal income tax treatment afforded regulated
investment companies, or, even if it did so qualify, it might become liable for
federal taxes on undistributed income. In addition, the ability of the Fund to
obtain timely and accurate information relating to its investments is a
significant factor in complying with the requirements applicable to regulated
investment companies and in making tax-related computations. Thus, if the Fund
were unable to obtain accurate information on a timely basis, it might be unable
to qualify as a regulated investment company or its tax computations might be
subject to revisions (which could result in the imposition of taxes, interest
and penalties). See "Additional Information on Distribution and Taxes" in the
SAI.
LEVERAGE. Leveraging by means of borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities on the Fund's Net
Asset Value, and money borrowed will be subject to interest and other costs
(which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the income received from the
securities purchased with borrowed funds. The use of leverage will significantly
increase the Fund's investment risk.
FUTURES CONTRACTS AND RELATED Options. Option and foreign currency exchange
transactions and futures contracts are commonly referred to as derivative
instruments. Successful use of futures contracts and related options is subject
to special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation between
movements in the securities or foreign currency on which the futures or options
contract is based and movements in the securities or currency in the Fund's
portfolio. Successful use of futures or options contracts is further dependent
on Investment Counsel's ability to correctly predict movements in the securities
or foreign currency markets, and no assurance can be given that its judgment
will be
correct. Successful use of options on securities or indices is subject to
similar risk considerations. In addition, by writing covered call options, the
Fund gives up the opportunity, while the option is in effect, to profit from any
price increase in the underlying security above the option exercise price.
NON-DIVERSIFIED STATUS. The Fund is a "non-diversified" investment company,
which means the Fund is not limited in the proportion of its assets that may be
invested in the securities of a single issuer. However, the Fund intends to
conduct its operations so as to qualify as a "regulated investment company" for
purposes of the Code, which generally will relieve the Fund of any liability for
federal income tax to the extent its earnings are distributed to shareholders.
See "How Taxation Affects the Fund and Its Shareholders." To so qualify, among
other requirements, the Fund will limit its investments so that, in general, at
the close of each quarter of the taxable year, (i) not more than 25% of the
market value of the Fund's total assets will be invested in the securities of a
single issuer, and (ii) with respect to 50% of the market value of its total
assets, not more than 5% of the market value of its total assets will be
invested in the securities of a single issuer and the Fund will not own more
than 10% of the outstanding voting securities of a single issuer. The Fund's
investments in U.S. government securities are not subject to these limitations.
Because the Fund, as a non-diversified investment company, may invest in a
smaller number of individual issuers than a diversified investment company, and
may be more susceptible to any single economic, political or regulatory
occurrence, an investment in the Fund may present greater risk to an investor
than an investment in a diversified company.
There are further risk factors, including risks associated with mortgage-backed
securities (particularly derivative mortgage-backed securities) and illiquid and
restricted securities, which are described under "How Does the Fund Invest Its
Assets? -- Types of Securities in which the Fund May Invest" in this prospectus,
and possible losses through the holding of securities in domestic and foreign
custodian banks and depositories, described under "What Are the Funds' Potential
Risks?" in the SAI.
WHO MANAGES THE FUND? THE BOARD. The Board oversees the management of the Fund
and elects its officers. The officers are responsible for the Fund's day-to-day
operations.
INVESTMENT MANAGER. Investment Counsel manages the Fund's assets and makes its
investment decisions. Investment Counsel also performs similar services for
other funds. It is wholly owned by Resources, a publicly owned company engaged
in the financial services industry through its subsidiaries. Charles B. Johnson
and Rupert H. Johnson, Jr. are the principal shareholders of Resources.
Together, Investment Counsel and its affiliates manage over $199 billion in
assets. The Templeton organization has been investing globally since 1940.
Investment Counsel and its affiliates have offices in Argentina, Australia,
Bahamas, Canada, France, Germany, Hong Kong, India, Italy, Japan, Korea,
Luxembourg, Poland, Russia, Singapore, South Africa, Taiwan, United Kingdom,
U.S., and Vietnam. Please see "Investment Management and Other Services" and
"Miscellaneous Information" in the SAI for information on securities
transactions and a summary of the Fund's Code of Ethics.
Under an agreement with Investment Counsel, Advisers is the sub-advisor of the
Fund. Advisers provides Investment Counsel with investment advisory assistance
and portfolio management advice with regard to the Fund's investments in
securities of U.S. issuers. Adviser's activities are subject to the Board's
review and control, as well as Investment Counsel's instruction and supervision.
PORTFOLIO MANAGEMENT. The portfolio management responsibilities for the Fund
since 1996 are performed by a team consisting of Alexander C. Calvo, Thomas J.
Dickson and Cynthia A. New. Mr. Calvo is currently an analyst for a division of
Investment Counsel. He holds a BA in political science from Binghamton
University and an MA in international affairs from The Fletcher School of Law
and Diplomacy at Tufts University. He also has completed coursework toward a
Ph.D. in economics at Boston University. Prior to joining the Templeton
organization in 1995, Mr. Calvo was an account executive with Fleishman-Hillard,
where he served as a consultant to firms investing in Latin America; and
previously was a research analyst with Zeta Investments.
Mr. Dickson is currently a portfolio manager for several Franklin Templeton
mutual funds. He holds a BS in managerial economics from the University of
California at Davis. Prior to joining the Templeton organization in 1994, Mr.
Dickson worked as a fixed-income analyst and trader for Advisers. Mr. Dickson's
current research responsibilities include Australia, Canada, Japan, New Zealand
and the U.S., as well as non-dollar money market and currency analysis.
Ms. New is currently a portfolio manager for a division of Investment Counsel.
She holds a BS in accounting from the University of Florida and an MBA from the
University of Central Florida. Ms. New is also a certified public accountant
and, prior to joining the Templeton organization in 1993, she was an auditor
with the accounting firm of Deloitte and Touche. Upon joining the division, she
was responsible for sovereign and corporate credit analysis for emerging market
securities. Ms. New's current research responsibilities include Italy, Spain,
Sweden and Denmark, as well as South Africa in the emerging markets.
MANAGEMENT Fees. During the fiscal year ended March 31, 1997, management fees,
before any advance waiver, totaled 0.60% of the average daily net assets of the
Fund. Total operating expenses, before any advance waiver, were 2.79% of the
average daily net assets of the Fund. Under an agreement by Investment Counsel
to waive its fees, the Fund paid no (0.00%) management fees and the Fund paid
total operating expenses of 1.25%. After July 31, 1998, this arrangement may end
at any time upon notice to the Board.
During the same period, sub-advisory fees, before any advance waiver, totaled
0.25% of the average daily net assets of the Fund. Investment Counsel paid
Advisers no (0.00%) sub-advisory fees. This sub-advisory fee is not a separate
expense of the Fund but would have been paid by Investment Counsel if it had
received management fees from the Fund.
PORTFOLIO TRANSACTIONS. Investment Counsel tries to obtain the best execution on
all transactions. If Investment Counsel believes more than one broker or dealer
can provide the best execution, it may consider research and related services
and the sale of Fund shares, as well as shares of other funds in the Franklin
Templeton Group of Funds, when selecting a broker or dealer. Please see "How Do
the Funds Buy Securities for Their Portfolios?" in the SAI for more information.
ADMINISTRATIVE SERVICES. Since October 1, 1996, FT Services has provided certain
administrative services and facilities for the Fund. Prior to that date,
Templeton Global Investors, Inc. provided the same services to the Fund. During
the fiscal year ended March 31, 1997, administration fees, before any advance
waiver, totaled 0.15% of the average daily net assets of the Fund. Under an
agreement by the administrators to waive their fees, the Fund paid no (0.00%)
administration fees. Please see "Investment Management and Other Services" in
the SAI for more information.
THE RULE 12B-1 PLAN
The Fund has a distribution plan or "Rule 12b-1 Plan" under which it may
reimburse Distributors or others for the expenses of activities that are
primarily intended to sell shares of the Fund. These expenses may include, among
others, distribution or service fees paid to Securities Dealers or others who
have executed a servicing agreement with the Fund, Distributors or its
affiliates; a prorated portion of Distributors' overhead expenses; and the
expenses of printing prospectuses and reports used for sales purposes, and
preparing and distributing sales literature and advertisements.
Payments by the Fund under the plan may not exceed 0.35% per year of the Fund's
average daily net
assets. Expenses not reimbursed in any quarter may be reimbursed in future
quarters or years. This includes expenses not reimbursed because they exceeded
the applicable limit under the plan. As of March 31, 1997, expenses under the
plan that may be reimbursable in future quarters or years totaled $4,901, or
0.09% of the Fund's net assets. During the first year after certain purchases
made without a sales charge, Distributors may keep the Rule 12b-1 fees
associated with the purchase. For more information, please see "The Funds'
Underwriter" in the SAI.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, the Fund advertises its performance. The more commonly used
measures of performance are total return, current yield and current distribution
rate. Performance figures are usually calculated using the maximum sales charge,
but certain figures may not include the sales charge.
Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested. Current yield shows the
income per share earned by the Fund. The current distribution rate shows the
dividends or distributions paid to shareholders by the Fund. This rate is
usually computed by annualizing the dividends paid per share during a certain
period and dividing that amount by the current Offering Price. Unlike current
yield, the current distribution rate may include income distributions from
sources other than dividends and interest received by the Fund.
The Fund's investment results will vary. Performance figures are always based on
past performance and do not guarantee future results. For a more detailed
description of how the Fund calculates its performance figures, please see "How
Do the Funds Measure Performance?" in the SAI.
HOW TAXATION AFFECTS THE FUND AND ITS SHAREHOLDERS
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
The Fund intends to elect to be treated and to qualify each year as a regulated
investment company under Subchapter M of the Code. A regulated investment
company generally is not subject to federal income tax on income and gains
distributed in a timely manner to its shareholders. The Fund intends to
distribute to shareholders substantially all of its net investment income and
net realized capital gains, which generally will be taxable income or capital
gains in their hands. Distributions declared in October, November or December to
shareholders of record on a date in such month and paid during the following
January will be treated as having been received by shareholders on December 31
in the year such distributions were declared. The Fund will inform shareholders
each year of the amount and nature of such income or gains. Sales or other
dispositions of Fund shares generally will give rise to taxable gain or loss.
HOW IS THE TRUST ORGANIZED?
The Fund is a non-diversified series of the Trust, an open-end management
investment company, commonly called a mutual fund. The Trust was organized as a
Delaware business trust on December 21, 1993, and is registered with the SEC.
Shares of each series of the Trust have equal and exclusive rights to dividends
and distributions declared by that series and the net assets of the series in
the event of liquidation or dissolution. Shares of the Fund are considered Class
I shares for redemption, exchange and other purposes. Additional series and
classes of shares may be offered in the future.
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.
The Trust does not intend to hold annual shareholder meetings. The Trust or a
series of the Trust may hold special meetings, however, for matters requiring
shareholder approval. A meeting may also be called by the Board in its
discretion or for the purpose of considering the removal of a Board member if
requested in writing to do so by shareholders holding at least 10% of the
outstanding shares. In certain circumstances, we are required to help you
communicate with other shareholders about the removal of a Board member.
As of July 2, 1997, Templeton Global Investors, Inc., owned of record and
beneficially more than 25% of the outstanding shares of the Fund.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the Fund with your
check.
MINIMUM
INVESTMENTS*
- ------------------------------------------------- ------------------
To Open Your Account...................... $ 100
To Add to Your
Account................................. $ 25
*We may waive these minimums for retirement plans. We may also refuse any order
to buy shares.
SALES CHARGE REDUCTIONS AND WAIVERS
If you qualify to buy shares under one of the sales charge reduction or
waiver categories described below, please include a written statement with
each purchase order explaining which privilege applies. If you don't include
this statement, we cannot guarantee that you will receive the sales charge
reduction or waiver.
QUANTITY DISCOUNTS. The sales charge you pay depends on the dollar amount you
invest, as shown in the table below.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE AMOUNT PAID
AS A PERCENTAGE OF TO DEALER AS A
-----------------------------------------
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
- --------------------------------------------- -------------------- -------------------- ------------------------
<S> <C> <C> <C>
Under $100,000......................... 4.25% 4.44% 4.00%
$100,000 but less than $250,000........ 3.50% 3.63% 3.25%
$250,000 but less than $500,000........ 2.75% 2.83% 2.50%
$500,000 but less than
$1,000,000........................... 2.15% 2.20% 2.00%
$1,000,000 or more*.................... None None None
</TABLE>
*If you invest $1 million or more, a Contingent Deferred Sales Charge may be
imposed on an early redemption. Please see "How Do I Sell Shares? Contingent
Deferred Sales Charge." Please also see "Other Payments to Securities Dealers"
below for a discussion of payments Distributors may make out of its own
resources to Securities Dealers for certain purchases.
CUMULATIVE QUANTITY DISCOUNTS. To determine if you may pay a reduced sales
charge, the amount of your current purchase is added to the cost or current
value, whichever is higher, of your existing shares in the Franklin Templeton
Funds, as well as those of your spouse, children under the age of 21 and
grandchildren under the age of 21. If you are the sole owner of a company, you
may also add any company accounts, including retirement plan accounts. Companies
with one or more retirement plans may add together the total plan assets
invested in the Franklin Templeton Funds to determine the sales charge that
applies.
LETTER OF INTENT. You may buy shares at a reduced sales charge by completing the
Letter of Intent section of the shareholder application. A Letter of Intent is a
commitment by you to invest a specified dollar amount during a 13 month period.
The amount you agree to invest determines the sales charge you pay.
BY COMPLETING THE LETTER OF INTENT
SECTION OF THE SHAREHOLDER
APPLICATION, YOU ACKNOWLEDGE AND
AGREE TO THE FOLLOWING:
o You authorize Distributors to reserve 5% of your total intended purchase in
Fund shares registered in your name until you fulfill your Letter.
o You give Distributors a security interest in the reserved shares and appoint
Distributors as attorney-in-fact.
o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
o Although you may exchange your shares, you may not sell reserved shares
until you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct. Our policy of reserving shares does not apply to
certain retirement plans.
If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? -- Letter of Intent" in the SAI or
call
Shareholder Services.
GROUP PURCHASES. If you are a member of a qualified group, you may buy Fund
shares at a reduced sales charge that applies to the group as a whole. The sales
charge is based on the combined dollar value of the group members' existing
investments, plus the amount of the current purchase.
A qualified group is one that:
o Was formed at least six months ago,
o Has a purpose other than buying Fund shares at a discount,
o Has more than 10 members,
o Can arrange for meetings between our representatives and group members,
o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to
Distributors,
o Agrees to arrange for payroll
deduction or other bulk transmission of investments to the Fund, and
o Meets other uniform criteria that allow Distributors to achieve cost savings
in
distributing shares.
SALES CHARGE WAIVERS. The Fund's front-end sales charge and Contingent Deferred
Sales Charge do not apply to certain purchases. For waiver categories 1, 2 or 3
below: (i) the distributions or payments must be reinvested within 365 days of
their payment date, and (ii) the distributions may be from either Class I or
Class II shares of a fund.
The Fund's sales charges do not apply if you are buying shares with money from
the following sources:
1. Dividend and capital gain distributions from any Franklin Templeton Fund or a
real estate investment trust (REIT) sponsored or advised by Franklin Properties,
Inc.
2. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds.
3. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment option
the Franklin Valuemark Funds, the Templeton Variable Annuity Fund, the Templeton
Variable Products Series Fund, or the Franklin Government Securities Trust. You
should contact your tax advisor for information on any tax consequences that may
apply.
4. Redemptions from any Franklin Templeton Fund if you:
o Originally paid a sales charge on the shares,
o Reinvest the money within 365 days of the redemption date, and
o Reinvest the money in the SAME CLASS of shares.
An exchange is not considered a redemption for this privilege. The
Contingent Deferred Sales Charge will not be waived if the shares were
subject to a Contingent Deferred Sales Charge when sold. We will credit your
account in shares, at the current value, in proportion to the amount
reinvested for any Contingent Deferred Sales Charge paid in connection with
the earlier redemption, but a new Contingency Period will begin.
If you immediately placed your redemption proceeds in a Franklin Bank CD,
you may reinvest them as described above. The proceeds must be reinvested
within 365 days from the date the CD matures, including any rollover.
The Fund's sales charges also do not apply to purchases by:
5. Trust companies and bank trust departments agreeing to invest in Franklin
Templeton Funds over a 13 month period at least $1 million of assets held in a
fiduciary, agency, advisory, custodial or similar capacity and over which the
trust companies and bank trust departments or other plan fiduciaries or
participants, in the case of certain retirement plans, have full or shared
investment discretion. We will accept orders for these accounts by mail
accompanied by a check or by telephone or other means of electronic data
transfer directly from the bank or trust company, with payment by federal funds
received by the close of business on the next business day following the order.
6. Group annuity separate accounts offered to retirement plans.
7. Chilean retirement plans that meet the requirements described under
"Retirement Plans" below.
8. An Eligible Governmental Authority. Please consult your legal and investment
advisors to determine if an investment in the Fund is permissible and suitable
for you and the effect, if any, of payments by the Fund on arbitrage rebate
calculations.
9. Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs.
10. Registered Securities Dealers and their affiliates, for their investment
accounts only.
11. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer.
12. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies.
13. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer.
14. Accounts managed by the Franklin Templeton Group.
15. Certain unit investment trusts and their holders reinvesting distributions
from the trusts.
RETIREMENT PLANS. Retirement plans that (i) are sponsored by an employer with at
least 100 employees, or (ii) have plan assets of $1 million or more, or (iii)
agree to invest at least $500,000 in the Franklin Templeton Funds over a 13
month period may buy shares without a front-end sales charge. Retirement plans
that are not Qualified Retirement Plans or SEPs, such as 403(b) or 457 plans,
must also meet the requirements described under "Group Purchases" above. For
retirement plan accounts opened on or after May 1, 1997, a Contingent Deferred
Sales Charge may apply if the account is closed within 365 days of the
retirement plan account's initial purchase in the Franklin Templeton Funds.
Please see "How Do I Sell Shares? -- Contingent Deferred Sales Charge" for
details.
Any retirement plan that does not meet the requirements to buy shares without a
front-end sales charge and that was a shareholder of the Fund on or before
February 1, 1995, may buy shares of the Fund subject to a maximum sales charge
of 4% of the Offering Price, 3.2% of which will be retained by Securities
Dealers.
HOW DO I BUY SHARES IN CONNECTION
WITH RETIREMENT PLANS?
Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need an
application other than the one included in this prospectus. For a retirement
plan brochure or application, call Retirement Plan Services.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
OTHER PAYMENTS TO SECURITIES DEALERS
The payments described below may be made to Securities Dealers who initiate and
are responsible for certain purchases made without a sales charge. The payments
are subject to the sole discretion of Distributors, and are paid by Distributors
or one of its affiliates and not by the Fund or its shareholders.
1. Purchases of $1 million or more --
up to 0.75% of the amount invested.
2. Purchases made without a front-end sales charge by certain retirement plans
described under "Sales Charge Reductions and Waivers -- Retirement Plans"
above -- up to 1% of the amount invested. For retirement plan accounts opened
on or after May 1, 1997, a Contingent Deferred Sales Charge will not apply to
the account if the Securities Dealer chooses to receive a payment of 0.25% or
less or if no payment is made.
3. Purchases by trust companies and bank trust departments, Eligible
Governmental Authorities, and broker-dealers or others on behalf of clients
participating in comprehensive fee programs -- up to 0.25% of the amount
invested.
4. Purchases by Chilean retirement plans -- up to 1% of the amount invested.
A Securities Dealer may receive only one of these payments for each qualifying
purchase. Securities Dealers who receive payments in connection with investments
described in paragraphs 1 or 4 above or a payment of up to 1% for investments
described in paragraph 2 will be eligible to receive the Rule 12b-1 fee
associated with the purchase starting in the thirteenth calendar month after the
purchase.
FOR BREAKPOINTS THAT MAY APPLY AND INFORMATION ON ADDITIONAL COMPENSATION
PAYABLE TO SECURITIES DEALERS IN CONNECTION WITH THE SALE OF FUND SHARES, PLEASE
SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES? -- OTHER PAYMENTS TO SECURITIES
DEALERS" IN THE SAI.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment objective
and policies, and its rules and requirements for exchanges. For example, some
Franklin Templeton Funds do not accept exchanges and others may have different
investment minimums.
METHOD STEPS TO FOLLOW
- ---------------------- -------------------------------------------------------
BY MAIL 1. Send us written instructions signed by
all account owners
2. Include any outstanding share certificates
for the shares you want to exchange.
- ---------------------- -------------------------------------------------------
BY PHONE Call Shareholder Services or TeleFACTS(R)
If you do not want the ability to
exchange by phone to apply to your account,
account, please let us know.
- ---------------------- -------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ---------------------- -------------------------------------------------------
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable sales
charge of the new fund. If you have never paid a sales charge on your shares
because, for example, they have always been held in a money fund, you will pay
the Fund's applicable sales charge no matter how long you have held your shares.
These charges may not apply if you qualify to buy shares without a sales charge.
CONTINGENT DEFERRED SALES CHARGE. We will not impose a Contingent Deferred Sales
Charge when you exchange shares. Any shares subject to a Contingent Deferred
Sales Charge at the time of exchange, however, will remain so in the new fund.
For accounts with shares subject to a Contingent Deferred Sales Charge, we will
first exchange any shares in your account that are not subject to the charge. If
there are not enough of these to meet your exchange request, we will exchange
shares subject to the charge in the order they were purchased. If you exchange
shares into one of our money funds, the time your shares are held in that fund
will not count towards the completion of any Contingency Period. For more
information about the Contingent Deferred Sales Charge, please see that section
under "How Do I Sell Shares?"
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
o You may only exchange shares within the SAME CLASS, except as noted below.
o The accounts must be identically registered. You may, however, exchange shares
from a Fund account requiring two or more signatures into an identically
registered money fund account requiring only one signature for all transactions.
PLEASE NOTIFY US IN WRITING IF YOU DO NOT WANT THIS OPTION TO BE AVAILABLE ON
YOUR ACCOUNT. Additional procedures may apply. Please see "Transaction
Procedures and Special Requirements."
o Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact Retirement Plan Services for information on exchanges within
these plans.
o The fund you are exchanging into must be eligible for sale in your state.
o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
o Your exchange may be restricted or refused if you have: (i) requested an
exchange out of the Fund within two weeks of an earlier exchange request,
(ii) exchanged shares out of the Fund more than twice in a calendar quarter,
or (iii) exchanged shares equal to at least $5 million, or more than 1% of
the Fund's net assets. Shares under common ownership or control are combined
for these limits. If you have exchanged shares as described in this
paragraph, you will be considered a Market Timer. Each exchange by a Market
Timer, if accepted, will be charged $5.00. Some of our funds do not allow
investments by Market Timers.
Because excessive trading can hurt Fund performance, operations and
shareholders, we may refuse any exchange purchase if (i) we believe the Fund
would be harmed or unable to invest effectively, or (ii) the Fund receives or
anticipates simultaneous orders that may significantly affect the Fund.
LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES
Certain funds in the Franklin Templeton Funds offer classes of shares not
offered by the Fund, such as "Advisor Class" or "Class Z" shares. Because the
Fund does not currently offer an Advisor Class, you may exchange Advisor Class
shares of any Franklin Templeton Fund for shares of the Fund at Net Asset Value.
If you do so and you later decide you would like to exchange into a fund that
offers an Advisor Class, you may exchange your Fund shares for Advisor Class
shares of that fund. Certain shareholders of Class Z shares of Franklin Mutual
Series Fund Inc. may also exchange their Class Z shares for shares of the Fund
at Net Asset Value.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
METHOD STEPS TO FOLLOW
- ---------------------- -------------------------------------------------------
BY MAIL 1. Send us written instructions
signed by all account owners. If you
would like your redemption proceeds
wired to a bank account, your
instructions should include:
o The name, address and telephone number of
the bank where you want the proceeds sent
o Your bank account number
o The Federal Reserve ABA routing number
o If you are using a savings and loan or
credit union, the name of the corresponding
bank and the account number
2. Include any outstanding share certificates
for the shares you are selling.
3. Provide a signature guarantee if required.
4. Corporate, partnership and trust accounts
may need to send additional documents.
Accounts under court jurisdiction may have
have additional other requirements.
- ---------------------- -------------------------------------------------------
BY PHONE Call Shareholder Services. If you would like
your redemption proceeds wired to a bank
account, other than an escrow account, you
must first sign up for the wire feature. To
sign up, send us written instructions, with a
signature guarantee. To avoid any delay in
processing, the instructions should include
the items listed in "By Mail" above.
Telephone requests will be accepted:
o If the request is $50,000 or less.
Institutional accounts may exceed $50,000 by
completing a separate agreement. Call
Institutional Services to receive a copy.
o If there are no share certificates
issued for the shares you want to sell
or you have already returned them to
the Fund.
o Unless you are selling shares in a Trust
Company retirement plan account.
o Unless the address on your account was
changed by phone within the last 15
days.
If you do not want the ability to
redeem by phone to apply to your
account, please let us know.
- ---------------------- --------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- --------------------- ---------------------------------------------------------
We will send your redemption check within seven days after we receive your
request in proper form. If you would like the check sent to an address other
than the address of record or made payable to someone other than the registered
owners on the account, send us written instructions signed by all account
owners, with a signature guarantee. We are not able to receive or pay out cash
in the form of currency.
The wiring of redemption proceeds is a special service that we make available
whenever possible for redemption requests of $1,000 or more. If we receive your
request in proper form before 4:00 p.m. Eastern time, your wire payment will be
sent the next business day. For requests received in proper form after 4:00 p.m.
Eastern time, the payment will be sent the second business day. By offering this
service to you, the Fund is not bound to meet any redemption request in less
than the seven day period prescribed by law. Neither the Fund nor its agents
shall be liable to you or any other person if, for any reason, a redemption
request by wire is not processed as described in this section.
If you sell shares you recently purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless thE distribution meets an exception stated in the Code. To obtain
the necessary forms, please call Retirement Plan Services.
CONTINGENT DEFERRED SALES CHARGE
If you did not pay a front-end sales charge because you invested $1 million or
more or agreed to invest $1 million or more under a Letter of Intent, a
Contingent Deferred Sales Charge may apply if you sell all or a part of your
investment within the Contingency Period. Once you have invested $1 million or
more, any additional investments you make without a sales charge may also be
subject to a Contingent Deferred Sales Charge if they are sold within the
Contingency Period. The charge is 1% of the value of the shares sold or the Net
Asset Value at the time of purchase, whichever is less.
Certain retirement plan accounts opened on or after May 1, 1997, and that
qualify to buy shares without a front-end sales charge may also be subject to a
Contingent Deferred Sales Charge if the retirement plan account is closed within
365 days of the account's initial purchase in the Franklin Templeton Funds.
We will first redeem any shares in your account that are not subject to the
charge. If there are not enough of these to meet your request, we will redeem
shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated dollar amount, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated number of shares, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.
WAIVERS. We waive the Contingent Deferred Sales Charge for:
Exchanges
Account feeso Exchanges
o Account fees
o Sales of shares purchased pursuant to a sales charge waiver
o Sales of shares purchased without a front-end sales charge by certain
retirement plan accounts if (i) the account was opened before May 1, 1997,
or (ii) the Securities Dealer of record received a payment from Distributors
of 0.25% or less, or (iii) Distributors did not make any payment in
connection with the purchase, as described under "How Do I Buy Shares? --
Other Payments to Securities Dealers"
o Redemptions by the Fund when an account falls below the minimum required
account size
o Redemptions following the death of the shareholder or beneficial owner
o Redemptions through a systematic withdrawal plan set up before February 1,
1995
o Redemptions through a systematic withdrawal plan set up on or after February
1, 1995, at a rate of up to 1% a month of an account's Net Asset Value. For
example, if you maintain an annual balance of $1 million, you can redeem up
to $120,000 annually through a systematic withdrawal plan free of charge.
o Distributions from individual retirement plan accounts due to death or
disability or upon periodic distributions based on life expectancy
o Tax-free returns of excess contributions from employee benefit plans
o Redemptions by Trust Company employee benefit plans or employee benefit plans
serviced by ValuSelect(R)
o Participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee benefit
plans
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
The Fund intends to pay a monthly dividend representing substantially all of its
net investment income and to distribute at least annually any net realized
capital gains.
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution and you will then receive a portion of the price you paid back in
the form of a taxable distribution.
DISTRIBUTION OPTIONS
You may receive your distributions from the Fund in any of these ways:
1. BUY ADDITIONAL SHARES OF THE FUND -- You may buy additional shares of the
Fund (without a sales charge or imposition of a Contingent Deferred Sales
Charge) by reinvesting capital gain distributions, dividend distributions, or
both. This is a convenient way to accumulate additional shares and maintain or
increase your earnings base.
2. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS -- You may direct your
distributions to buy the same class of shares of another Franklin Templeton Fund
(without a sales charge or imposition of a Contingent Deferred Sales Charge).
Many shareholders find this a convenient way to diversify their investments.
3. RECEIVE DISTRIBUTIONS IN CASH -- You may receive capital gain distributions,
dividend distributions, or both in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee.
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE SECTIONS 6 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE FUND. You
may change your distribution option at any time by notifying us by mail or
phone. Please allow at least seven days before the record date for us to process
the new option. For Trust Company retirement plans, special forms are required
to receive distributions in cash.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
SHARE PRICE
When you buy shares, you pay the Offering Price. This is the Net Asset Value per
share, plus any applicable sales charges. When you sell shares, you receive the
Net Asset Value per share.
The Net Asset Value we use when you buy or sell shares is the one next
calculated after we receive your transaction request in proper form. If you buy
or sell shares through your Securities Dealer, however, we will use the Net
Asset Value next calculated after your Securities Dealer receives your request,
which is promptly transmitted to the Fund. Your redemption proceeds will not
earn interest between the time we receive the order from your dealer and the
time we receive any required documents.
HOW AND WHEN SHARES ARE PRICED
The Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share as of the scheduled close of the NYSE, generally 4:00 p.m.
Eastern time. You can find the prior day's closing Net Asset Value and Offering
Price of the Fund in many newspapers.
To calculate Net Asset Value per share, the Fund's assets are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares outstanding. The Fund's assets are valued as
described under "How Are Fund Shares Valued?" in the SAI.
PROPER FORM
An order to buy shares is in proper form when we receive your signed shareholder
application and check. Written requests to sell or exchange shares are in proper
form when we receive written instructions signed by all registered owners, with
a signature guarantee if necessary. We must also receive any outstanding share
certificates for those shares.
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
Your name,
The Fund's name,
A description of the request,
For exchanges, the name of the fund you're exchanging into, Your account number,
o Your name,
o The Fund's name,
o A description of the request,
o For exchanges, the name of the fund you are exchanging into,
o Your account number,
o The dollar amount or number of shares, and
o A telephone number where we may reach you during the day, or in the evening if
preferred.
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You should be
able to obtain a signature guarantee from a bank, broker, credit union, savings
association, clearing agency, or securities exchange or association. A NOTARIZED
SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed, you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form and to send the certificate and assignment form in separate
envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We may also record calls. We will not be
liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or not
implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send us written
instructions, as described elsewhere in this prospectus. If you are unable to
execute a transaction by phone, we will not be liable for any loss.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS. We cannot accept instructions to sell
shares or change distribution options on Trust Company retirement plans by
phone. While you may exchange shares of Trust Company IRA and 403(b) retirement
accounts by phone, certain restrictions may be imposed on other retirement
plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call Retirement Plan Services.
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, ALL owners must sign instructions to process transactions and changes to
the account. Even if the law in your state says otherwise, we cannot accept
instructions to change owners on the account unless all owners agree in writing.
If you would like another person or owner to sign for you, please send us a
current power of attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
TRUSTS. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- --------------------- --------------------------------------------------------
CORPORATION Corporate Resolution
- --------------------- ---------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement
that identify the general partners, or
2. A certification for a partnership
fica agreement
- --------------------- ---------------------------------------------------------
TRUST 1. The pages from the trust document that
identify the trustees, or
2. A certification for trust
- --------------------- ---------------------------------------------------------
2. A
STREET OR NOMINEE ACCOUNTS. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we cannot process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
IMPORTANT INFORMATION IF YOU HAVE AN INVESTMENT REPRESENTATIVE
If there is a Securities Dealer or other representative of record on your
account, we are authorized: (1) to provide confirmations, account statements and
other information about your account directly to your dealer and/or
representative; and (2) to accept telephone and electronic instructions directly
from your dealer or representative, including instructions to exchange or redeem
your shares. Electronic instructions may be processed through established
electronic trading systems and programs used by the Fund. Telephone instructions
directly from your representative will be accepted unless you have let us know
that you do not want telephone privileges to apply to your account.
TAX IDENTIFICATION NUMBER
The IRS requires us to have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the shareholder application included with this
prospectus or contact your investment representative. The market value of the
Fund's shares may fluctuate and a systematic investment plan such as this will
not assure a profit or protect against a loss. You may discontinue the program
at any time by notifying Investor Services by mail or phone.
SYSTEMATIC WITHDRAWAL PLAN
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum payment
amount for each withdrawal must be at least $50. For retirement plans subject to
mandatory distribution requirements, the $50 minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account. Once your plan is established, any
distributions paid by the Fund will be automatically reinvested in your account.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
To avoid paying sales charges on money you plan to withdraw within a short
period of time, you may not want to set up a systematic withdrawal plan if you
plan to buy shares on a regular basis. Shares sold under the plan may also be
subject to a Contingent Deferred Sales Charge. Please see "Contingent Deferred
Sales Charge" under "How Do I Sell Shares?"
You may discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us in writing at
least seven business days before the end of the month preceding a scheduled
payment. Please see "How Do I Buy, Sell and Exchange Shares? -- Systematic
Withdrawal Plan" in the SAI for more information.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS(R) system (day or night) at
1-800/247-1753 to:
o obtain information about your account;
o obtain price and performance information about any Franklin Templeton Fund;
o exchange shares between identically registered Franklin accounts; and
o request duplicate statements and deposit slips for Franklin accounts.
You will need the Fund's code number to use TeleFACTS(R). The Fund's code number
is 416.
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
o Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU
RECEIVE THEM.
o Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of the Fund may be
available to institutional accounts. Institutional investors may also be
required to complete an institutional account application. For more information,
call Institutional Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor Services
at 700 Central Avenue, P.O. Box 33030, St. Petersburg, Florida 33733-8030. The
Fund and Distributors are also located at this address. Investment Counsel is
located at 500 East Broward Boulevard, Ft. Lauderdale, Florida 33394-3091.
Advisers is located at 777 Mariners Island Boulevard, San Mateo, California
94403-7777. You may also contact us by phone at one of the numbers listed below.
<TABLE>
<CAPTION>
(EASTERN TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
- ----------------------------------------- -------------------------------------- -------------------------------------
<S> <C> <C>
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
(1-800/342-5236) 9:30 a.m. to 5:30 p.m. (Saturday)
Retirement Plan Services 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
<PAGE>
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1933 ACT -- Securities Act of 1933, as amended
1940 ACT -- Investment Company Act of 1940, as amended
ADVISERS -- Franklin Advisers, Inc., the Fund's sub-advisor
BOARD -- The Board of Trustees of the Trust
CD -- Certificate of deposit
CLASS I AND CLASS II -- Certain funds in the Franklin Templeton Funds offer
multiple classes of shares. The different classes have proportionate interests
in the same portfolio of investment securities. They differ, however, primarily
in their sales charge structures and Rule 12b-1 plans. Because the Fund's sales
charge structure and Rule 12b-1 plan are similar to those of Class I shares,
shares of the Fund are considered Class I shares for redemption, exchange and
other purposes.
CODE -- Internal Revenue Code of 1986, as amended
CONTINGENCY PERIOD -- The 12 month period during which a Contingent Deferred
Sales Charge may apply. Regardless of when during the month you purchased
shares, they will age one month on the last day of that month and each following
month.
CONTINGENT DEFERRED SALES CHARGE (CDSC)-- A sales charge of 1% that may apply if
you sell your shares within the Contingency Period.
DISTRIBUTORS -- Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
ELIGIBLE GOVERNMENTAL AUTHORITY -- Any state or local government or any
instrumentality, department, authority or agency thereof that has determined the
Fund is a legally permissible investment and that can only buy shares of the
Fund without paying sales charges.
FRANKLIN TEMPLETON FUNDS -- The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Franklin Government Securities Trust, Templeton Capital Accumulator Fund,
Inc., Templeton Variable Annuity Fund, and Templeton Variable Products Series
Fund
FRANKLIN TEMPLETON GROUP -- Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS -- All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds
FT SERVICES -- Franklin Templeton Services, Inc., the Fund's administrator
INVESTMENT COUNSEL -- The Fund's investment manager is Templeton Investment
Counsel, Inc., through its Global Bond Managers division
INVESTOR SERVICES -- Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS -- Internal Revenue Service
LETTER -- Letter of Intent
MARKET TIMERS -- Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange shares
based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.
MOODY'S -- Moody's Investors Service, Inc.
NASD -- National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) -- The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NSCC -- National Securities Clearing Corporation
NYSE -- New York Stock Exchange
OFFERING PRICE -- The public offering price is based on the Net Asset Value per
share and includes the front-end sales charge. The maximum front-end sales
charge is 4.25%.
QUALIFIED RETIREMENT PLANS -- An employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
RESOURCES -- Franklin Resources, Inc.
SAI -- Statement of Additional Information
S&P -- Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc.
SEC -- U.S. Securities and Exchange Commission
SECURITIES DEALER -- A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
SEP -- An employer sponsored simplified employee pension plan established under
section 408(k) of the Code
TELEFACTS(R) -- Franklin Templeton's automated customer servicing system
TRUST COMPANY -- Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. -- United States
WE/OUR/US -- Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
<PAGE>
APPENDIX
CORPORATE BOND RATINGS
MOODY'S
AAA -- Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA -- Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large, fluctuation of protective elements may be of greater amplitude, or
there may be other elements present which make the long-term risks appear
somewhat larger.
A -- Bonds rated A possess many favorable investment attributes and are
considered upper medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
BAA -- Bonds rated Baa are considered medium grade obligations. They are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well.
BA -- Bonds rated Ba are judged to have predominantly speculative elements and
their future cannot be considered well assured. Often the protection of interest
and principal payments is very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B -- Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
CAA -- Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
CA -- Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C -- Bonds rated C are the lowest rated class of bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond ratings. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; modifier 2 indicates a mid-range ranking; and modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.
S&P
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA -- Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and, in the majority of instances,
differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB, B, CCC, CC -- Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C -- Bonds rated C are typically subordinated debt to senior debt that is
assigned an actual or implied CCC-- rating. The C rating may also reflect the
filing of a bankruptcy petition under circumstances where debt service payments
are continuing. The C1 rating is reserved for income bonds on which no interest
is being paid.
D -- Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or minus (--): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
<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>
o Individual Individual o Trust, Estate, Trust, Estate, or
or Pension Plan Pension Plan Trust
Trust
- ----------------------------------- ------------------ ---------------------- ---------------------------------
o Joint Individual Owner who o Corporation, Corporation,
will be Partnership, or Partnership, or
paying tax other organization other organization
or
first-named
individual
- ----------------------------------- ------------------ ---------------------- ---------------------------------
o Unif. Gift/ Minor o Broker nominee Broker nominee
Transfer to Minor
- ----------------------------------- ------------------ ---------------------- ---------------------------------
o Sole Proprietor Owner of
business
- ----------------------------------- ------------------ ---------------------- ---------------------------------
o Legal Guardian Ward,
Minor, or
Incompetent
- ----------------------------------- ------------------ ---------------------- ---------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient" box
if you are an exempt recipient. Exempt recipients include:
<PAGE>
A corporation A real estate investment trust
A financial institution A common trust fund operated by
a bank under section 584(a)
An organization exempt from tax under An exempt charitable remainder
section 501(a), or an individual trust or a non-exempt trust
retirement plan described in section 4947(a)(1)
A registered dealer in securities or An entity registered atall
commodities registered in the U.S. or times under the Investment
a U.S. possession 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
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.
<PAGE>
RESOLUTION SUPPORTING AUTHORITY OF
CORPORATE /ASSOCIATION SHAREHOLDER
- -----------------------------------------------------------------------------
INSTRUCTION:
It will be necessary for corporate/association shareholders to provide a
certified copy of a resolution or other certificate of authority supporting the
authority of designated officers of the corporation/association to issue oral
and written instruction on behalf of the corporation/association for the
purchase, sale (redemption), transfer and/or exchange of Franklin Templeton Fund
shares. You may use the following form of resolution or you may prefer to use
your own.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
________________________ of ____________________ a _________________________
Title Corporate Name Type of Organization
organized under the laws of the State of-----------------------
State
and that the following is a true and correct copy of a resolution adopted
by the Board of Directors by unanimous written consent (a copy of which is
attached) or at a meeting duly called and held on _____________________, 19___.
"RESOLVED, that___________________________________________________________
Name of Corporation/Association
(the "Company") is authorized to invest the Company's assets in one or more
investment companies (mutual funds) whose shares are distributed by
Franklin/Templeton Distributors, Inc.("Distributors"). Each such investment
company, or series thereof, is referred to as a "Franklin Templeton Fund"
or "Fund."
FURTHER RESOLVED, that any (enter number) __________________ of the
following officers of this Company (acting alone, if one, or acting
together, if more than one) is/are authorized to issue oral or written
instructions (including the signing of drafts in the case of draft accessed
money fund accounts) on behalf of the Company for the purchase, sale
(redemption), transfer and/or exchange of Fund shares and to execute any
Fund application(s) and agreements pertaining to Fund shares registered or
to be registered to the Company (referred to as a "Company Instruction");
and, that this authority shall continue until Franklin/Templeton Investor
Services, Inc. ("Investor Services") receives written notice of revocation
or amendment delivered by registered mail. The Company's officers authorized
to act on behalf of the Company under this resolution are (enter officer
titles
only):_____________________________________________________________________
---------------------------------------------------------------------------
--------------------------------------------------------------------------
(referred to as the "Authorized Officers").
FURTHER RESOLVED, that Investor Services may rely on the most recently
provided incumbency certificate delivered by the Company to Investor
Services to identify those individuals who are the incumbent Authorized
Officers and that Investor Services shall have no independent duty to
determine if there has been any change in the individuals serving as
incumbent Authorized Officers.
FURTHER RESOLVED, that the Company ("Indemnitor") undertakes and agrees to
indemnify and hold harmless Distributors, each affiliate of Distributors,
each Franklin Templeton Fund and their officers, employees and agents
(referred to hereafter collectively as the "Indemnitees") from and against
any and all liability, loss, suits, claims, costs, damages and expenses of
whatever amount and whatever nature (including without limitation reasonable
attorneys' fees, whether for consultation and advice or representation in
litigation at both the trial and appellate level) any indemnitee may sustain
or incur by reason of, in consequence of, or arising from or in connection
with any action taken or not taken by an Indemnitee in good faith reliance
on a Company Instruction given as authorized under this resolution."
The undersigned further certifies that the below named persons, whose signatures
appear opposite their names, are the incumbent Authorized Officers (as that term
is defined in the above resolution) who have been duly elected to the office
identified beside their name(s) (attach additional list if necessary).
X
- ---------------------------------- -------------------------------------
Name/title (please print or type) Signature
X
- ---------------------------------- -------------------------------------
Name/title (please print or type) Signature
X
- ---------------------------------- -------------------------------------
Name/title (please print or type) Signature
X
- ---------------------------------- -------------------------------------
Name/title (please print or type) Signature
Certified from minutes
X
Signature
- ------------------------------------------------
Name/title (please print or type)
CORPORATE SEAL (if appropriate)
<PAGE>
FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST 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.
<PAGE>
GLOBAL GROWTH
Franklin Global Health Care Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller
Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton
Global Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High
Income Currency Fund
Templeton Americas
Government Securities Fund
GROWTH
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Gold Fundd
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund Franklin Convertible Securities Fund Franklin Equity Income
Fund Franklin Income Fund Franklin MicroCap Value Fund Franklin Natural
Resources Fund Franklin Real Estate Securities Fund Franklin Rising Dividends
Fund Franklin Strategic Income Fund Franklin Utilities Fund Franklin Value Fund
Mutual Beacon Fund Mutual Qualified Fund Mutual Shares Fund Templeton American
Trust, Inc.
FUND ALLOCATOR SERIES
Franklin Templeton
Conservative Target Fund
Franklin Templeton
Moderate Target Fund
Franklin Templeton
Growth Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment
Grade Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
CORPORATIONS
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES+
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
<PAGE>
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal
securities.
+Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC.
FGF02/97 [LOGO] Printed on recycled paperTL416 P 08/97
<PAGE>
TEMPLETON AMERICAS ----------------
GOVERNMENT SECURITIES FUND BULK RATE
U.S. Postage
PAID
So. San
P.O. Box 33031 Francisco, CA
St. Petersburg, FL 33733-8031 Permit No. 655
- ----------------------------- ----------------
TL416 P 08/97 [LOGO] Printed on recycled paper
<PAGE>
TEMPLETON REGION FUNDS
CLASS I AND II PROSPECTUS
<PAGE>
PROSPECTUS & APPLICATION
INVESTMENT STRATEGY:
GLOBAL GROWTH
Templeton Region Funds
TEMPLETON GREATER EUROPEAN FUND
TEMPLETON LATIN AMERICA FUND
-----------------------------------------------------
AUGUST 1, 1997
LOGO
-----------------------------------------------------
This prospectus describes Class I and Class II shares of Templeton Region Funds,
which are Templeton Greater European Fund ("Greater European Fund") and
Templeton Latin America Fund ("Latin America Fund") (each a "Fund" and
collectively the "Funds"). It 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 Funds currently offer another class of shares with a different sales charge
and expense structure, which affects performance. This class is described in a
separate prospectus. For more information, contact your investment
representative or call 1-800/DIAL BEN.
Each Fund is a diversified series of Templeton Global Investment Trust (the
"Trust"), an open-end management investment company. The Trust has a Statement
of Additional Information ("SAI") for its Class I and Class II shares, dated
August 1, 1997, which may be amended from time to time. It includes more
information about the Funds' 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 their address.
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, JURISDICTION OR COUNTRY IN WHICH THE OFFERING IS NOT AUTHORIZED. NO
SALES REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. FURTHER INFORMATION MAY BE BTAINED FROM DISTRIBUTORS.
<PAGE>
TEMPLETON TABLE OF CONTENTS
REGION
FUNDS ABOUT THE FUNDS
Expense Summary................... 2
----------------------
August 1, 1997 Financial Highlights.............. 4
When reading this How Do the Funds Invest Their 7
Assets?
prospectus, you
will see certain What Are the Funds' Potential Risks? 18
terms beginning
with capital Who Manages the Funds?............ 22
letters. This means
the term is How Do the Funds Measure 26
explained in Performance?
our glossary
section. How Taxation Affects the Funds
and Their Shareholders ........... 27
How Is the Trust Organized?....... 27
ABOUT YOUR ACCOUNT
How Do I Buy Shares?.............. 28
May I Exchange Shares for Shares of
Another Fund?..................... 35
How Do I Sell Shares?............ 39
What Distributions Might I Receive
From the Funds?................... 43
Transaction Procedures and Special
Requirements...................... 44
Services to Help You Manage Your
Account........................... 49
What If I Have Questions About My
Account?.......................... 51
GLOSSARY
Useful Terms and Definitions...... 53
700 Central Avenue
P.O. Box 33030
St. Petersburg, FL
33733-8030
1-800/DIAL BEN
<PAGE>
ABOUT THE FUNDS
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Funds. It is based on the historical expenses of each class, after fee waivers,
for the fiscal year ended March 31, 1997. Each Fund's actual expenses may vary.
<TABLE>
<CAPTION>
GREATER LATIN AMERICA
EUROPEAN FUND FUND
CLASS I CLASS II CLASS I CLASS II
--------------------------------------- ---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
A. SHAREHOLDER TRANSACTION XPENSES(1)
Maximum Sales Charge (as a percentage
of Offering Price) 5.75% 1.99% 5.75% 1.99%
Paid at time of purchase 5.75%(2) 1.00%(3) 5.75%(2) 1.00%(3)
Paid at redemption(4) NONE 0.99% NONE 0.99%
Exchange Fee (per transaction) $5.00 (5) $5.00 (5) $5.00 (5) $5.00 (5)
B. ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after fee waiver) 0.00% (6) 0.00%(6) 0.50%(6) 0.50% (6)
Rule 12b-1 Fees 0.35% (7) 1.00%(7) 0.35%(7) 1.00% (7)
Other Expenses (after fee waiver) 1.50% (6) 1.50%(6) 1.50% 1.50% (6)
---------------- -------------- -------------- ---------------
Total Fund Operating Expenses (after
fee waiver) 1.85% (6) 2.50%(6) 2.35%(6) 3.00% (6)
---------------- -------------- -------------- ---------------
</TABLE>
C. EXAMPLE
Assume the annual return for each class is 5%, operating expenses are as
described above, and you sell your shares after the number of years shown. These
are the projected expenses for each $1,000 that you invest in the Funds.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C>
Latin America Fund
Class I $80**** $127 $176 $311
Class II $50 $102 $166 $338
Greater European Fund
Class I $ 75(8) $ 112 $ 152 $ 262
Class II $ 45 $ 87 $ 142 $ 291
</TABLE>
For the same Class II investment, you would pay projected expenses of $35
for Greater European Fund and $40 for Latin America Fund if you did not sell
your shares at the end of the first year. Your projected expenses for the
remaining periods would be the same.
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. Each
Fund pays its operating expenses. The effects of these expenses are reflected in
the Net Asset Value or dividends of each class and are not directly charged to
your account.
(1) IF YOUR TRANSACTION IS PROCESSED THROUGH YOUR SECURITIES DEALER, YOU MAY BE
CHARGED A FEE BY YOUR SECURITIES DEALER FOR THIS SERVICE.
(2) THERE IS NO FRONT-END SALES CHARGE IF YOU INVEST $1 MILLION OR MORE IN CLASS
I SHARES.
(3) ALTHOUGH CLASS II HAS A LOWER FRONT-END SALES CHARGE THAN CLASS I, ITS RULE
12B-1 FEES ARE HIGHER. OVER TIME YOU MAY PAY MORE FOR CLASS II SHARES. PLEASE
SEE "HOW DO I BUY SHARES? -- DECIDING WHICH CLASS TO BUY."
++MONTHS AND TO CLASS I PURCHASES OF $1 MILLION OR MORE IF CYOU SELL THE SHARES
WITHIN ONE YEAR. A CONTINGENT DEFERRED SALES CHARGE MAY ALSO APPLY TO PURCHASES
BY CERTAIN RETIREMENT PLANS THAT QUALIFY TO BUY CLASS I SHARES WITHOUT A
FRONT-END SALES CHARGE. THE CHARGE IS 1% OF THE VALUE OF THE SHARES SOLD OR THE
NET ASSET VALUE AT THE TIME OF PURCHASE, WHICHEVER IS LESS. THE NUMBER IN THE
TABLE SHOWS THE CHARGE AS A PERCENTAGE OF OFFERING PRICE. WHILE THE PERCENTAGE
IS DIFFERENT DEPENDING ON WHETHER THE CHARGE IS SHOWN BASED ON THE NET ASSET
VALUE OR THE OFFERING PRICE, THE DOLLAR AMOUNT PAID BY YOU WOULD BE THE SAME.
SEE "HOW DO I SELL SHARES? -- CONTINGENT DEFERRED SALES CHARGE" FOR DETAILS.
(5) $5.00 FEE IS ONLY FOR MARKET TIMERS. WE PROCESS ALL OTHER EXCHANGES WITHOUT
A FEE.
(6) FOR THE PERIOD SHOWN, EACH FUND'S INVESTMENT MANAGER AND FT SERVICES HAD
AGREED IN ADVANCE TO LIMIT THEIR RESPECTIVE MANAGEMENT AND ADMINISTRATION
FEES. WITHOUT THESE REDUCTIONS, MANAGEMENT FEES FOR GREATER EUROPEAN FUND
WOULD HAVE BEEN 0.75%, OTHER EXPENSES WOULD HAVE BEEN 1.53% FOR CLASS I AND
1.54% FOR CLASS II, AND TOTAL OPERATING EXPENSES WOULD HAVE BEEN 2.63% FOR
CLASS I AND 3.29% FOR CLASS II; MANAGEMENT FEES FOR LATIN AMERICA FUND WOULD
HAVE BEEN 1.25%, OTHER EXPENSES WOULD HAVE BEEN 1.59% FOR CLASS II AND TOTAL
OPERATING EXPENSES WOULD HAVE BEEN 3.10% FOR CLASS I AND 3.84% FOR CLASS II.
AFTER JULY 31, 1998, THESE ARRANGEMENTS MAY END AT ANY TIME UPON NOTICE TO
THE BOARD.
(7) THE COMBINATION OF FRONT-END SALE CHARGES AND RULE 12B-1 FEES COULD CAUSE
LONG-TERM SHAREHOLDERS TO PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGE PERMITTED UNDER THE NASD'S RULES.
(8) ASSUMES A CONTINGENT DEFERRED SALES CHARGE WILL NOT APPLY.
<PAGE>
FINANCIAL HIGHLIGHTS
These tables summarize each Fund's financial history. The information has been
audited by McGladrey & Pullen, LLP, the Funds' independent auditors. Their audit
report covering each of the two years since the Funds' commencement of
operations on May 8, 1995, appears in the financial statements in each Fund's
Annual Report to Shareholders for the fiscal year ended March 31, 1997. The
Annual Reports to Shareholders also include more information about the Funds'
performance. For a free copy, please call Fund Information.
<TABLE>
<CAPTION>
TEMPLETON GREATER EUROPEAN -- CLASS I SHARES
YEAR ENDED MARCH 31 1997 1996(1)
<S> <C> <C>
------------------------------------------------- --------- ------------
Per Share Operating Performance
(For a share outstanding throughout the period)
Net asset value, beginning of period $ 10.39 $ 10.00
-------- --------
Income from investment operations:
Net investment income .14 .08
Net realized and unrealized gain 2.09 .31
-------- --------
Total from investment operations 2.23 .39
-------- --------
Distributions:
Dividends from net investment income (.13) --
Distributions from net realized gains (.14) --
-------- -------
Total distributions (.27) --
-------- -------
Change in net asset value 1.96 .39
-------- --------
Net asset value, end of period $ 12.35 $ 10.39
======== ========
Total Return(2) 21.70% 3.90%
Ratios/Supplemental Data
Net assets, end of period (000) $ 9,268 $ 4,308
Ratio of expenses to average net assets 2.63% 3.56%(3)
Ratio of expenses, net of reimbursement, to
average net assets 1.85% 1.85%(3)
Ratio of net investment income to average net 1.72% 1.39%(3)
assets
Portfolio turnover rate 30.58% 9.86%
Average commission rate paid (per share) $ .0264 $ .0205
</TABLE>
(1)FOR THE PERIOD MAY 8, 1995 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1996.
(2)TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR
PERIODS OF LESS THAN ONE YEAR.
(3)ANNUALIZED.
<TABLE>
<CAPTION>
TEMPLETON GREATER EUROPEAN -- CLASS II SHARES
YEAR ENDED MARCH 31 1997 1996(1)
<S> <C> <C>
-------------------------------------------------- --------- ------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of period $ 10.32 $ 10.00
-------- --------
Income from investment operations:
Net investment income .11 .07
Net realized and unrealized gain 2.02 .25
-------- --------
Total from investment operations 2.13 .32
-------- --------
Distributions:
Dividends from net investment income (.04) --
Distributions from net realized gains (.14) --
-------- -------
Total distributions (.18) --
-------- -------
Change in net asset value 1.95 .32
-------- --------
Net asset value, end of period $ 12.27 $ 10.32
======== ========
TOTAL RETURN(2) 20.83% 3.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 2,424 $ 1,431
Ratio of expenses to average net assets 3.29% 4.21%(3)
Ratio of expenses, net of reimbursement, to
average net assets 2.50% 2.50%(3)
Ratio of net investment income to average net 1.45% 1.06%(3)
assets
Portfolio turnover rate 30.58% 9.86%
Average commission rate paid (per share) $ .0264 $ .0205
</TABLE>
(1) FOR THE PERIOD MAY 8, 1995 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1996.
(2) TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT
ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
(3) ANNUALIZED.
<TABLE>
<CAPTION>
TEMPLETON LATIN AMERICA FUND -- CLASS I SHARES
YEAR ENDED MARCH 31 1997 1996(1)
<S> <C> <C>
--------------------------------------------------- ----------- -----------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of period $ 10.53 $ 10.00
--------- --------
Income from investment operations:
Net investment income .06 .12
Net realized and unrealized gain 1.86 .51
--------- --------
Total from investment operations 1.92 .63
--------- --------
Distributions:
Dividends from net investment income (.08) (.10)
Distributions from net realized gains (.03) --
--------- -------
Total distributions (.11) (.10)
--------- --------
Change in net asset value 1.81 .53
--------- --------
Net asset value, end of period $ 12.34 $ 10.53
========= ========
TOTAL RETURN(2) 18.34% 6.37%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 18,923 $ 5,150
Ratio of expenses to average net assets 3.10% 4.02%(3)
Ratio of expenses, net of reimbursement, to
average net assets 2.35% 2.35%(3)
Ratio of net investment income to average net .50% 1.71%(3)
assets
Portfolio turnover rate 3.72% --
Average commission rate paid (per share) $ .0003 $ .0004
</TABLE>
(1) FOR THE PERIOD MAY 8, 1995 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1996.
(2) TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
(3) ANNUALIZED.
<TABLE>
<CAPTION>
TEMPLETON LATIN AMERICA FUND -- CLASS II SHARES
YEAR ENDED MARCH 31 1997 1996(1)
<S> <C> <C>
- ---------------------------------------------------- ---------- ------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of period $ 10.49 $ 10.00
Income from investment operations:
Net investment income (loss) (.01) .08
Net realized and unrealized gain 1.85 .48
-------- --------
Total from investment operations 1.84 .56
-------- --------
Distributions:
Dividends from net investment income (.02) (.07)
Distributions from net realized gains (.03) --
-------- --------
Total distributions (.05) (.07)
-------- --------
Change in net asset value 1.79 .49
-------- --------
Net asset value, end of period $ 12.28 $ 10.49
======== ========
TOTAL RETURN(2) 17.62% 5.67%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 3,524 $ 1,351
Ratio of expenses to average net assets 3.84% 4.67%(3)
Ratio of expenses, net of reimbursement, to average
net assets 3.00% 3.00%(3)
Ratio of net investment income (loss) to average
net assets (.15)% 1.14%(3)
Portfolio turnover rate 3.72% --
Average commission rate paid (per share) $ .0003 $ .0004
</TABLE>
(1) FOR THE PERIOD MAY 8, 1995 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1996.
(2) TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
(3) ANNUALIZED.
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.
TYPES OF SECURITIES IN WHICH THE FUNDS MAY INVEST
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"), as described below.
Each Fund's 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.
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 (as used in this prospectus: 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 for descriptions of debt securities rated Baa by Moody's and BBB by S&P.
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 their 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 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.
The Funds do not emphasize short-term trading profits and usually expect to have
an annual portfolio turnover rate not exceeding 50%.
BRADY BONDS. Greater European Fund may invest up to 25% of its total assets and
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 Plan debt
restructurings have been implemented in a number of countries to date including
Argentina, Brazil, Bulgaria, Costa Rica, Croatia, the Dominican Republic,
Ecuador, Ivory Coast, Jordan, the former Yugoslav Republic of Macedonia, Mexico,
Nigeria, Panama, Peru, the Philippines, Poland, Russia, Slovenia, Uruguay,
Venezuela, and Vietnam (collectively, the "Brady Countries"). In addition, some
countries have reached an agreement in principle to restructure their bank debt
according to a Brady Plan and other countries are expected to negotiate similar
restructurings in the future. In some cases countries have restructured or are
planning to restructure their external bank debt into new loans or promissory
notes.
Many of the Brady Bonds have been issued relatively recently, and, accordingly,
do not have a long payment history. They may be collateralized or
uncollateralized and issued in various currencies (although most are U.S.
dollar-denominated) and they have been actively traded in the over-the-counter
secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate par
bonds or floating rate discount bonds, are generally collateralized in full as
to principal by U.S. Treasury zero coupon bonds which have the same maturity as
the Brady Bonds. Interest payments on these Brady Bonds generally are
collateralized on a one-year or longer rolling-forward basis by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of interest payments or, in the case of floating rate bonds,
initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest
payments. 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"). There can be no
assurance that Brady Bonds in which the Funds may invest will not be subject to
restructuring arrrangements or to requests for new credit, which may cause a
Fund to suffer a loss of interest or principal on any of its holdings.
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 Venezuelan Brady Bonds
and 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.
In light of the residual risk of Brady Bonds and, among other factors, the
history of defaults with respect to commercial bank loans by public and private
entities of countries issuing Brady Bonds, investments in Brady Bonds are
generally considered speculative. In addition, many Brady Bonds currently are
rated below investment grade. These securities are subject to each Fund's
current operating policy of not investing more than 5% of its assets in debt
securities rated lower than Baa by Moody's or BBB by S&P.
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 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.
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") 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 leveraged 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. A Fund's investment in these structured
investments may be limited by investment restrictions contained in the SAI.
Structured investments are typically sold in private placement transactions, and
there currently is no active trading market for structured investments.
TEMPORARY INVESTMENTS. When a Fund's Investment Manager believes that market
conditions warrant, the fund may adopt a temporary defensive position and may
invest up to 100% of its total assets in the following money market securities,
denominated in U.S. dollars or in the currency of any foreign country, 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 the Investment Manager;
obligations (including certificates of deposit, time deposits and bankers'
acceptances) of banks; and repurchase agreements with banks and broker-dealers
with respect to such securities. When deemed appropriate by a Fund's Investment
Manager, the Fund may invest cash balances in repurchase agreements and other
money market investments to maintain liquidity in an amount to meet expenses or
for day-to-day operating purposes.
OTHER INVESTMENT POLICIES OF THE FUNDS
The Funds are also authorized to use the various securities and investment
techniques described below. Although these strategies are regularly used by some
investment companies and other institutional investors in various markets, some
of these strategies cannot at the present time be used to a significant extent
by the Funds in some of the markets in which the Funds will invest and may not
be available for extensive use in the future.
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 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.
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.
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.
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 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
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.
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 recur 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.
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
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. Although each Fund's current investment policy is
that it will not invest more than 5% of its total assets in debt securities
rated lower than Baa by Moody's or BBB by S&P, 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.
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. Option and foreign currency exchange
transactions and futures contracts are commonly referred to as derivative
instruments. Successful use of futures contracts and related options is subject
to special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation between
movements in the securities or foreign currency on which the futures or options
contract is based and movements in the securities or currency in 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 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 their
officers. The officers are responsible for the Funds' day-to-day operations. The
Board also monitors the Funds to ensure no material conflicts exist between the
Funds' classes of shares. While none is expected, the Board will act
appropriately to resolve any material conflict that may arise.
INVESTMENT MANAGERS. The Investment Manager of Greater European Fund is Global
Advisors. The Investment Manager of Latin America Fund is Investment Counsel.
Global Advisors and Investment Counsel manage the respective Fund's assets and
make its investment decisions. The Investment Managers also perform similar
services for other funds. Global Advisors and Investment Counsel 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, Global Advisors and
Investment Counsel and their affiliates manage over $199 billion in assets. The
Templeton organization has been investing globally since 1940. Global Advisors
and Investment Counsel and their affiliates have offices in Argentina,
Australia, Bahamas, Canada, France, Germany, Hong Kong, India, Italy, Japan,
Korea, Luxembourg, Poland, Russia, Singapore, South Africa, Taiwan, United
Kingdom, U.S., and Vietnam. Please see "Investment Management and Other
Services" and "Miscellaneous Information" in the SAI for information on
securities transactions and a summary of the Funds' Code of Ethics.
PORTFOLIO MANAGEMENT. The lead portfolio manager of Greater European Fund since
1996 is Mark G. Holowesko. Mr. Holowesko is president of Greater European Fund's
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 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 Greater European Fund's Investment
Manager and managing several mutual funds.
Jeffrey A. Everett and Richard Sean Farrington have secondary portfolio
management responsibilities for the Fund. Mr. Everett is an executive vice
president of Greater European Fund's Investment Manager. He holds a BS in
finance from Pennsylvania State University and is also a Chartered Financial
Analyst. 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. Everett
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 current research responsibilities include real estate and country
coverage of Australia and Italy. Mr. Farrington is a vice president of Greater
European Fund's Investment Manager. He holds a BA in economics from Harvard
University. Mr. Farrington is a Chartered Financial Analyst and is a past
president of the Bahamas Society of Financial Analysts. He joined the Templeton
organization in 1991 and now manages several mutual funds. Mr. Farrington's
research responsibilities include global coverage of the electrical equipment
industry, as well as non-U.S. electric utilities. He is also responsible for
country coverage of Hong Kong, China and Taiwan.
The lead portfolio manager of Latin America Fund since June 1997 is Mark R.
Beveridge. Mr. Beveridge is a 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 and 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 appliances and household durables,
industrial components, waste management and business and public services. He
also has country coverage of Argentina.
Howard J. Leonard and Gary R. Clemons exercise secondary portfolio management
responsibilities for Latin America Fund. Mr. Leonard is an executive vice
president of Latin America Fund's Investment Manager. He holds a BBA in
finance/economics from the Temple University School of Business Administration.
Mr. Leonard 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. Mr. Leonard currently manages
both institutional and mutual fund accounts of global and international
mandates. He has research responsibility for the non-U.S. forest products/paper
and investment management industries, and also follows the following countries:
Brazil, Indonesia and Switzerland. Mr. Clemons is a senior vice president of
Latin America Fund's Investment Manager. He holds a BS from the University of
Nevada -- Reno and an MBA with emphases in finance and investment banking from
the University of Wisconsin -- Madison. He joined Latin America Fund's
Investment Manager in 1993. Prior to that time he was a research analyst at
Templeton Quantitative Advisors, Inc. in New York, where he was also responsible
for management of a small capitalization fund. As a portfolio manager and
research analyst with Templeton, Mr. Clemons has responsibility for the
telecommunications industry and country coverage of Colombia, Norway, Peru and
Sweden.
MANAGEMENT FEES. During the fiscal year ended March 31, 1997, management fees,
before any advance waiver, totaled 0.75% of the average daily net assets of
Greater European Fund. Total operating expenses, before any advance waiver, were
2.63% for Class I and 3.29% for Class II. Under an agreement by Global Advisors
to waive its fees, the Fund paid no (0.00%) management fees and the Fund paid
total operating expenses of 1.85% for Class I and 2.50% for Class II. After July
31, 1998, Global Advisors may end this arrangement at any time upon notice to
the Board.
During the fiscal year ended March 31, 1997, management fees before any advance
waiver, totaled 1.25% of the average daily net assets of Latin America Fund.
Total operating expenses, before any advance waiver, were 3.10% for Class I and
3.84% for Class II. Under an agreement by Investment Counsel to limit its fees,
the Fund paid management fees totaling 0.50% for Class I and 0.50% for Class II,
and the Fund paid total operating expenses of 2.35% for Class I and 3.00% for
Class II. After July 31, 1998, Investment Counsel may end this arrangement at
any time upon notice to the Board.
PORTFOLIO TRANSACTIONS. The Investment Managers try to obtain the best execution
on all transactions. If the Investment Managers believe more than one broker or
dealer can provide the best execution, they 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 Portfolio?" in the SAI for more
information.
ADMINISTRATIVE SERVICES. Since October 1, 1996, FT Services has provided certain
administrative services and facilities for each Fund. Prior to that date,
Templeton Global Investors, Inc. provided the same services to the Funds. During
the fiscal year ended March 31, 1997, before any advance waiver, administration
fees totaled 0.15% of the average daily net assets of Greater European Fund.
Under an agreement by the administrators to waive their fees, Greater European
Fund paid administrative fees totaling 0.12%. During the fiscal year ended March
31, 1997, Latin America Fund paid administrative fees totaling 0.15% of its
average daily net assets. These fees are included in the amount of total
operating expenses shown above.
THE RULE 12B-1 PLANS
Class I and Class II have separate distribution plans or "Rule 12b-1 Plans"
under which they may pay or reimburse Distributors or others for the expenses of
activities that are primarily intended to sell shares of the class. These
expenses may include, among others, distribution or service fees paid to
Securities Dealers or others who have executed a servicing agreement with a
Fund, Distributors or its affiliates; a prorated portion of Distributors'
overhead expenses; and the expenses of printing prospectuses and reports used
for sales purposes; and preparing and distributing sales literature and
advertisements.
Payments by each Fund under the Class I plan may not exceed 0.35% per year of
Class I's average daily net assets. Expenses not reimbursed in any quarter may
be reimbursed in future quarters or years. This includes expenses not reimbursed
because they exceeded the applicable limit under the plan. As of March 31, 1997,
expenses under the Class I plan that may be reimbursable in future quarters or
years totaled $143,613 or 1.55% of Greater European Fund's Class I net assets
and $180,742 or 0.96% of Latin America Fund's Class I net assets. During the
first year after certain Class I purchases made without a sales charge,
Distributors may keep the Rule 12b-1 fees associated with the purchase.
Under the Class II plan, each Fund may pay Distributors up to 0.75% per year of
Class II's average daily net assets to pay Distributors or others for providing
distribution and related services and bearing certain Class II expenses. All
distribution expenses over this amount will be borne by those who have incurred
them. During the first year after a purchase of Class II shares, Distributors
may keep this portion of the Rule 12b-1 fees associated with the purchase.
Each Fund may also pay a servicing fee of up to 0.25% per year of Class II's
average daily net assets under the Class II plan. This fee may be used to pay
Securities Dealers or others for, among other things, helping to establish and
maintain customer accounts and records, helping with requests to buy and sell
shares, receiving and answering correspondence, monitoring dividend payments
from each Fund on behalf of customers, and similar servicing and account
maintenance activities.
The Rule 12b-1 fees charged to each class are based only on the fees
attributable to that particular class. For more information, please see "The
Funds' Underwriter" in the SAI.
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 charges, but certain figures may not
include sales charges.
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 TAXATION AFFECTS THE FUNDS AND THEIR SHAREHOLDERS
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
net realized capital gains, which generally will be taxable income or capital
gains in their hands. Distributions declared in October, November or December to
shareholders of record on a date in such month and paid during the following
January will be treated as having been received by shareholders on December 31,
in the year such distributions were declared. The Trust will inform you 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.
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
Delaware business trust on December 21, 1993 and is registered with the SEC. As
of January 1, 1997, Greater European Fund began offering a new class of shares
designated Templeton Greater European Fund -- Advisor Class. All shares
outstanding before the offering of Advisor Class shares have been designated
Templeton Greater European Fund -- Class I and Templeton Greater European Fund
- -- Class II. As of January 1, 1997 Latin America Fund began offering a new class
of shares designated Latin America Fund -- Advisor Class. All shares outstanding
before the offering of Advisor Class shares have been designated Templeton Latin
America Fund -- Class I and Templeton Latin America Fund -- Class II. Additional
series and classes of shares may be offered in the future.
Shares of each class represent proportionate interests in the assets of the
respective Fund and have the same voting and other rights and preferences as any
other class of the Fund for matters that affect the Fund as a whole. For matters
that only affect one class, however, only shareholders of that class may vote.
Each class will vote separately on matters affecting only that class, or
expressly required to be voted on separately by state or federal law. Shares of
each class of a series have the same voting and other rights and preferences as
the other classes and series of the Trust for 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.
The Trust does not intend to hold annual shareholder meetings. The Trust or a
series of the Trust may hold special meetings, however, for matters requiring
shareholder approval. A meeting may also be called by the Board in its
discretion or for the purpose of considering the removal of a Board member if
requested in writing to do so by shareholders holding at least 10% of the
outstanding shares. In certain circumstances, we are required to help you
communicate with other shareholders about the removal of a Board member.
As of July 2, 1997, Dorothy R., Jeffrey R. and Christopher W. Silva owned of
record and beneficially more than 25% of the outstanding Advisor Class shares of
Greater European Fund. In addition, as of the same date, Resources owned of
record and beneficially more than 25% of the outstanding Advisor Class shares of
Greater European Fund.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, contact your investment representative or complete and
sign the enclosed shareholder application and return it to the respective Fund
with your check. PLEASE INDICATE WHICH CLASS OF SHARES YOU WANT TO BUY. IF YOU
DO NOT SPECIFY A CLASS, YOUR PURCHASE WILL BE AUTOMATICALLY INVESTED IN CLASS I
SHARES.
MINIMUM
INVESTMENTS*
--------------------------- ----------------------
To Open Your Account..... $ 100
To Add to Your Account.. $ 25
*We may waive these minimums for retirement plans. We may also refuse any order
to buy shares.
DECIDING WHICH CLASS TO BUY
You should consider a number of factors when deciding which class of shares to
buy. IF YOU PLAN TO BUY $1 MILLION OR MORE IN A SINGLE PAYMENT OR YOU QUALIFY TO
BUY CLASS I SHARES WITHOUT A SALES CHARGE, YOU MAY NOT BUY CLASS II SHARES.
Generally, you should consider buying Class I shares if:
o you expect to invest in a Fund over the long term;
o you qualify to buy Class I shares at a reduced sales charge; or
o you plan to buy $1 million or more over time.
You should consider Class II shares if:
o you expect to invest less than $50,000 in the Franklin Templeton Funds; and
o you plan to sell a substantial number of your shares within approximately six
years or less of your investment.
Class I shares are generally more attractive for long-term investors because of
Class II's higher Rule 12b-1 fees. These may accumulate over time to outweigh
the lower Class II front-end sales charge and result in lower income dividends
for Class II shareholders. If you qualify to buy Class I shares at a reduced
sales charge based upon the size of your purchase or through our Letter of
Intent or cumulative quantity discount programs, but plan to hold your shares
less than approximately six years, you should evaluate whether it is more
economical for you to buy Class I or Class II shares.
For purchases of $1 million or more, it is considered more beneficial for you to
buy Class I shares since there is no front-end sales charge, even though these
purchases may be subject to a Contingent Deferred Sales Charge. Any purchase of
$1 million or more is therefore automatically invested in Class I shares. You
may accumulate more than $1 million in Class II shares through purchases over
time, but if you plan to do this you should determine whether it would be more
beneficial for you to buy Class I shares through a Letter of Intent.
Please consider all of these factors before deciding which class of shares to
buy. There are no conversion features attached to either class of shares.
PURCHASE PRICE OF FUND SHARES
For Class I shares, the sales charge you pay depends on the dollar amount you
invest, as shown in the table below. The sales charge for Class II shares is 1%
and, unlike Class I, does not vary based on the size of your purchase.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE AMOUNT PAID
AS A PERCENTAGE OF TO DEALER AS A
---------------------------------
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
----------------------------------- ---------------- ---------------- --------------------
<S> <C> <C> <C>
CLASS I
Under $50,000..................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.... 4.50% 4.71% 3.75%
$100,000 but less than $250,000... 3.50% 3.63% 2.80%
$250,000 but less than $500,000... 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000. 2.00% 2.04% 1.60%
$1,000,000 or more*............... None None None
CLASS II
Under $1,000,000*................. 1.00% 1.01% 1.00%
</TABLE>
*A Contingent Deferred Sales Charge of 1% may apply to Class I purchases of $1
million or more and any Class II purchase. Please see "How Do I Sell Shares? --
Contingent Deferred Sales Charge." Please also see "Other Payments to Securities
Dealers" below for a discussion of payments Distributors may make out of its own
resources to Securities Dealers for certain purchases. Purchases of Class II
shares are limited to purchases below $1 million. Please see "Deciding Which
Class to Buy."
SALES CHARGE REDUCTIONS AND WAIVERS
IF YOU QUALIFY TO BUY SHARES UNDER ONE OF THE SALES CHARGE REDUCTION OR
WAIVER CATEGORIES DESCRIBED BELOW, PLEASE INCLUDE A WRITTEN STATEMENT WITH
EACH PURCHASE ORDER EXPLAINING WHICH PRIVILEGE APPLIES. If you don't include
this statement, we cannot guarantee that you will receive the sales charge
reduction or waiver.
CUMULATIVE QUANTITY DISCOUNTS -- CLASS I ONLY. To determine if you may pay a
reduced sales charge, the amount of your current Class I purchase is added to
the cost or current value, whichever is higher, of your existing shares in the
Franklin Templeton Funds, as well as those of your spouse, children under the
age of 21 and grandchildren under the age of 21. If you are the sole owner of a
company, you may also add any company accounts, including retirement plan
accounts. Companies with one or more retirement plans may add together the total
plan assets invested in the Franklin Templeton Funds to determine the sales
charge that applies.
LETTER OF INTENT -- CLASS I ONLY. You may buy Class I shares at a reduced sales
charge by completing the Letter of Intent section of the shareholder
application. A Letter of Intent is a commitment by you to invest a specified
dollar amount during a 13 month period. The amount you agree to invest
determines the sales charge you pay on Class I shares.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION, YOU
ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
o You authorize Distributors to reserve 5% of your total intended purchase in
Class I shares registered in your name until you fulfill your Letter.
o You give Distributors a security
interest in the reserved shares and
appoint Distributors as
attorney-in-fact.
o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
o Although you may exchange your shares, you may not sell reserved shares until
you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on the
reserved shares as you direct. Our policy of reserving shares does not apply to
certain retirement plans.
If you would like more information about the Letter of Intent privilege, please
see "How Do I Buy, Sell and Exchange Shares? -- Letter of Intent" in the SAI or
call Shareholder Services.
GROUP PURCHASES -- CLASS I ONLY. If you are a member of a qualified group, you
may buy Class I shares at a reduced sales charge that applies to the group as a
whole. The sales charge is based on the combined dollar value of the group
members' existing investments, plus the amount of the current purchase.
A qualified group is one that:
o Was formed at least six months ago,
o Has a purpose other than buying Fund shares at a discount,
o Has more than 10 members,
o Can arrange for meetings between our representatives and group members,
o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to Distributors,
o Agrees to arrange for payroll
deduction or other bulk
transmission of investments to the
Fund, and
o Meets other uniform criteria that allow Distributors to achieve cost savings
in distributing shares.
SALES CHARGE WAIVERS. Each Fund's front-end sales charge and Contingent Deferred
Sales Charge do not apply to certain purchases. For waiver categories 1, 2 or 3
below: (i) the distributions or payments must be reinvested within 365 days of
their payment date, and (ii) Class II distributions may be reinvested in either
Class I or Class II shares. Class I distributions may only be reinvested in
Class I shares.
Each Fund's sales charges do not apply if you are buying Class I shares with
money from the following sources or Class II shares with money from the sources
in waiver categories 1 or 4:
1. Dividend and capital gain distributions from any Franklin Templeton Fund or a
real estate investment trust (REIT) sponsored or advised by Franklin Properties,
Inc.
2. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds.
3. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment option
the Franklin Valuemark Funds, the Templeton Variable Annuity Fund, the
Templeton Variable Products Series Fund, or the Franklin Government
Securities Trust. You should contact your tax advisor for information on any
tax consequences that may apply.
4. Redemptions from any Franklin Templeton Fund if you:
o Originally paid a sales charge on the shares,
o Reinvest the money within 365 days of the redemption date, and
o Reinvest the money in the SAME CLASS of shares.
An exchange is not considered a redemption for this privilege. The Contingent
Deferred Sales Charge will not be waived if the shares were subject to a
Contingent Deferred Sales Charge when sold. We will credit your account in
shares, at the current value, in proportion to the amount reinvested for any
Contingent Deferred Sales Charge paid in connection with the earlier redemption,
but a new Contingency Period will begin.
If you immediately placed your redemption proceeds in a Franklin Bank CD, you
may reinvest them as described above. The proceeds must be reinvested within
365 days from the date the CD matures, including any rollover.
Each Fund's sales charges also do not apply to Class I purchases by:
5. Trust companies and bank trust departments agreeing to invest in Franklin
Templeton Funds over a 13 month period at least $1 million of assets held in
a fiduciary, agency, advisory, custodial or similar capacity and over which
the trust companies and bank trust departments or other plan fiduciaries or
participants, in the case of certain retirement plans, have full or shared
investment discretion. We will accept orders for these accounts by mail
accompanied by a check or by telephone or other means of electronic data
transfer directly from the bank or trust company, with payment by federal
funds received by the close of business on the next business day following
the order.
6. Group annuity separate accounts offered to retirement plans
7. Chilean retirement plans that meet the requirements described under
"Retirement Plans" below
8. An Eligible Governmental Authority. Please consult your legal and investment
advisors to determine if an investment in a Fund is permissible and suitable for
you and the effect, if any, of payments by a Fund on arbitrage rebate
calculations.
9. Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs
10. Registered Securities Dealers and their affiliates, for their investment
accounts only
11. Current employees of Securities
Dealers and their affiliates and their family members, as allowed by the
internal policies of their employer
12. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family members,
consistent with our then-current policies
13. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer
14. Accounts managed by the Franklin Templeton Group
15. Certain unit investment trusts and their holders reinvesting distributions
from the trusts
RETIREMENT PLANS. Retirement plans that (i) are sponsored by an employer with at
least 100 employees, or (ii) have plan assets of $1 million or more, or (iii)
agree to invest at least $500,000 in the Franklin Templeton Funds over a 13
month period may buy Class I shares without a front-end sales charge. Retirement
plans that are not Qualified Retirement Plans or SEPs, such as 403(b) or 457
plans, must also meet the requirements described under "Group Purchases -- Class
I Only" above. For retirement plan accounts opened on or after May 1, 1997, a
Contingent Deferred Sales Charge may apply if the account is closed within 365
days of the retirement plan account's initial purchase in the Franklin Templeton
Funds. Please see "How Do I Sell Shares? -- Contingent Deferred Sales Charge"
for details.
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, call Retirement Plan Services.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
OTHER PAYMENTS TO SECURITIES DEALERS
The payments described below may be made to Securities Dealers who initiate and
are responsible for Class II purchases and certain Class I purchases made
without a sales charge. The payments are subject to the sole discretion of
Distributors, and are paid by Distributors or one of its affiliates and not by
the Fund or its shareholders.
1. Class II purchases -- up to 1% of the purchase price.
2. Class I purchases of $1 million or more -- up to 1% of the amount invested.
3. Class I purchases made without a front-end sales charge by certain retirement
plans described under "Sales Charge Reductions and Waivers -- Retirement
Plans" above -- up to 1% of the amount invested. For retirement plan accounts
opened on or after May 1, 1997, a Contingent Deferred Sales Charge will not
apply to the account if the Securities Dealer chooses to receive a payment of
0.25% or less or if no payment is made.
4. Class I purchases by trust companies and bank trust departments, Eligible
Governmental Authorities, and broker-dealers or others on behalf of clients
participating in comprehensive fee programs -- up to 0.25% of the amount
invested.
5. Class I purchases by Chilean retirement plans -- up to 1% of the amount
invested.
A Securities Dealer may receive only one of these payments for each qualifying
purchase. Securities Dealers who receive payments in connection with investments
described in paragraphs 1, 2 or 5 above or a payment of up to 1% for investments
described in paragraph 3 will be eligible to receive the Rule 12b-1 fee
associated with the purchase starting in the thirteenth calendar month after the
purchase.
FOR BREAKPOINTS THAT MAY APPLY AND INFORMATION ON ADDITIONAL COMPENSATION
PAYABLE TO SECURITIES DEALERS IN CONNECTION WITH THE SALE OF FUND SHARES, PLEASE
SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES? -- OTHER PAYMENTS TO SECURITIES
DEALERS" IN THE SAI.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
If you own Class I shares, you may exchange into any of our money funds except
Franklin Templeton Money Fund II ("Money Fund II"). Money Fund II is the only
money fund exchange option available to Class II shareholders. Unlike our other
money funds, shares of Money Fund II may not be purchased directly and no drafts
(checks) may be written on Money Fund II accounts.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment objective
and policies, and its rules and requirements for exchanges. For example, some
Franklin Templeton Funds do not accept exchanges and others may have different
investment minimums. Some Franklin Templeton Funds do not offer Class II shares.
METHOD STEPS TO FOLLOW
- ------------------------------------------------------------
BY MAIL 1. Send us written instructions
signed by all account owners
2. Include any outstanding share
certificates for the shares
you want to exchange
- --------------------- ---------------------------------------
BY PHONE Call Shareholder Services or
TeleFACTS(R)
If you do not want the
ability to exchange by phone
to apply to your account, please
let us know.
- ------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- --------------------------------------------------------------
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable sales
charge of the new fund. If you have never paid a sales charge on your shares
because, for example, they have always been held in a money fund, you will pay a
Fund's applicable sales charge no matter how long you have held your shares.
These charges may not apply if you qualify to buy shares without a sales charge.
We will not impose a Contingent Deferred Sales Charge when you exchange shares.
Any shares subject to a Contingent Deferred Sales Charge at the time of
exchange, however, will remain so in the new fund. See the discussion on
Contingent Deferred Sales Charges below and under "How Do I Sell Shares?"
CONTINGENT DEFERRED SALES CHARGE -- CLASS I. For accounts with Class I shares
subject to a Contingent Deferred Sales Charge, we will first exchange any shares
in your account that are not subject to the charge. If there are not enough of
these to meet your exchange request, we will exchange shares subject to the
charge in the order they were purchased. If you exchange Class I shares into one
of our money funds, the time your shares are held in that fund will not count
towards the completion of any Contingency Period.
CONTINGENT DEFERRED SALES CHARGE -- CLASS II. For accounts with Class II shares
subject to a Contingent Deferred Sales Charge, shares are exchanged into the new
fund proportionately based on the amount of shares subject to a Contingent
Deferred Sales Charge and the length of time the shares have been held. For
example, suppose you own $1,000 in shares that have never been subject to a
Contingent Deferred Sales Charge, such as shares from the reinvestment of
dividends and capital gains ("free shares"), $2,000 in shares that are no longer
subject to a Contingent Deferred Sales Charge because you have held them for
longer than 18 months ("matured shares"), and $3,000 in shares that are still
subject to a Contingent Deferred Sales Charge ("CDSC liable shares"). If you
exchange $3,000 into a new fund, $500 will be exchanged from free shares, $1,000
from matured shares, and $1,500 from CDSC liable shares.
Likewise, CDSC liable shares purchased at different times will be exchanged into
a new fund proportionately. For example, assume you purchased $1,000 in shares 3
months ago, 6 months ago, and 9 months ago. If you exchange $1,500 into a new
fund, $500 will be exchanged from shares purchased at each of these three
different times.
While Class II shares are exchanged proportionately, they are redeemed in the
order purchased. In some cases, this means exchanged shares may be CDSC liable
even though they would not be subject to a Contingent Deferred Sales Charge if
they were sold. The tax consequences of a sale or exchange are determined by the
Code and not by the method used by a Fund to transfer shares.
If you exchange your Class II shares for shares of Money Fund II, the time your
shares are held in that fund will count towards the completion of any
Contingency Period.
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
o You may only exchange shares within the SAME CLASS, except as noted below.
o The accounts must be identically registered. You may, however exchange shares
from a Fund account requiring two or more signatures into an identically
registered money fund account requiring only one signature for all transactions.
PLEASE NOTIFY US IN WRITING IF YOU DO NOT WANT THIS OPTION TO BE AVAILABLE ON
YOUR ACCOUNT. Additional procedures may apply. Please see "Transaction
Procedures and Special
Requirements."
o Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact Retirement Plan Services for information on exchanges within
these plans.
o The fund you are exchanging into must be eligible for sale in your state.
o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
o Your exchange may be restricted or refused if you have: (i) requested an
exchange out of a Fund within two weeks of an earlier exchange request, (ii)
exchanged shares out of a Fund more than twice in a calendar quarter, or (iii)
exchanged shares equal to at least $5 million, or more than 1% of a Fund's net
assets. Shares under common ownership or control are combined for these limits.
If you have exchanged shares as described in this paragraph, you will be
considered a Market Timer. Each exchange by a Market Timer, if accepted, will be
charged $5.00. Some of our funds do not allow investments by Market Timers.
Because excessive trading can hurt Fund performance, operations and
shareholders, we may refuse any exchange purchase if (i) we believe a Fund would
be harmed or unable to invest effectively, or (ii) a Fund receives or
anticipates simultaneous orders that may significantly affect the Fund.
LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES
Certain funds in the Franklin Templeton Funds offer classes of shares not
offered by the Fund, such as "Class Z" shares. Certain shareholders of Class Z
shares of Franklin Mutual Series Fund Inc. may exchange their Class Z shares for
Class I shares of the Fund at Net Asset Value.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
METHOD STEPS TO FOLLOW
- --------------------------------------------------------------
BY MAIL 1. Send us written instructions signed
by all account owners. If you would
like your redemption proceeds wired
to a bank account, your instructions
should include:
o The name, address and telephone
number of the bank where
you want the proceeds sent
o Your bank account number
o The Federal Reserve ABA
routing number
o If you are using a
savings and loan or
credit union, the name of the
corresponding bank and the account
number
2. Include any outstanding share
certificates for the shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust
accounts may need to send additional
documents. Accounts under court jurisdiction
may have other requirements.
- ---------------------- ----------------------------------------
BY PHONE Call Shareholder Services. If you would
like your redemption proceeds wired to
a bank account, other than an escrow account,
you must first sign up for the wire
feature. To sign up, send us written instructions,
with a signature guarantee. To avoid any
delay in processing, the instructions should
include the items listed in "By Mail" above.
Telephone requests will be accepted:
o If the request is $50,000 or less.
Institutional accounts may exceed
$50,000 by completing a separate agreement.
Call Institutional Services to receive a
copy.
o If there are no share certificates
issued for the shares you want to sell or
you have already returned them to the
respective Fund
o Unless you are selling shares in a
Trust Company retirement plan account
o Unless the address on your account
was changed by phone within the last 15
days
If you do not want the ability to
redeem by phone to apply to your
account, please let us know.
- ---------------------- ----------------------------------------
THROUGH YOUR DEALER Call your investment representative
- --------------------------------------------------------------
We will send your redemption check within seven days after we receive your
request in proper form. If you would like the check sent to an address other
than the address of record or made payable to someone other than the registered
owners on the account, send us written instructions signed by all account
owners, with a signature guarantee. We are not able to receive or pay out
cash in the form of currency.
The wiring of redemption proceeds is a special service that we make available
whenever possible for redemption requests of $1,000 or more. If we receive your
request in proper form before 4:00 p.m. Eastern time, your wire payment will be
sent the next business day. For requests received in proper form after 4:00 p.m.
Eastern time, the payment will be sent the second business day. By offering this
service to you, a Fund is not bound to meet any redemption request in less than
the seven day period prescribed by law. Neither a Fund nor its agents shall be
liable to you or any other person if, for any reason, a redemption request by
wire is not processed as described in this section.
If you sell shares you recently purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call Retirement Plan Services.
CONTINGENT DEFERRED SALES CHARGE
For Class I purchases, if you did not pay a front-end sales charge because you
invested $1 million or more or agreed to invest $1 million or more under a
Letter of Intent, a Contingent Deferred Sales Charge may apply if you sell all
or a part of your investment within the Contingency Period. Once you have
invested $1 million or more, any additional Class I investments you make without
a sales charge may also be subject to a Contingent Deferred Sales Charge if they
are sold within the Contingency Period. For any Class II purchase, a Contingent
Deferred Sales Charge may apply if you sell the shares within the Contingency
Period. The charge is 1% of the value of the shares sold or the Net Asset Value
at the time of purchase, whichever is less.
Certain retirement plan accounts opened on or after May 1, 1997, and that
qualify to buy Class I shares without a front-end sales charge may also be
subject to a Contingent Deferred Sales Charge if the retirement plan account is
closed within 365 days of the account's initial purchase in the Franklin
Templeton Funds.
We will first redeem any shares in your account that are not subject to the
charge. If there are not enough of these to meet your request, we will redeem
shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated NUMBER OF SHARES, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.
WAIVERS. We waive the Contingent
Deferred Sales Charge for:
Exchanges Account fees
Account fees
Sales of shares purchased pursuant to a sales charge waiver
Sales of shares purchased without a front-end sales charge by certain retirement
plan accounts if (i) the account was opened before May 1, 1997, or (ii) the
Securities Dealer of record received a payment from Distributors of 0.25% or
less, or (iii) Distributors did not make any payment in connection with the
purchase, as described under "How Do I Buy Shares? -- Other Payments to
Securities Dealers"
Redemptions by a Fund when an account falls below the minimum required account
size
Redemptions following the death of the shareholder or beneficial owner
Redemptions through a systematic withdrawal plan, at a rate of up to 1% a month
of an account's Net Asset Value. For example, if you maintain an annual balance
of $1 million in Class I shares, you can redeem up to $120,000 annually through
a systematic withdrawal plan free of charge. Likewise, if you maintain an annual
balance of $10,000 in Class II shares, $1,200 may be redeemed annually free of
charge.
Distributions from individual retirement plan accounts due to death or
disability or upon periodic distributions based on life expectancy
Tax-free returns of excess contributions from employee benefit plans
Distributions from employee benefit plans, including those due to termination or
plan transferRedemptions by Trust Company employee benefit plans or employee
benefit plans serviced by ValuSelect(R)
Participant initiated distributions from employee benefit plans or participant
initiated exchanges among investment choices in employee benefit plans
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUNDS?
Each Fund intends to pay a dividend at least annually representing substantially
all of its net investment income and any net realized capital gains.
Dividends and capital gains are calculated and distributed the same way for each
class. The amount of any income dividends per share will differ, however,
generally due to the difference in the Rule 12b-1 fees of Class I and Class II.
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. NEITHER FUND PAYS "INTEREST" OR GUARANTEES ANY FIXED
RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the respective Fund's shares by the amount
of the distribution and you will then receive a portion of the price you paid
back in the form of a taxable distribution.
DISTRIBUTION OPTIONS
You may receive your distributions from 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 (without a sales charge or imposition of a Contingent Deferred
Sales Charge) by reinvesting capital gain distributions, dividend distributions,
or both. If you own Class II shares, you may also reinvest your distributions in
Class I shares of a Fund. This is a convenient way to accumulate additional
shares and maintain or increase your earnings base.
2. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS -- You may direct your
distributions to buy the same class of shares of another Franklin Templeton Fund
(without a sales charge or imposition of a Contingent Deferred Sales Charge). If
you own Class II shares, you may also direct your distributions to buy 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 SECTIONS 6 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE SAME CLASS
OF THE RESPECTIVE FUND. You may change your distribution option at any time by
notifying us by mail or phone. Please allow at least seven days before the
record date for us to process the new option. For Trust Company retirement
plans, special forms are required to receive distributions in cash. TRANSACTION
PROCEDURES AND SPECIAL REQUIREMENTS
SHARE PRICE
When you buy shares, you pay the Offering Price. This is the Net Asset Value per
share of the class you wish to purchase, plus any applicable sales charges. When
you sell shares, you receive the Net Asset Value per share minus any applicable
Contingent Deferred Sales Charges.
The Net Asset Value we use when you buy or sell shares is the one next
calculated after we receive your transaction request in proper form. If you buy
or sell shares through your Securities Dealer, however, we will use the Net
Asset Value next calculated after your Securities Dealer receives your request,
which is promptly transmitted to a Fund. Your redemption proceeds will not earn
interest between the time we receive the order from your dealer and the time we
receive any required documents.
HOW AND WHEN SHARES ARE PRICED
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. Each class, however,
bears the Rule 12b-1 fees payable under its Rule 12b-1 plan. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. Each Fund's assets are
valued as described under "How Are Fund Shares Valued?" in the SAI.
PROPER FORM
An order to buy shares is in proper form when we receive your signed shareholder
application and check. Written requests to sell or exchange shares are in proper
form when we receive written instructions signed by all registered owners, with
a signature guarantee if necessary. We must also receive any outstanding share
certificates for those shares.
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
o Your name,
o The respective Fund's name,
o The class of shares,
o A description of the request,
o For exchanges, the name of the fund you are exchanging into,
o Your account number,
o The dollar amount or number of shares, and
o A telephone number where we may reach you during the day, or in the
evening if preferred.
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 otential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You should be
able to obtain a signature guarantee from a bank, broker, credit union, savings
association, clearing agency, or securities exchange or association. A NOTARIZED
SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed, you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the 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 and to send the certificate and assignment form in separate
envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We may also record calls. We will not be
liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or not
implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send us written
instructions, as described elsewhere in this prospectus. If you are unable to
execute a transaction by phone, we will not be liable for any loss.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS. We cannot accept instructions to sell
shares or change distribution options on Trust Company retirement plans by
phone. While you may exchange shares of Trust Company IRA and 403(b) retirement
accounts by phone, certain restrictions may be imposed on other retirement
plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call Retirement Plan Services.
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, all owners must sign instructions to process transactions and changes to
the account. Even if the law in your state says otherwise, we cannot accept
instructions to change owners on the account unless all owners agree in writing.
If you would like another person or owner to sign for you, please send us a
current power of attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
TRUSTS. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
TYPE OF ACCOUNT DOCUMENTS REQUIRED
---------------------------------------------------------------------
CORPORATION Corporate Resolution
------------------------------ ---------------------------------------
PARTNERSHIP 1. The pages from the partnership
agreement that identify the general
partners, or
2. A certification for a partnership
agreement
------------------------------ ---------------------------------------
TRUST 1. The pages from the trust document
that identify the trustees, or
2. A certification for trust
------------------------------ ---------------------------------------
STREET OR NOMINEE ACCOUNTS. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we cannot process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
IMPORTANT INFORMATION IF YOU HAVE AN INVESTMENT REPRESENTATIVE
If there is a Securities Dealer or other representative of record on your
account, we are authorized: (1) to provide confirmations, account statements and
other information about your account directly to your dealer and/or
representative; and (2) to accept telephone and electronic instructions directly
from your dealer or representative, including instructions to exchange or redeem
your shares. Electronic instructions may be processed through established
electronic trading systems and programs used by each Fund. Telephone
instructions directly from your representative will be accepted unless you have
let us know that you do not want telephone privileges to apply to your account.
TAX IDENTIFICATION NUMBER
The IRS requires us to have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the respective Fund that the number you gave us is
incorrect, or (iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in each 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 you are
interested in this program, please refer to the shareholder application included
with this prospectus or contact your investment representative. The market value
of 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. Once your plan is established, any
distributions paid by a Fund will be automatically reinvested in your account.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
To avoid paying sales charges on money you plan to withdraw within a short
period of time, you may not want to set up a systematic withdrawal plan if you
plan to buy shares on a regular basis. Shares sold under the plan may also be
subject to a Contingent Deferred Sales Charge. Please see "Contingent Deferred
Sales Charge" under "How Do I Sell Shares?"
You may discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment by notifying us in writing at
least seven business days before the end of the month preceding a scheduled
payment. Please see "How Do I Buy, Sell and Exchange Shares? -- Systematic
Withdrawal Plan" in the SAI for more information.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS(R) system (day or night) at
1-800/247-1753 to:
obtain information about your account;
obtain price and performance information about any Franklin Templeton Fund;
exchange shares between identically registered Franklin accounts; and
request duplicate statements and deposit slips for Franklin accounts.
You will need the code number for each class to use TeleFACTS(R). The code
number is 419 for Class I and 519 for Class II of Greater European Fund and 418
for Class I and 518 for Class II of Latin America Fund.
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 a 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 reports.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of each Fund may be
available to institutional accounts. Institutional investors may also be
required to complete an institutional account application. For more information,
call Institutional Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, a Fund may not be able to offer these services directly to
you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS
ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor Services
at P.O. Box 33030, St. Petersburg, Florida 33733-8030. The Funds and
Distributors are also located at this address. Investment Counsel is located at
500 East Broward Boulevard, Ft. Lauderdale, Florida 33394-3091. Global Advisors
is located at P.O. Box N-7759, Lyford Cay, Nassau, Bahamas. You may also contact
us by phone at one of the numbers listed below.
<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
----------------------------- -------------------------- ------------------------------------------
<S> <C> <C>
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
(1-800/342-5236) 9:30 a.m. to 5:30 p.m. (Saturday)
Retirement Plan Services 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
<PAGE>
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1933 ACT -- Securities Act of 1933, as amended
1940 ACT -- Investment Company Act of 1940, as amended
BOARD -- The Board of Trustees of the 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. They differ,
however, primarily in their sales charge and expense structures.
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., the Funds' principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
ELIGIBLE GOVERNMENTAL AUTHORITY -- Any state or local government or any
instrumentality, department, authority or agency thereof that has determined a
Fund is a legally permissible investment and that can only buy shares of the
respective Fund without paying sales charges.
FRANKLIN TEMPLETON FUNDS -- The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Franklin Government Securities Trust, Templeton Capital Accumulator Fund,
Inc., Templeton Variable Annuity Fund, and Templeton Variable Products Series
Fund
FRANKLIN TEMPLETON GROUP -- Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS -- All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds
FT SERVICES -- Franklin Templeton Services, Inc., the Funds' administrator
GLOBAL ADVISORS -- Templeton Global Advisors Limited, Greater European Fund's
investment manager.
INVESTMENT COUNSEL -- Templeton Investment Counsel, Inc., Latin America Fund's
investment manager
INVESTMENT MANAGER(S) -- The investment manager of Greater European Fund is
Templeton Global Advisors Limited and the investment manager of Latin America
Fund is Templeton Investment Counsel, Inc.
INVESTOR SERVICES -- Franklin/Templeton Investor Services, Inc., the Funds'
shareholder servicing and transfer agent
IRS -- Internal Revenue Service
LETTER -- Letter of Intent
MARKET TIMERS -- Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange shares
based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.
MOODY'S -- Moody's Investors Service, Inc.
NASD -- National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) -- The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NSCC -- National Securities Clearing Corporation
NYSE -- New York Stock Exchange
OFFERING PRICE -- The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge. The maximum
front-end sales charge is 5.75% for Class I and 1% for Class II.
QUALIFIED RETIREMENT PLANS -- An employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
RESOURCES -- Franklin Resources, Inc.
SAI -- Statement of Additional Information
S&P -- Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc.
SEC -- U.S. Securities and Exchange Commission
SECURITIES DEALER -- A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Funds. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
SEP -- An employer sponsored simplified employee pension plan established under
section 408(k) of the Code
TELEFACTS(R) -- FRANKLIN TEMPLETON'S AUTOMATED CUSTOMER SERVICING SYSTEM
TRUST COMPANY -- Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. -- United States
WE/OUR/US -- Unless the context indicates a different meaning, these terms refer
to a Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
<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>
- --------------------------- --------------- ------------------- ---------------------------
o Individual Individual o Trust, Estate, Trust, Estate, or
or Pension Plan Pension Plan Trust
Trust
------------------------- --------------- ------------------- ---------------------------
o Joint Individual Owner who o Corporation, Corporation,
will be Partnership, or Partnership, or
paying tax or other other organization
first-named organization
individual
- -------------------------- --------------- ------------------- ---------------------------
o Unif. Gift/ Minor o Broker nominee Broker nominee
Transfer to Minor
- -------------------------- --------------- ------------------- ---------------------------
o Sole Proprietor Owner of
business
- --------------------------- --------------- ------------------- ---------------------------
o Legal Guardian Ward,
Minor, or
Incompetent
------------------------- --------------- ------------------- ---------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient" box
if you are an exempt recipient. Exempt recipients include:
A corporation An organization exempt from
tax under section 501(a), or an
A financial institution individual retirement plan
A registered dealer in securities An exempt charitable remainder
or commodities registered in trust or a non-exempt trust
the U.S. or a U.S. possession described in section 4947(a)(1)
A real estate investment trust An entity registered at all times
under the Investment Company
A common trust fund operated Act of 1940
by a bank under section 584(a)
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject to
an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your federal income tax
return, you will be treated as negligent and subject to an IRS 20% penalty on
any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith. If
you falsify information on this form or make any other false statement resulting
in no backup withholding on an account which should be subject to backup
withholding, you may be subject to an IRS $500 penalty and certain criminal
penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as a
non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. You are an "Exempt
Foreign Person" if you are not (1) a citizen or resident of the U.S., or (2) a
U.S. corporation, partnership, estate, or trust. In the case of an individual,
an "Exempt Foreign Person" is one who has been physically present in the U.S.
for less than 31 days during the current calendar year. An individual who is
physically present in the U.S. for at least 31 days during the current calendar
year will still be treated as an "Exempt Foreign Person," provided that the
total number of days physically present in the current calendar year and the two
preceding calendar years does not exceed 183 days (counting all of the days in
the current calendar year, only one-third of the days in the first preceding
calendar year and only one-sixth of the days in the second preceding calendar
year). In addition, lawful permanent residents or green card holders may not be
treated as "Exempt Foreign Persons." If you are an individual or an entity, you
must not now be, or at this time expect to be, engaged in a U.S. trade or
business with respect to which any gain derived from transactions effected by
the Fund/Payer during the calendar year is effectively connected to the U.S. (or
your transactions are exempt from U.S. taxes under a tax treaty).
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual, provide
your permanent address. If you are a partnership or corporation, provide the
address of your principal office. If you are an estate or trust, provide the
address of your permanent residence or the principal office of any fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and backup
withholding may also begin unless you certify to the Fund/Payer that (1) the
taxpayer identification number you have given is correct, and (2) the Internal
Revenue Service has not notified you that you are subject to backup withholding
because you failed to report certain interest or dividend income. You may use
Form W-9, "Payer's Request for Taxpayer Identification Number and
Certification," to make these certifications. If an account is no longer active,
you do not have to notify a Fund/Payer or broker of your change in status unless
you also have another account with the same Fund/Payer that is still active. If
you receive interest from more than one Fund/Payer or have dealings with more
than one broker or barter exchange, file a certificate with each. If you have
more than one account with the same Fund/Payer, the Fund/Payer may require you
to file a separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for three
calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
<PAGE>
RESOLUTION SUPPORTING AUTHORITY OF
CORPORATE /ASSOCIATION SHAREHOLDER
- -------------------------------------------------------------------------
INSTRUCTION:
It will be necessary for corporate/association shareholders to provide a
certified copy of a resolution or other certificate of authority supporting the
authority of designated officers of the corporation/association to issue oral
and written instruction on behalf of the corporation/association for the
purchase, sale (redemption), transfer and/or exchange of Franklin Templeton Fund
shares. You may use the following form of resolution or you may prefer to use
your own.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly
elected________________________of -------------------- Title Corporate Name a
____________________________________organized under the laws of the State of
____________________and that the following Type of Organization State is a true
and correct copy of a resolution adopted by the Board of Directors by unanimous
written consent (a copy of which is attached) or at a meeting duly called and
held on _______________________________, 19______.
"RESOLVED,
that______________________________________________________________________ Name
of Corporation/Association (the "Company") is authorized to invest the Company's
assets in one or more investment companies (mutual funds) whose shares are
distributed by Franklin/Templeton Distributors, Inc. ("Distributors"). Each such
investment company, or series thereof, is referred to as a "Franklin Templeton
Fund" or "Fund."
FURTHER RESOLVED, that any (enter number) _____________of the following officers
of this Company (acting alone, if one, or acting together, if more than one)
is/are authorized to issue oral or written instructions (including the signing
of drafts in the case of draft accessed money fund accounts) on behalf of the
Company for the purchase, sale (redemption), transfer and/or exchange of Fund
shares and to execute any Fund application(s) and agreements pertaining to Fund
shares registered or to be registered to the Company (referred to as a "Company
Instruction"); and, that this authority shall continue until Franklin/Templeton
Investor Services, Inc. ("Investor Services") receives written notice of
revocation or amendment delivered by registered mail. The Company's officers
authorized to act on behalf of the Company under this resolution are (enter
officer titles only): ------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(referred to as the "Authorized Officers").
FURTHER RESOLVED, that Investor Services may rely on the most recently provided
incumbency certificate delivered by the Company to Investor Services to identify
those individuals who are the incumbent Authorized Officers and that Investor
Services shall have no independent duty to determine if there has been any
change in the individuals serving as incumbent Authorized Officers.
FURTHER RESOLVED, that the Company ("Indemnitor") undertakes and agrees to
indemnify and hold harmless Distributors, each affiliate of Distributors, each
Franklin Templeton Fund and their officers, employees and agents (referred to
hereafter collectively as the "Indemnitees") from and against any and all
liability, loss, suits, claims, costs, damages and expenses of whatever amount
and whatever nature (including without limitation reasonable attorneys' fees,
whether for consultation and advice or representation in litigation at both the
trial and appellate level) any indemnitee may sustain or incur by reason of, in
consequence of, or arising from or in connection with any action taken or not
taken by an Indemnitee in good faith reliance on a Company Instruction given as
authorized under this resolution."
The undersigned further certifies that the below named persons, whose signatures
appear opposite their names, are the incumbent Authorized Officers (as that term
is defined in the above resolution) who have been duly elected to the office
identified beside their name(s) (attach additional list if necessary).
X
- ------------------------------------ ------------------------------------
Name/title (please print or type) Signature
X
- ------------------------------------- ------------------------------------
Name/title (please print or type) Signature
X
- ------------------------------------- -------------------------------------
Name/title (please print or type) Signature
X
- ------------------------------------- --------------------------------------
Name/title (please print or type) Signature
Certified from minutes
X
- ------------------------------------------------------
Signature
- -------------------------------------------------------------------------------
Name/title (please print or type)
CORPORATE SEAL (if appropriate)
<PAGE>
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.
GLOBAL GROWTH
Franklin Global Health Care Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Franklin Convertible Securities
Fund~Templeton Global Real Estate
Fund
Templeton Global Smaller
Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
klin Adjustable U.S.~Franklin
Templeton
Global Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High
Income Currency Fund
Templeton Americas
Government Securities Fund
GROWTH
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund
Franklin Convertible Securities
Fund
Franklin Equity Income Fund
Templeton Global Infrastructure
Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American Trust, Inc.
FUND ALLOCATOR SERIES
Franklin Templeton
Conservative Target Fund
Franklin Templeton
Moderate Target Fund
Franklin Templeton
Growth Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment
Grade Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR CORPORATIONS
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES+
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
<PAGE>
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal
securities.
+Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC.
<PAGE>
TEMPLETON REGION FUNDS
P.O. Box 33031
ST. PETERSBURG, FL 33733-8031
<PAGE>
TEMPLETON REGION FUNDS
ADVISOR CLASS PROSPECTUS
<PAGE>
PROSPECTUS & APPLICATION
INVESTMENT STRATEGY: Templeton Region Funds
GLOBAL GROWTH
TEMPLETON GREATER EUROPEAN FUND
TEMPLETON LATIN AMERICA FUND
ADVISOR CLASS
-----------------------------------------
AUGUST 1, 1997
[LOGO]
- ---------------------------------------------------------------------------
This prospectus describes the Advisor Class shares of Templeton Greater European
Fund ("Greater European Fund") and Templeton Latin America Fund ("Latin America
Fund") (each a "Fund" and collectively the "Funds"). It 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 Funds currently offer other classes of shares with different sales charge
and expense structures, which affect performance. These classes are described in
a separate prospectus. For more information, contact your investment
representative or call 1-800/DIAL BEN.
Each Fund is a diversified series of Templeton Global Investment Trust (the
"Trust"), an open-end management investment company. The Trust has a Statement
of Additional Information ("SAI") for its Advisor Class, dated August 1, 1997,
which may be amended from time to time. It includes more information about the
Funds' 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.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. SHARES OF THE 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, JURISDICTION OR COUNTRY IN WHICH THE OFFERING IS NOT AUTHORIZED. NO
SALES REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. FURTHER INFORMATION MAY BE
OBTAINED FROM DISTRIBUTORS.
<PAGE>
TEMPLETON TABLE OF CONTENTS
REGION
ABOUT THE FUNDS
FUNDS --
Expense Summary........................ 2
ADVISOR CLASS
_______________________ Financial Highlights................... 4
August 1, 1997
How Do the Funds Invest Their Assets?.. 4
When reading this
prospectus, you will What Are the Funds' Potential Risks?... 15
see certain terms
beginning with capital Who Manages the Funds?................. 19
letters. This means the
term is explained in How Do the Funds Measure Performance?... 22
our glossary section.
How Taxation Affects the Funds
and Their Shareholders.................. 22
How Is the Trust Organized?............. 23
ABOUT YOUR ACCOUNT
How Do I Buy Shares? ................... 24
May I Exchange Shares for Shares of
Another Fund?.......................... 27
How Do I Sell Shares?................... 29
What Distributions Might I Receive
From the Funds?....................... 31
Transaction Procedures and Special
Requirements.......................... 32
Services to Help You Manage Your Account. 37
What If I Have Questions About My Account? 39
700 Central Avenue GLOSSARY
P.O. Box 33030
St. Petersburg, Useful Terms and Definitions................ 40
FL33733-8030
1-800/DIAL BEN
<PAGE>
ABOUT THE FUNDS
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in each
Fund. It is based on the historical expenses of each Fund's Advisor Class,
after fee waivers, for the period from January 2, 1997 (commencement of
sales) to March 31, 1997. The expenses are annualized. Each Fund's actual
expenses may vary.
<TABLE>
<CAPTION>
GREATER LATIN
EUROPEAN AMERICA
ADVISOR CLASS FUND FUND
- ------------------------------------------------- --------------- ----------------
<S> <C> <C>
A. SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge
Imposed on Purchases NONE NONE
Exchange Fee (per transaction) $ 5.00(2) $ 5.00(2)
B. ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after fee 0.00%(3) 0.50% (3)
reductionwaiver)
Rule 12b-1 Fees NONE NONE
Other Expenses 1.50%(4) 1.50% (4)
-------- --------
Total Fund Operating Expenses (after fee
waiver) 1.50%(3) 2.00% (3)
======= ========
</TABLE>
C. EXAMPLE
Assume the annual return for the class is 5%, operating expenses are as
described above, and you sell your shares after the number of years shown.
These are the projected expenses for each $1,000 that you invest in the
Funds.
<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.
Each Fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends of the class and are not
directly charged to your account.
<PAGE>
(1)IF YOUR TRANSACTION IS PROCESSED THROUGH YOUR SECURITIES DEALER, YOU MAY BE
CHARGED A FEE BY YOUR SECURITIES DEALER FOR THIS SERVICE.
(2)$5.00 FEE IS ONLY FOR MARKET TIMERS. WE PROCESS ALL OTHER EXCHANGES WITHOUT A
FEE.
(3)FOR THE PERIOD SHOWN, EACH FUND'S INVESTMENT MANAGER AND FT SERVICES HAD
AGREED IN ADVANCE TO LIMIT THEIR RESPECTIVE MANAGEMENT AND ADMINISTRATION FEES.
WITHOUT THESE REDUCTIONS, GREATER EUROPEAN FUND'S MANAGEMENT FEES WOULD HAVE
BEEN 0.75% AND TOTAL OPERATING EXPENSES WOULD HAVE BEEN 2.25%; LATIN AMERICA
FUND'S MANAGEMENT FEES WOULD HAVE BEEN 1.25% AND TOTAL OPERATING EXPENSES WOULD
HAVE BEEN 2.75%. AFTER JULY 31, 1998, THESE ARRANGEMENTS MAY END AT ANY TIME
UPON NOTICE TO THE BOARD.
(4)OTHER EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL YEAR.
<PAGE>
FINANCIAL HIGHLIGHTS
This table summarizes financial history of each Fund's Advisor Class. The
information has been audited by McGladrey & Pullen, LLP, the Funds' independent
auditors. Their audit report covering the three months since the commencement of
sales of Advisor Class on January 2, 1997, appears in the financial statements
in each Fund's Annual Report to Shareholders for the fiscal year ended March 31,
1997. The Annual Reports to Shareholders also include more information about the
Funds' performance. For a free copy, please call Fund Information.
<TABLE>
<CAPTION>
GREATER LATIN
ADVISOR CLASS SHARES EUROPEAN FUND AMERICA FUND
YEAR ENDED MARCH 31 1997(1) 1997(1)
- ---------------------------------------------------- -------------------- -------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of period $ 11.56 $ 10.92
------- -------
Income from investment operations:
Net investment income .07 .02
Net realized and unrealized gain .73 1.41
------- -------
Total from investment operations: .80 1.43
------- -------
Change in net asset value .80 1.43
------- -------
Net asset value, end of period $ 12.36 $ 12.35
======= =======
TOTAL RETURN(2) 6.92% 13.09%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 36 $ 71
Ratio of expenses to average net assets 1.90%(3) 2.08%(3)
Ratio of expenses, net of reimbursement, to
average net assets 1.50%(3) 2.00%(3)
Ratio of net investment income to average net assets 2.56%(3) .82%(3)
Portfolio turnover rate 30.58% 3.72%
Average commission rate paid (per share) $ .0264 $ .0003
</TABLE>
(1)FOR THE PERIOD JANUARY 2, 1997 (COMMENCEMENT OF SALES)TO MARCH 31, 1997.
(2)TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR PERIODS
OF LESS THAN ONE YEAR.
(3)ANNUALIZED.
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.
TYPES OF SECURITIES IN WHICH THE FUNDS MAY INVEST
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"), as described below.
Each Fund's 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.
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 (as used in this prospectus: 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 for descriptions of debt securities rated Baa by Moody's and BBB by S&P.
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 their perception of which investments
would best enable each 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 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.
The Funds do not emphasize short-term trading profits and usually expect to have
an annual portfolio turnover rate not exceeding 50%.
BRADY BONDS. Greater European Fund may invest up to 25% of its total assets and
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 Plan debt
restructurings have been implemented in a number of countries to date including
Argentina, Brazil, Bulgaria, Costa Rica, Croatia, the Dominican Republic,
Ecuador, Ivory Coast, Jordan, the former Yugoslav Republic of Macedonia, Mexico,
Nigeria, Panama, Peru, the Philippines, Poland, Russia, Slovenia, Uruguay,
Venezuela, and Vietnam (collectively, the "Brady Countries"). In addition, some
countries have reached an agreement in principle to restructure their bank debt
according to a Brady Plan and other countries are expected to negotiate similar
restructurings in the future. In some cases countries have restructured or are
planning to restructure their external bank debt into new loans or promissory
notes.
Many of the Brady Bonds have been issued relatively recently, and, accordingly,
do not have a long payment history. They may be collateralized or
uncollateralized and issued in various currencies (although most are U.S.
dollar-denominated) and they have been actively traded in the over-the-counter
secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate par
bonds or floating rate discount bonds, are generally collateralized in full as
to principal by U.S. Treasury zero coupon bonds which have the same maturity as
the Brady Bonds. Interest payments on these Brady Bonds generally are
collateralized on a one-year or longer rolling-forward basis by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of interest payments or, in the case of floating rate bonds,
initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest
payments. 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"). There can be no
assurance that Brady Bonds in which the Funds may invest will not be subject to
restructuring arrrangements or to requests for new credit, which may cause a
Fund to suffer a loss of interest or principal on any of its holdings.
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 Venezuelan Brady Bonds
and 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.
In light of the residual risk of Brady Bonds and, among other factors, the
history of defaults with respect to commercial bank loans by public and private
entities of countries issuing Brady Bonds, investments in Brady Bonds are
generally considered speculative. In addition, many Brady Bonds currently are
rated below investment grade. These securities are subject to each Fund's
current operating policy of not investing more than 5% of its assets in debt
securities rated lower than Baa by Moody's or BBB by S&P.
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 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.
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") 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 leveraged 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. A Fund's investment in these structured
investments may be limited by investment restrictions contained in the SAI.
Structured investments are typically sold in private placement transactions, and
there currently is no active trading market for structured investments.
TEMPORARY INVESTMENTS. When a Fund's Investment Manager believes that market
conditions warrant, the fund may adopt a temporary defensive position and may
invest up to 100% of its total assets in the following money market securities,
denominated in U.S. dollars or in the currency of any foreign country, 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 the Investment Manager;
obligations (including certificates of deposit, time deposits and bankers'
acceptances) of banks; and repurchase agreements with banks and broker-dealers
with respect to such securities. When deemed appropriate by a Fund's Investment
Manager, the Fund may invest cash balances in repurchase agreements and other
money market investments to maintain liquidity in an amount to meet expenses or
for day-to-day operating purposes.
OTHER INVESTMENT POLICIES OF THE FUNDS
The Funds are also authorized to use the various securities and investment
techniques described below. Although these strategies are regularly used by some
investment companies and other institutional investors in various markets, some
of these strategies cannot at the present time be used to a significant extent
by the Funds in some of the markets in which the Funds will invest and may not
be available for extensive use in the future.
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 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.
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.
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.
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 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
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.
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 recur 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.
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
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. Although each Fund's current investment policy is
that it will not invest more than 5% of its total assets in debt securities
rated lower than Baa by Moody's or BBB by S&P, 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.
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. Option and foreign currency exchange
transactions and futures contracts are commonly referred to as derivative
instruments. Successful use of futures contracts and related options is subject
to special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation between
movements in the securities or foreign currency on which the futures or options
contract is based and movements in the securities or currency in 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 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 their
officers. The officers are responsible for the Funds' day-to-day operations. The
Board also monitors the Funds to ensure no material conflicts exist between the
Funds' classes of shares. While none is expected, the Board will act
appropriately to resolve any material conflict that may arise.
INVESTMENT MANAGERS. The Investment Manager of Greater European Fund is Global
Advisors. The Investment Manager of Latin America Fund is Investment Counsel.
Global Advisors and Investment Counsel manage the respective Fund's assets and
make its investment decisions. The Investment Managers also perform similar
services for other funds. Global Advisors and Investment Counsel 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, Global Advisors and
Investment Counsel and their affiliates manage over $199 billion in assets. The
Templeton organization has been investing globally since 1940. Global Advisors
and Investment Counsel their affiliates have offices in Argentina, Australia,
Bahamas, Canada, France, Germany, Hong Kong, India, Italy, Japan, Korea,
Luxembourg, Poland, Russia, Singapore, South Africa, Taiwan, United Kingdom,
U.S., and Vietnam. Please see "Investment Management and Other Services" and
"Miscellaneous Information" in the SAI for information on securities
transactions and a summary of the Fund's Code of Ethics.
PORTFOLIO MANAGEMENT. The lead portfolio manager of Greater European Fund since
1996 is Mark G. Holowesko. Mr. Holowesko is president of Greater European Fund's
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 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 Greater European Fund's Investment
Manager and managing several mutual funds.
Jeffrey A. Everett and Richard Sean Farrington have secondary portfolio
management responsibilities for the Fund. Mr. Everett is an executive vice
president of Greater European Fund's Investment Manager. He holds a BS in
finance from Pennsylvania State University and is also a Chartered Financial
Analyst. 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. Everett
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 current research responsibilities include real estate and country
coverage of Australia and Italy. Mr. Farrington is a vice president of Greater
European Fund's Investment Manager. He holds a BA in economics from Harvard
University. Mr. Farrington is a Chartered Financial Analyst and is a past
president of the Bahamas Society of Financial Analysts. He joined the Templeton
organization in 1991 and now manages several mutual funds. Mr. Farrington's
research responsibilities include global coverage of the electrical equipment
industry, as well as non-U.S. electric utilities. He is also responsible for
country coverage of Hong Kong, China and Taiwan.
The lead portfolio manager of Latin America Fund since June 1997 is Mark R.
Beveridge. Mr. Beveridge is a 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 and 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 appliances and household durables,
industrial components, waste management and business and public services. He
also has country coverage of Argentina.
Howard J. Leonard and Gary R. Clemons exercise secondary portfolio management
responsibilities for Latin America Fund. Mr. Leonard is an executive vice
president of Latin America Fund's Investment Manager. He holds a BBA in
finance/economics from the Temple University School of Business Administration.
Mr. Leonard 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. Mr. Leonard currently manages
both institutional and mutual fund accounts of global and international
mandates. He has research responsibility for the non-U.S. forest products/paper
and investment management industries, and also follows the following countries:
Brazil, Indonesia and Switzerland. Mr. Clemons is a senior vice president of
Latin America Fund's Investment Manager. He holds a BS from the University of
Nevada -- Reno and an MBA with emphases in finance and investment banking from
the University of Wisconsin -- Madison. He joined Latin America Fund's
Investment Manager in 1993. Prior to that time he was a research analyst at
Templeton Quantitative Advisors, Inc. in New York, where he was also responsible
for management of a small capitalization fund. As a portfolio manager and
research analyst with Templeton, Mr. Clemons has responsibility for the
telecommunications industry and country coverage of Colombia, Norway, Peru and
Sweden.
MANAGEMENT FEES. During the fiscal period ended March 31, 1997, management fees,
before any advance waiver, totaled 0.75% of the average daily net assets of
Greater European Fund. Total operating expenses of the class, before any advance
waiver, were 1.90%. Under an agreement by Global Advisors to limit its fees, the
class paid no (0.00%) management fees and the class paid total operating
expenses of 1.50%. After July 31, 1998, Global Advisors may end this arrangement
at any time upon notice to the Board.
During the fiscal period ended March 31, 1997, management fees, before any
advance waiver, totaled 1.25% of the average daily net assets of Latin America
Fund. Total operating expenses of the class, before any advance waiver, were
2.08%. Under an agreement by Investment Counsel to limit its fees, the class
paid management fees totaling 0.50% of its average daily net assets and the
class paid total operating expenses of 2.00%. After July 31, 1998, Investment
Counsel may end this arrangement at any time upon notice to the Board.
PORTFOLIO TRANSACTIONS. The Investment Managers try to obtain the best execution
on all transactions. If the Investment Managers believe more than one broker or
dealer can provide the best execution, they 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. Since October 1, 1996, FT Services has provided certain
administrative services and facilities for each Fund. Prior to that date,
Templeton Global Investors, Inc. provided the same services to the Funds. During
the fiscal year ended March 31, 1997, administration fees totaled 0.15% of the
average daily net assets of each Fund.
HOW DO THE FUNDS MEASURE PERFORMANCE?
From time to time, the Advisor Class of each Fund advertises its performance.
The more commonly used measure of performance is total return.
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 the Advisor 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 TAXATION AFFECTS THE FUNDS AND THEIR SHAREHOLDERS
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 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
net realized capital gains, which generally will be taxable income or capital
gains in their hands. Distributions declared in October, November or December to
shareholders of record on a date in such month and paid during the following
January will be treated as having been received by shareholders on December 31,
in the year such distributions were declared. Each Fund will inform you 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.
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
Delaware business trust on December 21, 1993, and is registered with the SEC. As
of January 2, 1997, Greater European Fund began offering a new class of shares
designated Templeton Greater European Fund -- Advisor Class. All shares
outstanding before the offering of Advisor Class shares have been designated
Templeton Greater European Fund -- Class I and Templeton Greater European Fund
- -- Class II. As of January 2, 1997 Latin America Fund began offering a new class
of shares designated Latin America Fund -- Advisor Class. All shares outstanding
before the offering of Advisor Class shares have been designated Templeton Latin
America Fund -- Class I and Templeton Latin America Fund -- Class II. Additional
series and classes of shares may be offered in the future.
Shares of each class represent proportionate interests in the assets of the
respective Fund and have the same voting and other rights and preferences as any
other class of the Fund for matters that affect the Fund as a whole. For matters
that only affect one class, however, only shareholders of that class may vote.
Each class will vote separately on matters affecting only that class, or
expressly required to be voted on separately by state or federal law. Shares of
each class of a series have the same voting and other rights and preferences as
the other classes and series of the Trust for 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.
The Trust does not intend to hold annual shareholder meetings. The Trust or a
series of the Trust may hold special meetings, however, for matters requiring
shareholder approval. A meeting may also be called by the Board in its
discretion or for the purpose of considering the removal of a Board member if
requested in writing to do so by shareholders holding at least 10% of the
outstanding shares. In certain circumstances, we are required to help you
communicate with other shareholders about the removal of a Board member.
As of July 2, 1997, Dorothy R., Jeffrey R. and Christopher W. Silva owned of
record and beneficially more than 25% of the outstanding Advisor Class shares of
Greater European Fund. In addition, as of the same date, Resources owned of
record and beneficially more than 25% of the outstanding Advisor Class shares of
Greater European Fund.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
Shares of each Fund may be purchased without a sales charge. To open your
account, contact your investment representative or complete and sign the
enclosed shareholder application and return it to the respective Fund with your
check.
MINIMUM
INVESTMENTS*
- ---------------------------------------------- -------------------
To Open Your Account.................... $5,000,000
To Add to Your Account.................. $ 25
*We waive or lower these minimums for certain investors listed below. We may
also refuse any order to buy shares.
To determine if you meet the minimum investment requirement, the amount of your
current purchase is added to the cost or current value, whichever is higher, of
your existing shares in the Franklin Templeton Funds. At least $1 million of
this amount, however, must be invested in Advisor Class or Class Z shares of any
of the Franklin Templeton Funds.
Each Fund's minimum initial investment requirement will not apply to purchases
by:
1. Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs
2. Qualified registered investment advisors or certified financial planners who
have clients invested in the Franklin Mutual Series Fund Inc. on October 31,
1996, or who buy through a broker-dealer or service agent who has entered
into an agreement with Distributors
3. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group and their immediate family
members, subject to a $100 minimum investment requirement
4. Accounts managed by the Franklin Templeton Group
5. The Franklin Templeton Profit Sharing 401(k) Plan
6. Each series of the Franklin Templeton Fund Allocator Series, subject to a
$1,000 minimum initial and subsequent investment requirement
7. 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, and that
(i) are sponsored by an employer with at least 5,000 employees, or (ii) have
plan assets of $50 million or more
8. Trust companies and bank trust departments initially investing in 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 and bank trust departments or other plan fiduciaries or
participants, in the case of certain retirement plans, have full or shared
investment discretion
9. Defined benefit plans or governments, municipalities, and tax-exempt
entities that meet the requirements for qualification under Section 501 of
the Code, subject to a $1 million initial investment in Advisor Class shares
10. Any other investor, including a private investment vehicle such as a family
trust or foundation, who is a member of a qualified group, if the group as a
whole meets the $5 million minimum investment requirement. A qualified group is
one that:
o Was formed at least six months ago
o Has a purpose other than buying Fund shares at a discount,
o Has more than 10 members,
o Can arrange for meetings between our representatives and group members,
o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to
Distributors,
o Agrees to arrange for payroll deduction or other bulk transmission of
investments to a Fund, and
o Meets other uniform criteria that allow Distributors to achieve cost
savings in distributing shares.
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, call Retirement Plan Services.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
PAYMENTS TO SECURITIES DEALERS
Securities Dealers who initiate and are responsible for purchases of Advisor
Class shares may receive up to 0.25% of the amount invested. The payment is
subject to the sole discretion of Distributors, and is paid by Distributors or
one of its affiliates and not by the Funds or their shareholders.
For information on additional compensation payable to Securities Dealers in
connection with the sale of Funds' shares, please see "How Do I Buy, Sell and
Exchange Shares? -- Other Payments to Securities Dealers" in the SAI.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment objective
and policies, and its rules and requirements for exchanges. For example, some
Franklin Templeton Funds do not accept exchanges and some do not offer Advisor
Class shares.
METHOD STEPS TO FOLLOW
- ------------------------------------- --------------------------------------
BY MAIL 1. Send us written instructions
signed by
all account owners
2. Include any outstanding share
certificates
for the shares you
are selling.want to exchange
- ------------------------------------- --------------------------------------
BY PHONE Call Shareholder Services
If you do not want the
ability to
not exchange by phone to apply to
your account,
please let us know.
- ------------------------------------- --------------------------------------
THROUGH YOUR DEALER Call your investment representative
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
EXCHANGE RESTRICTIONS
Please be aware that the
following restrictions apply to
exchanges:
o You may only exchange shares within the SAME CLASS, except as noted below.
o The accounts must be identically registered. You may, however, exchange shares
from a Fund account requiring two or more signatures into an identically
registered money fund account requiring only one signature for all transactions.
PLEASE NOTIFY US IN WRITING IF YOU DO NOT WANT THIS OPTION TO BE AVAILABLE ON
YOUR ACCOUNT. Additional procedures may apply. Please see "Transaction
Procedures and Special Requirements."
o Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact Retirement Plan Services for information on exchanges within
these plans.
o The fund you are exchanging into must be eligible for sale in your state.
o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
o Your exchange may be restricted or refused if you have: (i) requested an
exchange out of a Fund within two weeks of an earlier exchange request, (ii)
exchanged shares out of a Fund more than twice in a calendar quarter, or (iii)
exchanged shares equal to at least $5 million, or more than 1% of a Fund's net
assets. Shares under common ownership or control are combined for these limits.
If you have exchanged shares as described in this paragraph, you will be
considered a Market Timer. Each exchange by a Market Timer, if accepted, will be
charged $5.00. Some of our funds do not allow investments by Market Timers.
Because excessive trading can hurt Fund performance, operations and
shareholders, we may refuse any exchange purchase if (i) we believe a Fund would
be harmed or unable to invest effectively, or (ii) a Fund receives or
anticipates simultaneous orders that may significantly affect the Fund.
LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES
If you want to exchange into a fund that does not currently offer an Advisor
Class, you may exchange your Advisor Class shares for Class I shares of that
fund at Net Asset Value. If you do not qualify to buy Advisor Class shares of
Templeton Developing Markets Trust, Templeton Foreign Fund or Templeton Growth
Fund, you may exchange the Advisor Class shares you own for Class I shares of
those funds or of Templeton Institutional Funds, Inc. at Net Asset Value. If you
do so and you later decide you would like to exchange into a fund that offers an
Advisor Class, you may exchange your Class I shares for Advisor Class shares of
that fund. You may also exchange your Advisor Class shares for Class Z shares of
Franklin Mutual Series Fund Inc.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
METHOD STEPS TO FOLLOW
--------------------------------- ---------------------------------------
BY MAIL 1.Send us written instructions
signed by all account owners. If you
would like your redemption proceeds
wired to a bank account, your
instructions should include:
the bank where you want the
proceeds sent
o Your bank account number
o The Federal Reserve ABA routing
number
o If you are using a savings and loan
or credit union, the name of the
corresponding bank and the account
number
2.Include any outstanding
share certificates
for the shares you are selling
3.Provide a signature
guarantee if required
METHOD STEPS TO FOLLOW
- ------------------------------------- ---------------------------------------
4.Corporate, partnership and
trust accounts
may need to send additional
documents.
Accounts under court jurisdiction may
have other requirements.
--------------------------------- ---------------------------------------
BY PHONE Call Shareholder Services. If you
would like your redemption proceeds wired
to a bank account, other than an escrow
account, you must first sign up for the
wire feature. To sign up, send us written
instructions, with a signature guarantee.
To avoid any delay in processing, the
instructions should include the items
listed in "By Mail" above.
Telephone requests will be accepted:
o If the request is $50,000 or less.
Institutional accounts may exceed
$50,000 by completing a separate
agreement. Call Institutional Services
to receive a copy.
o If there are no share certificates
issued for the shares you want to sell
or you have already returned them to
the respective Fund
o Unless you are selling shares in a
Trust Company retirement plan account
o Unless the address on your account
was changed by phone within the last 15
days
If you do not want the ability to
redeem by phone to apply to your
account, please let us know.
--------------------------------- ---------------------------------------
THROUGH YOUR DEALER Call your investment representative
--------------------------------- ---------------------------------------
We will send your redemption check within seven days after we receive your
request in proper form. If you would like the check sent to an address other
than the address of record or made payable to someone other than the registered
owners on the account, send us written instructions signed by all account
owners, with a signature guarantee. We are not able to receive or pay out cash
in the form of currency.
The wiring of redemption proceeds is a special service that we make available
whenever possible for redemption requests of $1,000 or more. If we receive your
request in proper form before 4:00 p.m. Eastern time, your wire payment will be
sent the next business day. For requests received in proper form after 4:00 p.m.
Eastern time, the payment will be sent the second business day. By offering this
service to you, a Fund is not bound to meet any redemption request in less than
the seven day period prescribed by law. Neither a Fund nor its agents shall be
liable to you or any other person if, for any reason, a redemption request by
wire is not processed as described in this section.
If you sell shares you recently purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
TRUST COMPANY RETIREMENT PLAN
ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call Retirement Plan Services.
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUNDS?
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. NEITHER FUND PAYS "INTEREST" OR GUARANTEES ANY FIXED
RATE OF RETURN ON AN INVESTMENT IN THEIR SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the respective Fund's shares by the amount
of the distribution and you will then receive a portion of the price you paid
back in the form of a taxable distribution.
DISTRIBUTION OPTIONS
You may receive your distributions from 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.
2. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS -- You may direct your
distributions to buy the same class of shares of another Franklin Templeton
Fund. You may also direct your distributions to buy 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 SECTIONS 6 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE SAME CLASS
OF THE RESPECTIVE FUND. You may change your distribution option at any time by
notifying us by mail or phone. Please allow at least seven days before the
record date for us to process the new option. For Trust Company retirement
plans, special forms are required to receive distributions in cash.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
SHARE PRICE
You buy and sell Advisor Class shares at the Net Asset Value per share. The Net
Asset Value we use when you buy or sell shares is the one next calculated after
we receive your transaction request in proper form. If you buy or sell shares
through your Securities Dealer, however, we will use the Net Asset Value next
calculated after your Securities Dealer receives your request, which is promptly
transmitted to the Funds. Your redemption proceeds will not earn interest
between the time we receive the order from your dealer and the time we receive
any required documents.
HOW AND WHEN SHARES ARE PRICED
Each Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share as of the scheduled close of the NYSE, generally 4:00 p.m.
Eastern time. You can find the prior day's closing Net Asset Value 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.
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,
o The respective Fund's name,
o The class of shares,
o A description of the request,
o For exchanges, the name of the fund you are exchanging into,
o Your account number,
o The dollar amount or number of shares, and
o A telephone number where we may reach you during the day, or in the evening if
preferred.
SIGNATURE GUARANTEES
For our mutual protection we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You should be
able to obtain a signature guarantee from a bank, broker, credit union, savings
association, clearing agency, or securities exchange or association. A NOTARIZED
SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed, you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the 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 and to send the certificate and assignment form in separate
envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We may also record calls. We will not be
liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or not
implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send us written
instructions, as described elsewhere in this prospectus. If you are unable to
execute a transaction by phone, we will not be liable for any loss.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS. We cannot accept instructions to sell
shares or change distribution options on Trust Company retirement plans by
phone. While you may exchange shares of Trust Company IRA and 403(b) retirement
accounts by phone, certain restrictions may be imposed on other retirement
plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call Retirement Plan Services.
ACCOUNT REGISTRATIONS AND REQUIRED
DOCUMENTS
When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, all owners must sign instructions to process transactions and changes to
the account. Even if the law in your state says otherwise, we cannot accept
instructions to change owners on the account unless all owners agree in writing.
If you would like another person or owner to sign for you, please send us a
current power of attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
TRUSTS. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.
REQUIRED DOCUMENTS. For corporate,partnership and trust accounts, please send us
the following documents when you open your account. This will help avoid delays
in processing your transactions while we verify who may sign on the account.
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- ------------------------- -----------------------------
CORPORATION Corporate Resolution
- ------------------------- -----------------------------
PARTNERSHIP 1. The pages from the partnership
agreement
that identify the general
partners, or
2. A certification for a partnership
agreement
- ------------------------ ---------------------------------------
TRUST 1. The pages from the trust document
that identify the trustees, or
2. A certification for trust
- ------------------------ ---------------------------------------
STREET OR NOMINEE ACCOUNTS. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we cannot process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
IMPORTANT INFORMATION IF YOU HAVE AN INVESTMENT REPRESENTATIVE
If there is a Securities Dealer or other representative of record on your
account, we are authorized: (1) to provide confirmations, account statements and
other information about your account directly to your dealer and/or
representative; and (2) to accept telephone and electronic instructions directly
from your dealer or representative, including instructions to exchange or redeem
your shares. Electronic instructions may be processed through established
electronic trading systems and programs used by each Fund. Telephone
instructions directly from your representative will be accepted unless you have
let us know that you do not want telephone privileges to apply to your account.
TAX IDENTIFICATION NUMBER
The IRS requires us to have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the respective Fund that the number you gave us is
incorrect, or (iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to $100.
These minimums do not apply if you fall within categories 4, 5, 6 or 7 under
"How Do I Buy Shares? -- Opening Your Account."
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in each 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 you are
interested in this program, please refer to the shareholder application included
with this prospectus or contact your investment representative. The market value
of 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. Once your plan is established, any
distributions paid by a Fund will be automatically reinvested in your account.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
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:
o Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
o Financial reports of a 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 reports.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of each Fund may be
available to institutional accounts. Institutional investors may also be
required to complete an institutional account application. For more information,
call Institutional Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, a Fund may not be able to offer these services directly to
you. Please contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor Services
at 700 Central Avenue, P.O. Box 33030, St. Petersburg, Florida 33733-8030. The
Funds and Distributors are also located at this address. Investment Counsel is
located at 500 East Broward Boulevard, Ft. Lauderdale, Florida 33394-3091.
Global Advisors is located at P.O. Box N-7759, Lyford Cay, Nassau, Bahamas. You
may also contact us by phone at one of the numbers listed below.
<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
<S> <C> <C>
- ------------------------------------------ ---------------------- ---------------------------------------------------
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
(1-800/342-5236) 9:30 a.m. to 5:30 p.m. (Saturday)
9:30 a.m. to 5:30 p.m.
Retirement Plan Services 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
<PAGE>
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1933 ACT -- Securities Act of 1933, as amended
1940 ACT -- Investment Company Act of 1940, as amended
BOARD -- The Board of Trustees of the 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. They differ,
however, primarily in their sales charge and expense structures.
CODE -- Internal Revenue Code of 1986, as amended
DISTRIBUTORS -- Franklin/Templeton Distributors, Inc., the Funds' principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
FRANKLIN TEMPLETON FUNDS -- The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Franklin Government Securities Trust, Templeton Capital Accumulator Fund,
Inc., Templeton Variable Annuity Fund, and Templeton Variable Products Series
Fund
FRANKLIN TEMPLETON GROUP -- Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS -- All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton
Group of Funds
FT SERVICES -- Franklin Templeton Services, Inc., the Funds' administrator
GLOBAL ADVISORS -- Templeton Global Advisors Limited, Greater European Fund's
investment manager.
INVESTMENT COUNSEL -- Templeton Investment Counsel, Inc., Latin America Fund's
investment manager.
INVESTMENT MANAGER(S) -- The investment manager of Greater European Fund is
Templeton Global Advisors Limited and the investment manager of Latin America
Fund is Templeton Investment Counsel, Inc.
INVESTOR SERVICES -- Franklin/Templeton Investor Services, Inc., the Funds'
shareholder servicing and transfer agent
IRS -- Internal Revenue Service
MARKET TIMERS -- Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange shares
based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.
MOODY'S -- Moody's Investors Service, Inc.
NASD -- National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) -- The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NSCC -- National Securities Clearing Corporation
NYSE -- New York Stock Exchange
RESOURCES -- Franklin Resources, Inc.
SAI -- Statement of Additional Information
S&P -- Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc.
SEC -- U.S. Securities and Exchange Commission
SECURITIES DEALER -- A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
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 a Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
<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>
- ------------------------------------ ------------------ ----------------------- ------------------------------
o Individual Individual o Trust, Estate, Trust, Estate, or
or Pension Plan Pension Plan Trust
Trust
- ------------------------------------ ------------------ ----------------------- ------------------------------
Joint Individual Owner who o Corporation, Corporation,
will be Partnership, or Partnership, or
paying tax other organization other organization
or
first-named
individual
- ------------------------------------ ------------------ ----------------------- ------------------------------
Unif. Gift/ Minor o Broker nominee Broker nominee
Transfer to Minor
- ------------------------------------ ------------------ ----------------------- ------------------------------
Sole Proprietor Owner of
business
- ------------------------------------ ------------------ ----------------------- ------------------------------
o Legal Guardian Ward,
Minor, or
Incompetent
- ------------------------------------ ------------------ ----------------------- ------------------------------
</TABLE>
EXEMPT RECIPIENTS. Please provide your TIN and check the "Exempt Recipient" box
if you are an exempt recipient. Exempt recipients include:
<PAGE>
A corporation A real estate investment trust
A financial institution A common trust fund operated by a
bank under section 584(a)
An organization exempt from An exempt charitable remainder
tax under section 501(a), or an trust or a non-exempt trust
individual retirement plan described in section 4947(a)(1)
A registered dealer in An entity registered at all times
securities or commodities under the Investment Company
registered in the U.S. or a Act of 1940
U.S. possession
IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject to
an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your federal income tax
return, you will be treated as negligent and subject to an IRS 20% penalty on
any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith. If
you falsify information on this form or make any other false statement resulting
in no backup withholding on an account which should be subject to backup
withholding, you may be subject to an IRS $500 penalty and certain criminal
penalties including fines and imprisonment.
<PAGE>
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as a
non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. You are an "Exempt
Foreign Person" if you are not (1) a citizen or resident of the U.S., or (2) a
U.S. corporation, partnership, estate, or trust. In the case of an individual,
an "Exempt Foreign Person" is one who has been physically present in the U.S.
for less than 31 days during the current calendar year. An individual who is
physically present in the U.S. for at least 31 days during the current calendar
year will still be treated as an "Exempt Foreign Person," provided that the
total number of days physically present in the current calendar year and the two
preceding calendar years does not exceed 183 days (counting all of the days in
the current calendar year, only one-third of the days in the first preceding
calendar year and only one-sixth of the days in the second preceding calendar
year). In addition, lawful permanent residents or green card holders may not be
treated as "Exempt Foreign Persons." If you are an individual or an entity, you
must not now be, or at this time expect to be, engaged in a U.S. trade or
business with respect to which any gain derived from transactions effected by
the Fund/Payer during the calendar year is effectively connected to the U.S. (or
your transactions are exempt from U.S. taxes under a tax treaty).
PERMANENT ADDRESS. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual, provide
your permanent address. If you are a partnership or corporation, provide the
address of your principal office. If you are an estate or trust, provide the
address of your permanent residence or the principal office of any fiduciary.
NOTICE OF CHANGE IN STATUS. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and backup
withholding may also begin unless you certify to the Fund/Payer that (1) the
taxpayer identification number you have given is correct, and (2) the Internal
Revenue Service has not notified you that you are subject to backup withholding
because you failed to report certain interest or dividend income. You may use
Form W-9, "Payer's Request for Taxpayer Identification Number and
Certification," to make these certifications. If an account is no longer active,
you do not have to notify a Fund/Payer or broker of your change in status unless
you also have another account with the same Fund/Payer that is still active. If
you receive interest from more than one Fund/Payer or have dealings with more
than one broker or barter exchange, file a certificate with each. If you have
more than one account with the same Fund/Payer, the Fund/Payer may require you
to file a separate certificate for each account.
WHEN TO FILE. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years.
HOW OFTEN YOU MUST FILE. This certificate generally remains in effect for three
calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
<PAGE>
RESOLUTION SUPPORTING AUTHORITY OF
CORPORATE /ASSOCIATION SHAREHOLDER
- ------------------------------------------------------------------
INSTRUCTION:
It will be necessary for corporate/association shareholders to provide a
certified copy of a resolution or other certificate of authority supporting the
authority of designated officers of the corporation/association to issue oral
and written instruction on behalf of the corporation/association for the
purchase, sale (redemption), transfer and/or exchange of Franklin Templeton Fund
shares. You may use the following form of resolution or you may prefer to use
your own.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the
duly elected of ___________________ a ___________________
TitleCorporate Name
organized under the laws of the State of _____________________
that the following is a true and correct copy of a resolution
Type of Organization
adopted by the Board of Directors by unanimous written consent (a copy of which
is attached) or at a meeting duly called and held on _________________, 19___.
"RESOLVED, that
Name of Corporation/Association
(the "Company") is authorized to invest the Company's assets
in one or more investment companies (mutual funds) whose
shares are distributed by Franklin/Templeton Distributors,
Inc. ("Distributors"). Each such investment company, or
series thereof, is referred to as a "Franklin Templeton Fund"
or "Fund."
FURTHER RESOLVED, that any (enter number) __________________ of the
following officers of this Company (acting alone, if one, or acting
together, if more than one) is/are authorized to issue oral or written
instructions (including the signing of drafts in the case of draft accessed
money fund accounts) on behalf of the Company for the purchase, sale
(redemption), transfer and/or exchange of Fund shares and to execute any
Fund application(s) and agreements pertaining to Fund shares registered or
to be registered to the Company (referred to as a "Company Instruction");
and, that this authority shall continue until Franklin/Templeton Investor
Services, Inc. ("Investor Services") receives written notice of revocation
or amendment delivered by registered mail. The Company's officers authorized
to act on behalf of the Company under this resolution are (enter officer
titles
only):________________________________________________________________
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(referred to as the "Authorized Officers").
FURTHER RESOLVED, that Investor Services may rely on the most recently
provided incumbency certificate delivered by the Company to Investor
Services to identify those individuals who are the incumbent Authorized
Officers and that Investor Services shall have no independent duty to
determine if there has been any change in the individuals serving as
incumbent Authorized Officers.
FURTHER RESOLVED, that the Company ("Indemnitor") undertakes and agrees to
indemnify and hold harmless Distributors, each affiliate of Distributors,
each Franklin Templeton Fund and their officers, employees and agents
(referred to hereafter collectively as the "Indemnitees") from and against
any and all liability, loss, suits, claims, costs, damages and expenses of
whatever amount and whatever nature (including without limitation reasonable
attorneys' fees, whether for consultation and advice or representation in
litigation at both the trial and appellate level) any indemnitee may sustain
or incur by reason of, in consequence of, or arising from or in connection
with any action taken or not taken by an Indemnitee in good faith reliance
on a Company Instruction given as authorized under this resolution."
The undersigned further certifies that the below named persons, whose signatures
appear opposite their names, are the incumbent Authorized Officers (as that term
is defined in the above resolution) who have been duly elected to the office
identified beside their name(s) (attach additional list if necessary).
X
- ----------------------------------- ---------------------------------------
Name/title (please print or type) Signature
X
- ----------------------------------- ---------------------------------------
Name/title (please print or type) Signature
X
- ----------------------------------- ---------------------------------------
Name/title (please print or type) Signature
X
- ----------------------------------- ---------------------------------------
Name/title (please print or type) Signature
Certified from minutes
X
Signature
------------------------------------------------------------------------------
Name/title (please print or type)
CORPORATE SEAL (if appropriate)
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
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.
<PAGE>
GLOBAL GROWTH
Franklin Global Health Care Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller
Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton
Global Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High
Income Currency Fund
Templeton Americas
Government Securities Fund
GROWTH
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap
Growth Fund
Franklin Small Cap Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund
Franklin Convertible Securities Fund
Franklin Equity Income und
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural
Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends
Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American
Trust, Inc.
FUND ALLOCATOR SERIES
Franklin Templeton
Conservative Target Fund
Franklin Templeton
Moderate Target Fund
Franklin Templeton
Growth Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment
Grade Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR CORPORATIONS
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES+
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
<PAGE>
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal securities.
+Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC.
FGF02/97 [LOGO] Printed on recycled paperTLGIT PZ 08/97
<PAGE>
TEMPLETON REGION FUNDS
ADVISOR CLASS
P.O. Box 33031
St. Petersburg, FL 33733-8031
- -----------------------------
TLGIT PZ 08/97 [LOGO] Printed on recycled paper
<PAGE>
CLASS I AND II
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1997
700 CENTRAL AVENUE, P.O. BOX 33030
ST. PETERSBURG, FL 33733-8030 1-800/DIAL BEN
TABLE OF CONTENTS
How Do the Funds Invest Their Assets?............................
What Are the Funds' Potential Risks?.............................
Investment Restrictions..........................................
Officers and Trustees............................................
Investment Management and Other Services.........................
How Do the Funds Buy Securities for Their Portfolios?............
How Do I Buy, Sell and Exchange Shares?..........................
How Are Fund Shares Valued?......................................
Additional Information on Distributions and Taxes................
The Funds' Underwriter...........................................
How Do the Funds Measure Performance?............................
Miscellaneous Information........................................
Financial Statements.............................................
Useful Terms and Definitions.....................................
Appendix
Description of Ratings...........................................
When reading this SAI, you will see certain terms beginning with
capital letters. This means the term is explained under "Useful Terms
and Definitions."
Templeton Global Investment Trust (the "Trust") is an open-end management
investment company with five separate series. There are four diversified
series: Templeton Growth and Income Fund ("Growth and Income Fund"); Templeton
Global Infrastructure Fund ("Infrastructure Fund") - Templeton Greater European
Fund ("Greater European Fund") - and Templeton Latin America Fund ("Latin
America Fund"). There is also one non-diversified series: Templeton Americas
Government Securities Fund ("Americas Government Securities Fund").
Each Fund may, separately or collectively, be referred to as the "Fund" or
"Funds," or individually by its name.
Growth and Income Fund's investment objective is high total return, which it
seeks to achieve primarily by investing in equity and debt securities of
domestic and foreign companies. The Fund changed its name from Templeton
Global Rising Dividends Fund on July 10, 1995.
Infrastructure Fund's investment objective is long-term capital growth, which
it seeks to achieve primarily by investing in securities of domestic and
foreign companies that are principally engaged in the development, operation or
rehabilitation of the physical and social infrastructures of various nations.
Greater European Fund's investment objective is long-term capital appreciation,
which it seeks to achieve by investing in equity securities of companies in
Greater Europe (Western, Central and Eastern Europe and Russia).
Latin America Fund's investment objective is long-term capital appreciation,
which it seeks to achieve by investing in equity securities and debt
obligations of issuers in Latin American countries.
Americas Government Securities Fund's investment objective is a high level of
current income. A secondary objective is total return. It seeks to achieve this
objective by investing in debt securities of governmental entities located in
the Western Hemisphere.
Each Fund's Prospectus, dated August 1, 1997, as may be amended from time to
time, contains the basic information you should know before investing in the
Fund. For a free copy, call 1-800/DIAL BEN or write the Fund at the address
shown.
This SAI describes each Fund's (except Americas Government Securities Fund)
Class I and Class II shares. Americas Government Securities Fund offers one
class of shares. Greater European Fund and Latin America Fund currently offer
another class of shares with a different sales charge and expense structure,
which affects performance. This class is described in a separate SAI and
prospectus. For more information, contact your investment representative or
call 1-800/DIAL BEN.
THIS SAI IS NOT A PROSPECTUS. IT CONTAINS INFORMATION IN ADDITION TO AND IN
MORE DETAIL THAN SET FORTH IN EACH FUND'S PROSPECTUS. THIS SAI IS INTENDED TO
PROVIDE YOU WITH ADDITIONAL INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS
OF THE FUNDS, AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR
ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK;
ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
How Do the Funds Invest Their Assets?
-------------------------------------------------------------
INVESTMENT POLICIES. The investment objective and policies of each Fund are
described in each Fund's Prospectus under the heading "How Do the Funds Invest
Their Assets?"
REPURCHASE AGREEMENTS. Repurchase agreements are contracts under which the
buyer of a security simultaneously commits to resell the security to the seller
at an agreed-upon price and date. Under a repurchase agreement, the seller is
required to maintain the value of the securities subject to the repurchase
agreement at not less than their repurchase price. The Investment Manager of
each Fund will monitor the value of such securities daily to determine that the
value equals or exceeds the repurchase price. Repurchase agreements may involve
risks in the event of default or insolvency of the seller, including possible
delays or restrictions upon a Fund's ability to dispose of the underlying
securities. A Fund will enter into repurchase agreements only with parties who
meet creditworthiness standards approved by the Board, i.e., banks or
broker-dealers which have been determined by a Fund's Investment Manager to
present no serious risk of becoming involved in bankruptcy proceedings within
the time frame contemplated by the repurchase transaction.
DEBT SECURITIES. The Funds may invest in debt securities that are rated in any
rating category by S&P or Moody's or that are unrated by any rating agency. As
an operating policy, which may be changed by the Board without shareholder
approval, neither Growth and Income Fund, Infrastructure Fund, Greater European
Fund, nor Latin America Fund will invest more than 5% of its assets in debt
securities rated lower than Baa by Moody's or BBB by S&P. The market value of
debt securities generally varies in response to changes in interest rates and
the financial condition of each issuer. During periods of declining interest
rates, the value of debt securities generally increases. Conversely, during
periods of rising interest rates, the value of such securities generally
declines. These changes in market value will be reflected in a Fund's net asset
value.
Bonds which are rated Baa by Moody's are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well. Bonds which are rated C by Moody's are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Bonds rated BBB by S&P are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories. Bonds rated D by S&P
are the lowest rated class of bonds, and generally are in payment default. The
D rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Although they may offer higher yields than do higher rated securities,
high-risk, low rated debt securities (commonly referred to as "junk bonds") and
unrated debt securities generally involve greater volatility of price and risk
of principal and income, including the possibility of default by, or bankruptcy
of, the issuers of the securities. In addition, the markets in which low rated
and unrated debt securities are traded are more limited than those in which
higher rated securities are traded. The existence of limited markets for
particular securities may diminish a Fund's ability to sell the securities at
fair value either to meet redemption requests or to respond to a specific
economic event such as a deterioration in the creditworthiness of the issuer.
Reduced secondary market liquidity for certain low rated or unrated debt
securities may also make it more difficult for a Fund to obtain accurate market
quotations for the purposes of valuing the Fund's portfolio. Market quotations
are generally available on many low rated or unrated securities only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of low rated debt securities,
especially in a thinly traded market. Analysis of the creditworthiness of
issuers of low rated debt securities may be more complex than for issuers of
higher rated securities, and the ability of a Fund to achieve its investment
objective may, to the extent of investment in low rated debt securities, be
more dependent upon such creditworthiness analysis than would be the case if
the Fund were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of low rated debt securities have been found to be less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection
of an economic downturn or of a period of rising interest rates, for example,
could cause a decline in low rated debt securities prices because the advent of
a recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of low
rated debt securities defaults, a Fund may incur additional expenses seeking
recovery.
A Fund may accrue and report interest income on high yield bonds, such as zero
coupon bonds or pay-in-kind securities, even though it receives no cash
interest until the security's maturity or payment date. In order to qualify for
beneficial tax treatment afforded regulated investment companies, and to
generally be relieved of federal tax liabilities, a Fund must distribute all of
its net income and gains to shareholders (see "Additional Information on
Distributions and Taxes") generally on an annual basis. A Fund may have to
dispose of portfolio securities under disadvantageous circumstances to generate
cash or leverage itself by borrowing cash in order to satisfy the distribution
requirement.
STRUCTURED INVESTMENTS. Included among the issuers of debt securities in which
each Fund may invest are entities organized and operated solely for the purpose
of restructuring the investment characteristics of various securities. These
entities are typically organized by investment banking firms which receive fees
in connection with establishing each entity and arranging for the placement of
its securities. This type of restructuring involves the deposit with or
purchase by an entity, such as a corporation or trust, of specified instruments
and the issuance by that entity of one or more classes of securities
(Ostructured investments") backed by, or representing interests in, the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued structured investments to create securities
with different investment characteristics such as varying 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 each Fund anticipates investing typically involve no credit enhancement,
their credit risk will generally be equivalent to that of the underlying
instruments.
Each Fund is permitted to invest in a class of structured investments that is
either subordinated or unsubordinated to the right of payment of another class.
Subordinated structured investments typically have higher yields and present
greater risks than unsubordinated structured investments. Although each 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 such 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. A Fund's investment in these structured
investments may be limited by its investment restrictions. See "Investment
Restrictions" below. 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 a Fund's restrictions on investments in illiquid securities.
CONVERTIBLE SECURITIES. The Funds may invest in convertible securities,
including convertible debt and convertible preferred stock. Convertible
securities are fixed-income securities which may be converted at a stated price
within a specific amount of time into a specified number of shares of common
stock. These securities are usually senior to common stock in a corporation's
capital structure, but usually are subordinated to non-convertible debt
securities. In general, the value of a convertible security is the higher of
its investment value (its value as a fixed-income security) and its conversion
value (the value of the underlying shares of common stock if the security is
converted). The investment value of a convertible security generally increases
when interest rates decline and generally decreases when interest rates rise.
The conversion value of a convertible security is influenced by the value of
the underlying common stock.
FUTURES CONTRACTS. Each Fund may purchase and sell financial futures contracts.
Although some financial futures contracts call for making or taking delivery of
the underlying securities, in most cases these obligations are closed out
before the settlement date. The closing of a contractual obligation is
accomplished by purchasing or selling an identical offsetting futures contract.
Other financial futures contracts by their terms call for cash settlements.
Each Fund may also buy and sell index futures contracts with respect to any
stock or bond index traded on a recognized stock exchange or board of trade. An
index futures contract is a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the contract is made. The
index futures contract specifies that no delivery of the actual securities
making up the index will take place. Instead, settlement in cash must occur
upon the termination of the contract, with the settlement being the difference
between the contract price and the actual level of the index at the expiration
of the contract.
At the time a Fund purchases a futures contract, an amount of cash, U.S.
government securities, or other highly liquid debt securities equal to the
market value of the contract will be deposited in a segregated account with the
Fund's custodian. When writing a futures contract, a Fund will maintain with
its custodian liquid assets that, when added to the amounts deposited with a
futures commission merchant or broker as margin, are equal to the market value
of the instruments underlying the contract. Alternatively, a Fund may "cover"
its position by owning the instruments underlying the contract or, in the case
of an index futures contract, owning a portfolio with a volatility
substantially similar to that of the index on which the futures contract is
based, or holding a call option permitting the Fund to purchase the same
futures contract at a price no higher than the price of the contract written by
the Fund (or at a higher price if the difference is maintained in liquid assets
with the Fund's custodian).
OPTIONS ON SECURITIES, INDICES AND FUTURES. Each Fund may write covered put and
call options and purchase put and call options on securities, securities
indices and futures contracts that are traded on U.S. and foreign exchanges and
in the over-the-counter markets.
An option on a security or a futures contract is a contract that gives the
purchaser of the option, in return for the premium paid, the right to buy a
specified security or futures contract (in the case of a call option) or to
sell a specified security or futures contract (in the case of a put option)
from or to the writer of the option at a designated price during the term of
the option. An option on a securities index gives the purchaser of the option,
in return for the premium paid, the right to receive from the seller cash equal
to the difference between the closing price of the index and the exercise price
of the option.
Each Fund may write a call or put option only if the option is "covered." A
call option on a security or futures contract written by a Fund is "covered" if
the Fund owns the underlying security or futures contract covered by the call
or has an absolute and immediate right to acquire that security without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio. A call option on a security or futures
contract is also covered if a Fund holds a call on the same security or futures
contract and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or high grade U.S.
Government securities in a segregated account with its custodian. A put option
on a security or futures contract written by a Fund is "covered" if the Fund
maintains cash or fixed-income securities with a value equal to the exercise
price in a segregated account with its custodian, or else holds a put on the
same security or futures contract and in the same principal amount as the put
written where the exercise price of the put held is equal to or greater than
the exercise price of the put written.
A Fund will cover call options on securities indices that it writes by owning
securities whose price changes, in the opinion of the Investment Manager, are
expected to be similar to those of the index, or in such other manner as may be
in accordance with the rules of the exchange on which the option is traded and
applicable laws and regulations. Nevertheless, where a Fund covers a call
option on a securities index through ownership of securities, such securities
may not match the composition of the index. In that event, a Fund will not be
fully covered and could be subject to risk of loss in the event of adverse
changes in the value of the index. A Fund will cover put options on securities
indices that it writes by segregating assets equal to the option's exercise
price, or in such other manner as may be in accordance with the rules of the
exchange on which the option is traded and applicable laws and regulations.
A Fund will receive a premium from writing a put or call option, which
increases its gross income in the event the option expires unexercised or is
closed out at a profit. If the value of a security, index or futures contract
on which a Fund has written a call option falls or remains the same, the Fund
will realize a profit in the form of the premium received (less transaction
costs) that could offset all or a portion of any decline in the value of the
portfolio securities being hedged. If the value of the underlying security,
index or futures contract rises, however, a Fund will realize a loss in its
call option position, which will reduce the benefit of any unrealized
appreciation in its investments. By writing a put option, a Fund assumes the
risk of a decline in the underlying security, index or futures contract. To the
extent that the price changes of the portfolio securities being hedged
correlate with changes in the value of the underlying security, index or
futures contract, writing covered put options will increase a Fund's losses in
the event of a market decline, although such losses will be offset in part by
the premium received for writing the option.
Each Fund may also purchase put options to hedge its investments against a
decline in value. By purchasing a put option, a Fund will seek to offset a
decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of a Fund's investments does not
decline as anticipated, or if the value of the option does not increase, each
Funds' loss will be limited to the premium paid for the option plus related
transaction costs. The success of this strategy will depend, in part, on the
accuracy of the correlation between the changes in value of the underlying
security, index or futures contract and the changes in value of a Fund's
security holdings being hedged.
A Fund may purchase call options on individual securities or futures contracts
to hedge against an increase in the price of securities or futures contracts
that it anticipates purchasing in the future. Similarly, a Fund may purchase
call options on a securities index to attempt to reduce the risk of missing a
broad market advance, or an advance in an industry or market segment, at a time
when the Fund holds uninvested cash or short-term debt securities awaiting
investment. When purchasing call options, a Fund will bear the risk of losing
all or a portion of the premium paid if the value of the underlying security,
index or futures contract does not rise.
There can be no assurance that a liquid market will exist when a Fund seeks to
close out an option position. Trading could be interrupted, for example,
because of supply and demand imbalances arising from a lack of either buyers or
sellers, or the options exchange could suspend trading after the price has
risen or fallen more than the maximum specified by the exchange. Although a
Fund may be able to offset to some extent any adverse effects of being unable
to liquidate an option position, it may experience losses in some cases as a
result of such inability. The value of over-the-counter options purchased by a
Fund, as well as the cover for options written by a Fund, are considered not
readily marketable and are subject to the Trust's limitation on investments in
securities that are not readily marketable. See "Investment Restrictions."
FOREIGN CURRENCY HEDGING TRANSACTIONS. In order to hedge against foreign
currency exchange rate risks, each Fund may enter into forward foreign currency
exchange contracts and foreign currency futures contracts, as well as purchase
put or call options on foreign currencies, as described below. Each Fund may
also conduct its foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market.
A Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to attempt to minimize the risk to the Fund from adverse changes in
the relationship between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency for an agreed
price at a future date which is individually negotiated and privately traded by
currency traders and their customers. A Fund may enter into a forward contract,
for example, when it enters into a contract for the purchase or sale of a
security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of the security. In addition, for example, when a Fund believes
that a foreign currency may suffer or enjoy a substantial movement against
another currency, it may enter into a forward contract to sell an amount of the
former foreign currency approximating the value of some or all of its portfolio
securities denominated in such foreign currency. This second investment
practice is generally referred to as "cross-hedging." Because in connection
with a Fund's forward foreign currency transactions, an amount of its assets
equal to the amount of the purchase will be held aside or segregated to be used
to pay for the commitment, a Fund will always have cash, cash equivalents or
high quality debt securities available in an amount sufficient to cover any
commitments under these contracts or to limit any potential risk. The
segregated account will be marked-to-market on a daily basis. While these
contracts are not presently regulated by the Commodity Futures Trading
Commission ("CFTC"), the CFTC may in the future assert authority to regulate
forward contracts. In such event, the Funds' ability to utilize forward
contracts in the manner set forth above may be restricted. Forward contracts
may limit potential gain from a positive change in the relationship between the
U.S. dollar and foreign currencies. Unanticipated changes in currency prices
may result in poorer overall performance for a Fund than if it had not engaged
in such contracts.
A Fund may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the dollar value of foreign
portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge up to the amount of the premium received, and a Fund could be required to
purchase or sell foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on foreign currency may constitute
an effective hedge against fluctuation in exchange rates, although, in the
event of rate movements adverse to its position, a Fund may forfeit the entire
amount of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by a Fund will be traded on U.S. and
foreign exchanges or over-the-counter.
A Fund may enter into exchange-traded contracts for the purchase or sale for
future delivery of foreign currencies ("foreign currency futures"). This
investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of a
Fund's portfolio securities or adversely affect the prices of securities that a
Fund intends to purchase at a later date. The successful use of foreign
currency futures will usually depend on the ability of the Investment Manager
to forecast currency exchange rate movements correctly. Should exchange rates
move in an unexpected manner, a Fund may not achieve the anticipated benefits
of foreign currency futures or may realize losses.
What Are the Funds' Potential Risks?
Each Fund has the right to purchase securities in any foreign country,
developed or developing. You should consider carefully the substantial risks
involved in securities of companies and governments of foreign nations, which
are in addition to the usual risks inherent in domestic investments.
There may be less publicly available information about foreign companies
comparable to the reports and ratings published about companies in the U.S.
Foreign companies are not generally subject to uniform accounting and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to U.S. companies. The Funds, therefore, may
encounter difficulty in obtaining market quotations for purposes of valuing its
portfolio and calculating its net asset value. Foreign markets have
substantially less volume than the NYSE and securities of some foreign
companies are less liquid and more volatile than securities of comparable U.S.
companies. Commission rates in foreign countries, which are generally fixed
rather than subject to negotiation as in the U.S., are likely to be higher. In
many foreign countries there is less government supervision and regulation of
stock exchanges, brokers and listed companies than in the U.S.
Investments in companies domiciled in developing countries may be subject to
potentially higher risks than investments in developed countries. These risks
include (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict a
Fund's investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests; (iv) foreign
taxation; (v) the absence of developed structures governing private or foreign
investment or allowing for judicial redress for injury to private property;
(vi) the absence, until recently in certain Eastern European countries, of a
capital market structure or market-oriented economy; and (vii) the possibility
that recent favorable economic developments in Eastern Europe may be slowed or
reversed by unanticipated political or social events in such countries.
To the extent of the Communist Party's influence, investments in such countries
may involve risks of nationalization, expropriation and confiscatory taxation.
The communist governments of a number of Eastern European countries
expropriated large amounts of private property in the past, in many cases
without adequate compensation, and there can be no assurance that such
expropriation will not occur in the future. In the event of such expropriation,
a Fund could lose a substantial portion of any investments it has made in the
affected countries. Further, no accounting standards exist in Eastern European
countries. Finally, even though certain Eastern European currencies may be
convertible into U.S. dollars, the conversion rates may be artificial to the
actual market values and may be adverse to Fund shareholders.
Certain Eastern European countries, which do not have market economies, are
characterized by an absence of developed legal structures governing private and
foreign investments and private property. Certain countries require
governmental approval prior to investments by foreign persons, or limit the
amount of investment by foreign persons in a particular company, or limit the
investment of foreign persons to only a specific class of securities of a
company that may have less advantageous terms than securities of the company
available for purchase by nationals.
Governments in certain Eastern European countries may require that a
governmental or quasi-governmental authority act as custodian of a Fund's
assets invested in such country. To the extent such governmental or
quasi-governmental authorities do not satisfy the requirements of the 1940 Act
to act as foreign custodians of a Fund's cash and securities, the Fund's
investment in such countries may be limited or may be required to be effected
through intermediaries. The risk of loss through governmental confiscation may
be increased in such countries.
The Infrastructure Fund, Growth and Income Fund, and Greater European Fund may
each invest a portion of its assets in Russian securities. There can be no
assurance that appropriate sub-custody arrangements will be available to the
Funds if and when one or more of the Funds seeks to invest a portion of its
assets in Russian securities. As a non-fundamental policy, none of these Funds
will invest more than 5% of its total assets in Russian securities.
Investing in Russian securities involves a high degree of risk and special
considerations not typically associated with investing in the U.S. securities
markets, and should be considered highly speculative. Such risks include: (i)
delays in settling portfolio transactions and risk of loss arising out of
Russia's system of share registration and custody; (ii) the risk that it may be
impossible or more difficult than in other countries to obtain and/or enforce a
judgment; (iii) pervasiveness of corruption and crime in the Russian economic
system; (iv) currency exchange rate volatility and the lack of available
currency hedging instruments; (v) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation); (vi) controls on
foreign investment and local practices disfavoring foreign investors and
limitations on repatriation of invested capital, profits and dividends, and on
a Fund's ability to exchange local currencies for U.S. dollars; (vii) the risk
that the government of Russia or other executive or legislative bodies may
decide not to continue to support the economic reform programs implemented
since the dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the dissolution of the Soviet Union; (viii) the
financial condition of Russian companies, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (ix)
dependency on exports and the corresponding importance of international trade;
(x) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (xi) possible
difficulty in identifying a purchaser of securities held by a Fund due to the
underdeveloped nature of the securities markets.
There is little historical data on Russian securities markets because they are
relatively new and a substantial proportion of securities transactions in
Russia are privately negotiated outside of stock exchanges. Because of the
recent formation of the securities markets as well as the underdeveloped state
of the banking and telecommunications systems, settlement, clearing and
registration of securities transactions are subject to significant risks.
Ownership of shares (except where shares are held through depositories that
meet the requirements of the 1940 Act) is defined according to entries in the
company's share register and normally evidenced by extracts from the register
or by formal share certificates. However, there is no central registration
system for shareholders and these services are carried out by the companies
themselves or by registrars located throughout Russia. These registrars are not
necessarily subject to effective state supervision and it is possible for a
Fund to lose its registration through fraud, negligence or even mere oversight.
While a Fund will endeavor to ensure that its interest continues to be
appropriately recorded either itself or through a custodian or other agent
inspecting the share register and by obtaining extracts of share registers
through regular confirmations, these extracts have no legal enforceability and
it is possible that subsequent illegal amendment or other fraudulent act may
deprive a Fund of its ownership rights or improperly dilute its interests. In
addition, while applicable Russian regulations impose liability on registrars
for losses resulting from their errors, it may be difficult for a Fund to
enforce any rights it may have against the registrar or issuer of the
securities in the event of loss of share registration. Furthermore, although a
Russian public enterprise with more than 1,000 shareholders is required by law
to contract out the maintenance of its shareholder register to an independent
entity that meets certain criteria, in practice this regulation has not always
been strictly enforced. Because of this lack of independence, management of a
company may be able to exert considerable influence over who can purchase and
sell the company's shares by illegally instructing the registrar to refuse to
record transactions in the share register. This practice may prevent a Fund
from investing in the securities of certain Russian issues deemed suitable by
its Investment Manager. Further, this also could cause a delay in the sale of
Russian securities by a Fund if a potential purchaser is deemed unsuitable,
which may expose the Fund to potential loss on the investment.
Investing in Latin American issuers involves a high degree of risk and special
considerations not typically associated with investing in the U. S. and other
more developed securities markets, and should be considered highly speculative.
Such risks include: (i) restrictions or controls on foreign investment and
limitations on repatriation of invested capital and Latin America Fund's
ability to exchange local currencies for U.S. dollars; (ii) higher and
sometimes volatile rates of inflation (including the risk of social unrest
associated with periods of hyper-inflation); (iii) the risk that certain Latin
American countries, which are among the largest debtors to commercial banks and
foreign governments and which have experienced difficulty in servicing
sovereign debt obligations in the past, may negotiate to restructure sovereign
debt obligations; (iv) the risk that it may be impossible or more difficult
than in other countries to obtain and/or enforce a judgment; (v) currency
exchange rate fluctuations and the lack of available currency hedging
instruments; (vi) more substantial government involvement in and control over
the local economies; and (vii) dependency on exports and the corresponding
importance of international trade.
Latin American countries may be subject to a greater degree of economic,
political, and social instability than is the case in the U.S., Japan, or
Western European countries. Such instability may result from, among other
things, the following: (i) authoritarian governments or military involvement in
political and economic decision-making, including changes in governmental
control through extra-constitutional means; (ii) popular unrest associated with
demands for improved political, economic, and social conditions; (iii) internal
insurgencies and terrorist activities; (iv) hostile relations with neighboring
countries; (v) ethnic, religious and racial disaffection; and (vi) drug
trafficking.
Each Fund endeavors to buy and sell foreign currencies on as favorable a basis
as practicable. Some price spread on currency exchange (to cover service
charges) may be incurred, particularly when a Fund changes investments from one
country to another or when proceeds of the sale of shares in U.S. dollars are
used for the purchase of securities in foreign countries. Also, some countries
may adopt policies which would prevent a Fund from transferring cash out of the
country or withhold portions of interest and dividends at the source. There is
the possibility of cessation of trading on national exchanges, expropriation,
nationalization or confiscatory taxation, withholding and other foreign taxes
on income or other amounts, foreign exchange controls (which may include
suspension of the ability to transfer currency from a given country), default
in foreign government securities, political or social instability, or
diplomatic developments which could affect investments in securities of issuers
in foreign nations.
The Funds may be affected either unfavorably or favorably by fluctuations in
the relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments. Some countries in which the Funds may invest may also have fixed
or managed currencies that are not free-floating against the U.S. dollar.
Further, certain currencies may not be internationally traded. Certain of these
currencies have experienced a steady devaluation relative to the U.S. dollar.
Any devaluations in the currencies in which the Funds' portfolio securities are
denominated may have a detrimental impact on the Funds. Through the flexible
policy of the Funds, the Investment Managers endeavor to avoid unfavorable
consequences and to take advantage of favorable developments in particular
nations where from time to time they place the Funds' investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
The Board considers at least annually the likelihood of the imposition by any
foreign government of exchange control restrictions which would affect the
liquidity of the Funds' assets maintained with custodians in foreign countries,
as well as the degree of risk from political acts of foreign governments to
which such assets may be exposed. The Board also considers the degree of risk
involved through the holding of portfolio securities in domestic and foreign
securities depositories (see "Investment Management and Other Services").
However, in the absence of willful misfeasance, bad faith or gross negligence
on the part of an Investment Manager, any losses resulting from the holding of
portfolio securities in foreign countries and/or with securities depositories
will be at the risk of the shareholders. No assurance can be given that the
Board's appraisal of the risks will always be correct or that such exchange
control restrictions or political acts of foreign governments will not occur.
A Fund's ability to reduce or eliminate its futures and related options
positions will depend upon the liquidity of the secondary markets for such
futures and options. The Funds intend to purchase or sell futures and related
options only on exchanges or boards of trade where there appears to be an
active secondary market, but there is no assurance that a liquid secondary
market will exist for any particular contract or at any particular time. Use of
futures and options for hedging may involve risks because of imperfect
correlations between movements in the prices of the futures or options and
movements in the prices of the securities being hedged. Successful use of
futures and related options by a Fund for hedging purposes also depends upon
the Investment Manager's ability to predict correctly movements in the
direction of the market, as to which no assurance can be given.
There are several risks associated with transactions in options on securities
indices. For example, there are significant differences between the securities
and options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. A decision
as to whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events. There can be no
assurance that a liquid market will exist when a Fund seeks to close out an
option position. If a Fund were unable to close out an option that it had
purchased on a securities index, it would have to exercise the option in order
to realize any profit or the option may expire worthless. If trading were
suspended in an option purchased by the Fund, it would not be able to close out
the option. If restrictions on exercise were imposed, a Fund might be unable to
exercise an option it has purchased. Except to the extent that a call option on
an index written by a Fund is covered by an option on the same index purchased
by the Fund, movements in the index may result in a loss to the Fund; however,
such losses may be mitigated by changes in the value of the Fund's securities
during the period the option was outstanding.
Additional risks may be involved with the Funds' special investment techniques,
including loans of portfolio securities and borrowing for investment purposes.
These "How Do the Funds Invest Their Assets? - Types of Securities In Which the
Funds May Invest" in each Fund's Prospectus.
Investment Restrictions
The Funds have adopted the following restrictions as fundamental policies.
These restrictions may not be changed without the approval of a majority of the
outstanding voting securities of a Fund. Under the 1940 Act, this means the
approval of (i) more than 50% of the outstanding shares of a Fund or (ii) 67%
or more of the shares of a Fund present at a shareholder meeting if more than
50% of the outstanding shares of the Fund are represented at the meeting in
person or by proxy, whichever is less. Each Fund MAY NOT:
1. Invest in real estate or mortgages on real estate (although the Funds may
invest in marketable securities secured by real estate or interests therein);
invest in other open-end investment companies (except in connection with a
merger, consolidation, acquisition or reorganization); invest in interests
(other than publicly issued debentures or equity stock interests) in oil, gas
or other mineral exploration or development programs; or purchase or sell
commodity contracts (except futures contracts as described in each Fund's
Prospectus).
2. Purchase any security (other than obligations of the U.S. government, its
agencies or instrumentalities) if, as a result, as to 75% of a Fund's total
assets (a) more than 5% of the Fund's total assets would then be invested in
securities of any single issuer, or (b) the Fund would then own more than 10%
of the voting securities of any single issuer; provided, however, that this
restriction does not apply to Americas Government Securities Fund.
3. Act as an underwriter; issue senior securities except as set forth in
investment restriction 6 below; or purchase on margin or sell short, except
that each Fund may make margin payments in connection with futures, options and
currency transactions.
4. Loan money, except that a Fund may (a) purchase a portion of an issue of
publicly distributed bonds, debentures, notes and other evidences of
indebtedness, (b) enter into repurchase agreements and (c) lend its portfolio
securities.
5. Borrow money, except that a Fund may borrow money from banks in an amount
not exceeding 33 1/3% of the value of its total assets (including the amount
borrowed).
6. Mortgage, pledge or hypothecate its assets (except as may be necessary in
connection with permitted borrowings); provided, however, this does not
prohibit escrow, collateral or margin arrangements in connection with its use
of options, futures contracts and options on future contracts.
7. Invest more than 25% of its total assets in a single
industry.
8. Participate on a joint or a joint and several basis in any trading account
in securities. (See "How Do the Funds Buy Securities for Their Portfolios?") as
to transactions in the same securities for the Funds, other clients and/or
other mutual funds within the Franklin Templeton Group of Funds.)
If a Fund receives from an issuer of securities held by the Fund subscription
rights to purchase securities of that issuer, and if the Fund exercises such
subscription rights at a time when the Fund's portfolio holdings of securities
of that issuer would otherwise exceed the limits set forth in Investment
Restrictions 2 or 7 above, it will not constitute a violation if, prior to
receipt of securities upon exercise of such rights, and after announcement of
such rights, the Fund has sold at least as many securities of the same class
and value as it would receive on exercise of such rights.
TRADING POLICIES. The Investment Managers and their affiliated
companies serve as investment advisers to other investment companies and
private clients. Accordingly, the respective portfolios of certain of these
funds and clients may contain many or some of the same securities. When certain
funds or clients are engaged simultaneously in the purchase or sale of the same
security, the trades may be aggregated for execution and then allocated in a
manner designed to be equitable to each party. The larger size of the
transaction may affect the price of the security and/or the quantity which may
be bought or sold for each party. If the transaction is large enough, brokerage
commissions in certain countries may be negotiated below those otherwise
chargeable.
Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other remuneration in
connection therewith, may be effected between any of these funds, or between
funds and private clients, under procedures adopted pursuant to Rule 17a-7
under the 1940 Act.
PERSONAL SECURITIES TRANSACTIONS. Access persons of the Franklin Templeton
Group, as defined in SEC Rule 17(j) under the 1940 Act, who are employees of
Franklin Resources, Inc. or their subsidiaries, are permitted to engage in
personal securities transactions subject to the following general restrictions
and procedures: (i) The trade must receive advance clearance from a compliance
officer and must be completed within 24 hours after this clearance; (ii) Copies
of all brokerage confirmations must be sent to the compliance officer and
within 10 days after the end of each calendar quarter, a report of all
securities transactions must be provided to the compliance officer; (iii) In
addition to items (i) and (ii), access persons involved in preparing and making
investment decisions must file annual reports of their securities holdings each
January and also inform the compliance officer (or other designated personnel)
if they own a security that is being considered for a fund or other client
transaction or if they are recommending a security in which they have an
ownership interest for purchase or sale by a fund or other client.
ADDITIONAL RESTRICTIONS. Each Fund has adopted the following additional
restrictions which are not fundamental and which may be changed without
shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy. Under these restrictions, a Fund may not:
1. Purchase or retain securities of any company in which Trustees or officers of
the Trust or of a Fund's Investment Manager, individually owning more than 1/2
of 1% of the securities of such company, in the aggregate own more than 5% of
the securities of such company.
2. Invest more than 5% of the value of its total assets in securities of issuers
which have been in continuous operation less than three years.
3. Invest more than 5% of its net assets in warrants whether or not listed on
the NYSE or American Stock Exchange, and more than 2% of its net assets in
warrants that are not listed on those exchanges. Warrants acquired in units or
attached to securities are not included in this restriction.
4. Purchase or sell real estate limited partnership interests.
5. Purchase or sell interests in oil, gas and mineral leases (other than
securities of companies that invest in or sponsor such programs).
6. Invest for the purpose of exercising control over management of any company.
7. Purchase more than 10% of a company's outstanding voting securities.
8. Invest more than 15% of the Fund's total assets in securities that are not
readily marketable (including repurchase agreements maturing in more than seven
days and over-the-counter options purchased by the Fund), including no more than
10% of its total assets in restricted securities. Rule 144A securities are not
subject to the 10% limitation on restricted securities, although a Fund will
limit its investment in all restricted securities, including Rule 144A
securities, to 15% of its total assets.
Each Fund may also be subject to investment limitations imposed by foreign
jurisdictions in which the Fund sells its shares.
If a percentage restriction is met at the time of investment, a later increase
or decrease in the percentage due to a change in the value or liquidity of
portfolio securities or the amount of assets will not be considered a violation
of any of the foregoing restrictions.
OFFICERS AND TRUSTEES
The Board has the responsibility for the overall management of the Funds,
including general supervision and review of their investment activities. The
Board, in turn, elects the officers of the Trust who are responsible for
administering the Funds' day-to-day operations. The affiliations of the officers
and Board members and their principal occupations for the past five years are
shown below. Members of the Board who are considered "interested persons" of the
Trust under the 1940 Act are indicated by an asterisk (*).
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS WITH THE TRUST DURING THE PAST FIVE YEARS
<S> <C> <C>
HARRIS J. ASHTON Trustee Chairman of the board, president and chief executive officer
Age 65 of General Host Corporation (nursery and craft centers);
Metro Center director of RBC Holdings Inc. (a bank holding company) and
1 Station Place Bar-S Foods (a meat packing company); and director or trustee
Stamford, Connecticut of 53 of the investment companies in the Franklin Templeton
Group of Funds.
NICHOLAS F. BRADY* Trustee Chairman of Templeton Emerging Markets Investment Trust PLC;
Age 67 chairman of Templeton Latin America Investment Trust PLC;
The Bullitt House chairman of Darby Overseas Investments, Ltd. (an investment
102 East Dover Street firm) (1994-present); chairman and director of Templeton
Easton, Maryland Central and Eastern European Investment Company; director of
the Amerada Hess Corporation, Christiana Companies, and the
H.J. Heinz Company; formerly, Secretary of the United States
Department of the Treasury (1988-1993) and chairman of the
board of Dillon, Read & Co. Inc. (investment banking) prior
to 1988; and director or trustee of 23 of the investment
companies in the Franklin Templeton Group of Funds.
MARTIN L. FLANAGAN* Trustee and Vice President Senior vice president, treasurer and chief financial officer
Age 37 of Franklin Resources, Inc.; director and executive vice
777 Mariners Island Blvd. president of Templeton Worldwide, Inc.; director, executive
San Mateo, California vice president and chief operating officer of Templeton
Investment Counsel, Inc.; senior vice president and
treasurer of Franklin Advisers, Inc.; treasurer of
Franklin Advisory Services, Inc.; treasurer and chief financial
officer of Franklin Investment Advisory Services, Inc.;
president of Franklin Templeton Services, Inc.; senior vice
president of Franklin/Templeton Investor Services, Inc.;
and officer and/or director or trustee, as the case may be,
of 58 of the investment companies in the Franklin Templeton
Group of Funds.
S. JOSEPH FORTUNATO Trustee Member of the law firm of Pitney, Hardin, Kipp &
Age 65 Szuch; director of General Host Corporation (nursery and
200 Campus Drive craft centers); and director or trustee of 55 of
Florham Park, New Jersey the investment companies in the Franklin Templeton Group of
Funds.
JOHN Wm. GALBRAITH Trustee President of Galbraith Properties, Inc. (personal investment
Age 75 company); director of Gulf West Banks, Inc. (bank holding
360 Central Avenue company) (1995-present); formerly, director of Mercantile
Suite 1300 Bank (1991-1995), vice chairman of Templeton, Galbraith &
St. Petersburg, Florida Hansberger Ltd. (1986-1992), and chairman of Templeton Funds
Management, Inc. (1974-1991); and director or trustee of 22
of the investment companies in the Franklin Templeton Group
of Funds.
ANDREW H. HINES, JR. Trustee Consultant for the Triangle Consulting Group;
Age 74 executive-in-residence of Eckerd College (1991-present);
150 Second Avenue N. formerly, chairman of the board and chief executive officer
St. Petersburg, Florida of Florida Progress Corporation (1982-1990) and director of
various of its subsidiaries; and director or trustee of
24 of the investment companies in the Franklin Templeton Group
of Funds.
CHARLES B. JOHNSON* Chairman of the Board and President, chief executive officer and director of Franklin
Age 64 Vice President Resources, Inc.; chairman of the board and director of
777 Mariners Island Blvd. Franklin Advisers, Inc., Franklin Investment Advisory
San Mateo, California Services, Inc., Franklin Advisory Services, Inc. and Franklin
Templeton Distributors, Inc.; director of Franklin/Templeton
Investor Services, Inc., Franklin Templeton Services, Inc.
and General Host Corporation (nursery and craft centers); and
officer and/or director or trustee, as the case may be, of
most of the other subsidiaries of Franklin Resources, Inc.
and 54 of the investment companies in the Frankln Templeton
Group of Funds.
<PAGE>
BETTY P. KRAHMER Trustee Director or trustee of various civic associations; formerly,
Age 68 economic analyst, U.S. government; and director or trustee of
2201 Kentmere Parkway 23 of the investment companies in the Franklin Templeton
Wilmington, Delaware Group of Funds.
GORDON S. MACKLIN Trustee Chairman of White River Corporation (financial services);
Age 69 director of Fund American Enterprises Holdings, Inc., MCI
8212 Burning Tree Road Communications Corporation, CCC Information Services Group,
Bethesda, Maryland Inc., (information services), MedImmune, Inc. (biotechnology),
Shoppers Express, Inc. (home shopping) and Spacehab, Inc.,
(aerospace technology); formerly, chairman of Hambrecht and
Quist Group, director of H&Q Healthcare Investors, and
president of the National Association of Securities
Dealers, Inc.; and director or trustee of 50 of the investment
companies in the Franklin Templeton Group of Funds.
FRED R. MILLSAPS Trustee Manager of personal investments (1978-present); director of
Age 68 various business and nonprofit organizations; formerly,
2665 N.E. 37th Drive chairman and chief executive officer of Landmark Banking
Fort Lauderdale, Florida Corporation (1969-1978), financial vice president of Florida
Power and Light (1965-1969), and vice president of The Federal
Reserve Bank of Atlanta (1958-1965); and director or trustee,
as the case may be, of 24 of the investment
companies in the Franklin Templeton Group of Funds.
EDITH E. HOLIDAY Trustee Director (1993-present) of Amerada Hess Corporation and
Age 45 Hercules Incorporated; director of Beverly Enterprises, Inc.
3239 38th Street, N.W. (1995-present) and H.J. Heinz Company (1994-present);
Washington, DC 20016 chairman (1995-present) and trustee (1993-present) of
National Child Research Center; formerly, assistant to the
President of the United States and Secretary of the
Cabinet (1990-1993), general counsel to the United States
Treasury Department (1989-1990), and counselor to the
Secretary and Assistant Secretary for Public Affairs
and Public Liaison--United States Treasury Department
(1988-1989); and director or trustee of 15 of the investment
companies in the Franklin Templeton Group of Funds.
MARK G. HOLOWESKO President President and director of Templeton Global Advisors Limited;
Age 37 Vice President chief investment officer of global equity research for
Lyford Cay Templeton Worldwide, Inc.; formerly, investment administrator
Nassau, Bahamas with Roy West Trust Corporation (Bahamas) Limited
(1984-1985); and officer of 23 of the investment companies in
the Franklin Templeton Group of Funds.
RUPERT H. JOHNSON, Vice President Executive vice president and director of Franklin Resources,
JR.*JR. Age 56 Inc. and Franklin Templeton Distributors, Inc.; president and
777 Mariners Island Blvd. director of Franklin Advisers, Inc.; senior vice president
San Mateo, California and director of Franklin Advisory Services, Inc.; director of
Franklin/Templeton Investor Services, Inc.; and officer
and/or director or trustee, as the case may be, of most other
subsidiaries of Franklin Resources, Inc. and 58 of the
investment companies in the Franklin Templeton Group of Funds.
HARMON E. BURNS Vice President Executive vice president, secretary and director of Franklin
Age 52 Resources, Inc.; executive vice president and director of
777 Mariners Island Blvd. Franklin Templeton Distributors, Inc. and Franklin Templeton
San Mateo, California Services, Inc.; executive vice president of Franklin
Advisers, Inc.; director of Franklin/Templeton Investor
Services, Inc.; officer and/or director or trustee, as the
case may be, of most of the other subsidiaries of Franklin
Resources, Inc. and 58 of the investment companies in the
Franklin Templeton Groupof Funds.
CHARLES E. JOHNSON Vice President Senior vice president and director of Franklin Resources,
Age 41 Inc.; senior vice president of Franklin Templeton
500 East Broward Blvd. Distributors, Inc.; president and director of Templeton
Fort Lauderdale, Florida Worldwide, Inc.; president, chief executive officer, chief
investment officer, and director of Franklin Institutional
Services Corporation; chairman and director of Templeton
Investment Counsel, Inc.; vice president of Franklin
Advisers, Inc.; officer and/or director, of some of the other
subsidiaries of Franklin Resources, Inc.; and officer
and/or director or trustee, as the case may be, of 37 of the
investment companies in the Franklin Templeton Group
of Funds.
DEBORAH R. GATZEK Vice President Senior vice president and general counsel of Franklin
Age 48 Resources, Inc.; senior vice president of Franklin Templeton
777 Mariners Island Blvd. Services, Inc. and Franklin Templeton Distributors, Inc.;
San Mateo, California vice president of Franklin Advisers, Inc. and Franklin
Advisory Services, Inc.; vice president, chief legal
officer and chief operating officer of Franklin Investment
Advisory Services, Inc.; and officer of 58 of the investment
companies in the Franklin Templeton Group of Funds.
SAMUEL J. FORESTER, JR. Vice President Vice president of 10 of the investment companies in the
Age 49 Franklin Templeton Group of Funds; formerly, president of the
500 East Broward Blvd. Templeton Global Bond Managers Division of Templeton
Fort Lauderale Investment Counsel, Inc.; founder and partner of Forester,
Hairston Investment Management (1989-1990), managing director
(Mid-East Region) of Merrill Lynch, Pierce, Fenner & Smith
Inc. (1987-1988) and advisor for Saudi Arabian Monetary
Agency (1982-1987).
<PAGE>
JOHN R. KAY Vice President Vice president and treasurer of Templeton Worldwide, Inc.;
Age 57 assistant vice president of Franklin Templeton Distributors,
500 East Broward Blvd. Inc.; formerly, vice president and controller of the Keystone
Fort Lauderdale, Florida Group, Inc.; and officer of 27 of the investment companies in
the Franklin Templeton Group of Funds.
GARY R. CLEMONS Vice President Research analyst for Templeton Investment Counsel, Inc.
Age 40 (1993-present); formerly, research analyst for Templeton
500 East Broward Blvd. Quantitative Advisors, Inc.
Fort Lauderdale, Florida
DOUGLAS R. LEMPEREUR Age 48 Vice President Senior vice president of the Templeton Global Bond Managers
500 East Broward Blvd. Division of Templeton Investment Counsel, Inc.; formerly,
Fort Lauderdale, Florida securities analyst for Colonial Management Associates
(1985-1988), Standish, Ayer & Wood (1977-1985), and The First
National Bank of Chicago (1974-1977); and officer of 3 of
the investment companies in the Franklin Templeton Group
of Funds.
NEIL S. DEVLIN Vice President Senior vice president, Portfolio Management/Research, of the
Age 40 Templeton Global Bond Managers division of Templeton
500 East Broward Blvd. Investment Counsel, Inc.; formerly, portfolio manager and
Fort Lauderdale, Florida bond analyst for Constitutional Capital Management
(1985-1987), and a bond trader and research analyst
for Bank of New England (1982-1985); and officer of 4 of
the investment companies in the Franklin Templeton Group
of Funds.
<PAGE>
JAMES R. BAIO Treasurer Certified public accountant; treasurer of Franklin Mutual
Age 43 Advisers, Inc.; senior vice president of Templeton Worldwide,
500 East Broward Blvd. Inc., Templeton Global Investors, Inc. and Templeton Funds
Fort Lauderdale, Florida Trust Company; formerly, senior tax manager with Ernst &
Treasurer Young (certified public accountants) (1977-1989); and
treasurer of 24 of the investment companies in the Franklin
Templeton Group of Funds.
ELIZABETH M. KNOBLOCK Vice President - General counsel, secretary and a senior vice president of
Age 42 Compliance Templeton Investment Counsel, Inc.; senior vice president of
500 East Broward Blvd. Templeton Global Investors, Inc.; formerly, vice president
Fort Lauderdale, Florida and associate general counsel of Kidder Peabody & Co. Inc.
(1989-1990), assistant general counsel of Gruntal & Co., Inc.
(1988), vice president and associate general counsel of
Shearson Lehman Hutton Inc. (1988), vice president and
assistant general counsel of E.F. Hutton & Co. Inc.
(1986-1988), and special counsel of the Division of
Investment Management of the Securities and Exchange
Commission (1984-1986); and officer of 23 of the investment
companies in the Franklin Templeton Group of Funds.
BARBARA J. GREEN Secretary Senior vice president of Worldwide, Inc. and an officer of
Age 49 other subsidiaries of Templeton Worldwide, Inc.; senior
500 East Broward Blvd. vice president of Templeton Global Investors, Inc.; formerly,
Fort Lauderdale, Florida deputy director of the Division of Investment Management,
executive assistant and senior advisor to
the chairman, counsellor to the chairman, special
counsel and attorney fellow, U.S. Securities and
Exchange Commission (1986-1995), attorney, Rogers
& Wells, and judicial clerk, U.S. District Court (District
of Massachusetts); and secretary of 23 of the investment
companies in the Franklin Templeton Group of Funds.
</TABLE>
* Nicholas F. Brady, Martin L. Flanagan and Charles B. Johnson are "interested
persons" of the Trust under the 1940 Act, which limits the percentage of
interested persons that can comprise a fund's board. Charles B. Johnson is an
interested person due to his ownership interest in Resources. Martin L. Flanagan
is an interested person due to his employment affiliation with Resources. Mr.
Brady's status as an interested person results from his business affiliations
with Resources and Templeton Global Advisors Limited. Mr. Brady and Resources
are both limited partners of Darby Overseas Partners, L.P. ("Darby Overseas").
Mr. Brady established Darby Overseas in February 1994, and is Chairman and
shareholder of the corporate general partner of Darby Overseas. In addition,
Darby Overseas and Templeton Global Advisors Limited are limited partners of
Darby Emerging Markets Fund, L.P. The remaining Board members of the Trust are
not interested persons (the "independent members of the Board").
The table above shows the officers and Board members who are affiliated with
Distributors and the Investment Managers. Nonaffiliated members of the Board and
Mr. Brady are currently paid an annual retainer and/or fees for attendance at
Board and committee meetings. Currently, the Trust pays the nonaffiliated Board
members and Mr. Brady an annual retainer of $1,000, a fee of $100 per Board
meeting, and its portion of a flat fee of $2,000 for each audit committee
meeting and/or nominating and compensation committee meeting attended. As shown
above, the nonaffiliated Board members also serve as directors or trustees of
other investment companies in the Franklin Templeton Group of Funds. They may
receive fees from these funds for their services. The following table provides
the total fees paid to nonaffiliated Board members and Mr. Brady by the Trust
and by other funds in the Franklin Templeton Group of Funds.
<TABLE>
<CAPTION>
NUMBER OF BOARDS IN THE
FRANKLIN TEMPLETON GROUP OF
TOTAL FEES RECEIVED FROM FUNDS ON WHICH EACH SERVES3
THE FRANKLIN TEMPLETON
TOTAL FEES RECEIVED FROM GROUP OF FUNDS2
THE TRUST1
NAME
<S> <C> <C> <C>
Harris J. Ashton $1,500 $343,592 55
Nicholas F. Brady 1,500 119,275 23
S. Joseph Fortunato 1,500 360,412 57
John Wm. Galbraith 1,503 102,475 22
Andrew H. Hines, Jr. 1,603 130,525 24
Edith E. Holiday4 700 15,450 15
Betty P. Krahmer 1,500 119,275 23
Gordon S. Macklin 1,500 335,542 52
Fred R. Millsaps 1,603 130,525 24
</TABLE>
1For the fiscal year ended March 31, 1997.
2For the calendar year ended December 31, 1996.
3We base the number of boards on the number of registered investment companies
in the Franklin Templeton Group of Funds. This number does not include the total
number of series or funds within each investment company for which the Board
members are responsible. The Franklin Templeton Group of Funds currently
includes 59 registered investment companies, with approximately 170 U.S. based
funds or series. 4Ms. Holiday was elected a trustee on December 3, 1996.
Nonaffiliated members of the Board and Mr. Brady are reimbursed for expenses
incurred in connection with attending board meetings, paid pro rata by each fund
in the Franklin Templeton Group of Funds for which they serve as director or
trustee. No officer or Board member received any other compensation, including
pension or retirement benefits, directly or indirectly from the Trust or other
funds in the Franklin Templeton Group of Funds. Certain officers or Board
members who are shareholders of Resources may be deemed to receive indirect
remuneration by virtue of their participation, if any, in the fees paid to its
subsidiaries.
As of July 2, 1997, the officers and Board members, as a group, owned of record
and beneficially the following shares of the Funds: approximately 1,305 shares
of Growth and Income Fund - Class I, 976 shares of Infrastructure Fund - Class
I, 411 shares of Americas Government Securities Fund, 252 shares of Greater
European - Class I, 256 shares of Latin America Fund - Class I, or less than 1%
of the total outstanding shares of each Fund's Class I shares. Many of the Board
members also own shares in other funds in the Franklin Templeton Group
respectively, of Charles E. Johnson.ert H. Johnson, Jr. are brothers
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT MANAGERS AND SERVICES PROVIDED. The Investment Manager of Growth and
Income Fund and Greater European Fund is Global Advisors. The Investment Manager
of Infrastructure Fund and Latin America Fund is Investment Counsel. Americas
Government Securities Fund's Investment Manager is Investment Counsel, through
its Global Bond Managers division. Each Fund's Investment Manager provides
investment research and portfolio management services, including the selection
of securities for a Fund to buy, hold or sell and the selection of brokers
through whom the Fund's portfolio transactions are executed. Global Advisors
renders its services to the Funds from outside the U.S. Each Investment
Manager's activities are subject to the review and supervision of the Board to
whom the Investment Manager renders periodic reports of a Fund's investment
activities. Each Investment Manager and its officers, directors and employees
are covered by fidelity insurance for the protection of each Fund.
The Investment Managers and their affiliates act as investment managers to
numerous other investment companies and accounts. Each Investment Manager may
give advice and take action with respect to any of the other funds it manages,
or for its own account, that may differ from action taken by the Investment
Manager on behalf of each Fund. Similarly, with respect to a Fund, the
Investment Manager is not obligated to recommend, buy or sell, or to refrain
from recommending, buying or selling any security that the Investment Manager
and access persons, as defined by the 1940 Act, may buy or sell for its or their
own account or for the accounts of any other fund. An Investment Manager is not
obligated to refrain from investing in securities held by a Fund or other funds
that it manages. Of course, any transactions for the accounts of an Investment
Manager and other access persons will be made in compliance with the Trust's
Code of Ethics. Please see "Miscellaneous Information - Summary of Code of
Ethics."
Under an agreement with Investment Counsel, Advisers is the sub-advisor for
Americas Government Securities Fund. Advisers provides Investment Counsel with
investment management advice and assistance. Advisers provides Investment
Counsel on an ongoing basis with research services, including information,
analytical reports, computer screening studies, statistical data and factual
resumes pertaining to securities.
MANAGEMENT FEES. Under its investment management agreement, Growth and Income
Fund pays Global Advisors a monthly fee equal on an annual basis to 0.75% of its
average daily net assets. Infrastructure Fund pays Investment Counsel a monthly
fee equal on an annual basis to 0.75% of its average daily net assets. Americas
Government Securities Fund pays Investment Counsel a monthly fee equal on an
annual basis to 0.60% of its average daily net assets. Greater European Fund
pays Global Advisors a monthly fee equal on an annual basis to 0.75% of its
average daily net assets. Latin America Fund pays Investment Counsel a monthly
fee equal on an annual basis to 1.25% of its average daily net assets. The fees
are computed at the close of business on the last business day of each month.
Each class of each Fund pays its proportionate share of the management fee.
Under the sub-advisory agreement, Investment Counsel pays Advisers a
sub-advisory fee, in U.S. dollars, equal to a annual rate of 0.25% of Americas
Government Securities Fund's average daily net assets. This fee is not a
separate expense of Americas Government Securities Fund but is paid by
Investment Counsel from the management fees it receives from the Fund.
For the fiscal years and periods indicated below, before any advance waiver,
each Fund paid the following investment management fees:
<TABLE>
<CAPTION>
MANAGEMENT FEES
(EXCLUDING WAIVER)
YEAR ENDED MARCH 31 1997 1996 1995
<S> <C> <C> <C>
Growth and Income Fund $157,964 $ 64,366 $25,969
Infrastructure Fund 202,081 158,648 75,6631
Americas Government
Securities Fund 27,267 19,280 7,0362
Greater European Fund 59,263 24,7413 --
Latin America Fund 133,551 44,3503 --
</TABLE>
1 The agreement to limit the expenses of Infrastructure Fund was terminated on
April 15, 1995.
2 For the period June 27, 1994 (commencement of operations) to March 31, 1995.
3 For the period May 8, 1995 (commencement of operations) to March 31, 1996.
Under an agreement by each Investment Manager to waive its fees, for the fiscal
years and periods incicated below, each Fund (except for Infrastructure Fund)
paid the following investment management fees:
<TABLE>
<CAPTION>
MANAGEMENT FEES
(INCLUDING WAIVER)
YEAR ENDED MARCH 31 1997 1996 1995
<S> <C> <C> <C>
Growth and Income Fund $ 0 $0 $0
Americas Government
Securities Fund 0 0 0 (1)
Greater European Fund 0 02 --
Latin America Fund 51,427 02 --
</TABLE>
1 For the period June 27, 1994 (commencement of operations) to March 31, 1995.
2 For the period May 8, 1995 (commencement of operations) to March 31, 1996.
For the fiscal years ended March 31, 1997 and 1996, and the period June 27, 1994
to March 31, 1995, Investment Counsel paid Advisers sub-advisory fees of $[],
$8,033 and $2,932.
MANAGEMENT AGREEMENTS. The management and sub-advisory agreements are in effect
until August 1, 1998. They may continue in effect for successive annual periods
if their continuance is specifically approved at least annually by a vote of the
Board or by a vote of the holders of a majority of a Fund's outstanding voting
securities, and in either event by a majority vote of the Board members who are
not parties to an agreement or interested persons of any such party (other than
as members of the Board), cast in person at a meeting called for that purpose. A
management agreement may be terminated without penalty at any time by the Board
or by a vote of the holders of a majority of a Fund's outstanding voting
securities, or by the respective Investment Manager on 60 days' written notice,
and will automatically terminate in the event of its assignment, as defined in
the 1940 Act. The sub-advisory agreement may be terminated without penalty at
any time by the Board or by vote of the holders of a majority of Americas
Government Securities Fund's outstanding voting securities, or by either
Investment Counsel or Advisers on not less than 60 days' written notice, and
will automatically terminate in the event of its assignment, as defined in the
1940 Act.
ADMINISTRATIVE SERVICES. Since October 1, 1996, FT Services has provided certain
administrative services and facilities for the Funds. Prior to that date,
Templeton Global Investors, Inc. provided the same services to the Funds. These
include preparing and maintaining books, records, and tax and financial reports,
and monitoring compliance with regulatory requirements. FT Services is a wholly
owned subsidiary of Resources.
Under its administration agreement, the Trust pays FT Services a monthly
administration fee equal to an annual rate of 0.15% of the Trust's average daily
net assets up to $200 million, 0.135% of average daily net assets over $200
million up to $700 million, 0.10% of average daily net assets over $700 million
up to $1.2 billion, and 0.075% of average daily net assets over $1.2 billion.
The fee is allocated between the Funds according to their respective average
daily net assets.
For the fiscal years and periods indicated below, before any advance waiver,
each Fund paid the following administration fees:
<TABLE>
<CAPTION>
ADMINISTRATION FEES
(EXCLUDING WAIVER)
YEAR ENDED MARCH 31 1997 1996 1995
<S> <C> <C> <C>
Growth and Income Fund $31,593 $12,868 $ 5,188
Infrastructure Fund 40,416 31,729 15,126 (1)
Americas Government
Securities Fund 6,819 4,822 1,752 (2)
Greater European Fund 11,851 4,9493 --
Latin America Fund 16,026 5,322 (3) --
</TABLE>
1 The agreement to limit the expenses of Infrastructure Fund was terminated on
April 15, 1995.
2 For the period June 27, 1994 (commencement of operations) to March 31, 1995.
3 For the period May 8, 1995 (commencement of operations) to March 31, 1996.
Under an agreement by the administrators to waive their fees, for the fiscal
years and periods indicated above, each Fund (except for Infrastructure Fund)
paid paid the following administrative fees:
<TABLE>
<CAPTION>
ADMINISTRATION FEES
(INCLUDING WAIVER)
YEAR ENDED MARCH 31 1997 1996 1995
<S> <C> <C> <C>
Growth and Income Fund $ 0 $0 $0
Americas Government
Securities Fund 0 0 0 (1)
Greater European Fund 9,376 0 (2) --
Latin America Fund 16,026 0 (2) --
</TABLE>
1 For the period June 27, 1994 (commencement of operations) to March 31, 1995.
2 For the period May 8, 1995 (commencement of operations) to March 31, 1996.
SHAREHOLDER SERVICING AGENT. Investor Services, a wholly owned subsidiary of
Resources, is each Fund's shareholder servicing agent and acts as each Fund's
transfer agent and dividend-paying agent. Investor Services is compensated on
the basis of a fixed fee per account. Each Fund may also reimburse Investor
Services for certain out-of-pocket expenses, which may include payments by
Investor Services to entities, including affiliated entities, that provide
sub-shareholder services, recordkeeping and/or transfer agency services to
beneficial owners of the respective Fund. The amount of reimbursements for these
services per benefit plan participant Fund account per year may not exceed the
per account fee payable by each Fund to Investor Services in connection with
maintaining shareholder accounts.
CUSTODIAN. The Chase Manhattan Bank, at its principal office at MetroTech
Center, Brooklyn, New York, 11245, and at the offices of its branches and
agencies throughout the world, acts as custodian of each Fund's assets. The
custodian does not participate in decisions relating to the purchase and sale of
portfolio securities.
AUDITORS. McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York, 10017,
are the Funds' independent auditors. During the fiscal year ended March 31,
1997, their auditing services consisted of rendering an opinion on the financial
statements of each Fund included in the Fund's Annual Report to Shareholders for
the fiscal year ended March 31, 1997, and review of the Trust's filings with the
SEC.
HOW DO THE FUNDS BUY SECURITIES FOR THEIR PORTFOLIOS?
The Investment Managers select brokers and dealers to execute a Fund's portfolio
transactions in accordance with criteria set forth in the management agreement
and any directions that the Board may give.
When placing a portfolio transaction, each Investment Manager seeks to obtain
prompt execution of orders at the most favorable net price. For portfolio
transactions on a securities exchange, the amount of commission paid by a Fund
is negotiated between its Investment Manager and the broker executing the
transaction. The determination and evaluation of the reasonableness of the
brokerage commissions paid are based to a large degree on the professional
opinions of the persons responsible for placement and review of the
transactions. These opinions are based on the experience of these individuals in
the securities industry and information available to them about the level of
commissions being paid by other institutional investors of comparable size. Each
Investment Manager will ordinarily place orders to buy and sell over-the-counter
securities on a principal rather than agency basis with a principal market maker
unless, in the opinion of the Investment Manager, a better price and execution
can otherwise be obtained. Purchases of portfolio securities from underwriters
will include a commission or concession paid by the issuer to the underwriter,
and purchases from dealers will include a spread between the bid and ask price.
Each Investment Manager may pay certain brokers commissions that are higher than
those another broker may charge, if the Investment Manager determines in good
faith that the amount paid is reasonable in relation to the value of the
brokerage and research services it receives. This may be viewed in terms of
either the particular transaction or the Investment Manager's overall
responsibilities to client accounts over which it exercises investment
discretion. The services that brokers may provide to an Investment Manager
include, among others, supplying information about particular companies,
markets, countries, or local, regional, national or transnational economies,
statistical data, quotations and other securities pricing information, and other
information that provides lawful and appropriate assistance to the Investment
Manager in carrying out its investment advisory responsibilities. These services
may not always directly benefit a Fund. They must, however, be of value to an
Investment Manager in carrying out its overall responsibilities to its clients.
It is not possible to place a dollar value on the special executions or on the
research services an Investment Manager receives from dealers effecting
transactions in portfolio securities. The allocation of transactions in order to
obtain additional research services permits each Investment Manager to
supplement its own research and analysis activities and to receive the views and
information of individuals and research staffs of other securities firms. As
long as it is lawful and appropriate to do so, each Investment Manager and its
affiliates may use this research and data in their investment advisory
capacities with other clients. If the Trust's officers are satisfied that the
best execution is obtained, the sale of Fund shares, as well as shares of other
funds in the Franklin Templeton Group of Funds, may also be considered a factor
in the selection of broker-dealers to execute a Fund's portfolio transactions.
Because Distributors is a member of the NASD, it may sometimes receive certain
fees when a Fund tenders portfolio securities pursuant to a tender-offer
solicitation. As a means of recapturing brokerage for the benefit of a Fund, any
portfolio securities tendered by the Fund will be tendered through Distributors
if it is legally permissible to do so. In turn, the next management fee payable
to that Fund's Investment Manager will be reduced by the amount of any fees
received by Distributors in cash, less any costs and expenses incurred in
connection with the tender.
If purchases or sales of securities of a Fund and one or more other investment
companies or clients supervised by the Fund's Investment Manager are considered
at or about the same time, transactions in these securities will be allocated
among the several investment companies and clients in a manner deemed equitable
to all by the Investment Manager, taking into account the respective sizes of
the funds and the amount of securities to be purchased or sold. In some cases
this procedure could have a detrimental effect on the price or volume of the
security so far as a Fund is concerned. In other cases it is possible that the
ability to participate in volume transactions and to negotiate lower brokerage
commissions will be beneficial to a Fund.
During the fiscal years and periods indicated below, each Fund paid the
following brokerage commissions:
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS
YEAR ENDED MARCH 31 1997 1996 1995
<S> <C> <C> <C>
Growth and Income Fund $35,486 $26,767 $11,237
Infrastructure Fund 71,025 56,451 63,971
Americas Government
Securities Fund -0- -0- -0- (1)
Greater European Fund 21,967 17,067 (2) --
Latin America Fund 50,579 20,945 (2) --
</TABLE>
1 For the period June 27, 1994 (commencement of operations) to March 31, 1995.
2 For the period May 8, 1995(commencement of operations) to March 31, 1996.
As of March 31, 1997, each Fund did not own securities of its regular
broker-dealers.
HOW DO I BUY, SELL AND EXCHANGE SHARES?
ADDITIONAL INFORMATION ON BUYING SHARES
Each Fund continuously offers its shares through Securities Dealers who have an
agreement with Distributors. Securities Dealers may at times receive the entire
sales charge. A Securities Dealer who receives 90% or more of the sales charge
may be deemed an underwriter under the Securities Act of 1933, as amended.
Securities laws of states where a Fund offers its shares may differ from federal
law. Banks and financial institutions that sell shares of a Fund may be required
by state law to register as Securities Dealers. Financial institutions or their
affiliated brokers may receive an agency transaction fee in the percentages
indicated in the table under "How Do I Buy Shares? - Purchase Price of Fund
Shares" in each Fund's Prospectus.
When you buy shares, if you submit a check or a draft that is returned unpaid to
a Fund we may impose a $10 charge against your account for each returned item.
Under agreements with certain banks in Taiwan, Republic of China, the Funds'
shares are available to these banks' trust accounts without a sales charge. The
banks may charge service fees to their customers who participate in the trusts.
A portion of these service fees may be paid to Distributors or one of its
affiliates to help defray expenses of maintaining a service office in Taiwan,
including expenses related to local literature fulfillment and communication
facilities.
Class I shares of a Fund may be offered to investors in Taiwan through
securities advisory firms known locally as Securities Investment Consulting
Enterprises. In conformity with local business practices in Taiwan, Class I
shares may be offered with the following schedule of sales charges for all Funds
except Americas Government Securities Fund:
SIZE OF PURCHASE - U.S. DOLLARS SALES CHARGE
- ------------------------------- ------------
Under $30,000 3.0%
$30,000 but less than $50,000 2.5%
$50,000 but less than $100,000 2.0%
$100,000 but less than $200,000 1.5%
$200,000 but less than $400,000 1.0%
$400,000 or more 0%
In conformity with local business practices in Taiwan, shares of Americas
Government Securities Fund may be offered with the following schedule of sales
charges:
SIZE OF PURCHASE - U.S. DOLLARS SALES CHARGE
Under $30,000 3%
$30,000 but less than $100,000 2%
$100,000 but less than $400,000 1%
$400,000 or more 0%
OTHER PAYMENTS TO SECURITIES DEALERS. For each Fund, except Americas Government
Securities, Distributors may pay the following commissions, out of its own
resources, to Securities Dealers who initiate and are responsible for purchases
of Class I shares of $1 million or more: 1% on sales of $1 million to $2
million, plus 0.80% on sales over $2 million to $3 million, plus 0.50% on sales
over $3 million to $50 million, plus 0.25% on sales over $50 million to $100
million, plus 0.15% on sales over $100 million.
For Americas Government Securities Fund, Distributors may pay the following
commissions, out of its own resources, to Securities Dealers who initiate and
are responsible for purchases of Class I shares of $1 million or more: 0.75% on
sales of $1 million to $2 million, plus 0.60% on sales over $2 million to $3
million, plus 0.50% on sales over $3 million to $50 million, plus 0.25% on sales
over $50 million to $100 million, plus 0.15% on sales over $100 million.
Either Distributors or one of its affiliates may pay the following amounts, out
of its own resources, to Securities Dealers who initiate and are responsible for
purchases of Class I shares by certain retirement plans without a front-end
sales charge, as discussed in the Prospectus: 1% on sales of $500,000 to $2
million, plus 0.80% on sales over $2 million to $3 million, plus 0.50% on sales
over $3 million to $50 million, plus 0.25% on sales over $50 million to $100
million, plus 0.15% on sales over $100 million. Distributors may make these
payments in the form of contingent advance payments, which may be recovered from
the Securities Dealer or set off against other payments due to the dealer if
shares are sold within 12 months of the calendar month of purchase. Other
conditions may apply. All terms and conditions may be imposed by an agreement
between Distributors, or one of its affiliates, and the Securities Dealer.
These breakpoints are reset every 12 months for purposes of additional
purchases.
Distributors and/or its affiliates provide financial support to various
Securities Dealers that sell shares of the Franklin Templeton Group of Funds.
This support is based primarily on the amount of sales of fund shares. The
amount of support may be affected by: total sales; net sales; levels of
redemptions; the proportion of a Securities Dealer's sales and marketing efforts
in the Franklin Templeton Group of Funds; a Securities Dealer's support of, and
participation in, Distributors' marketing programs; a Securities Dealer's
compensation programs for its registered representatives; and the extent of a
Securities Dealer's marketing programs relating to the Franklin Templeton Group
of Funds. Financial support to Securities Dealers may be made by payments from
Distributors' resources, from Distributors' retention of underwriting
concessions and, in the case of funds that have Rule 12b-1 plans, from payments
to Distributors under such plans. In addition, certain Securities Dealers may
receive brokerage commissions generated by fund portfolio transactions in
accordance with the NASD's rules.
LETTER OF INTENT. You may qualify for a reduced sales charge when you buy Class
I shares, or shares of Americas Government Securities Fund, as described in each
Fund's Prospectus. At any time within 90 days after the first investment that
you want to qualify for a reduced sales charge, you may file with a Fund a
signed shareholder application with the Letter of Intent section completed.
After the Letter is filed, each additional investment will be entitled to the
sales charge applicable to the level of investment indicated on the Letter.
Sales charge reductions based on purchases in more than one Franklin Templeton
Fund will be effective only after notification to Distributors that the
investment qualifies for a discount. Your holdings in the Franklin Templeton
Funds acquired more than 90 days before the Letter is filed will be counted
towards completion of the Letter, but they will not be entitled to a retroactive
downward adjustment in the sales charge. Any redemptions you make during the 13
month period, except in the case of certain retirement plans, will be subtracted
from the amount of the purchases for purposes of determining whether the terms
of the Letter have been completed. If the Letter is not completed within the 13
month period, there will be an upward adjustment of the sales charge, depending
on the amount actually purchased (less redemptions) during the period. The
upward adjustment does not apply to certain retirement plans. If you execute a
Letter before a change in the sales charge structure of a Fund, you may complete
the Letter at the lower of the new sales charge structure or the sales charge
structure in effect at the time the Letter was filed.
As mentioned in each Fund's Prospectus, five percent (5%) of the amount of the
total intended purchase will be reserved in Class I shares of the Fund
registered in your name until you fulfill the Letter. This policy of reserving
shares does not apply to certain retirement plans. If total purchases, less
redemptions, equal the amount specified under the Letter, the reserved shares
will be deposited to an account in your name or delivered to you or as you
direct. If total purchases, less redemptions, exceed the amount specified under
the Letter and is an amount that would qualify for a further quantity discount,
a retroactive price adjustment will be made by Distributors and the Securities
Dealer through whom purchases were made pursuant to the Letter (to reflect such
further quantity discount) on purchases made within 90 days before and on those
made after filing the Letter. The resulting difference in Offering Price will be
applied to the purchase of additional shares at the Offering Price applicable to
a single purchase or the dollar amount of the total purchases. If the total
purchases, less redemptions, are less than the amount specified under the
Letter, you will remit to Distributors an amount equal to the difference in the
dollar amount of sales charge actually paid and the amount of sales charge that
would have applied to the aggregate purchases if the total of the purchases had
been made at a single time. Upon remittance, the reserved shares held for your
account will be deposited to an account in your name or delivered to you or as
you direct. If within 20 days after written request the difference in sales
charge is not paid, the redemption of an appropriate number of reserved shares
to realize the difference will be made. In the event of a total redemption of
the account before fulfillment of the Letter, the additional sales charge due
will be deducted from the proceeds of the redemption, and the balance will be
forwarded to you.
If a Letter is executed on behalf of certain retirement plans, the level and any
reduction in sales charge for these plans will be based on actual plan
participation and the projected investments in the Franklin Templeton Funds
under the Letter. These plans are not subject to the requirement to reserve 5%
of the total intended purchase, or to any penalty as a result of the early
termination of a plan, nor are these plans entitled to receive retroactive
adjustments in price for investments made before executing the Letter.
REINVESTMENT DATE. Shares acquired through the reinvestment of dividends will be
purchased at the Net Asset Value determined on the business day following the
dividend record date (sometimes known as the "ex-dividend date"). The processing
date for the reinvestment of dividends may vary and does not affect the amount
or value of the shares acquired.
ADDITIONAL INFORMATION ON EXCHANGING SHARES
If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will be exchanged into
the new fund and will be invested at Net Asset Value. Backup withholding and
information reporting may apply. Information regarding the possible tax
consequences of an exchange is included in the tax section in this SAI and in
each Fund's Prospectus.
If a substantial number of shareholders should, within a short period, sell
their shares of a Fund under the exchange privilege, the Fund might have to sell
portfolio securities it might otherwise hold and incur the additional costs
related to such transactions. On the other hand, increased use of the exchange
privilege may result in periodic large inflows of money. If this occurs, it is
each Fund's general policy to initially invest this money in short-term,
interest-bearing money market instruments, unless it is believed that attractive
investment opportunities consistent with the Fund's investment objective exist
immediately. This money will then be withdrawn from the short-term, money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
The proceeds from the sale of shares of an investment company are generally not
available until the fifth business day following the sale. The funds you are
seeking to exchange into may delay issuing shares pursuant to an exchange until
that fifth business day. The sale of Fund shares to complete an exchange will be
effected at Net Asset Value at the close of business on the day the request for
exchange is received in proper form. Please see "May I Exchange Shares for
Shares of Another Fund?" in each Fund's Prospectus.
ADDITIONAL INFORMATION ON SELLING SHARES
SYSTEMATIC WITHDRAWAL PLAN. There are no service charges for establishing or
maintaining a systematic withdrawal plan. Payments under the plan will be made
from the redemption of an equivalent amount of shares in your account, generally
on the 25th day of the month in which a payment is scheduled. If the 25th falls
on a weekend or holiday, we will process the redemption on the prior business
day.
Redeeming shares through a systematic withdrawal plan may reduce or exhaust the
shares in your account if payments exceed distributions received from a Fund.
This is especially likely to occur if there is a market decline. If a withdrawal
amount exceeds the value of your account, your account will be closed and the
remaining balance in your account will be sent to you. Because the amount
withdrawn under the plan may be more than your actual yield or income, part of
the payment may be a return of your investment.
A Fund may discontinue a systematic withdrawal plan by notifying you in writing
and will automatically discontinue a systematic withdrawal plan if all shares in
your account are withdrawn or if the Fund receives notification of the
shareholder's death or incapacity.
THROUGH YOUR SECURITIES DEALER. If you sell shares through your Securities
Dealer, it is your dealer's responsibility to transmit the order to a Fund in a
timely fashion. Any loss to you resulting from your dealer's failure to do so
must be settled between you and your Securities Dealer.
REDEMPTIONS IN KIND. Each Fund has committed itself to pay in cash (by check)
all requests for redemption by any shareholder of record, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of the 90-day period. This commitment
is irrevocable without the prior approval of the SEC. In the case of redemption
requests in excess of these amounts, the Board reserves the right to make
payments in whole or in part in securities or other assets of a Fund, in case of
an emergency, or if the payment of such a redemption in cash would be
detrimental to the existing shareholders of a Fund. In these circumstances, the
securities distributed would be valued at the price used to compute the Fund's
net assets and you may incur brokerage fees in converting the securities to
cash. The Fund does not intend to redeem illiquid securities in kind. If this
happens, however, you may not be able to recover your investment in a timely
manner.
GENERAL INFORMATION
If dividend checks are returned to a Fund marked "unable to forward" by the
postal service, we will consider this a request by you to change your dividend
option to reinvest all distributions. The proceeds will be reinvested in
additional shares at Net Asset Value until we receive new instructions.
If mail is returned as undeliverable or we are unable to locate you or verify
your current mailing address, we may deduct the costs of our efforts to find you
from your account. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for its location services.
All checks, drafts, wires and other payment mediums used to buy or sell shares
of a Fund must be denominated in U.S. dollars. We may, in our sole discretion,
either (a) reject any order to buy or sell shares denominated in any other
currency or (b) honor the transaction or make adjustments to your account for
the transaction as of a date and with a foreign currency exchange factor
determined by the drawee bank.
SPECIAL SERVICES. Investor Services may pay certain financial institutions that
maintain omnibus accounts with a Fund on behalf of numerous beneficial owners
for recordkeeping operations performed with respect to such owners. For each
beneficial owner in the omnibus account, a Fund may reimburse Investor Services
an amount not to exceed the per account fee that the Fund normally pays Investor
Services. These financial institutions may also charge a fee for their services
directly to their clients.
Certain shareholder servicing agents may be authorized to accept your
transaction request.
HOW ARE FUND SHARES VALUED?
We calculate the Net Asset Value per share of each class as of the scheduled
close of the NYSE, generally 4:00 p.m. Eastern time, each day that the NYSE is
open for trading. As of the date of this SAI, the Trust is informed that the
NYSE observes the following holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
For the purpose of determining the aggregate net assets of each Fund, cash and
receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date. Portfolio securities
listed on a securities exchange or on the NASDAQ National Market System for
which market quotations are readily available are valued at the last quoted sale
price of the day or, if there is no such reported sale, within the range of the
most recent quoted bid and ask prices. Over-the-counter portfolio securities are
valued within the range of the most recent quoted bid and ask prices. Portfolio
securities that are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market as
determined by an Investment Manager.
Portfolio securities underlying actively traded call options are valued at their
market price as determined above. The current market value of any option held by
the Fund is its last sale price on the relevant exchange before the time when
assets are valued. Lacking any sales that day or if the last sale price is
outside the bid and ask prices, options are valued within the range of the
current closing bid and ask prices if the valuation is believed to fairly
reflect the contract's market value.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
of the NYSE on each day that the NYSE is open. Trading in European or Far
Eastern securities generally, or in a particular country or countries, may not
take place on every NYSE business day. Furthermore, trading takes place in
various foreign markets on days that are not business days for the NYSE and on
which the Net Asset Value of each class is not calculated. Thus, the calculation
of the Net Asset Value of each class does not take place contemporaneously with
the determination of the prices of many of the portfolio securities used in the
calculation and, if events materially affecting the values of these foreign
securities occur, the securities will be valued at fair value as determined by
management and approved in good faith by the Board.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times before
the scheduled close of the NYSE. The value of these securities used in computing
the Net Asset Value of each class is determined as of such times. Occasionally,
events affecting the values of these securities may occur between the times at
which they are determined and the scheduled close of the NYSE that will not be
reflected in the computation of the Net Asset Value of each class. If events
materially affecting the values of these securities occur during this period,
the securities will be valued at their fair value as determined in good faith by
the Board.
Other securities for which market quotations are readily available are valued at
the current market price, which may be obtained from a pricing service, based on
a variety of factors including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific issues. Securities and other assets for which
market prices are not readily available are valued at fair value as determined
following procedures approved by the Board. With the approval of the Board, a
Fund may utilize a pricing service, bank or Securities Dealer to perform any of
the above described functions.
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
You may receive two types of distributions from the Fund:
1. INCOME DIVIDENDS. A Fund receives income generally in the form of dividends,
interest and other income derived from its investments. This income, less the
expenses incurred in a Fund's operations, is its net investment income from
which income dividends may be distributed. Thus, the amount of dividends paid
per share may vary with each distribution.
2. CAPITAL GAIN DISTRIBUTIONS. A Fund may derive capital gains or losses in
connection with sales or other dispositions of its portfolio securities.
Distributions by a Fund derived from net short-term and net long-term capital
gains (after taking into account any capital loss carryforward or post-October
loss deferral) may generally be made twice each year, once in December and once
following the end of the Fund's fiscal year. Each Fund may adjust the timing of
these distributions for operational or other reasons.
TAXES
As stated in each Fund's Prospectus, the Funds have elected to be treated as
regulated investment companies under Subchapter M of the Code. The Board
reserves the right not to maintain the qualification of a Fund as a regulated
investment company if it determines this course of action to be beneficial to
shareholders. In that case, a Fund will be subject to federal and possibly state
corporate taxes on its taxable income and gains, and distributions to
shareholders will be taxable to the extent of a Fund's available earnings and
profits.
To qualify as a regulated investment company under the Code, each Fund must,
among other things: (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock or securities and gains from the sale or other
disposition of foreign currencies, or other income (including gains from
options, futures contracts and forward contracts) derived with respect to the
Fund's business of investing in stocks, securities or currencies; (b) derive
less than 30% of its gross income from the sale or other disposition of the
following assets held for less than three months: (i) stock and securities, (ii)
options, futures and forward contracts (other than options, futures and forward
contracts on foreign currencies), and (iii) foreign currencies (and options,
futures and forward contracts on foreign currencies) which are not directly
related to the Fund's principal business of investing in stocks and securities
(or options and futures with respect to stock or securities); (c) diversify its
holdings so that, at the end of each quarter, (i) at least 50% of the value of
the Fund's total assets is represented by cash and cash items, U.S. government
securities, securities of other regulated investment companies, and other
securities, with such other securities limited in respect of any one issuer to
an amount not greater in value than 5% of the Fund's total assets and to not
more than 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of the Fund's total assets is invested in the
securities (other than U.S. government securities or securities of other
regulated investment companies) of any one issuer or of any two or more issuers
that the Fund controls and that are determined to be engaged in the same
business or similar or related businesses; and (d) distribute at least 90% of
its investment company taxable income (which includes, among other items,
dividends, interest and net short-term capital gains in excess of net long-term
capital losses) each taxable year.
The Treasury Department is authorized to issue regulations providing that
foreign currency gains that are not directly related to a Fund's principal
business of investing in stock or securities (or options and futures with
respect to stock or securities) will be excluded from the income which qualifies
for purposes of the 90% gross income requirement described above. To date,
however, no such regulations have been issued.
The status of the Funds as regulated investment companies does not involve
government supervision of management or of their investment practices or
policies. As a regulated investment company, a Fund generally will be relieved
of liability for U.S. federal income tax on that portion of its net investment
income and net realized capital gains which it distributes to its shareholders.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement also are subject to a nondeductible 4% excise tax. To
prevent application of the excise tax, each Fund intends to make distributions
in accordance with the calendar year distribution requirement.
Dividends of net investment income and net short-term capital gains are taxable
to you as ordinary income. Distributions of net investment income may be
eligible for the corporate dividends-received deduction to the extent
attributable to a Fund's qualifying dividend income. However, the alternative
minimum tax applicable to corporations may reduce the benefit of the
dividends-received deduction. Distributions of net capital gains (the excess of
net long-term capital gains over net short-term capital losses) designated by a
Fund as capital gain dividends are taxable to you as long-term capital gains,
regardless of the length of time you have held the Fund's shares, and are not
eligible for the dividends-received deduction. Generally, dividends and
distributions are taxable to you, whether received in cash or reinvested in
shares of a Fund. Any distributions that are not from a Fund's net investment
income or net capital realized gain may be characterized as a return of capital
to you or, in some cases, as capital gain. You will be notified annually as to
the federal tax status of dividends and distributions you receive and any tax
withheld thereon.
Distributions by a Fund reduce the net asset value of the Fund shares. Should a
distribution reduce the net asset value below your cost basis, the distribution
nevertheless would be taxable to you as ordinary income or capital gain as
described above, even though, from an investment standpoint, it may constitute a
partial return of capital. In particular, you should be careful to consider the
tax implication of buying shares just prior to a distribution by a Fund. The
price of shares purchased at that time includes the amount of the forthcoming
distribution, but the distribution will generally be taxable to you.
Certain of the debt securities acquired by the Funds may be treated as debt
securities that were originally issued at a discount. Original issue discount
can generally be defined as the difference between the price at which a security
was issued and its stated redemption price at maturity. Although no cash income
is actually received by the Funds, original issue discount that accrues on a
debt security in a given year generally is treated for Federal income tax
purposes as interest and, therefore, such income would be subject to the
distribution requirements of the Code.
Some of the debt securities may be purchased by the Funds at a discount which
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for federal income tax purposes.
The gain realized on the disposition of any taxable debt security having market
discount generally will be treated as ordinary income to the extent it does not
exceed the accrued market discount on such debt security. Generally, market
discount accrues on a daily basis for each day the debt security is held by a
Fund at a constant rate over the time remaining to the debt security's maturity
or, at the election of a Fund, at a constant yield to maturity which takes into
account the semiannual compounding of interest.
A Fund may invest in debt securities issued in bearer form. Special rules
applicable to bearer debt may in some cases result in (i) treatment of gain
realized with respect to such a debt security as ordinary income and (ii)
disallowance of deductions for losses realized on dispositions of such debt
securities. If these special rules apply, the amount that must be distributed to
Fund shareholders may be increased as compared to a fund that did not invest in
debt securities issued in bearer form.
A Fund may invest in stocks of foreign companies that are classified under the
Code as passive foreign investment companies ("PFICs"). In general, a foreign
company is classified as a PFIC if at least one-half of its assets constitute
investment-type assets or 75% or more of its gross income is investment-type
income. Under the PFIC rules, an "excess distribution" received with respect to
PFIC stock is treated as having been realized ratably over the period during
which a Fund held the PFIC stock. A Fund itself will be subject to tax on the
portion, if any, of the excess distribution that is allocated to that Fund's
holding period in prior taxable years (and an interest factor will be added to
the tax, as if the tax had actually been payable in such prior taxable years)
even though the Fund distributes the corresponding income to shareholders.
Excess distributions include any gain from the sale of PFIC stock as well as
certain distributions from a PFIC. All excess distributions are taxable as
ordinary income.
A Fund may be able to elect alternative tax treatment with respect to PFIC
stock. Under an election that currently may be available, a Fund generally would
be required to include in its gross income its share of the earnings of a PFIC
on a current basis, regardless of whether any distributions are received from
the PFIC. If this election is made, the special rules, discussed above, relating
to the taxation of excess distributions, would not apply. In addition, another
election may be available that would involve marking-to-market the Funds' PFIC
shares at the end of each taxable year (and on certain other dates prescribed in
the Code), with the result that unrealized gains are treated as though they were
realized. If this election were made, tax at the Fund level under the PFIC rules
would generally be eliminated, but the Funds could, in limited circumstances,
incur nondeductible interest charges. Each Fund's intention to qualify annually
as a regulated investment company may limit its elections with respect to PFIC
shares.
Because the application of the PFIC rules may affect, among other things, the
character of gains, the amount of gain or loss and the timing of the recognition
of income with respect to PFIC stock, as well as subject a Fund itself to tax on
certain income from PFIC stock, the amount that must be distributed to
shareholders, and which will be taxed to you as ordinary income or long-term
capital gain, may be increased or decreased substantially as compared to a fund
that did not invest in PFIC stock.
Income received by a Fund from sources within foreign countries may be subject
to withholding and other income or similar taxes imposed by such countries. If
more than 50% of the value of a Fund's total assets at the close of its taxable
year consists of securities of foreign corporations, that Fund will be eligible
and intends to elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by that Fund. Pursuant to this election, you will be required
to include in gross income (in addition to taxable dividends actually received)
your pro rata share of the foreign taxes paid by a Fund, and will be entitled
either to deduct (as an itemized deduction) your pro rata share of foreign
income and similar taxes in computing your taxable income or to use it as a
foreign tax credit against your U.S. federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed if you do not itemize
deductions, but in such case you may be eligible to claim the foreign tax credit
(see below). You will be notified within 60 days after the close of the relevant
Fund's taxable year whether the foreign taxes paid by the Fund will "pass
through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed your U.S. tax attributable to your foreign source taxable income. For
this purpose, if the pass-through election is made, the source of a Fund's
income flows through to its Shareholders. With respect to a Fund, gains from the
sale of securities will be treated as derived from U.S. sources and certain
currency fluctuation gains, including fluctuation gains from foreign
currency-denominated debt securities, receivables and payables, will be treated
as ordinary income derived from U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income (as defined for
purposes of the foreign tax credit), including the foreign source passive income
passed through by a Fund. You may be unable to claim a credit for the full
amount of your proportionate share of the foreign taxes paid by a Fund. Foreign
taxes may not be deducted in computing alternative minimum taxable income and
the foreign tax credit can be used to offset only 90% of the alternative minimum
tax (as computed under the Code for purposes of this limitation) imposed on
corporations and individuals. If a Fund is not eligible to make the election to
"pass through" to its shareholders its foreign taxes, the foreign income taxes
it pays generally will reduce investment company taxable income and the
distributions by a Fund will be treated as U.S. source income.
Certain options, futures, and foreign currency forward contracts in which the
Funds may invest are "section 1256 contracts." Gains or losses on section 1256
contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"); however, foreign currency gains or losses (as
discussed below) arising from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts held by a Fund at the end
of each taxable year (and on certain other dates as prescribed under the Code)
are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by a Fund. In addition, losses
realized by a Fund on positions that are part of the straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to a Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by a Fund which is taxed as ordinary income when
distributed to shareholders.
A Fund may make one or more of the elections available under the Code which are
applicable to straddles. If a Fund makes any of the elections, the amount,
character, and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders and which will be taxed to you as ordinary income or long-term
capital gain may be increased or decreased as compared to a fund that did not
engage in such hedging transactions.
Requirements relating to each Fund's tax status as a regulated investment
company may limit the extent to which a Fund will be able to engage in
transactions in options, futures, and foreign currency forward contracts.
If a Fund invests in another investment company, it is possible that the Fund
would not receive information or distributions from the underlying investment
company in a time frame that permits the Fund to meet its tax-related
requirements in an optimal manner. However, it is anticipated that the Fund
would seek to minimize these risks. The diversification and distribution
requirements applicable to each Fund may limit the extent to which each Fund
will be able to invest in other investment companies.
Under the Code, gains or losses attributable to fluctuations in foreign currency
exchange rates which occur between the time a Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time a Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain financial contracts and options, gains or losses
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as "section 988" gains and losses, may increase or decrease the amount of a
Fund's net investment income to be distributed to its shareholders as ordinary
income. For example, fluctuations in exchange rates may increase the amount of
income that a Fund must distribute in order to qualify for treatment as a
regulated investment company and to prevent application of an excise tax on
undistributed income. Alternatively, fluctuations in exchange rates may decrease
or eliminate income available for distribution. If section 988 losses exceed
other net investment income during a taxable year, a Fund would not be able to
make ordinary dividend distributions, or distributions made before the losses
were realized would be recharacterized as return of capital to shareholders for
Federal income tax purposes, rather than as an ordinary dividend, reducing your
basis in your Fund shares, or as a capital gain.
Upon the sale or exchange of your shares, you will realize a taxable gain or
loss depending upon your basis in the shares. Such gain or loss will be treated
as capital gain or loss if the shares are capital assets in your hands, and
generally will be long-term if your holding period for the shares is more than
one year and generally otherwise will be short-term. Any loss realized on a sale
or exchange will be disallowed to the extent that the shares disposed of are
replaced (including replacement through the reinvesting of dividends and capital
gain distributions in a Fund) within a period of 61 days beginning 30 days
before and ending 30 days after the disposition of the shares. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss. Any loss realized by you on the sale of a Fund's shares held by you for
six months or less will be treated for federal income tax purposes as a
long-term capital loss to the extent of any distributions of long-term capital
gains you received with respect to such shares.
In some cases, you will not be permitted to take sales charges into account for
purposes of determining the amount of gain or loss realized on the disposition
of your shares. This prohibition generally applies where (i) you incur a sales
charge in acquiring the stock of a regulated investment company, (ii) the stock
is disposed of before the 91st day after the date on which it was acquired, and
(iii) you subsequently acquire shares of the same or another regulated
investment company and the otherwise applicable sales charge is reduced or
eliminated under a "reinvestment right" received upon the initial purchase of
shares of stock. In that case, the gain or loss recognized will be determined by
excluding from the tax basis of the shares exchanged all or a portion of the
sales charge incurred in acquiring those shares. This exclusion applies to the
extent that the otherwise applicable sales charge with respect to the newly
acquired shares is reduced as a result of having incurred a sales charge
initially. Sales charges affected by this rule are treated as if they were
incurred with respect to the stock acquired under the reinvestment right. This
provision may be applied to successive acquisitions of stock.
Each Fund generally will be required to withhold federal income tax at a rate of
31% ("backup withholding") from dividends paid, capital gain distributions, and
redemption proceeds to you if (i) you fail to furnish a Fund with your correct
taxpayer identification number or social security number and to make such
certifications as a Fund may require, (ii) the IRS notifies you or a Fund that
you have failed to report properly certain interest and dividend income to the
IRS and to respond to notices to that effect, or (iii) when required to do so,
you fail to certify that you are not subject to backup withholding. Any amounts
withheld may be credited against your federal income tax liability.
Dividends, including capital gain dividends, declared in October, November, or
December with a record date in such month and paid during the following January
will be treated as having been paid by a Fund and received by shareholders on
December 31 of the calendar year in which declared, rather than the calendar
year in which the dividends are actually received.
Distributions also may be subject to state, local and foreign taxes. U.S. tax
rules applicable to foreign investors may differ significantly from those
outlined above. This discussion does not purport to deal with all of the tax
consequences applicable to shareholders. You are advised to consult your own tax
advisers for details with respect to the particular tax consequences of an
investment in a Fund.
THE FUNDS' UNDERWRITER
Pursuant to underwriting agreements, Distributors acts as principal underwriter
in a continuous public offering for all classes of each Fund's shares. Each
underwriting agreement will continue in effect for successive annual periods if
its continuance is specifically approved at least annually by a vote of the
Board or by a vote of the holders of a majority of a Fund's outstanding voting
securities, and in either event by a majority vote of the Board members who are
not parties to the underwriting agreement or interested persons of any such
party (other than as members of the Board), cast in person at a meeting called
for that purpose. Each underwriting agreement terminates automatically in the
event of its assignment and may be terminated by either party on 90 days'
written notice.
Distributors pays the expenses of the distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. Each Fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders.
For the fiscal years and periods indicated below, in connection with the
offering of shares, each Fund paid the following aggregate underwriting
commissions, and retained the following net underwriting discounts and
commissions after allowances to dealers, and received the following compensation
in connection with redemptions or repurchases of shares:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 1997 1996 1995
<S> <C> <C> <C>
GROWTH AND INCOME FUND
aggregate underwriting
commissions paid $225,287 $145,909 $181,252
net underwriting discounts
and commissions retained 39,159 29,841 22,379
compensation received 1,489 49 0
INFRASTRUCTURE FUND
aggregate underwriting
commissions paid 173,935 211,424 677,878
net underwriting discounts
and commissions retained 27,323 25,501 52,041
compensation received 747 456 0
AMERICAS GOVERNMENT SECURITIES FUND
aggregate underwriting
commissions paid 62,167 19,359 7,179 (1)
net underwriting discounts
and commissions retained 5,018 2,021 963
compensation received 0 0 0
GREATER EUROPEAN FUND
aggregate underwriting
commissions paid 96,312 112,442(2) --
net underwriting discounts
and commissions retained 15,811 (1,130) --
compensation received 6,203 14 --
LATIN AMERICA FUND
aggregate underwriting
commissions paid 215,273 190,7562 --
net underwriting discounts
and commissions retained 35,174 9,226 --
compensation received 852 20 --
</TABLE>
1 For the period June 27, 1994 (commencement of operations) to March 31, 1995.
2 For the period May 8, 1995 (commencement of operations) to March 31, 1996.
Distributors may be entitled to reimbursement under the Rule 12b-1 plan for each
class, as discussed below. Except as noted, Distributors received no other
compensation from the Funds for acting as underwriter.
THE RULE 12B-1 PLANS
Class I and Class II have separate distribution plans or "Rule 12b-1 plans" that
were adopted pursuant to Rule 12b-1 of the 1940 Act.
THE CLASS I PLANS. Under the Class I plans (which include the plan for all
shares issued by Americas Government Securities Fund), each Fund may pay up to a
maximum of 0.35% per year of Class I's average daily net assets, payable
quarterly, for expenses incurred in the promotion and distribution of Class I
shares.
Under the Class I plans, the costs and expenses not reimbursed in any one given
quarter (including costs and expenses not reimbursed because they exceed 0.35%
of a Fund's average daily net assets attributable to Class I shares) may be
reimbursed in subsequent quarters or years.
THE CLASS II PLANS. Under the Class II plans, Growth and Income Fund,
Infrastructure Fund, Greater European Fund and Latin America Fund each pay
Distributors up to 0.75% per year of Class II's average daily net assets,
payable quarterly, for distribution and related expenses. These fees may be used
to compensate Distributors or others for providing distribution and related
services and bearing certain Class II expenses. All distribution expenses over
this amount will be borne by those who have incurred them without reimbursement
by a Fund. Under the Class II plans, an additional 0.25% per year of Class II's
average daily net assets, may be paid as a servicing fee.
THE CLASS I AND CLASS II PLANS. The terms and provisions of each plan relating
to required reports, term, and approval are consistent with Rule 12b-1.
In no event shall the aggregate asset-based sales charges, which include
payments made under each plan, plus any other payments deemed to be made
pursuant to a plan, exceed the amount permitted to be paid under the rules of
the NASD.
To the extent fees are for distribution or marketing functions, as distinguished
from administrative servicing or agency transactions, certain banks will not be
entitled to participate in the plans as a result of applicable federal law
prohibiting certain banks from engaging in the distribution of mutual fund
shares. These banking institutions, however, are permitted to receive fees under
the plans for administrative servicing or for agency transactions. If you are a
customer of a bank that is prohibited from providing these services, you would
be permitted to remain a shareholder of a Fund, and alternate means for
continuing the servicing would be sought. In this event, changes in the services
provided might occur and you might no longer be able to avail yourself of any
automatic investment or other services then being provided by the bank. It is
not expected that you would suffer any adverse financial consequences as a
result of any of these changes.
Each plan has been approved in accordance with the provisions of Rule 12b-1. The
plans are renewable annually by a vote of the Board, including a majority vote
of the Board members who are not interested persons of a Fund and who have no
direct or indirect financial interest in the operation of the plans, cast in
person at a meeting called for that purpose. It is also required that the
selection and nomination of such Board members be done by the non-interested
members of the Board. The plans and any related agreement may be terminated at
any time, without penalty, by vote of a majority of the non-interested Board
members on not more than 60 days' written notice, by Distributors on not more
than 60 days' written notice, by any act that constitutes an assignment of a
management agreement with an Investment Manager or by vote of a majority of the
outstanding shares of the class. Distributors or any dealer or other firm may
also terminate their respective distribution or service agreement at any time
upon written notice.
The plans and any related agreements may not be amended to increase materially
the amount to be spent for distribution expenses without approval by a majority
of the outstanding shares of the class, and all material amendments to the plans
or any related agreements shall be approved by a vote of the non-interested
members of the Board, cast in person at a meeting called for the purpose of
voting on any such amendment.
Distributors is required to report in writing to the Board at least quarterly on
the amounts and purpose of any payment made under the plans and any related
agreements, as well as to furnish the Board with such other information as may
reasonably be requested in order to enable the Board to make an informed
determination of whether the plans should be continued.
For the fiscal year ended March 31, 1997, the total amounts paid by each Fund
pursuant to the Class I and Class II plans, and the purpose for which they were
used, are as follows:
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND CLASS I CLASS II
<S> <C> <C>
Advertising $22,950 $ 5,340
Printing and mailing of prospectuses
other than to current shareholders 13,302 3,095
Payments to underwriters 827 8,210
Payments to broker-dealers 22,639 23,062
Other 0 0
------- -------
Total Amount Paid $59,718 $39,707
GLOBAL INFRASTRUCTURE FUND CLASS I CLASS II
Advertising $16,369 $ 1,323
Printing and mailing of prospectuses
other than to current shareholders 21,412 1,737
Payments to underwriters 1,756 6,123
Payments to broker-dealers 47,227 10,930
Other 0 0
------- -------
Total Amount Paid $86,700 $20,113
AMERICAS GOVERNMENT SECURITIES FUND CLASS I
Advertising $ 95
Printing and mailing of prospectuses
other than to current shareholders 14,442
Payments to underwriters 1,166
Payments to broker-dealers 1,725
Other 0
-------
Total Amount Paid $17,428
GREATER EUROPEAN FUND CLASS I CLASS II
Advertising $11,639 $ 3,161
Printing and mailing of prospectuses
other than to current shareholders 2,803 761
Payments to underwriters 324 2,953
Payments to broker-dealers 6,955 10,021
Other 0 0
------- -------
Total Amount Paid $21,721 $16,896
LATIN AMERICA FUND CLASS I CLASS II
Advertising $13,274 $ 3,345
Printing and mailing of prospectuses
other than to current shareholders 4,486 1,131
Payments to underwriters 779 4,360
Payments to broker-dealers 11,311 12,668
Other 0 0
------- -------
Total Amount Paid $29,850 $21,504
</TABLE>
HOW DO THE FUNDS MEASURE PERFORMANCE?
Performance quotations are subject to SEC rules. These rules require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by a Fund be accompanied by
certain standardized performance information computed as required by the SEC.
Average annual total return and current yield quotations used by the Funds are
based on the standardized methods of computing performance mandated by the SEC.
If a Rule 12b-1 plan is adopted, performance figures reflect fees from the date
of the plan's implementation. An explanation of these and other methods used by
the Funds to compute or express performance for each class follows. Regardless
of the method used, past performance does not guarantee future results, and is
an indication of the return to shareholders only for the limited historical
period used.
TOTAL RETURN
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is determined by
finding the average annual rates of return over one-year and from inception
periods that would equate an initial hypothetical $1,000 investment to its
ending redeemable value. The calculation assumes the maximum front-end sales
charge is deducted from the initial $1,000 purchase, and income dividends and
capital gain distributions are reinvested at Net Asset Value. The quotation
assumes the account was completely redeemed at the end of each one-year and from
inception period and the deduction of all applicable charges and fees. If a
change is made to the sales charge structure, historical performance information
will be restated to reflect the maximum front-end sales charge currently in
effect.
When considering the average annual total return quotations, you should keep in
mind that the maximum front-end sales charge reflected in each quotation is a
one time fee charged on all direct purchases, which will have its greatest
impact during the early stages of your investment. This charge will affect
actual performance less the longer you retain your investment in the Fund.
For the periods indicated below, the average annual total return for each class
of each Fund was as follows:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
PERIOD ENDED MARCH 31 ONE YEAR SINCE INCEPTION
<S> <C> <C>
GROWTH AND INCOME FUND
Class I 9.55% 9.56% (1)
Class II 13.25% 16.06% (2)
INFRASTRUCTURE FUND
Class I 9.56% 4.97% (1)
Class II 13.34% 11.44% (2)
AMERICAS GOVERNMENT
SECURITIES FUND 11.29% 8.98% (3)
GREATER EUROPEAN FUND
Class I 14.74% 9.69% (4)
Class II 18.68% 11.75% (4)
LATIN AMERICA FUND
Class I 11.54% 9.43% (4)
Class II 15.44% 11.54% (4)
</TABLE>
1 For the period March 14, 1994 (commencement of operations) to March 31, 1997.
2 For the period May 1, 1995 (commencement of sales) to March 31, 1997.
3 For the period June 27, 1994 (commencement of operations) to March 31, 1997.
4 For the period May 8, 1995 (commencement of operations) to March 31, 1997.
These figures were calculated according to the SEC formula:
P(1+T)n = ERV
where:
P =a hypothetical initial payment of $1,000
T =average annual total return
n =number of years
ERV =ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one-year and since
inception periods at the end of the one-year and since
inception periods
CUMULATIVE TOTAL RETURN. Like average annual total return, cumulative total
return assumes the maximum front-end sales charge is deducted from the initial
$1,000 purchase, and income dividends and capital gain distributions are
reinvested at Net Asset Value. Cumulative total return, however, will be based
on the actual return for each class for a specified period rather than on the
average return over one-year and since inception periods.
For the periods indicated below, the cumulative total return for each class of
each Fund was as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
PERIOD ENDED MARCH 31 ONE YEAR SINCE INCEPTION
<S> <C> <C>
GROWTH AND INCOME FUND
Class I 9.55% 32.07% (1)
Class II 13.25% 33.48% (2)
INFRASTRUCTURE FUND
Class I 9.56% 15.94% (1)
Class II 13.34% 23.31% (2)
AMERICAS GOVERNMENT
SECURITIES FUND 11.29% 26.72% (3)
GREATER EUROPEAN FUND
Class I 14.74% 19.18% (4)
Class II 18.68% 23.46% (4)
LATIN AMERICA FUND
Class I 11.54% 18.65% (4)
Class II 15.44% 23.15% (4)
</TABLE>
1 For the period March 14, 1994 (commencement of operations) to March 31, 1997.
2 For the period May 1, 1995 (commencement of sales) to March 31, 1997.
3 For the period June 27, 1994 (commencement of operations) to March 31, 1997.
4 For the period May 8, 1995 (commencement of operations) to March 31, 1997.
YIELD
CURRENT YIELD. Current yield of Americas Government Securities Fund shows the
income per share earned by the Fund. It is calculated by dividing the net
investment income per share earned during a 30-day base period by the applicable
maximum Offering Price per share on the last day of the period and annualizing
the result. Expenses accrued for the period include any fees charged to all
shareholders during the base period. The yield for the 30-day period ended March
31, 1997, was 5.02%.
This figure was obtained using the following SEC formula:
Yield = 2 [(A-B + 1)6 - 1]
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum Offering Price per share on the last day of the
period
CURRENT DISTRIBUTION RATE
Current yield, which is calculated according to a formula prescribed by the SEC,
is not indicative of the amounts which were or will be paid to shareholders.
Amounts paid to shareholders are reflected in the quoted current distribution
rate. The current distribution rate is usually computed by annualizing the
dividends paid per share during a certain period and dividing that amount by the
current maximum Offering Price. The current distribution rate differs from the
current yield computation because it may include distributions to shareholders
from sources other than dividends and interest, such as premium income from
option writing and short-term capital gains and is calculated over a different
period of time. The current distribution rate for Americas Government Securities
Fund for the 30-day period ended March 31, 1997, was 6.48%.
VOLATILITY
Occasionally statistics may be used to show a Fund's volatility or risk.
Measures of volatility or risk are generally used to compare a Fund's Net Asset
Value or performance to a market index. One measure of volatility is beta. Beta
is the volatility of a fund relative to the total market, as represented by an
index considered representative of the types of securities in which the fund
invests. A beta of more than 1.00 indicates volatility greater than the market
and a beta of less than 1.00 indicates volatility less than the market. Another
measure of volatility or risk is standard deviation. Standard deviation is used
to measure variability of Net Asset Value or total return around an average over
a specified period of time. The idea is that greater volatility means greater
risk undertaken in achieving performance.
OTHER PERFORMANCE QUOTATIONS
Each Fund may also quote the performance of shares without a sales charge. Sales
literature and advertising may quote a current distribution rate, yield,
cumulative total return, average annual total return and other measures of
performance as described elsewhere in this SAI with the substitution of Net
Asset Value for the public Offering Price.
Sales literature referring to the use of a Fund as a potential investment for
Individual Retirement Accounts (IRAs), Business Retirement Plans, and other
tax-advantaged retirement plans may quote a total return based upon compounding
of dividends on which it is presumed no federal income tax applies.
Each Fund may include in its advertising or sales material information relating
to investment objectives and performance results of funds belonging to the
Franklin Templeton Group of Funds. Resources is the parent company of the
Investment Managers and underwriter of the Franklin Templeton Group of Funds.
COMPARISONS
To help you better evaluate how an investment in a Fund may satisfy your
investment objective, advertisements and other materials about each Fund may
discuss certain measures of each class' performance as reported by various
financial publications. Materials may also compare performance (as calculated
above) to performance as reported by other investments, indices, and averages.
These comparisons may include, but are not limited to, the following examples:
(i) unmanaged indices so that you may compare a Fund's results with those of a
group of unmanaged securities widely regarded by investors as representative of
the securities market in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, Inc., a widely used independent research firm that
ranks mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank mutual
funds on overall performance or other criteria; and (iii) the Consumer Price
Index (measure for inflation) to assess the real rate of return from an
investment in a Fund. Unmanaged indices may assume the reinvestment of dividends
but generally do not reflect deductions for administrative and management costs
and expenses.
From time to time, each Fund and its Investment Manager may also refer to the
following information:
a) An Investment Manager and its affiliates' market share of international
equities managed in mutual funds prepared or published by Strategic
Insight or a similar statistical organization.
b) The performance of U.S. equity and debt markets relative to foreign markets
prepared or published by Morgan Stanley Capital InternationalAE or a similar
financial organization.
c) The capitalization of U.S. and foreign stock markets as prepared or published
by the International Finance Corporation, Morgan Stanley Capital InternationalAE
or a similar financial organization.
d) The geographic and industry distribution of a Fund's portfolio and its top
ten holdings.
e) The gross national product and populations, including age
characteristics, literacy rates, foreign investment improvements due to
a liberalization of securities laws and a reduction of foreign exchange
controls, and improving communication technology, of various countries
as published by various statistical organizations.
f) To assist investors in understanding the different returns and risk
characteristics of various investments, each Fund may show historical
returns of various investments and published indices (E.G., Ibbotson
Associates, Inc. Charts and Morgan Stanley EAFE - Index).
g) The major industries located in various jurisdictions as published by the
Morgan Stanley Index.
h) Rankings by DALBAR Surveys, Inc. with respect to mutual fund shareholder
services.
i) Allegorical stories illustrating the importance of persistent long-term
investing.
j) Each Fund's portfolio turnover rate and its ranking relative to industry
standards as published by Lipper Analytical Services, Inc. or Morningstar, Inc.
k) A description of the Templeton organization's investment management
philosophy and approach, including its worldwide search for undervalued
or "bargain" securities and its diversification by industry, nation and
type of stocks or other securities.
l) The number of shareholders in a Fund or the aggregate number of
shareholders of the open-end investment companies in the Franklin
Templeton Group of Funds or the dollar amount of fund and private
account assets under management.
m) Comparison of the characteristics of various emerging markets, including
population, financial and economic conditions.
n) Quotations from the Templeton organization's founder, Sir John Templeton,*
advocating the virtues of diversification and long-term investing, including the
following:
(infinity) "Never follow the crowd. Superior performance is possible
only if you invest differently from the crowd."
(infinity) "Diversify by company, by industry and by country."
(infinity) "Always maintain a long-term perspective."
(infinity) "Invest for maximum total real return."
(infinity) "Invest - don't trade or speculate."
(infinity) "Remain flexible and open-minded about types of investment."
(infinity) "Buy low."
(infinity) "When buying stocks, search for bargains among quality stocks."
(infinity) "Buy value, not market trends or the economic outlook."
(infinity) "Diversify. In stocks and bonds, as in much else, there is safety in
numbers."
(infinity) "Do your homework or hire wise experts to help you."
(infinity) "Aggressively monitor your investments."
(infinity) "Don't panic."
(infinity) "Learn from your mistakes."
(infinity) "Outperforming the market is a difficult task."
(infinity) "An investor who has all the answers doesn't even understand all the
questions."
(infinity) "There's no free lunch."
(infinity) "And now the last principle: Do not be fearful or negative too
often."
From time to time, advertisements or information for each Fund may include a
discussion of certain attributes or benefits to be derived from an investment in
the Fund. The advertisements or information may include symbols, headlines, or
other material that highlights or summarizes the information discussed in more
detail in the communication.
Advertisements or information may also compare a class' performance to the
return on CDs or other investments. You should be aware, however, that an
investment in each Fund involves the risk of fluctuation of principal value, a
risk generally not present in an investment in a CD issued by a bank. For
example, as the general level of interest rates rise, the value of a Fund's
fixed-income investments, if any, as well as the value of its shares that are
based upon the value of such portfolio investments, can be expected to decrease.
Conversely, when interest rates decrease, the value of a Fund's shares can be
expected to increase. CDs are frequently insured by an agency of the U.S.
government. An investment in a Fund is not insured by any federal, state or
private entity.
In assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to a Fund's portfolio, the indices and averages are generally
unmanaged, and the items included in the calculations of the averages may not be
identical to the formula used by a Fund to calculate its figures. In addition,
there can be no assurance that a Fund will continue its performance as compared
to these other averages.
MISCELLANEOUS INFORMATION
A Fund may help you achieve various investment goals such as accumulating money
for retirement, saving for a down payment on a home, college costs and other
long-term goals. The Franklin College Costs Planner may help you in determining
how much money must be invested on a monthly basis in order to have a projected
amount available in the future to fund a child's college education. (Projected
college cost estimates are based upon current costs published by the College
Board.) The Franklin Retirement Planning Guide leads you through the steps to
start a retirement savings program. Of course, an investment in a Fund cannot
guarantee that these goals will be met.
The Trust is a member of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., and may be considered in a
program for diversification of assets. Founded in 1947, Franklin, one of the
oldest mutual fund organizations, has managed mutual funds for over 49 years and
now services more than 2.7 million shareholder accounts. In 1992, Franklin, a
leader in managing fixed-income mutual funds and an innovator in creating
domestic equity funds, joined forces with Templeton Worldwide, Inc., a pioneer
in international investing. Mutual Series Fund Inc., known for its value-driven
approach to domestic equity investing, became part of the organization four
years later. Together, the Franklin Templeton Group has over $207 billion in
assets under management for more than 5.4 million U.S. based mutual fund
shareholder and other accounts. The Franklin Templeton Group of Funds offers 120
U.S. based open-end investment companies to the public. A Fund may identify
itself by its NASDAQ symbol or CUSIP number.
The Dalbar Surveys, Inc. broker-dealer survey has ranked Franklin number one in
service quality for five of the
past nine years.
As of July 2, 1997, the principal shareholders of each Fund, beneficial or of
record, were as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARE AMOUNT PERCENTAGE
<S> <C> <C>
GROWTH AND INCOME FUND -CLASS I
Trukan & Co. 182,140 8%
250 N. Water Street
Suite 315
P.O. Box 3699
Wichita, KS 67201-3699
GROWTH AND INCOME FUND -
CLASS II
Merrill Lynch, Pierce, Fenner & Smith, Inc. 33,601 5%
4800 Deer Lake Drive East 3rd Floor
Jacksonville, FL 32246
AMERICAS GOVERNMENT SECURITIES FUND
CLASS I
Templeton Global Investors, Inc. 327,506 58%
1850 Gateway Drive
6th Floor
San Mateo, CA 94404
Donaldson Lufkin Jenrette Securities 50,437 8%
Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
GREATER EUROPEAN FUND -
CLASS I
Templeton Global Investors, Inc. 52,720 6%
500 East Broward Boulevard
Suite 2100
Fort Lauderdale, FL 33394-3091
PaineWebber - For the Benefit of American 52,400 6%
Guaranty & Trust Co.
Trustee for Sara Brianne Kiner Trust
P.O. Box 15627
Wilmington, DE 19850-5627
GREATER EUROPEAN FUND - CLASS II
Templeton Global Investors, Inc. 52,261 21%
1850 Gateway Drive
6th Floor
San Mateo, CA 94404
Donaldson Lufkin Jenrette Securities 18,091 7%
Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
GREATER EUROPEAN FUND - ADVISOR CLASS
Franklin Resources, Inc. 1,778 53%
1850 Gateway Drive
6th Floor
San Mateo, CA 94404
Dorothy R. Silva, Jeffrey R. Silva & 956 28%
Christopher W. Silva
1977 Grosse Avenue
Santa Rosa, CA 95404
Howard M. McEldowney 1,926 17%
951 Mariners Island Blvd.
Suite 665
San Mateo, CA 94404-1561
Franklin Templeton Trust Company - Custodian 1,158 10%
for the IRA of Joseph E. Sedlick
13347 88th Place No.
Seminole, FL 33776-2410
Mary E. Little 170 5%
8094 Shadowood Court
Granite Bay, CA 95746
LATIN AMERICA FUND -
CLASS II
Templeton Global Investors, Inc. 50,659 13%
1850 Gateway Drive
6th Floor
San Mateo, CA 94404
LATIN AMERICA FUND -
ADVISOR CLASS
Daniel P. Sinton 2,063 18%
62 Vicksburg Street
San Francisco, CA 94114
Franklin Resources, Inc. 1,815 16%1
850 Gateway Drive
6th Floor
San Mateo, CA 94404
</TABLE>
From time to time, the number of Fund shares held in the "street name" accounts
of various Securities Dealers for the benefit of their clients or in centralized
securities depositories may exceed 5% of the total shares outstanding.
In the event of disputes involving multiple claims of ownership or authority to
control your account, a Fund has the right (but has no obligation) to: (a)
freeze the account and require the written agreement of all persons deemed by
the Fund to have a potential property interest in the account, before executing
instructions regarding the account; (b) interplead disputed funds or accounts
with a court of competent jurisdiction; or (c) surrender ownership of all or a
portion of the account to the IRS in response to a Notice of Levy.
SUMMARY OF CODE OF ETHICS. Employees of the Franklin Templeton Group who are
access persons under the 1940 Act are permitted to engage in personal securities
transactions subject to the following general restrictions and procedures: (i)
the trade must receive advance clearance from a compliance officer and must be
completed by the close of the business day following the day clearance is
granted; (ii) copies of all brokerage confirmations must be sent to a compliance
officer and, within 10 days after the end of each calendar quarter, a report of
all securities transactions must be provided to the compliance officer; and
(iii) access persons involved in preparing and making investment decisions must,
in addition to (i) and (ii) above, file annual reports of their securities
holdings each January and inform the compliance officer (or other designated
personnel) if they own a security that is being considered for a fund or other
client transaction or if they are recommending a security in which they have an
ownership interest for purchase or sale by a fund or other client.
FINANCIAL STATEMENTS
The audited financial statements contained in the Annual Report to Shareholders
of each Fund of the Trust, for the fiscal year ended March 31, 1997, including
the auditors' report, are incorporated herein by reference.
USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
ADVISERS - Franklin Advisers, Inc., the sub-advisor of Americas Government
Securities Fund
BOARD - The Board of Trustees of the Trust
CD - Certificate of deposit
CLASS I, CLASS II AND ADVISOR CLASS - Growth and Income Fund and Infrastructure
Fund offer two classes of shares, designated "Class I" and "Class II." The two
classes have proportionate interests in each Fund's portfolio. They differ,
however, primarily in their sales charge structures and Rule 12b-1 plans.
Americas Government Securities Fund offers a single class of shares and because
its sales charge structure and Rule 12b-1 plan are similar to those of Class I
shares, shares of Americas Government Securities are considered Class I shares
for redemption, exchange and other purposes. Greater European and Latin America
Fund offer three classes of shares, designated "Class I," "Class II," and
"Advisor Class." The three classes have proportionate interests in each Fund's
portfolio. They differ, however, primarily in their sales charge and expense
structures.
CODE - Internal Revenue Code of 1986, as amended
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Funds' principal
underwriter
FRANKLIN TEMPLETON FUNDS - The U.S. registered mutual funds in the Franklin
Group of FundsAE and the Templeton Group of Funds except Franklin Valuemark
Funds, Franklin Government Securities Trust, Templeton Capital Accumulator Fund,
Inc., Templeton Variable Annuity Fund, and Templeton Variable Products Series
Fund
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies in
the Franklin Group of FundsAE and the Templeton Group of Funds
FT SERVICES - Franklin Templeton Services, Inc., the Funds' administrator
GLOBAL ADVISORS - Templeton Global Advisors Limited, the investment manager of
Growth and Income Fund and Greater European Fund
INVESTMENT COUNSEL - Templeton Investment Counsel, Inc., the investment manager
of Infrastructure Fund and Latin America Fund; and Americas Government
Securities Fund, through its Global Bond Managers division
INVESTMENT MANAGER(S) - The Investment Manager of Growth and Income Fund and
Greater European Fund is Global Advisors; the Investment Manager of
Infrastructure Fund and Latin America Fund is Investment Counsel; and in the
case of Americas Government Securities Fund, the Investment Manager is
Investment Counsel, through its Global Bond Managers division (collectively
"Investment Managers")
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the Funds'
shareholder servicing and transfer agent
IRS - Internal Revenue Service
LETTER - Letter of Intent
MOODY'S - Moody's Investors Service, Inc.
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NYSE - New York Stock Exchange
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. The maximum
front-end sales charge is 5.75% for Class I (except Americas Government
Securities Fund is 4.25%) an 1% for Class II.
PROSPECTUS - The prospectus dated August 1, 1997, as may be amended from time to
time, for Growth and Income Fund, Infrastructure Fund, Americas Government
Securities Fund, and the Class I and Class II shares of Greater European Fund
and Latin America Fund
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
S&P - Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc.
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with each Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
U.S. - United States
WE/OUR/US - Unless a different meaning is indicated by the context, these terms
refer to a Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
APPENDIX
CORPORATE BOND RATINGS
MOODY'S
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large, fluctuation of protective elements may be of greater amplitude, or
there may be other elements present which make the long-term risks appear
somewhat larger.
A - Bonds rated A possess many favorable investment attributes and are
considered upper medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered medium grade obligations. They are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well.
BA - Bonds rated Ba are judged to have predominantly speculative elements and
their future cannot be considered well assured. Often the protection of interest
and principal payments is very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond ratings. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; modifier 2 indicates a mid-range ranking; and modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.
S&P
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and, in the majority of instances,
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB, B, CCC, CC - Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C - Bonds rated C are typically subordinated debt to senior debt that is
assigned an actual or implied CCC- rating. The C rating may also reflect the
filing of a bankruptcy petition under circumstances where debt service payments
are continuing. The C1 rating is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
TLGIT SAI 08/97
- --------
* Sir John Templeton sold the Templeton organization to Resources in
October 1992 and resigned from the Board on April 16, 1995. He is no
longer involved with the investment management process.
<PAGE>
ADVISOR CLASS
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
TEMPLETON GLOBAL INVESTMENT TRUST - ADVISOR CLASS
TEMPLETON REGION FUNDS
GREATER EUROPEAN FUND
LATIN AMERICA FUND
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1997
700 CENTRAL AVENUE, P.O. BOX 33030
ST. PETERSBURG, FL 33733-8030 1-800/DIAL BEN
TABLE OF CONTENTS
How Do the Funds Invest Their Assets?........................
What are the Funds'Potential Risks?..........................
Investment Restrictions......................................
Officers and Trustees........................................
Investment Management and Other Services.....................
How Do the Funds Buy Securities for Their Portfolios?........
How Do I Buy, Sell and Exchange Shares?......................
How Are Fund Shares Valued?..................................
Additional Information on Distributions and Taxes............
The Funds' Underwriter.......................................
How Do the Funds Measure Performance?........................
Miscellaneous Information....................................
Financial Statements.........................................
Useful Terms and Definitions.................................
Appendix.....................................................
Description of Ratings......................................
- -------------------------------------------------------------------------------
When reading this SAI you will see certain terms beginning with
capital letters. This means the term is explained under "Useful Terms
and Definitions."
- -------------------------------------------------------------------------------
Templeton Greater European Fund ("Greater European Fund"); and Templeton Latin
America Fund ("Latin America Fund") are diversified series of Templeton Global
Investment Trust (the "Trust"), an open-end management investment company.
Greater European Fund's investment objective is long-term capital appreciation,
which it seeks to achieve by investing primarily in equity securities of Greater
European Companies as defined in the Prospectus. Latin America Fund's investment
objective is long-term capital appreciation, which it seeks to achieve by
investing primarily in equity securities and debt securities of issuers in
various Latin American countries.
This SAI describes the Advisor Class shares of Greater European Fund and Latin
America Fund. The Greater European collectively, be referred to as the "Fund" or
"Funds," or individually by their respective names. The Funds' Prospectus, dated
August 1, 1997, as may be amended from time to time, contains the basic
information you should know before investing in each Fund. For a free copy, call
1-800/DIAL BEN or write the Funds at the address shown.
HIS SAI IS NOT A PROSPECTUS. IT CONTAINS INFORMATION IN ADDITION TO AND IN MORE
DETAIL THAN SET FORTH IN THE FUNDS' PROSPECTUS. THIS SAI IS INTENDED TO PROVIDE
YOU WITH ADDITIONAL INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF THE
FUNDS, AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS.
- ------------------------------------------------------------------------------
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK;
ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
- ------------------------------------------------------------------------------
HOW DO THE FUNDS INVEST THEIR ASSETS?
The following provides more detailed information about some of the securities
the Funds may buy and their investment policies. You should read it together
with the section in the Funds' Prospectus entitled "How Do the Funds Invest
Their Assets?"
REPURCHASE AGREEMENTS. Repurchase agreements are contracts under which the buyer
of a security simultaneously commits to resell the security to the seller at an
agreed-upon price and date. Under a repurchase agreement, the seller is required
to maintain the value of the securities subject to the repurchase agreement at
not less than their repurchase price. The Investment Manager of each Fund will
monitor the value of such securities daily to determine that the value equals or
exceeds the repurchase price. Repurchase agreements may involve risks in the
event of default or insolvency of the seller, including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities. A
Fund will enter into repurchase agreements only with parties who meet
creditworthiness standards approved by the Board, I.E., banks or broker-dealers
which have been determined by a Fund's Investment Manager to present no serious
risk of becoming involved in bankruptcy proceedings within the time frame
contemplated by the repurchase transaction.
DEBT SECURITIES. The Funds may invest in debt securities that are rated in any
rating category by Moody's or S&P or that are unrated by any rating agency. As
an operating policy, which may be changed by the Board without shareholder
approval, neither Greater European Fund nor Latin America Fund will invest more
than 5% of its assets in debt securities rated lower than Baa by Moody's or BBB
by S&P. The market value of debt securities generally varies in response to
changes in interest rates and the financial condition of each issuer. During
periods of declining interest rates, the value of debt securities generally
increases. Conversely, during periods of rising interest rates, the value of
such securities generally declines. These changes in market value will be
reflected in a Fund's Net Asset Value.
Bonds which are rated Baa by Moody's are considered as medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated C by
Moody's are the lowest rated class of bonds, and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing.
Bonds rated BBB by S&P are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories. Bonds rated D by S&P are
the lowest rated class of bonds, and generally are in payment default. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Although they may offer higher yields than do higher rated securities,
high-risk, low rated debt securities (commonly referred to as "junk bonds") and
unrated debt securities generally involve greater volatility of price and risk
of principal and income, including the possibility of default by, or bankruptcy
of, the issuers of the securities. In addition, the markets in which low rated
and unrated debt securities are traded are more limited than those in which
higher rated securities are traded. The existence of limited markets for
particular securities may diminish a Fund's ability to sell the securities at
fair value either to meet redemption requests or to respond to a specific
economic event such as a deterioration in the creditworthiness of the issuer.
Reduced secondary market liquidity for certain low rated or unrated debt
securities may also make it more difficult for a Fund to obtain accurate market
quotations for the purposes of valuing the Fund's portfolio. Market quotations
are generally available on many low rated or unrated securities only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of low rated debt securities,
especially in a thinly traded market. Analysis of the creditworthiness of
issuers of low rated debt securities may be more complex than for issuers of
higher rated securities, and the ability of a Fund to achieve its investment
objective may, to the extent of investment in low rated debt securities, be more
dependent upon such creditworthiness analysis than would be the case if the Fund
were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of low rated debt securities have been found to be less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interest rates, for example, could
cause a decline in low rated debt securities prices because the advent of a
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of low
rated debt securities defaults, a Fund may incur additional expenses seeking
recovery.
A Fund may accrue and report interest income on high yield bonds, such as zero
coupon bonds or pay-in-kind securities, even though it receives no cash interest
until the security's maturity or payment date. In order to qualify for
beneficial tax treatment afforded regulated investment companies, and to
generally be relieved of federal tax liabilities, a Fund must distribute all of
its net income and gains to shareholders (see "Additional Information on
Distributions and Taxes") generally on an annual basis. A Fund may have to
dispose of portfolio securities under disadvantageous circumstances to generate
cash or leverage itself by borrowing cash in order to satisfy the distribution
requirement.
STRUCTURED INVESTMENTS. Included among the issuers of debt securities in which
each Fund may invest are entities organized and operated solely for the purpose
of restructuring the investment characteristics of various securities. These
entities are typically organized by investment banking firms which receive fees
in connection with establishing each entity and arranging for the placement of
its securities. This type of restructuring involves the deposit with or purchase
by an entity, such as a corporation or trust, of specified instruments and the
issuance by that entity of one or more classes of securities ("structured
investments") backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued structured investments to create securities with
different investment characteristics such as varying 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
each Fund anticipates investing typically involve no credit enhancement, their
credit risk will generally be equivalent to that of the underlying instruments.
Each Fund is permitted to invest in a class of structured investments that is
either subordinated or unsubordinated to the right of payment of another class.
Subordinated structured investments typically have higher yields and present
greater risks than unsubordinated structured investments. Although each 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 that such Fund's assets may be used for borrowing activities.
Certain issuers of structured investments may be deemed to be "investment
companies" as defined in the 1940 Act. A Fund's investment in these structured
investments may be limited by its investment restrictions. See "Investment
Restrictions" below. 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 a Fund's restrictions on investments in illiquid securities.
CONVERTIBLE SECURITIES. The Funds may invest in convertible securities,
including convertible debt and convertible preferred stock. Convertible
securities are fixed-income securities which may be converted at a stated price
within a specific amount of time into a specified number of shares of common
stock. These securities are usually senior to common stock in a corporation's
capital structure, but usually are subordinated to non-convertible debt
securities. In general, the value of a convertible security is the higher of its
investment value (its value as a fixed-income security) and its conversion value
(the value of the underlying shares of common stock if the security is
converted). The investment value of a convertible security generally increases
when interest rates decline and generally decreases when interest rates rise.
The conversion value of a convertible security is influenced by the value of the
underlying common stock.
FUTURES CONTRACTS. Each Fund may purchase and sell financial futures contracts.
Although some financial futures contracts call for making or taking delivery of
the underlying securities, in most cases these obligations are closed out before
the settlement date. The closing of a contractual obligation is accomplished by
purchasing or selling an identical offsetting futures contract. Other financial
futures contracts by their terms call for cash settlements. Each Fund may also
buy and sell index futures contracts with respect to any stock or bond index
traded on a recognized stock exchange or board of trade. An index futures
contract is a contract to buy or sell units of an index at a specified future
date at a price agreed upon when the contract is made. The index futures
contract specifies that no delivery of the actual securities making up the index
will take place. Instead, settlement in cash must occur upon the termination of
the contract, with the settlement being the difference between the contract
price and the actual level of the index at the expiration of the contract.
At the time a Fund purchases a futures contract, an amount of cash, U.S.
government securities, or other highly liquid debt securities equal to the
market value of the contract will be deposited in a segregated account with the
Fund's custodian. When writing a futures contract, a Fund will maintain with its
custodian liquid assets that, when added to the amounts deposited with a futures
commission merchant or broker as margin, are equal to the market value of the
instruments underlying the contract. Alternatively, a Fund may "cover" its
position by owning the instruments underlying the contract or, in the case of an
index futures contract, owning a portfolio with a volatility substantially
similar to that of the index on which the futures contract is based, or holding
a call option permitting the Fund to purchase the same futures contract at a
price no higher than the price of the contract written by the Fund (or at a
higher price if the difference is maintained in liquid assets with the Fund's
custodian).
OPTIONS ON SECURITIES, INDICES AND FUTURES. Each Fund may write covered put and
call options and purchase put and call options on securities, securities indices
and futures contracts that are traded on U.S. and foreign exchanges and in the
over-the-counter markets.
An option on a security or a futures contract is a contract that gives the
purchaser of the option, in return for the premium paid, the right to buy a
specified security or futures contract (in the case of a call option) or to sell
a specified security or futures contract (in the case of a put option) from or
to the writer of the option at a designated price during the term of the option.
An option on a securities index gives the purchaser of the option, in return for
the premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of the
option.
Each Fund may write a call or put option only if the option is "covered." A call
option on a security or futures contract written by a Fund is "covered" if the
Fund owns the underlying security or futures contract covered by the call or has
an absolute and immediate right to acquire that security without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other securities held in its
portfolio. A call option on a security or futures contract is also covered if a
Fund holds a call on the same security or futures contract and in the same
principal amount as the call written where the exercise price of the call held
(a) is equal to or less than the exercise price of the call written or (b) is
greater than the exercise price of the call written if the difference is
maintained by the Fund in cash or high grade U.S. Government securities in a
segregated account with its custodian. A put option on a security or futures
contract written by a Fund is "covered" if the Fund maintains cash or fixed-
income securities with a value equal to the exercise price in a segregated
account with its custodian, or else holds a put on the same security or futures
contract and in the same principal amount as the put written where the exercise
price of the put held is equal to or greater than the exercise price of the put
written.
A Fund will cover call options on securities indices that it writes by owning
securities whose price changes, in the opinion of the Fund's Investment Manager,
are expected to be similar to those of the index, or in such other manner as may
be in accordance with the rules of the exchange on which the option is traded
and applicable laws and regulations. Nevertheless, where a Fund covers a call
option on a securities index through ownership of securities, such securities
may not match the composition of the index. In that event, a Fund will not be
fully covered and could be subject to risk of loss in the event of adverse
changes in the value of the index. A Fund will cover put options on securities
indices that it writes by segregating assets equal to the option's exercise
price, or in such other manner as may be in accordance with the rules of the
exchange on which the option is traded and applicable laws and regulations.
A Fund will receive a premium from writing a put or call option, which increases
its gross income in the event the option expires unexercised or is closed out at
a profit. If the value of a security, index or futures contract on which a Fund
has written a call option falls or remains the same, the Fund will realize a
profit in the form of the premium received (less transaction costs) that could
offset all or a portion of any decline in the value of the portfolio securities
being hedged. If the value of the underlying security, index or futures contract
rises, however, a Fund will realize a loss in its call option position, which
will reduce the benefit of any unrealized appreciation in its investments. By
writing a put option, a Fund assumes the risk of a decline in the underlying
security, index or futures contract. To the extent that the price changes of the
portfolio securities being hedged correlate with changes in the value of the
underlying security, index or futures contract, writing covered put options will
increase a Fund's losses in the event of a market decline, although such losses
will be offset in part by the premium received for writing the option.
Each Fund may also purchase put options to hedge its investments against a
decline in value. By purchasing a put option, a Fund will seek to offset a
decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of a Fund's investments does not
decline as anticipated, or if the value of the option does not increase, each
Fund's loss will be limited to the premium paid for the option plus related
transaction costs. The success of this strategy will depend, in part, on the
accuracy of the correlation between the changes in value of the underlying
security, index or futures contract and the changes in value of a Fund's
security holdings being hedged.
A Fund may purchase call options on individual securities or futures contracts
to hedge against an increase in the price of securities or futures contracts
that it anticipates purchasing in the future. Similarly, a Fund may purchase
call options on a securities index to attempt to reduce the risk of missing a
broad market advance, or an advance in an industry or market segment, at a time
when the Fund holds uninvested cash or short-term debt securities awaiting
investment. When purchasing call options, a Fund will bear the risk of losing
all or a portion of the premium paid if the value of the underlying security,
index or futures contract does not rise.
There can be no assurance that a liquid market will exist when a Fund seeks to
close out an option position. Trading could be interrupted, for example, because
of supply and demand imbalances arising from a lack of either buyers or sellers,
or the options exchange could suspend trading after the price has risen or
fallen more than the maximum specified by the exchange. Although a Fund may be
able to offset to some extent any adverse effects of being unable to liquidate
an option position, it may experience losses in some cases as a result of such
inability. The value of over-the-counter options purchased by a Fund, as well as
the cover for options written by a Fund, are considered not readily marketable
and are subject to the Trust's limitation on investments in securities that are
not readily marketable. See "Investment Restrictions."
FOREIGN CURRENCY HEDGING TRANSACTIONS. In order to hedge against foreign
currency exchange rate risks, each Fund may enter into forward foreign currency
exchange contracts and foreign currency futures contracts, as well as purchase
put or call options on foreign currencies, as described below. Each Fund may
also conduct its foreign currency exchange transactions on a spot (I.E., cash)
basis at the spot rate prevailing in the foreign currency exchange market.
A Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to attempt to minimize the risk to the Fund from adverse changes in
the relationship between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency for an agreed
price at a future date which is individually negotiated and privately traded by
currency traders and their customers. A Fund may enter into a forward contract,
for example, when it enters into a contract for the purchase or sale of a
security denominated in a foreign currency in order to "lock in" the U.S. dollar
price of the security. In addition, for example, when a Fund believes that a
foreign currency may suffer or enjoy a substantial movement against another
currency, it may enter into a forward contract to sell an amount of the former
foreign currency approximating the value of some or all of its portfolio
securities denominated in such foreign currency. This second investment practice
is generally referred to as "cross-hedging." Because in connection with a Fund's
forward foreign currency transactions, an amount of its assets equal to the
amount of the purchase will be held aside or segregated to be used to pay for
the commitment, a Fund will always have cash, cash equivalents or high quality
debt securities available in an amount sufficient to cover any commitments under
these contracts or to limit any potential risk. The segregated account will be
marked-to-market on a daily basis. While these contracts are not presently
regulated by the Commodity Futures Trading Commission ("CFTC"), the CFTC may in
the future assert authority to regulate forward contracts. In such event, the
Funds' ability to utilize forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a positive change in
the relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for a Fund
than if it had not engaged in such contracts.
A Fund may purchase and write put and call options on foreign currencies for the
purpose of protecting against declines in the dollar value of foreign portfolio
securities and against increases in the dollar cost of foreign securities to be
acquired. As is the case with other kinds of options, however, the writing of an
option on foreign currency will constitute only a partial hedge up to the amount
of the premium received, and a Fund could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on foreign currency may constitute an effective hedge
against fluctuation in exchange rates, although, in the event of rate movements
adverse to its position, a Fund may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or
purchased by a Fund will be traded on U.S. and foreign exchanges or
over-the-counter.
A Fund may enter into exchange-traded contracts for the purchase or sale for
future delivery of foreign currencies ("foreign currency futures"). This
investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of a
Fund's portfolio securities or adversely affect the prices of securities that a
Fund intends to purchase at a later date.
The successful use of foreign currency futures will usually depend on the
ability of the Investment Managers to forecast currency exchange rate movements
correctly. Should exchange rates move in an unexpected manner, a Fund may not
achieve the anticipated benefits of foreign currency futures or may realize
losses.
<PAGE>
WHAT ARE THE FUNDS' POTENTIAL RISKS?
Both Funds have the right to purchase securities in any foreign country,
developed or developing. You should consider carefully the substantial risks
involved in securities of companies and governments of foreign nations, which
are in addition to the usual risks inherent in domestic investments.
There may be less publicly available information about foreign companies
comparable to the reports and ratings published about companies in the U.S.
Foreign companies are not generally subject to uniform accounting and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to U.S. companies. The Funds, therefore, may
encounter difficulty in obtaining market quotations for purposes of valuing its
portfolio and calculating its Net Asset Value. Foreign markets have
substantially less volume than the NYSE and securities of some foreign companies
are less liquid and more volatile than securities of comparable U.S. companies.
Commission rates in foreign countries, which are generally fixed rather than
subject to negotiation as in the U.S., are likely to be higher. In many foreign
countries there is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the U.S.
Investments in companies domiciled in developing countries may be subject to
potentially higher risks than investments in developed countries. These risks
include (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict a
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property; (vi) the absence,
until recently in certain Eastern European countries, of a capital market
structure or market-oriented economy; and (vii) the possibility that recent
favorable economic developments in Eastern Europe may be slowed or reversed by
unanticipated political or social events in such countries.
To the extent of the Communist Party's influence, investments in such countries
may involve risks of nationalization, expropriation and confiscatory taxation.
The communist governments of a number of Eastern European countries expropriated
large amounts of private property in the past, in many cases without adequate
compensation, and there can be no assurance that such expropriation will not
occur in the future. In the event of such expropriation, a Fund could lose a
substantial portion of any investments it has made in the affected countries.
Further, no accounting standards exist in Eastern European countries. Finally,
even though certain Eastern European currencies may be convertible into U.S.
dollars, the conversion rates may be artificial to the actual market values and
may be adverse to Fund shareholders.
Certain Eastern European countries, which do not have market economies, are
characterized by an absence of developed legal structures governing private and
foreign investments and private property. Certain countries require governmental
approval prior to investments by foreign persons, or limit the amount of
investment by foreign persons in a particular company, or limit the investment
of foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals.
Governments in certain Eastern European countries may require that a
governmental or quasi-governmental authority act as custodian of a Fund's assets
invested in such country. To the extent such governmental or quasi-governmental
authorities do not satisfy the requirements of the 1940 Act to act as foreign
custodians of a Fund's cash and securities, the Fund's investment in such
countries may be limited or may be required to be effected through
intermediaries. The risk of loss through governmental confiscation may be
increased in such countries.
Greater European Fund may invest a portion of its assets in Russian securities.
There can be no assurance that appropriate sub-custody arrangements will be
available to the Fund if and when the Fund seeks to invest a portion of its
assets in Russian securities. As a non-fundamental policy, the Fund will not
invest more than 5% of its total assets in Russian securities.
Investing in Russian securities involves a high degree of risk and special
considerations not typically associated with investing in the U.S. securities
markets, and should be considered highly speculative. Such risks include: (i)
delays in settling portfolio transactions and risk of loss arising out of
Russia's system of share registration and custody; (ii) the risk that it may be
impossible or more difficult than in other countries to obtain and/or enforce a
judgment; (iii) pervasiveness of corruption and crime in the Russian economic
system; (iv) currency exchange rate volatility and the lack of available
currency hedging instruments; (v) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation); (vi) controls on
foreign investment and local practices disfavoring foreign investors and
limitations on repatriation of invested capital, profits and dividends, and on
the Fund's ability to exchange local currencies for U.S. dollars; (vii) the risk
that the government of Russia or other executive or legislative bodies may
decide not to continue to support the economic reform programs implemented since
the dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the dissolution of the Soviet Union; (viii) the
financial condition of Russian companies, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (ix)
dependency on exports and the corresponding importance of international trade;
(x) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (xi) possible
difficulty in identifying a purchaser of securities held by the Fund due to the
underdeveloped nature of the securities markets.
There is little historical data on Russian securities markets because they are
relatively new and a substantial proportion of securities transactions in Russia
are privately negotiated outside of stock exchanges. Because of the recent
formation of the securities markets as well as the underdeveloped state of the
banking and telecommunications systems, settlement, clearing and registration of
securities transactions are subject to significant risks. Ownership of shares
(except where shares are held through depositories that meet the requirements of
the 1940 Act) is defined according to entries in the company's share register
and normally evidenced by extracts from the register or by formal share
certificates. However, there is no central registration system for shareholders
and these services are carried out by the companies themselves or by registrars
located throughout Russia. These registrars are not necessarily subject to
effective state supervision and it is possible for the Fund to lose its
registration through fraud, negligence or even mere oversight. While the Fund
will endeavor to ensure that its interest continues to be appropriately recorded
either itself or through a custodian or other agent inspecting the share
register and by obtaining extracts of share registers through regular
confirmations, these extracts have no legal enforceability and it is possible
that subsequent illegal amendment or other fraudulent act may deprive the Fund
of its ownership rights or improperly dilute its interests. In addition, while
applicable Russian regulations impose liability on registrars for losses
resulting from their errors, it may be difficult for the Fund to enforce any
rights it may have against the registrar or issuer of the securities in the
event of loss of share registration. Furthermore, although a Russian public
enterprise with more than 1,000 shareholders is required by law to contract out
the maintenance of its shareholder register to an independent entity that meets
certain criteria, in practice this regulation has not always been strictly
enforced. Because of this lack of independence, management of a company may be
able to exert considerable influence over who can purchase and sell the
company's shares by illegally instructing the registrar to refuse to record
transactions in the share register. This practice may prevent the Fund from
investing in the securities of certain Russian issues deemed suitable by its
Investment Manager. Further, this also could cause a delay in the sale of
Russian securities by the Fund if a potential purchaser is deemed unsuitable,
which may expose the Fund to potential loss on the investment.
Investing in Latin American issuers involves a high degree of risk and special
considerations not typically associated with investing in the U. S. and other
more developed securities markets, and should be considered highly speculative.
Such risks include: (i) restrictions or controls on foreign investment and
limitations on repatriation of invested capital and the Fund's ability to
exchange local currencies for U.S. dollars; (ii) higher and sometimes volatile
rates of inflation (including the risk of social unrest associated with periods
of hyper-inflation); (iii) the risk that certain Latin American countries, which
are among the largest debtors to commercial banks and foreign governments and
which have experienced difficulty in servicing sovereign debt obligations in the
past, may negotiate to restructure sovereign debt obligations; (iv) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgment; (v) currency exchange rate fluctuations and the lack
of available currency hedging instruments; (vi) more substantial government
involvement in and control over the local economies; and (vii) dependency on
exports and the corresponding importance of international trade.
Latin American countries may be subject to a greater degree of economic,
political, and social instability than is the case in the U.S., Japan, or
Western European countries. Such instability may result from, among other
things, the following: (i) authoritarian governments or military involvement in
political and economic decision-making, including changes in governmental
control through extra-constitutional means; (ii) popular unrest associated with
demands for improved political, economic, and social conditions; (iii) internal
insurgencies and terrorist activities; (iv) hostile relations with neighboring
countries; (v) ethnic, religious and racial disaffection; and (vi) drug
trafficking.
Each Fund endeavors to buy and sell foreign currencies on as favorable a basis
as practicable. Some price spread on currency exchange (to cover service
charges) may be incurred, particularly when a Fund changes investments from one
country to another or when proceeds of the sale of shares in U.S. dollars are
used for the purchase of securities in foreign countries. Also, some countries
may adopt policies which would prevent a Fund from transferring cash out of the
country or withhold portions of interest and dividends at the source. There is
the possibility of cessation of trading on national exchanges, expropriation,
nationalization or confiscatory taxation, withholding and other foreign taxes on
income or other amounts, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country), default in foreign
government securities, political or social instability, or diplomatic
developments which could affect investments in securities of issuers in foreign
nations.
The Funds may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments. Some countries in which the Funds may invest may also have fixed
or managed currencies that are not free-floating against the U.S. dollar.
Further, certain currencies may not be internationally traded. Certain of these
currencies have experienced a steady devaluation relative to the U.S. dollar.
Any devaluations in the currencies in which the Funds' portfolio securities are
denominated may have a detrimental impact on the Funds. Through the flexible
policy of the Funds, the Investment Managers endeavor to avoid unfavorable
consequences and to take advantage of favorable developments in particular
nations where from time to time they place the Funds' investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
The Board considers at least annually the likelihood of the imposition by any
foreign government of exchange control restrictions which would affect the
liquidity of the Funds' assets maintained with custodians in foreign countries,
as well as the degree of risk from political acts of foreign governments to
which such assets may be exposed. The Board also considers the degree of risk
involved through the holding of portfolio securities in domestic and foreign
securities depositories (see "Investment Management and Other Services").
However, in the absence of willful misfeasance, bad faith or gross negligence on
the part of an Investment Manager, any losses resulting from the holding of
portfolio securities in foreign countries and/or with securities depositories
will be at the risk of the shareholders. No assurance can be given that the
Board's appraisal of the risks will always be correct or that such exchange
control restrictions or political acts of foreign governments will not occur.
A Fund's ability to reduce or eliminate its futures and related options
positions will depend upon the liquidity of the secondary markets for such
futures and options. The Funds intend to purchase or sell futures and related
options only on exchanges or boards of trade where there appears to be an active
secondary market, but there is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. Use of futures and
options for hedging may involve risks because of imperfect correlations between
movements in the prices of the futures or options and movements in the prices of
the securities being hedged. Successful use of futures and related options by a
Fund for hedging purposes also depends upon the Investment Manager's ability to
predict correctly movements in the direction of the market, as to which no
assurance can be given.
There are several risks associated with transactions in options on securities
indices. For example, there are significant differences between the securities
and options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. A decision
as to whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events. There can be no
assurance that a liquid market will exist when a Fund seeks to close out an
option position. If a Fund were unable to close out an option that it had
purchased on a securities index, it would have to exercise the option in order
to realize any profit or the option may expire worthless. If trading were
suspended in an option purchased by a Fund, it would not be able to close out
the option. If restrictions on exercise were imposed, a Fund might be unable to
exercise an option it has purchased. Except to the extent that a call option on
an index written by a Fund is covered by an option on the same index purchased
by the Fund, movements in the index may result in a loss to the Fund; however,
such losses may be mitigated by changes in the value of the Fund's securities
during the period the option was outstanding.
Additional risks may be involved with the Funds' special investment techniques,
including loans of portfolio securities and borrowing for investment purposes.
These risks are described under the heading "How Do the Funds Invest Their
Assets? - Types of Securities In Which the Funds May Invest" in the Funds'
Prospectus.
INVESTMENT RESTRICTIONS
The Funds have adopted the following restrictions as fundamental policies. These
restrictions may not be changed without the approval of a majority of the
outstanding voting securities of a Fund. Under the 1940 Act, this means the
approval of (i) more than 50% of the outstanding shares of a Fund or (ii) 67% or
more of the shares of a Fund present at a shareholder meeting if more than 50%
of the outstanding shares of the Fund are represented at the meeting in person
or by proxy, whichever is less.
Each Fund MAY NOT:
1. Invest in real estate or mortgages on real estate (although the Funds may
invest in marketable securities secured by real estate or interests therein);
invest in other open-end investment companies (except in connection with a
merger, consolidation, acquisition or reorganization); invest in interests
(other than publicly issued debentures or equity stock interests) in oil, gas
or other mineral exploration or development programs; or purchase or sell
commodity contracts (except futures contracts as described in the Funds'
Prospectus).
2. Purchase any security (other than obligations of the U.S. government, its
agencies or instrumentalities) if, as a result, as to 75% of a Fund's total
assets (a) more than 5% of the Fund's total assets would then be invested in
securities of any single issuer, or (b) the Fund would then own more than 10%
of the voting securities of any single issuer.
3. Act as an underwriter; issue senior securities except as set forth in
investment restriction 6 below; or purchase on margin or sell short, except
that each Fund may make margin payments in connection with futures, options
and currency transactions.
4. Loan money, except that a Fund may (a) purchase a portion of an issue of
publicly distributed bonds, debentures, notes and other evidences of
indebtedness, (b) enter into repurchase agreements and (C) lend its
portfolio securities.
5. Borrow money, except that a Fund may borrow money from banks in an amount not
exceeding 33 1/3% of the value of its total assets (including the amount
borrowed).
6. Mortgage, pledge or hypothecate its assets (except as may be necessary in
connection with permitted borrowings); provided, however, this does not
prohibit escrow, collateral or margin arrangements in connection with its use
of options, futures contracts and options on future contracts.
7. Invest more than 25% of its total assets in a single industry.
8. Participate on a joint or a joint and several basis in any trading account in
securities. (See "How Do the Funds Buy Securities for Their Portfolios?" as
to transactions in the same securities for a Fund, other clients and/or
mutual funds within the Franklin Templeton Group of Funds.)
If a Fund receives from an issuer of securities held by the Fund subscription
rights to purchase securities of that issuer, and if the Fund exercises such
subscription rights at a time when the Fund's portfolio holdings of securities
of that issuer would otherwise exceed the limits set forth in Investment
Restrictions 2 or 7 above, it will not constitute a violation if, prior to
receipt of securities upon exercise of such rights, and after announcement of
such rights, the Fund has sold at least as many securities of the same class and
value as it would receive on exercise of such rights.
ADDITIONAL RESTRICTIONS. Each Fund has adopted the following additional
restrictions which are not fundamental and which may be changed without
shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy.
Under these restrictions, a Fund MAY NOT:
1. Purchase or retain securities of any company in which trustees or officers of
the Trust or of a Fund's Investment Manager, individually owning more than
1/2 of 1% of the securities of such company, in the aggregate own more than
5% of the securities of such company.
2. Invest more than 5% of the value of its total assets in securities of issuers
which have been in continuous operation less than three years.
3. Invest more than 5% of its net assets in warrants whether or not listed on
the NYSE or American Stock Exchange, and more than 2% of its net assets in
warrants that are not listed on those exchanges. Warrants acquired in units
or attached to securities are not included in this restriction.
4. Purchase or sell real estate limited partnership interests.
5. Purchase or sell interests in oil, gas and mineral leases (other than
securities of companies that invest in or sponsor such programs).
6. Invest for the purpose of exercising control over management of any company.
7. Purchase more than 10% of a company's outstanding voting securities.
8. Invest more than 15% of the Fund's total assets in securities that are not
readily marketable (including repurchase agreements maturing in more than
seven days and over-the-counter options purchased by the Fund), including no
more than 10% of its total assets in restricted securities. Rule 144A
securities are not subject to the 10% limitation on restricted securities,
although a Fund will limit its investment in all restricted securities,
including Rule 144A securities, to 15% of its total assets.
If a percentage restriction is met at the time of investment, a later increase
or decrease in the percentage due to a change in value of portfolio securities
or the amount of assets will not be considered a violation of any of the
foregoing restrictions.
A Fund may also be subject to investment limitations imposed by foreign
jurisdictions in which the Fund sells its shares.
OFFICERS AND TRUSTEES
The Board has the responsibility for the overall management of the Trust,
including general supervision and review of its investment activities. The
Board, in turn, elects the officers of the Trust who are responsible for
administering the Trust's day-to-day operations. The affiliations of the
officers and Board members and their principal occupations for the past five
years are shown below. Members of the Board who are considered "interested
persons" of the Funds under the 1940 Act are indicated by an asterisk ("*").
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
NAME, AGE AND ADDRESS WITH THE TRUST
<S> <C> <C>
HARRIS J. ASHTON Trustee Chairman of the board, president and chief executive officer
Age 65 of General Host Corporation (nursery and craft centers);
Metro Center director of RBC Holdings Inc. (a bank holding company) and
1 Station Place Bar-S Foods (a meat packing company); and director or trustee
Stamford, Connecticut of 53 of the investment companies in the Franklin Templeton
Group of Funds.
<PAGE>
NICHOLAS F. BRADY Trustee Chairman of Templeton Emerging Markets Investment Trust PLC;
Age 67 chairman of Templeton Latin America Investment Trust PLC;
The Bullitt House chairman of Darby Overseas Investments, Ltd. (an investment
102 East Dover Street firm) (1994-present); chairman and director of Templeton
Easton, Maryland Central and Eastern European Investment Company; director of
the Amerada Hess Corporation, Christiana Companies, and the
H.J. Heinz Company; formerly, Secretary of the United States
Department of the Treasury (1988-1993) and chairman of the
board of Dillon, Read & Co. Inc. (investment banking) prior
to 1988; and director or trustee of 23 of the investment
companies in the Franklin Templeton Group of Funds.
MARTIN L. FLANAGAN* Trustee and Vice President Senior vice president, treasurer and chief financial officer
Age 37 of Franklin Resources, Inc.; director and executive vice
777 Mariners Island Blvd. president of Templeton Worldwide, Inc.; director, executive
San Mateo, California vice president and chief operating officer of Templeton
Investment Counsel, Inc.; senior vice president and
treasurer of Franklin Advisers,Inc.; treasurer of
Franklin Advisory Services, Inc.; treasurer and chief financial
officer of Franklin Investment Advisory Services, Inc.;
president of Franklin Templeton Services, Inc.; senior vice
president of Franklin/Templeton Investor Services, Inc.;
and officer and/or director or trustee, as the case may be,
of 58 of the investment companies in the
Franklin Templeton Group of Funds.
S. JOSEPH FORTUNATO Trustee Member of the law firm of Pitney, Hardin, Kipp &
Age 65 Szuch; director of General Host Corporation (nursery
200 Campus Drive and craft centers); and director or trustee of 55 of
Florham Park, New Jersey the investment companies in the Franklin Templeton Group
of Funds.
JOHN Wm. GALBRAITH Trustee President of Galbraith Properties, Inc. (personal investment
Age 75 company); director of Gulf West Banks, Inc. (bank holding
360 Central Avenue company) (1995-present); formerly, director of Mercantile
Suite 1300 Bank (1991-1995), vice chairman of Templeton, Galbraith &
St. Petersburg, Florida Hansberger Ltd. (1986-1992), and chairman of Templeton Funds
Management, Inc. (1974-1991); and director or trustee of 22
of the investment companies in the Franklin Templeton Group
of Funds.
ANDREW H. HINES, JR. Trustee Consultant for the Triangle Consulting Group;
Age 74 executive-in-residence of Eckerd College (1991-present);
150 Second Avenue N. formerly, chairman of the board and chief executive officer
St. Petersburg, Florida of Florida Progress Corporation (1982-1990) and director of
various of its subsidiaries; and director or trustee of 24 of
the investment companies in the Franklin
Templeton Group of Funds.
CHARLES B. JOHNSON* Chairman of the Board and President, chief executive officer and director of Franklin
Age 64 Vice President Resources, Inc.; chairman of the board and director of
777 Mariners Island Blvd. Franklin Advisers, Inc., Franklin Investment Advisory
San Mateo, California Services, Inc., Franklin Advisory Services, Inc. and Franklin
Templeton Distributors, Inc.; director of Franklin/Templeton
Investor Services, Inc., Franklin Templeton Services, Inc.
and General Host Corporation (nursery and craft centers);
and officer and/or director or trustee, as the case may be,
of most of the other subsidiaries of Franklin Resources, Inc.
and 54 of the investment companies in the Franklin
Templeton Group of Funds.
<PAGE>
BETTY P. KRAHMER Trustee Director or trustee of various civic associations; formerly,
Age 68 economic analyst, U.S. government; and director or trustee of
2201 Kentmere Parkway 23 of the investment companies in the Franklin Templeton
Wilmington, Delaware Group of Funds.
GORDON S. MACKLIN Trustee Chairman of White River Corporation (financial services);
Age 69 director of Fund American Enterprises Holdings, Inc., MCI
8212 Burning Tree Road Communications Corporation, CCC Information Services Group,
Bethesda, Maryland Inc., (information services), MedImmune, Inc.
(biotechnology), Shoppers Express, Inc.(home shopping) and
Spacehab, Inc., (aerospace technology); formerly, chairman of
Hambrecht and Quist Group, director of H&Q Healthcare
Investors, and president of the National Association of
Securities Dealers, Inc.; and director or trustee of 50 of
the investment companies in the Franklin Templeton Group
of Funds.
FRED R. MILLSAPS Trustee Manager of personal investments (1978-present); director of
Age 68 various business and nonprofit organizations; formerly,
2665 N.E. 37th Drive chairman and chief executive officer of Landmark Banking
Fort Lauderdale, Florida Corporation (1969-1978), financial vice president of Florida
Power and Light (1965-1969), and vice president of The Federal
Reserve Bank of Atlanta (1958-1965); and director or
trustee, as the case may be, of 24 of the investment
companies in the Franklin Templeton Group of Funds.
EDITH E. HOLIDAY Trustee Director (1993-present) of Amerada Hess Corporation and
Age 45 Hercules Incorporated; director of Beverly Enterprises, Inc.
3239 38th Street, N.W. (1995-present) and H.J. Heinz Company (1994-present);
Washington, DC 20016 chairman (1995-present) and trustee (1993-present) of
National Child Research Center; formerly, assistant to the
President of the United States and Secretary of the
Cabinet (1990-1993), general counsel to the United States Treasury
Department (1989-1990), and counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison--United
States Treasury Department (1988-1989); and director or
trustee of 15 of the investment companies in the
Franklin Templeton Group of Funds.
MARK G. HOLOWESKO President President and director of Templeton Global Advisors Limited;
Age 37 Vice President chief investment officer of global equity research for
Lyford Cay Templeton Worldwide, Inc.; formerly, investment administrator
Nassau, Bahamas with Roy West Trust Corporation (Bahamas) Limited
(1984-1985); and officer of 23 of the investment companies in
the Franklin Templeton Group of Funds.
RUPERT H. JOHNSON, JR. Age 56 Vice President Executive vice president and director of Franklin Resources,
777 Mariners Island Blvd. Inc. and Franklin Templeton Distributors, Inc.; president and
San Mateo, California director of Franklin Advisers, Inc.; senior vice president
and director of Franklin Advisory Services, Inc.; director of
Franklin/Templeton Investor Services, Inc.; and officer
and/or director or trustee, as the case may be, of most other
subsidiaries of Franklin Resources, Inc. and 58 of the
investment companies in the Franklin Templeton Group
of Funds.
HARMON E. BURNS Vice President Executive vice president, secretary and director of Franklin
Age 52 Resources, Inc.; executive vice president and director of
777 Mariners Island Blvd. Franklin Templeton Distributors, Inc. and Franklin Templeton
San Mateo, California Services, Inc.; executive vice president of Franklin
Advisers, Inc.; director of Franklin/Templeton
Investor Services, Inc.; officer and/or director or
trustee, as the case may be, of most of the other
subsidiaries of Franklin Resources, Inc. and 58 of the
investment companies in the Franklin Templeton Group
of Funds.
CHARLES E. JOHNSON Vice President Senior vice president and director of Franklin Resources,
Age 41 Inc.; senior vice president of Franklin Templeton
500 East Broward Blvd. Distributors, Inc.; president and director of Templeton
Fort Lauderdale, Florida Worldwide, Inc.; president, chief executive officer, chief
investment officer, and director of Franklin Institutional
Services Corporation; chairman and director of Templeton
Investment Counsel, Inc.; vice president of Franklin
Advisers, Inc.; officer and/or director, of some
of the other subsidiaries of Franklin Resources, Inc.;
and officer and/or director or trustee, as the case may be,
of 37 of the investment companies in the Franklin
Templeton Group of Funds.
DEBORAH R. GATZEK Vice President Senior vice president and general counsel of Franklin
Age 48 Resources, Inc.; senior vice president of Franklin Templeton
777 Mariners Island Blvd. Services, Inc. and Franklin Templeton Distributors, Inc.;
San Mateo, California vice president of Franklin Advisers, Inc. and Franklin
Advisory
Services, Inc.;
vice president,
chief legal
officer and chief
operating officer
of Franklin
Investment
Advisory
Services, Inc.;
and officer of 58
of the investment
companies in the
Franklin
Templeton Group
of Funds.
SAMUEL J. FORESTER, JR. Age 49 Vice President Vice president of 10 of the investment companies in the
500 East Broward Blvd. Franklin Templeton Group of Funds; formerly, president of the
Fort Lauderale Templeton Global Bond Managers Division of Templeton
Investment
Counsel, Inc.;
founder and
partner of
Forester,
Hairston
Investment
Management
(1989-1990),
managing director
(Mid-East Region)
of Merrill Lynch,
Pierce, Fenner &
Smith Inc.
(1987-1988) and
advisor for Saudi
Arabian Monetary
Agency
(1982-1987).
<PAGE>
JOHN R. KAY Vice President Vice president and treasurer of Templeton Worldwide, Inc.;
Age 57 assistant vice president of Franklin Templeton Distributors,
500 East Broward Blvd. Inc.; formerly, vice president and controller of the Keystone
Fort Lauderdale, Florida Group, Inc.; and officer of 27 of the investment companies in
the Franklin Templeton Group of Funds.
<PAGE>
GARY R. CLEMONS Vice President Research analyst for Templeton Investment Counsel, Inc.
Age 40 (1993-present); formerly, research analyst for Templeton
500 East Broward Blvd. Quantitative Advisors, Inc.
Fort Lauderdale, Florida
DOUGLAS R. LEMPEREUR Age 48 Vice President Senior vice president of the Templeton Global Bond Managers
500 East Broward Blvd. Division of Templeton Investment Counsel, Inc.; formerly,
Fort Lauderdale, Florida securities analyst for Colonial Management Associates
(1985-1988), Standish, Ayer & Wood (1977-1985),
and The First National Bank of Chicago (1974-1977); and
officer of 3 of the investment companies in the
Franklin Templeton Group of Funds.
<PAGE>
NEIL S. DEVLIN Vice President Senior vice president, Portfolio Management/Research, of the
Age 40 Templeton Global Bond Managers division of Templeton
500 East Broward Blvd. Investment Counsel, Inc.; formerly, portfolio manager and
Fort Lauderdale, Florida bond analyst for Constitutional Capital Management
(1985-1987), and a bond trader and research analyst
for Bank of New England (1982-1985); and
officer of 4 of the investment companies in the
Franklin Templeton Group of Funds.
<PAGE>
JAMES R. BAIO Treasurer Certified public accountant; treasurer of Franklin Mutual
Age 43 Advisers, Inc.; senior vice president of Templeton Worldwide,
500 East Broward Blvd. Inc., Templeton Global Investors, Inc. and Templeton Funds
Fort Lauderdale, Florida Trust Company; formerly, senior tax manager with Ernst &
Young (certified public accountants)
(1977-1989); and treasurer of 24 of the investment
companies in the Franklin Templeton Group
of Funds.
ELIZABETH M. KNOBLOCK Vice President - General counsel, secretary and a senior vice president of
Age 42 Compliance Templeton Investment Counsel, Inc.; senior vice president of
500 East Broward Blvd. Templeton Global Investors, Inc.; formerly, vice president
Fort Lauderdale, Florida and associate general counsel of Kidder Peabody & Co. Inc.
(1989-1990), assistant general counsel of Gruntal & Co., Inc.
(1988), vice president and associate general counsel of
Shearson Lehman Hutton Inc. (1988), vice president and
assistant general counsel of E.F. Hutton & Co. Inc.
(1986-1988), and special counsel of the Division of
Investment Management of the Securities and Exchange
Commission (1984-1986); and officer of 23 of the investment
companies in the Franklin Templeton Group of Funds.
BARBARA J. GREEN Secretary Senior vice president of Templeton Worldwide, Inc. and an
Age 49 officer of other subsidiaries of Templeton Worldwide, Inc.;
500 East Broward Blvd. senior vice president of Templeton Global Investors, Inc.;
Fort Lauderdale, Florida formerly, deputy director of the Division of Investment
Management, executive assistant and senior advisor to
the chairman, counsellor to the chairman, special
counsel and attorney fellow, U.S. Securities and Exchange
Commission (1986-1995), attorney, Rogers & Wells, and
judicial clerk, U.S. District Court (District of
Massachusetts); and secretary of 23 of the investment
companies in the Franklin Templeton Groupof Funds.
</TABLE>
* Nicholas F. Brady, Martin L. Flanagan, Charles E. Johnson and Charles B.
Johnson are "interested persons" of the Trust under the 1940 Act, which limits
the percentage of interested persons that can comprise a fund's board. Charles
B. Johnson is an interested person due to his ownership interest in Resources.
Martin L. Flanagan and Charles E. Johnson are interested persons due to their
employment affiliations with Resources. Mr. Brady's status as an interested
person results from his business affiliations with Resources and Templeton
Global Advisors Limited. Mr. Brady and Resources are both limited partners of
Darby Overseas Partners, L.P. ("Darby Overseas"). Mr. Brady established Darby
Overseas in February 1994, and is Chairman and shareholder of the corporate
general partner of Darby Overseas. In addition, Darby Overseas and Templeton
Global Advisors Limited are limited partners of Darby Emerging Markets Fund,
L.P. The remaining Board members of the Trust are not interested persons (the
"independent members of the Board").
The table above shows the officers and Board members who are affiliated with
Distributors and the Investment Managers. Nonaffiliated members of the Board and
Mr. Brady are currently paid an annual retainer and/or fees for attendance at
Board and committee meetings. Currently, the Fund pays the nonaffiliated Board
members and Mr. Brady an annual retainer of $1,000, a fee of $100 per Board
meeting, and its portion of a flat fee of $2,000 for each audit committee
meeting and/or nominating and compensation committee meeting attended. As shown
above, the nonaffiliated Board members also serve as directors or trustees of
other investment companies in the Franklin Templeton Group of Funds. They may
receive fees from these funds for their services. The following table provides
the total fees paid to nonaffiliated Board members and Mr. Brady by the Trust
and by other funds in the Franklin Templeton Group of Funds.
<TABLE>
<CAPTION>
NUMBER OF BOARDS IN THE
TOTAL FEES RECEIVED FROM FRANKLIN TEMPLETON GROUP
THE FRANKLIN TEMPLETON OF FUNDS ON WHICH EACH
GROUP OF FUNDS2 SERVES3
TOTAL FEES RECEIVED FROM
THE TRUST1
NAME
<S> <C> <C> <C>
Harris J. Ashton $1,500 $343,592 55
Andrew H. Hines, Jr. 1,500 119,275 23
Edith Holiday 1,500 360,412 57
Betty P. Krahmer 1,503 102,475 22
Fred R. Millsaps 1,603 130,525 24
S. Joseph Fortunato 700 15,450 15
Gordon S. Macklin 1,500 119,275 23
John Wm. Galbraith 1,500 335,542 52
Nicholas F. Brady 1,603 130,525 24
</TABLE>
1 For the fiscal year ended March 31, 1997.
2 For the calendar year ended December 31, 1996.
3 We base the number of boards on the number of registered investment companies
in the Franklin Templeton Group of Funds. This number does not include the total
number of series or funds within each investment company for which the Board
members are responsible. The Franklin Templeton Group of Funds currently
includes 59 registered investment companies, with approximately 171 U.S. based
funds or series.
Nonaffiliated members of the Board and Mr. Brady are reimbursed for expenses
incurred in connection with attending board meetings, paid pro rata by each fund
in the Franklin Templeton Group of Funds for which they serve as director or
trustee. No officer or Board member received any other compensation, including
pension or retirement benefits, directly or indirectly from the Trust or other
funds in the Franklin Templeton Group of Funds. Certain officers or Board
members who are shareholders of Resources may be deemed to receive indirect
remuneration by virtue of their participation, if any, in the fees paid to its
subsidiaries.
As of July 2, 1997, the officers and Board members, as a group, owned of record
and beneficially the following shares of the Fund: approximately 252 shares of
Greater European Fund - Class I and 256 shares of Latin America Fund - Class I
or less than 1% of the total outstanding shares of each Fund's Class I shares.
Many of the Board
Templeton Group of Funds. Charles B. Johnson and Rupert H. Johnson, Jr. are
brothers and the father and uncle, respectively, of Charles E. Johnson.
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT MANAGERS AND SERVICES PROVIDED. The Investment Manager of Greater
European Fund is Templeton Global Advisors. The Investment Manager of Latin
America Fund is Templeton Investment Counsel. The Funds' Investment Managers
each provide investment research and portfolio management services, including
the selection of securities for the Fund to buy, hold or sell and the selection
of brokers through whom each Fund's portfolio transactions are executed.
Templeton Global Advisors renders its services to Greater European Fund from
outside the U.S. Each Investment Manager's activities are subject to the review
and supervision of the Board to whom the Investment Manager renders periodic
reports of the Fund's investment activities. Each Investment Manager and its
officers, directors and employees are covered by fidelity insurance for the
protection of the respective Fund.
The Investment Managers and their affiliates act as investment manager to
numerous other investment companies and accounts. Each Investment Manager may
give advice and take action with respect to any of the other funds it manages,
or for its own account, that may differ from action taken by the Investment
Manager on behalf of each Fund. Similarly, with respect to a Fund, the
Investment Manager is not obligated to recommend, buy or sell, or to refrain
from recommending, buying or selling any security that the Investment Manager
and access persons, as defined by the 1940 Act, may buy or sell for its or their
own account or for the accounts of any other fund. An Investment Manager is not
obligated to refrain from investing in securities held by a Fund or other funds
that it manages. Of course, any transactions for the accounts of an Investment
Manager and other access persons will be made in compliance with each Fund's
Code of Ethics. Please see "Miscellaneous Information - Summary of Code of
Ethics."
MANAGEMENT FEES. Under its management agreement, Greater European Fund pays
Global Advisors a monthly fee equal on an annual basis to 0.75% of its average
daily net assets. Latin America Fund pays Investment Counsel a monthly fee equal
on an annual basis to 1.25% of its average daily net assets. The fees are
computed at the close of business on the last business day of each month. Each
class pays its proportionate share of the management fee.
For the fiscal years and periods indicated below, before any advance waiver,
each Fund paid the following investment management fees:
MANAGEMENT FEES
(EXCLUDING WAIVER)
YEAR ENDED MARCH 31 1997 1996(1)
Greater European Fund 59,263 24,741
Latin America Fund 133,551 44,350
1 For the period May 8, 1995 (commencement of operations) to March 31, 1996.
Under an agreement by each Investment Manager to waive its fees, for the fiscal
years and periods indicated below, each Fund paid the following investment
management fees:
MANAGEMENT FEES
(INCLUDING WAIVER)
YEAR ENDED MARCH 31 1997 199(1)
Greater European Fund $ 0 $0
Latin America Fund 51,427 0
1 For the period May 8, 1995 (commencement of operations) to March 31, 1996.
MANAGEMENT AGREEMENTS. The management agreements are in effect until August 1,
1998. They may continue in effect for successive annual periods if their
continuance is specifically approved at least annually by a vote of the Board or
by a vote of the holders of a majority of a Fund's outstanding voting
securities, and in either event by a majority vote of the Board members who are
not parties to either agreement or interested persons of any such party (other
than as members of the Board), cast in person at a meeting called for that
purpose. Each investment management agreement may be terminated without penalty
at any time by the Board or by a vote of the holders of a majority of a Fund's
outstanding voting securities, or by the respective Investment Manager on 60
days' written notice, and will automatically terminate in the event of its
assignment, as defined in the 1940 Act.
ADMINISTRATIVE SERVICES. Since October 1, 1996, FT Services has provided certain
administrative services and facilities for the Funds. Prior to that date,
Templeton Global Investors, Inc. provided the same services to the Funds. These
include preparing and maintaining books, records, and tax and financial reports,
and monitoring compliance with regulatory requirements. FT Services is a wholly
owned subsidiary of Resources.
Under its administration agreement, the Trust pays FT Services a monthly
administration fee equal to an annual rate of 0.15% of the Trust's average daily
net assets up to $200 million, 0.135% of average daily net assets over $200
million up to $700 million, 0.10% of average daily net assets over $700 million
up to $1.2 billion, and 0.075% of average daily net assets over $1.2 billion.
The fee is allocated between the Funds according to their respective average
daily net assets.
For the fiscal years and periods indicated below, before any advance waiver,
each Fund paid the following administration fees:
ADMINISTRATION FEES
(EXCLUDING WAIVER)
YEAR ENDED MARCH 31 1997 1996(1)
Greater European Fund $11,851 $4,949
Latin America Fund 16,026 5,322
1 For the period May 8, 1995 (commencement of operations) to March 31, 1996.
Under an agreement by FT Services to limit or waive its fees, for the fiscal
years and periods indicated below, each Fund paid the following administration
fees:
ADMINISTRATION FEES
(INCLUDING WAIVER)
YEAR ENDED MARCH 31 1997 1996(1)
Greater European Fund $ 9,376 $0
Latin America Fund 16,026 0
For the period May 8, 1995 (commencement of operations) to March 31, 1996.
SHAREHOLDER SERVICING AGENT. Investor Services, a wholly owned subsidiary of
Resources, is each Fund's shareholder servicing agent and acts as each Fund's
transfer agent and dividend-paying agent. Investor Services is compensated on
the basis of a fixed fee per account. Each Fund may also reimburse Investor
Services for certain out-of-pocket expenses, which may include payments by
Investor Services to entities, including affiliated entities, that provide
sub-shareholder services, recordkeeping and/or transfer agency services to
beneficial owners of the respective Fund. The amount of reimbursements for these
services per benefit plan participant Fund account per year may not exceed the
per account fee payable by each Fund to Investor Services in connection with
maintaining shareholder accounts.
CUSTODIAN. The Chase Manhattan Bank, at its principal office at MetroTech
Center, Brooklyn, New York, 11245, and at the offices of its branches and
agencies throughout the world, acts as custodian of each Fund's assets. The
custodian does not participate in decisions relating to the purchase and sale of
portfolio securities.
AUDITORS. McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York, 10017,
are the Funds' independent auditors. During the fiscal year ended March 31,
1997, their auditing services consisted of rendering an opinion on the financial
statements of each Fund included in each Fund's Annual Report to Shareholders
for the fiscal year ended March 31, 1997, and review of the Trust's filings with
the SEC.
HOW DO THE FUNDS BUY SECURITIES FOR THEIR PORTFOLIOS?
Each Investment Manager selects brokers and dealers to execute a Fund's
portfolio transactions in accordance with criteria set forth in the management
agreement and any directions that the Board may give.
When placing a portfolio transaction, each Investment Manager seeks to obtain
prompt execution of orders at the most favorable net price. For portfolio
transactions on a securities exchange, the amount of commission paid by a Fund
is negotiated between the Investment Manager and the broker executing the
transaction. The determination and evaluation of the reasonableness of the
brokerage commissions paid are based to a large degree on the professional
opinions of the persons responsible for placement and review of the
transactions. These opinions are
on the experience of these individuals in the securities industry and
information available to them about the level of commissions being paid by other
institutional investors of comparable size. Each Investment Manager will
ordinarily place orders to buy and sell over-the-counter securities on a
principal rather than agency basis with a principal market maker unless, in the
opinion of the Investment Manager, a better price and execution can otherwise be
obtained. Purchases of portfolio securities from underwriters will include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers will include a spread between the bid and ask price.
Each Fund's Investment Manager may pay certain brokers commissions that are
higher than those another broker may charge, if the Investment Manager
determines in good faith that the amount paid is reasonable in relation to the
value of the brokerage and research services it receives. This may be viewed in
terms of either the particular transaction or an Investment Manager's overall
responsibilities to client accounts over which it exercises investment
discretion. The services that brokers may provide to an Investment Manager
include, among others, supplying information about particular companies,
markets, countries, or local, regional, national or transnational economies,
statistical data, quotations and other securities pricing information, and other
information that provides lawful and appropriate assistance to an Investment
Manager in carrying out its investment advisory responsibilities. These services
may not always directly benefit a Fund. They must, however, be of value to an
Investment Manager in carrying out its overall responsibilities to its clients.
It is not possible to place a dollar value on the special executions or on the
research services an Investment Manager receives from dealers effecting
transactions in portfolio securities. The allocation of transactions in order to
obtain additional research services permits each Investment Manager to
supplement its own research and analysis activities and to receive the views and
information of individuals and research staffs of other securities firms. As
long as it is lawful and appropriate to do so, each Investment Manager and its
affiliates may use this research and data in their investment advisory
capacities with other clients. If the Trust's officers are satisfied that the
best execution is obtained, the sale of Fund shares, as well as shares of other
funds in the Franklin Templeton Group of Funds, may also be considered a factor
in the selection of broker-dealers to execute a Fund's portfolio transactions.
Because Distributors is a member of the NASD, it may sometimes receive certain
fees when a Fund tenders portfolio securities pursuant to a tender-offer
solicitation. As a means of recapturing brokerage for the benefit of a Fund, any
portfolio securities tendered by a Fund will be tendered through Distributors if
it is legally permissible to do so. In turn, the next management fee payable to
that Fund's Investment Manager will be reduced by the amount of any fees
received by Distributors in cash, less any costs and expenses incurred in
connection with the tender.
If purchases or sales of securities of a Fund and one or more other investment
companies or clients supervised by an Investment Manager are considered at or
about the same time, transactions in these securities will be allocated among
the several investment companies and clients in a manner deemed equitable to all
by the Investment Manager, taking into account the respective sizes of the funds
and the amount of securities to be purchased or sold. In some cases this
procedure could have a detrimental effect on the price or volume of the security
so far as a Fund is concerned. In other cases it is possible that the ability to
participate in volume transactions and to negotiate lower brokerage commissions
will be beneficial to a Fund.
During the fiscal years and periods indicated below, each Fund paid the
following brokerage commissions:
BROKERAGE COMMISSIONS
YEAR ENDED MARCH 31 1997 1996(1)
Greater European Fund $21,967 $17,067
Latin America Fund 50,579 20,945
1 For the period May 8, 1995 (commencement of operations) to March 31, 1996.
As of March 31, 1997, each Fund did not own securities of its regular
broker-dealers.
HOW DO I BUY, SELL AND EXCHANGE SHARES?
ADDITIONAL INFORMATION ON BUYING SHARES
Each Fund continuously offers its shares through Securities Dealers who have an
agreement with Distributors. Securities laws of states where a Fund offers its
shares may differ from federal law. Banks and financial institutions that sell
shares of a Fund may be required by state law to register as Securities Dealers.
When you buy shares, if you submit a check or a draft that is returned unpaid to
a Fund we may impose a $10 charge against your account for each returned item.
OTHER PAYMENTS TO SECURITIES DEALERS. Distributors and/or its affiliates provide
financial support to various Securities Dealers that sell shares of the Franklin
Templeton Group of Funds. This support is based primarily on the amount of sales
of fund shares. The amount of support may be affected by: total sales; net
sales; levels of redemptions; the proportion of a Securities Dealer's sales and
marketing efforts in the Franklin Templeton Group of Funds; a Securities
Dealer's support of, and participation in, Distributors' marketing programs; a
Securities Dealer's compensation programs for its registered representatives;
and the extent of a Securities Dealer's marketing programs relating to the
Franklin Templeton Group of Funds. Financial support to Securities Dealers may
be made by payments from Distributors' resources, from Distributors' retention
of underwriting concessions and, in the case of funds that have Rule 12b-1
plans, from payments to Distributors under such plans. In addition, certain
Securities Dealers may receive brokerage commissions generated by fund portfolio
transactions in accordance with the NASD's rules.
REINVESTMENT DATE. Shares acquired through the reinvestment of dividends will be
purchased at the Net Asset Value determined on the business day following the
dividend record date (sometimes known as the "ex-dividend date"). The processing
date for the reinvestment of dividends may vary and does not affect the amount
or value of the shares acquired.
ADDITIONAL INFORMATION ON EXCHANGING SHARES
If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will be exchanged into
the new fund and will be invested at Net Asset Value. Backup withholding and
information reporting may apply. Information regarding the possible tax
consequences of an exchange is included in the tax section in this SAI and in
the Funds' Prospectus.
If a substantial number of shareholders should, within a short period, sell
their shares of a Fund under the exchange privilege, the Fund might have to sell
portfolio securities it might otherwise hold and incur the additional costs
related to such transactions. On the other hand, increased use of the exchange
privilege may result in periodic large inflows of money. If this occurs, it is
each Fund's general policy to initially invest this money in short-term,
interest-bearing money market instruments, unless it is believed that attractive
investment opportunities consistent with the Fund's investment objective exist
immediately. This money will then be withdrawn from the short-term, money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
The proceeds from the sale of shares of an investment company are generally not
available until the fifth business day following the sale. The funds you are
seeking to exchange into may delay issuing shares pursuant to an exchange until
that fifth business day. The sale of Fund shares to complete an exchange will be
effected at Net Asset Value at the close of business on the day the request for
exchange is received in proper form. Please see "May I Exchange Shares for
Shares of Another Fund?" in the Funds' Prospectus.
ADDITIONAL INFORMATION ON SELLING SHARES
SYSTEMATIC WITHDRAWAL PLAN. There are no service charges for establishing or
maintaining a systematic withdrawal plan. Payments under the plan will be made
from the redemption of an equivalent amount of shares in your account, generally
on the 25th day of the month in which a payment is scheduled. If the 25th falls
on a weekend or holiday, we will process the redemption on the prior business
day.
Redeeming shares through a systematic withdrawal plan may reduce or exhaust the
shares in your account if payments exceed distributions received from a Fund.
This is especially likely to occur if there is a market decline. If a withdrawal
amount exceeds the value of your account, your account will be closed and the
remaining balance in your account will be sent to you. Because the amount
withdrawn under the plan may be more than your actual yield or income, part of
the payment may be a return of your investment.
A Fund may discontinue a systematic withdrawal plan by notifying you in writing
and will automatically discontinue a systematic withdrawal plan if all shares in
your account are withdrawn or if a Fund receives notification of the
shareholder's death or incapacity.
THROUGH YOUR SECURITIES DEALER. If you sell shares through your Securities
Dealer, it is your dealer's responsibility to transmit the order to a Fund in a
timely fashion. Any loss to you resulting from your dealer's failure to do so
must be settled between you and your Securities Dealer.
REDEMPTIONS IN KIND. Each Fund has committed itself to pay in cash (by check)
all requests for redemption by any shareholder of record, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the value
of a Fund's net assets at the beginning of the 90-day period. This commitment is
irrevocable without the prior approval of the SEC. In the case of redemption
requests in excess of these amounts, the Board reserves the right to make
payments in whole or in part in securities or other assets of a Fund, in case of
an emergency, or if the payment of such a redemption in cash would be
detrimental to the existing shareholders of a Fund. In these circumstances, the
securities distributed would be valued at the price used to compute a Fund's net
assets and you may incur brokerage fees in converting the securities to cash.
Each Fund does not intend to redeem illiquid securities in kind. If this
happens, however, you may not be able to recover your investment in a timely
manner.
GENERAL INFORMATION
If dividend checks are returned to a Fund marked "unable to forward" by the
postal service, we will consider this a request by you to change your dividend
option to reinvest all distributions. The proceeds will be reinvested in
additional shares at Net Asset Value until we receive new instructions.
If mail is returned as undeliverable or we are unable to locate you or verify
your current mailing address, we may deduct the costs of our efforts to find you
from your account. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for its location services.
All checks, drafts, wires and other payment mediums used to buy or sell shares
of a Fund must be denominated in U.S. dollars. We may, in our sole discretion,
either (a) reject any order to buy or sell shares denominated in any other
currency or (b) honor the transaction or make adjustments to your account for
the transaction as of a date and with a foreign currency exchange factor
determined by the drawee bank.
Investor Services may pay certain financial institutions that maintain omnibus
accounts with a Fund on behalf of numerous beneficial owners for recordkeeping
operations performed with respect to such owners. For each beneficial owner in
the omnibus account, a Fund may reimburse Investor Services an amount not to
exceed the per account fee that the Fund normally pays Investor Services. These
financial institutions may also charge a fee for their services directly to
their clients.
transaction request.ervicing agents may be authorized to accept your
HOW ARE FUND SHARES VALUED?
We calculate the Net Asset Value per share of each class of each Fund's shares
as of the scheduled close of the NYSE, generally 4:00 p.m. Eastern time, each
day that the NYSE is open for trading. As of the date of this SAI, the Trust is
informed that the NYSE observes the following holidays: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
For the purpose of determining the aggregate net assets of each Fund, cash and
receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date. Portfolio securities
listed on a securities exchange or on the NASDAQ National Market System for
which market quotations are readily available are valued at the last quoted sale
price of the day or, if there is no such reported sale, within the range of the
most recent quoted bid and ask prices. Over-the-counter portfolio securities are
valued within the range of the most recent quoted bid and ask prices. Portfolio
securities that are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market as
determined by an Investment Manager.
Portfolio securities underlying actively traded call options are valued at their
market price as determined above. The current market value of any option held by
a Fund is its last sale price on the relevant exchange before the time when
assets are valued. Lacking any sales that day or if the last sale price is
outside the bid and ask prices, options are valued within the range of the
current closing bid and ask prices if the valuation is believed to fairly
reflect the contract's market value.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
of the NYSE on each day that the NYSE is open. Trading in European or Far
Eastern securities generally, or in a particular country or countries, may not
take place on every NYSE business day. Furthermore, trading takes place in
various foreign markets on days that are not business days for the NYSE and on
which the Net Asset Value is not calculated. Thus, the calculation of the Net
Asset Value does not take place contemporaneously with the determination of the
prices of many of the portfolio securities used in the calculation and, if
events materially affecting the values of these foreign securities occur, the
securities will be valued at fair value as determined by management and approved
in good faith by the Board.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times before
the scheduled close of the NYSE. The value of these securities used in computing
the Net Asset Value is determined as of such times. Occasionally, events
affecting the values of these securities may occur between the times at which
they are determined and the scheduled close of the NYSE that will not be
reflected in the computation of the Net Asset Value. If events materially
affecting the values of these securities occur during this period, the
securities will be valued at their fair value as determined in good faith by the
Board.
Other securities for which market quotations are readily available are valued at
the current market price, which may be obtained from a pricing service, based on
a variety of factors including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific issues. Securities and other assets for which
market prices are not readily available are valued at fair value as determined
following procedures approved by the Board. With the approval of the Board, a
Fund may utilize a pricing service, bank or Securities Dealer to perform any of
the above described functions.
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
You may receive two types of distributions from a Fund:
1. INCOME DIVIDENDS. A Fund receives income generally in the form of dividends,
interest and other income derived from its investments. This income, less the
expenses incurred in a Fund's operations, is its net investment income from
which income dividends may be distributed. Thus, the amount of dividends paid
per share may vary with each distribution.
2. CAPITAL GAIN DISTRIBUTIONS. A Fund may derive capital gains or losses in
connection with sales or other dispositions of its portfolio securities.
Distributions by a Fund derived from net short-term and net long-term capital
gains (after taking into account any capital loss carryforward or post-October
loss deferral) may generally be made twice each year, once in December and once
following the end of a Fund's fiscal year. Each Fund may adjust the timing of
these distributions for operational or other reasons.
TAXES
As stated in the Funds' Prospectus, the Funds have elected to be treated as
regulated investment companies under Subchapter M of the Code. The Board
reserves the right not to maintain the qualification of a Fund as a regulated
investment company if it determines this course of action to be beneficial to
shareholders. In that case, a Fund will be subject to federal and possibly state
corporate taxes on its taxable income and gains, and distributions to
shareholders will be taxable to the extent of a Fund's available earnings and
profits.
Each Fund intends to qualify as a regulated investment company under the Code.
To so qualify, each Fund must, among other things: (a) derive at least 90% of
its gross income from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock or securities and gains
from the sale or other disposition of foreign currencies, or other income
(including gains from options, futures contracts and forward contracts) derived
with respect to the Fund's business of investing in stocks, securities or
currencies; (b) derive less than 30% of its gross income from the sale or other
disposition of the following assets held for less than three months: (i) stock
and securities, (ii) options, futures and forward contracts (other than options,
futures and forward contracts on foreign currencies), and (iii) foreign
currencies (and options, futures and forward contracts on foreign currencies)
which are not directly related to the Fund's principal business of investing in
stocks and securities (or options and futures with respect to stock or
securities); (C) diversify its holdings so that, at the end of each quarter, (i)
at least 50% of the value of the Fund's total assets is represented by cash and
cash items, U.S. government securities, securities of other regulated investment
companies, and other securities, with such other securities limited in respect
of any one issuer to an amount not greater in value than 5% of the Fund's total
assets and to not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of the Fund's total assets is
invested in the securities (other than U.S. government securities or securities
of other regulated investment companies) of any one issuer or of any two or more
issuers that the Fund controls and that are determined to be engaged in the same
business or similar or related businesses; and (d) distribute at least 90% of
its investment company taxable income (which includes, among other items,
dividends, interest and net short-term capital gains in excess of net long-term
capital losses) each taxable year.
The Treasury Department is authorized to issue regulations providing that
foreign currency gains that are not directly related to a Fund's principal
business of investing in stock or securities (or options and futures with
respect to stock or securities) will be excluded from the income which qualifies
for purposes of the 90% gross income requirement described above. To date,
however, no such regulations have been issued.
The status of the Funds as regulated investment companies does not involve
government supervision of management or of their investment practices or
policies. As a regulated investment company, a Fund generally will be relieved
of liability for U.S. federal income tax on that portion of its net investment
income and net realized capital gains which it distributes to its shareholders.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement also are subject to a nondeductible 4% excise tax. To
prevent application of the excise tax, each Fund intends to make distributions
in accordance with the calendar year distribution requirement.
Dividends of net investment income and net short-term capital gains are taxable
to you as ordinary income. Distributions of net investment income may be
eligible for the corporate dividends-received deduction to the extent
attributable to a Fund's qualifying dividend income. However, the alternative
minimum tax applicable to corporations may reduce the benefit of the
dividends-received deduction. Distributions of net capital gains (the excess of
net long-term capital gains over net short-term capital losses) designated by a
Fund as capital gain dividends are taxable to you as long-term capital gains,
regardless of the length of time you have held the Fund's shares, and are not
eligible for the dividends-received deduction. Generally, dividends and
distributions are taxable to you, whether received in cash or reinvested in
shares of a Fund. Any distributions that are not from a Fund's net investment
income or net capital realized gain may be characterized as a return of capital
to you or, in some cases, as capital gain. You will be notified annually as to
the federal tax status of dividends and distributions you receive and any tax
withheld thereon.
Distributions by a Fund reduce the Net Asset Value of the Fund shares. Should a
distribution reduce the Net Asset Value below your cost basis, the distribution
nevertheless would be taxable to you as ordinary income or capital gain as
described above, even though, from an investment standpoint, it may constitute a
partial return of capital. In particular, you should be careful to consider the
tax implication of buying shares just prior to a distribution by a Fund. The
price of shares purchased at that time includes the amount of the forthcoming
distribution, but the distribution will generally be taxable to you.
Certain of the debt securities acquired by the Funds may be treated as debt
securities that were originally issued at a discount. Original issue discount
can generally be defined as the difference between the price at which a security
was issued and its stated redemption price at maturity. Although no cash income
is actually received by the Funds, original issue discount that accrues on a
debt security in a given year generally is treated for Federal income tax
purposes as interest and, therefore, such income would be subject to the
distribution requirements of the Code.
Some of the debt securities may be purchased by the Funds at a discount which
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for federal income tax purposes.
The gain realized on the disposition of any taxable debt security having market
discount generally will be treated as ordinary income to the extent it does not
exceed the accrued market discount on such debt security. Generally, market
discount accrues on a daily basis for each day the debt security is held by a
Fund at a constant rate over the time remaining to the debt security's maturity
or, at the election of a Fund, at a constant yield to maturity which takes into
account the semiannual compounding of interest.
A Fund may invest in debt securities issued in bearer form. Special rules
applicable to bearer debt may in some cases result in (i) treatment of gain
realized with respect to such a debt security as ordinary income and (ii)
disallowance of deductions for losses realized on dispositions of such debt
securities. If these special rules apply, the amount that must be distributed to
Fund shareholders may be increased as compared to a fund that did not invest in
debt securities issued in bearer form.
A Fund may invest in stocks of foreign companies that are classified under the
Code as passive foreign investment companies ("PFICs"). In general, a foreign
company is classified as a PFIC if at least one-half of its assets constitute
investment-type assets or 75% or more of its gross income is investment-type
income. Under the PFIC rules, an "excess distribution" received with respect to
PFIC stock is treated as having been realized ratably over the period during
which a Fund held the PFIC stock. A Fund itself will be subject to tax on the
portion, if any, of the excess distribution that is allocated to that Fund's
holding period in prior taxable years (and an interest factor will be added to
the tax, as if the tax had actually been payable in such prior taxable years)
even though the Fund distributes the corresponding income to shareholders.
Excess distributions include any gain from the sale of PFIC stock as well as
certain distributions from a PFIC. All excess distributions are taxable as
ordinary income.
A Fund may be able to elect alternative tax treatment with respect to PFIC
stock. Under an election that currently may be available, a Fund generally would
be required to include in its gross income its share of the earnings of a PFIC
on a current basis, regardless of whether any distributions are received from
the PFIC. If this election is made, the special rules, discussed above, relating
to the taxation of excess distributions, would not apply. In addition, another
election may be available that would involve marking-to-market the Funds' PFIC
shares at the end of each taxable year (and on certain other dates prescribed in
the Code), with the result that unrealized gains are treated as though they were
realized. If this election were made, tax at the Fund level under the PFIC rules
would generally be eliminated, but the Funds could, in limited circumstances,
incur nondeductible interest charges. Each Fund's intention to qualify annually
as a regulated investment company may limit its elections with respect to PFIC
shares.
Because the application of the PFIC rules may affect, among other things, the
character of gains, the amount of gain or loss and the timing of the recognition
of income with respect to PFIC stock, as well as subject a Fund itself to tax on
certain income from PFIC stock, the amount that must be distributed to
shareholders, and which will be taxed to you as ordinary income or long-term
capital gain, may be increased or decreased substantially as compared to a fund
that did not invest in PFIC stock.
Income received by a Fund from sources within foreign countries may be subject
to withholding and other income or similar taxes imposed by such countries. If
more than 50% of the value of a Fund's total assets at the close of its taxable
year consists of securities of foreign corporations, that Fund will be eligible
and intends to elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by that Fund. Pursuant to this election, you will be required
to include in gross income (in addition to taxable dividends actually received)
your pro rata share of the foreign taxes paid by a Fund, and will be entitled
either to deduct (as an itemized deduction) your pro rata share of foreign
income and similar taxes in computing your taxable income or to use it as a
foreign tax credit against your U.S. federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed if you do not itemize
deductions, but in such case you may be eligible to claim the foreign tax credit
(see below). You will be notified within 60 days after the close of the relevant
Fund's taxable year whether the foreign taxes paid by the Fund will "pass
through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed your U.S. tax attributable to your foreign source taxable income. For
this purpose, if the pass-through election is made, the source of a Fund's
income flows through to its Shareholders. With respect to a Fund, gains from the
sale of securities will be treated as derived from U.S. sources and certain
currency fluctuation gains, including fluctuation gains from foreign
currency-denominated debt securities, receivables and payables, will be treated
as ordinary income derived from U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income (as defined for
purposes of the foreign tax credit), including the foreign source passive income
passed through by a Fund. You may be unable to claim a credit for the full
amount of your proportionate share of the foreign taxes paid by a Fund. Foreign
taxes may not be deducted in computing alternative minimum taxable income and
the foreign tax credit can be used to offset only 90% of the alternative minimum
tax (as computed under the Code for purposes of this limitation) imposed on
corporations and individuals. If a Fund is not eligible to make the election to
"pass through" to its shareholders its foreign taxes, the foreign income taxes
it pays generally will reduce investment company taxable income and the
distributions by a Fund will be treated as U.S. source income.
Certain options, futures, and foreign currency forward contracts in which the
Funds may invest are "section 1256 contracts." Gains or losses on section 1256
contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"); however, foreign currency gains or losses (as
discussed below) arising from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts held by a Fund at the end
of each taxable year (and on certain other dates as prescribed under the Code)
are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by a Fund. In addition, losses
realized by a Fund on positions that are part of the straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to a Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by a Fund which is taxed as ordinary income when
distributed to shareholders.
A Fund may make one or more of the elections available under the Code which are
applicable to straddles. If a Fund makes any of the elections, the amount,
character, and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders and which will be taxed to you as ordinary income or long-term
capital gain may be increased or decreased as compared to a fund that did not
engage in such hedging transactions.
Requirements relating to each Fund's tax status as a regulated investment
company may limit the extent to which a Fund will be able to engage in
transactions in options, futures, and foreign currency forward contracts.
If a Fund invests in another investment company, it is possible that the Fund
would not receive information or distributions from the underlying investment
company in a time frame that permits the Fund to meet its tax-related
requirements in an optimal manner. However, it is anticipated that the Fund
would seek to minimize these risks. The diversification and distribution
requirements applicable to each Fund may limit the extent to which each Fund
will be able to invest in other investment companies.
Under the Code, gains or losses attributable to fluctuations in foreign currency
exchange rates which occur between the time a Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time a Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain financial contracts and options, gains or losses
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as "section 988" gains and losses, may increase or decrease the amount of a
Fund's net investment income to be distributed to its shareholders as ordinary
income. For example, fluctuations in exchange rates may increase the amount of
income that a Fund must distribute in order to qualify for treatment as a
regulated investment company and to prevent application of an excise tax on
undistributed income. Alternatively, fluctuations in exchange rates may decrease
or eliminate income available for distribution. If section 988 losses exceed
other net investment income during a taxable year, a Fund would not be able to
make ordinary dividend distributions, or distributions made before the losses
were realized would be recharacterized as return of capital to shareholders for
Federal income tax purposes, rather than as an ordinary dividend, reducing your
basis in your Fund shares, or as a capital gain.
Upon the sale or exchange of your shares, you will realize a taxable gain or
loss depending upon your basis in the shares. Such gain or loss will be treated
as capital gain or loss if the shares are capital assets in your hands, and
generally will be long-term if your holding period for the shares is more than
one year and generally otherwise will be short-term. Any loss realized on a sale
or exchange will be disallowed to the extent that the shares disposed of are
replaced (including replacement through the reinvesting of dividends and capital
gain distributions in a Fund) within a period of 61 days beginning 30 days
before and ending 30 days after the disposition of the shares. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss. Any loss realized by you on the sale of a Fund's shares held by you for
six months or less will be treated for federal income tax purposes as a
long-term capital loss to the extent of any distributions of long-term capital
gains you received with respect to such shares.
In some cases, you will not be permitted to take sales charges into account for
purposes of determining the amount of gain or loss realized on the disposition
of your shares. This prohibition generally applies where (i) you incur a sales
charge in acquiring the stock of a regulated investment company, (ii) the stock
is disposed of before the 91st day after the date on which it was acquired, and
(iii) you subsequently acquire shares of the same or another regulated
investment company and the otherwise applicable sales charge is reduced or
eliminated under a "reinvestment right" received upon the initial purchase of
shares of stock. In that case, the gain or loss recognized will be determined by
excluding from the tax basis of the shares exchanged all or a portion of the
sales charge incurred in acquiring those shares. This exclusion applies to the
extent that the otherwise applicable sales charge with respect to the newly
acquired shares is reduced as a result of having incurred a sales charge
initially. Sales charges affected by this rule are treated as if they were
incurred with respect to the stock acquired under the reinvestment right. This
provision may be applied to successive acquisitions of stock.
Each Fund generally will be required to withhold federal income tax at a rate of
31% ("backup withholding") from dividends paid, capital gain distributions, and
redemption proceeds to you if (i) you fail to furnish a Fund with your correct
taxpayer identification number or social security number and to make such
certifications as a Fund may require, (ii) the IRS notifies you or a Fund that
you have failed to report properly certain interest and dividend income to the
IRS and to respond to notices to that effect, or (iii) when required to do so,
you fail to certify that you are not subject to backup withholding. Any amounts
withheld may be credited against your federal income tax liability.
Dividends, including capital gain dividends, declared in October, November, or
December with a record date in such month and paid during the following January
will be treated as having been paid by a Fund and received by shareholders on
December 31 of the calendar year in which declared, rather than the calendar
year in which the dividends are actually received.
Distributions also may be subject to state, local and foreign taxes. U.S. tax
rules applicable to foreign investors may differ significantly from those
outlined above. This discussion does not purport to deal with all of the tax
consequences applicable to shareholders. You are advised to consult your own tax
advisers for details with respect to the particular tax consequences of an
investment in a Fund.
THE FUND'S UNDERWRITER
Pursuant to an underwriting agreement, Distributors acts as principal
underwriter in a continuous public offering for each class of each Fund's
shares. Each underwriting agreement will continue in effect for successive
annual periods if its continuance is specifically approved at least annually by
a vote of the Board or by a vote of the holders of a majority of a Fund's
outstanding voting securities, and in either event by a majority vote of the
Board members who are not parties to the underwriting agreement or interested
persons of any such party (other than as members of the Board), cast in person
at a meeting called for that purpose. The underwriting agreement terminates
automatically in the event of its assignment and may be terminated by either
party on 90 days' written notice.
Distributors pays the expenses of the distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. Each Fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders.
Distributors does not receive compensation from a Fund for acting as underwriter
of the Fund's Advisor Class shares.
HOW DO THE FUNDS MEASURE PERFORMANCE?
Performance quotations are subject to SEC rules. These rules require the use of
standardized performance non-standardized performance quotation furnished by a
Fund be accompanied by certain standardized performance
information computed as required by the SEC. Average annual total return
quotations used by a Fund is based on the standardized methods of computing
performance mandated by the SEC. If a Rule 12b-1 plan is adopted, performance
figures reflect fees from the date of the plan's implementation.
For periods before January 1, 1997, standardized performance quotations for
Advisor Class are calculated by substituting Class I performance for the
relevant time period, excluding the effect of Class I's maximum initial sales
charge, and including the effect of the Rule 12b-1 fees applicable to Class I.
For periods after January 1, 1997, standardized performance quotations for
Advisor Class are calculated as described below.
An explanation of these and other methods used by a Fund to compute or express
performance for Advisor Class follows. Regardless of the method used, past
performance does not guarantee future results, and is an indication of the
return to shareholders only for the limited historical period used.
TOTAL RETURN
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is determined by
finding the average annual rates of return over one year and from inception
periods that would equate an initial hypothetical $1,000 investment to its
ending redeemable value. The calculation assumes income dividends and capital
gain distributions are reinvested at Net Asset Value. The quotation assumes the
account was completely redeemed at the end of a one year
If a change is made to the sales charge structure, historical performance
information will be restated to reflect the maximum front-end sales charge
currently in effect.
For the periods indicated below, the average annual total return for Advisor
Class of each Fund was as follows:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
YEAR ENDED MARCH 31 1997(1) 1997 1996(2)
<S> <C> <C> <C>
Greater European Fund 6.92% 20.41% 13.21%
Latin America Fund 13.09% 14.88% 13.13%
</TABLE>
1For the period January 2, 1997 (commencement of sales of Advisor Class shares)
to March 31, 1996. 2For the period May 8, 1995 (commencement of Fund operations)
to March 31, 1996.
These figures were calculated according to the SEC formula:
n = ERV
where:
P =a hypothetical initial payment of $1,000
T =average annual total return
n =number of years
ERV =ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the one year and
since inception periods at the end of the one year and
since inception periods.
CUMULATIVE TOTAL RETURN. Like average annual total return, cumulative total
return assumes income dividends and capital gain distributions are reinvested at
Net Asset Value. Cumulative total return, however, will be based on the actual
return for Advisor Class for a specified period rather than on the average
return over one year and from inception periods.
For the periods indicated below, the cumulative total return for Advisor Class
of each Fund was as follows:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
YEAR ENDED MARCH 31 1997(1) 1997 1996(2)
<S> <C> <C> <C>
Greater European Fund 6.92% 20.41% 26.55%
Latin America Fund 13.09% 14.88% 26.38%
</TABLE>
1For the period January 2, 1997 (commencement of sales of Advisor Class shares)
to March 31, 1996. 2For the period May 8, 1995 (commencement of Fund operations)
to March 31, 1996.
VOLATILITY
Measures of volatility or risk are generally used to compare a Fund's Net Asset
Value or performance to a market index. One measure of volatility is beta. Beta
is the volatility of a fund relative to the total market, as represented by an
index considered representative of the types of securities in which the fund
invests. A beta of more than 1.00 indicates volatility greater than the market
and a beta of less than 1.00 indicates volatility less than the market. Another
measure of volatility or risk is standard deviation. Standard deviation is used
to measure variability of Net Asset Value or total return around an average over
a specified period of time. The idea is that greater volatility means greater
risk undertaken in achieving performance.
OTHER PERFORMANCE QUOTATIONS
Sales literature referring to the use of a Fund as a potential investment for
Individual Retirement Accounts (IRAs), Business Retirement Plans, and other
tax-advantaged retirement plans may quote a total return based upon compounding
of dividends on which it is presumed no federal income tax applies.
A Fund may include in its advertising or sales material information relating to
investment objectives and performance results of funds belonging to the Franklin
Templeton Group of Funds. Resources is the parent company of the advisors and
underwriter of the Franklin Templeton Group of Funds.
COMPARISONS
To help you better evaluate how an investment in a Fund may satisfy your
investment objective, advertisements and other materials about a Fund may
discuss certain measures of performance as reported by various financial
publications. Materials may also compare performance (as calculated above) to
performance as reported by other investments, indices, and averages. These
comparisons may include, but are not limited to, the following examples: (i)
unmanaged indices so that you may compare the Fund's results with those of a
group of unmanaged securities widely regarded by investors as representative of
the securities market in general; (ii) other groups of mutual funds tracked by
Lipper Analytical Services, Inc., a widely used independent research firm that
ranks mutual publications, or persons who rank mutual funds on overall
performance or other criteria; and (iii) the Consumer Price Index (measure for
inflation) to assess the real rate of return from an investment in the Fund.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
From time to time, each Fund and its Investment Manager may also refer to the
following information:
a) Each Investment Manager and its affiliates' market share of
international equities managed in mutual funds prepared or published by
Strategic Insight or a similar statistical organization.
b) The performance of U.S. equity and debt markets relative to foreign markets
prepared or published by Morgan Stanley Capital InternationalAE or a similar
financial organization.
c) The capitalization of U.S. and foreign stock markets as prepared or
published by the International Finance Corporation, Morgan Stanley
Capital InternationalAE or a similar financial organization.
d) The geographic and industry distribution of each Fund's portfolio and its top
ten holdings.
e) The gross national product and populations, including age
characteristics, literacy rates, foreign investment improvements due to
a liberalization of securities laws and a reduction of foreign exchange
controls, and improving communication technology, of various countries
as published by various statistical organizations.
f) To assist investors in understanding the differenct return
characteristics of various investments, each Fund may show historical
returns of various investments and published indices (E.G., Ibbotson
Associates, Inc. Charts and Morgan Stanley EAFE - Index).
g) The major industries located in various jurisdictions as published by the
Morgan Stanley Index.
h) Rankings by DALBAR Surveys, Inc. with respect to mutual fund shareholder
services.
i) Allegorical stories illustrating the importance of persistent long-term
investing.
j) Each Fund's portfolio turnover rate and its ranking relative to industry
standards as published by Lipper Analytical Services, Inc. or Morningstar, Inc.
k) A description of the Templeton organization's investment management
philosophy and approach, including its worldwide search for undervalued or
"bargain" securities and its diversification by industry, nation and type of
stocks or other securities.
l) The number of shareholders in each Fund or the aggregate number of
shareholders of the open-end investment companies in the Franklin
Templeton Group of Funds or the dollar amount of fund and private
account assets under management.
m) Comparison of the characteristics of various emerging markets, including
population, financial and economic conditions.
n) Quotations from the Templeton organization's founder, Sir John Templeton,*
advocating the virtues of
diversification and long-term investing, including the following:
(infinity) "Never follow the crowd. Superior performance is
possible only if you invest differently from the crowd."
(infinity) "Diversify by company, by industry and by country."
(infinity) "Always maintain a long-term perspective."
(infinity) "Invest for maximum total real return."
(infinity) "Invest - don't trade or speculate."
(infinity) "Remain flexible and open-minded about types of
investment."
(infinity) "Buy low."
(infinity) "When buying stocks, search for bargains among quality
stocks."
(infinity) "Buy value, not market trends or the economic outlook."
(infinity) "Diversify. In stocks and bonds, as in much else, there
is safety in numbers."
(infinity) "Do your homework or hire wise experts to help you."
(infinity) "Aggressively monitor your investments."
(infinity) "Don't panic."
(infinity) "Learn from your mistakes."
(infinity) "Outperforming the market is a difficult task."
(infinity) "An investor who has all the answers doesn't even
understand all the questions."
(infinity) "There's no free lunch."
(infinity) "And now the last principle: Do not be fearful or
negative too often."
From time to time, advertisements or information for a Fund may include a
discussion of certain attributes or benefits to be derived from an investment in
a Fund. The advertisements or information may include symbols, headlines, or
other material that highlights or summarizes the information discussed in more
detail in the communication.
Advertisements or information may also compare the performance of Advisor Class
to the return on CDs or other investments. You should be aware, however, that an
investment in a Fund involves the risk of fluctuation of principal value, a risk
generally not present in an investment in a CD issued by a bank. For example, as
the general level of interest rates rise, the value of a Fund's fixed-income
investments, if any, as well as the value of its shares that are based upon the
value of such portfolio investments, can be expected to decrease. Conversely,
when interest rates decrease, the value of a Fund's shares can be expected to
increase. CDs are frequently insured by an agency of the U.S. government. An
investment in a Fund is not insured by any federal, state or private entity.
In assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to a Fund's portfolio, the indices and averages are generally
unmanaged, and the items included in the calculations of the averages may not be
identical to the formula used by a Fund to calculate its figures. In addition,
there can be no assurance that a Fund will continue its performance as compared
to these other averages.
MISCELLANEOUS INFORMATION
A Fund may help you achieve various investment goals such as accumulating money
for retirement, saving for a down payment on a home, college costs and other
long-term goals. The Franklin College Costs Planner may help you in determining
how much money must be invested on a monthly basis in order to have a projected
amount available in the future to fund a child's college education. (Projected
college cost estimates are based upon current costs published by the College
Board.) The Franklin Retirement Planning Guide leads you through the steps to
start a retirement savings program. Of course, an investment in a Fund cannot
guarantee that these goals will be met.
The Trust is a member of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., and may be considered in a
program for diversification of assets. Founded in 1947, Franklin, one of the
oldest mutual fund organizations, has managed mutual funds for over 49 years and
now services more than 2.7 million shareholder accounts. In 1992, Franklin, a
leader in managing fixed-income mutual funds and an innovator in creating
domestic equity funds, joined forces with Templeton Worldwide, Inc., a pioneer
in international investing. Mutual Series Fund Inc., known for its value-driven
approach to domestic equity investing, became part of the organization four
years later. Together, the Franklin Templeton Group has over $207 billion in
assets under management for more than 5.4 million U.S. based mutual fund
shareholder and other accounts. The Franklin Templeton Group of Funds offers 120
U.S. based open-end investment companies to the public. A Fund may identify
itself by its NASDAQ symbol or CUSIP number.
The Dalbar Surveys, Inc. broker-dealer survey has ranked Franklin number one in
service quality for five of the past nine years.
July 2, 1997, the principal shareholders of the Fund, beneficial or of record,
were as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARE AMOUNT PERCENTAGE
<S> <C> <C>
GREATER EUROPEAN FUND -
CLASS I
Templeton Global Investors, Inc. 52,720 6%
500 East Broward Boulevard
Suite 2100
Fort Lauderdale, FL 33394-3091
PaineWebber - For the Benefit of American 52,400 6%
Guaranty & Trust Co.
Trustee for Sara Brianne Kiner Trust
P.O. Box 15627
Wilmington, DE 19850-5627
GREATER EUROPEAN FUND - CLASS II
Templeton Global Investors, Inc. 52,261 21%
1850 Gateway Drive
6th Floor
San Mateo, CA 94404
Donaldson Lufkin Jenrette Securities 18,091 7%
Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
GREATER EUROPEAN FUND - ADVISOR CLASS
Franklin Resources, Inc. 1,778 53%
1850 Gateway Drive
6th Floor
San Mateo, CA 94404
Dorothy R. Silva, Jeffrey R. Silva & 956 28%
Christopher W. Silva
1977 Grosse Avenue
Santa Rosa, CA 95404
Howard M. McEldowney 1,926 17%
951 Mariners Island Blvd.
Suite 665
San Mateo, CA 94404-1561
Franklin Templeton Trust Company - Custodian 1,158 10%
for the IRA of Joseph E. Sedlick
13347 88th Place No.
Seminole, FL 33776-2410
Mary E. Little 170 5%
8094 Shadowood Court
Granite Bay, CA 95746
LATIN AMERICA FUND -
CLASS II
Templeton Global Investors, Inc. 50,659 13%
1850 Gateway Drive
6th Floor
San Mateo, CA 94404
LATIN AMERICA FUND -
ADVISOR CLASS
Daniel P. Sinton 2,063 18%
62 Vicksburg Street
San Francisco, CA 94114
Franklin Resources, Inc. 1,815 16%
1850 Gateway Drive
6th Floor
San Mateo, CA 94404
</TABLE>
From time to time, the number of Fund shares held in the "street name" accounts
of various Securities Dealers for outstanding. f their clients or in centralized
securities depositories may exceed 5% of the total shares
In the event of disputes involving multiple claims of ownership or authority to
control your account, the Fund has the right (but has no obligation) to: (a)
freeze the account and require the written agreement of all persons deemed by
the Fund to have a potential property interest in the account, before executing
instructions regarding the account; (b) interplead disputed funds or accounts
with a court of competent jurisdiction; or (c) surrender ownership of all or a
portion of the account to the IRS in response to a Notice of Levy.
SUMMARY OF CODE OF ETHICS. Employees of the Franklin Templeton Group who are
access persons under the 1940 Act are permitted to engage in personal securities
transactions subject to the following general restrictions and procedures: (i)
the trade must receive advance clearance from a compliance officer and must be
completed by the close of the business day following the day clearance is
granted; (ii) copies of all brokerage confirmations must be sent to a compliance
officer and, within 10 days after the end of each calendar quarter, a report of
all securities transactions must be provided to the compliance officer; and
(iii) access persons involved in
reports of their securities holdings each January and inform the compliance
officer (or other designated personnel) if they own a security that is being
considered for a fund or other client transaction or if they are recommending a
security in which they have an ownership interest for purchase or sale by a fund
or other client.
FINANCIAL STATEMENTS
The audited financial statements contained in the Annual Report to Shareholders
of each Fund, for the fiscal year ended March 31, 1997, including the auditors'
report, are incorporated herein by reference.
USEFUL TERMS AND DEFINITIONS
1940 ACT - Investment Company Act of 1940, as amended
BOARD - The Board of Directors of the Trust
CD - Certificate of deposit
CLASS I, CLASS II AND ADVISOR CLASS - The Fund offers three classes of shares,
designated "Class I," "Class II," and "Advisor Class." The three classes have
proportionate interests in the Fund's portfolio. They differ, however, primarily
in their sales charge and expense structures.
CODE - Internal Revenue Code of 1986, as amended
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter
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 FundsAE and
the Templeton Group of Funds
FT SERVICES - Franklin Templeton Services, Inc., the Fund's administrator
INVESTMENT MANAGERS - The Investment Manager of Growth and Income Fund and
Greater European Fund is Global Advisors; the Investment Manager of
Infrastructure Fund and Latin America Fund is Investment Counsel; and in the
case of Americas Government Securities Fund, the Investment Manager is
Investment Counsel, through its Global Bond Managers division (collectively
"Investment Managers")
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
MOODY'S - Moody's Investors Service, Inc.
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.
NYSE - New York Stock Exchange
PROSPECTUS - The prospectus for Advisor Class shares of Greater European Fund
and Latin America Fund dated August 1, 1997, as may be amended from time to time
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
S&P - Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc.
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
U.S. - United States
WE/OUR/US - Unless a different meaning is indicated by the context, these terms
refer to the Fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.
APPENDIX
DESCRIPTION OF RATINGS
CORPORATE BOND RATINGS
MOODY'S
AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and "gilt-edged." Interest payments are
protected by a large or exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position of
such issues.
AA - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large, fluctuation of protective elements may be of greater amplitude, or
there may be other elements present which make the long-term risks appear
somewhat larger.
considered upper medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
BAA - Bonds rated Baa are considered medium grade obligations. They are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well.
BA - Bonds rated Ba are judged to have predominantly speculative elements and
their future cannot be considered well assured. Often the protection of interest
and principal payments is very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond ratings. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; modifier 2 indicates a mid-range ranking; and modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.
S&P
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and, in the majority of instances,
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB, B, CCC, CC - Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
assigned an actual or implied CCC- rating. The C rating may also reflect the
filing of a bankruptcy petition under circumstances where debt service payments
are continuing. The C1 rating is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
COMMERCIAL PAPER RATINGS
MOODY'S
Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually their promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following designations, all judged to
be investment grade, to indicate the relative repayment capacity of rated
issuers:
P-1 (PRIME-1): Superior capacity for repayment.
P-2 (PRIME-2): Strong capacity for repayment.
S&P
S&P's ratings are a current assessment of the likelihood of timely payment of
debt having an original maturity of no more than 365 days. Ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues within the "A" category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety, as follows:
A-1: This designation indicates the degree of safety regarding timely payment is
very strong. A "plus" (+) designation indicates an even stronger likelihood of
timely payment.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated A-1.
A-3: Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
FITCH
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, CDs, medium-term notes, and municipal and investment notes. The
short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+: Exceptionally strong credit quality. Regarded as having the strongest
degree of assurance for timely payment.
F-1: Very strong credit quality. Reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2: Good credit quality. A satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned F-1+ and F-1
ratings.
F-3: Fair credit quality. Have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.
F-5: Weak credit quality. Have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.
D: Default. Actual or imminent payment default.
LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
TLGIT SAIZ 08/97
- --------
* Sir John Templeton sold the Templeton organization to Resources in
October, 1992 and resigned from the Board on April 16, 1995. He is no
longer involved with the investment management process.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS:
Incorporated by reference from Registrant's 1997 Annual
Reports to Shareholders of Templeton Growth and Income Fund,
Templeton Global Infrastructure, Templeton Americas
Government Securities Fund and Templeton Region Funds:
Independent Auditor's Report
Investment Portfolio as of March 31, 1997
Statement of Assets and Liabilities as of March 31, 1997
Statement of Operations for fiscal year ended March 31, 1997
Statement of Changes in Net Assets for the years ended
March 31, 1997 and 1996
Notes to Financial Statements
(B) EXHIBITS
(1) Trust Instrument ***
(2) By-Laws ***
(3) Not Applicable
(4) (A) Not Applicable
(5) (A) Investment Management Agreement -
Templeton Growth and Income Fund ****
(B) Investment Management Agreement -***
Templeton Global Infrastructure Fund
(C) Investment Management Agreement -***
Templeton Americas Government Securities Fund
(E) Investment Management Agreement -
Templeton Greater European Fund ****
(F) Investment Management Agreement -
Templeton Latin America Fund ****
(6) (A) Amended and Restated Distribution Agreement ****
(B) Form of Dealer Agreement ***
(7) Not Applicable
(8) Amended and Restated Custody Agreement ****
(9) (A) Fund Administration Agreement
(B) Amended and Restated Transfer Agent Agreement
(C) Form of Sub-Transfer Agent Services Agreement ***
(D) Form of Shareholder Sub-Accounting Services
Agreement ***
(10) Opinion and consent of counsel (filed with Rule
24f-2 Notice) **
(11) Consent of independent public accountants
(12) Not Applicable
(13) Investment Letter *
(14) Not Applicable
(15) (A)(i)Distribution Plan -- Templeton Growth and Income
Fund Class I Shares *
(ii)Distribution Plan -- Templeton Growth and
Income Fund Class II Shares *
(B)(i)Distribution Plan -- Templeton Global
Infrastructure Fund Class I Shares *
(ii)Distribution Plan -- Templeton Global
Infrastructure Fund Class II Shares *
(C) Distribution Plan -- Templeton Americas
Government Securities Fund ***
(D)(i)Distribution Plan -- Templeton Greater European
Fund Class I Shares ****
(ii)Distribution Plan -- Templeton Greater European
Fund Class II Shares ****
(E)(i)Distribution Plan -- Templeton Latin America
Fund Class I Shares ****
(ii)Distribution Plan -- Templeton Latin America
Fund Class II Shares ****
(16) Schedule showing computation of performance
quotations provided in response to Item 22(unaudited)***
(17) PowerS of Attorney*****
(18)(A) Form of Multiclass Plan *
Templeton Growth and Income Fund
Templeton Global Infrastructure Fund
Templeton Americas Government Securities Fund
(B) Form of Multiclass Plan
Templeton Latin America Fund
(C) Form of Multiclass Plan
Templeton Greater European Fund
(27) Financial Data schedules
<PAGE>
- --------------------
* Filed with Post-Effective Amendment No. 5 to the Registration
Statement on May 1, 1995
** Rule 24f-2 Notice filed with the Securities and Exchange Commission
on May 29, 1997.
*** Filed with Post-Effective Amendment No. 7 to the Registration
Statement on July 7, 1995.
**** Filed with Post-Effective Amendment No. 9 to the Registration
Statement on July 22, 1996.
***** Filed with Post-Effective Amendment No. 10 to the Registration
Statement on December 31, 1996.
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
Number of
TITLE OF CLASS RECORDHOLDERS
<S> <C>
TEMPLETON GROWTH AND INCOME FUND
Shares of Beneficial Interest, 2,424 as of
par value $0.01 per Share - June 30, 1997
Class I
Shares of Beneficial Interest, 727 as of
par value $0.01 per Share - June 30, 1997
Class II:
TEMPLETON GLOBAL INFRASTRUCTURE FUND
Shares of Beneficial Interest, 3,413 as of
par value $0.01 per Share - June 30, 1997
Class I
Shares of Beneficial Interest, 389 as of
par value $0.01 per Share - June 30, 1997
Class II:
TEMPLETON AMERICAS GOVERNMENT SECURITIES FUND
Shares of Beneficial Interest, 221 as of
par value $0.01 per Share - June 30, 1997
Class I
TEMPLETON GREATER EUROPEAN FUND
Shares of Beneficial Interest, 1,086 as of
par value $0.01 per Share - June 30, 1997
Class I
Shares of Beneficial Interest, 364 as of
par value $0.01 per Share - June 30, 1997
Class II:
Shares of Beneficial Interest, 10 as of
par value $0.01 per Share - June 30, 1997
Advisor Class
<PAGE>
TEMPLETON LATIN AMERICA FUND
Shares of Beneficial Interest, 2,978 as of
par value $0.01 per Share - June 30, 1997
Class I
Shares of Beneficial Interest, 665 as of
par value $0.01 per Share - June 30, 1997
Class II:
Shares of Beneficial Interest, 51 as of
par value $0.01 per Share - June 30, 1997
Advisor Class:
</TABLE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article IV of the Registrant's
Declaration of Trust, which is filed herewith.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Declaration of Trust or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, officers
or controlling persons of the Registrant in connection with
the successful defense of any act, suit or proceeding) is
asserted by such trustees, officers or controlling persons in
connection with the shares being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issues.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER AND ITS
OFFICERS AND DIRECTORS
The business and other connections of Templeton Global
Advisors Limited (the investment adviser of Templeton Growth
and Income Fund and Templeton Greater European Fund) and
Templeton Investment Counsel, Inc. (the investment adviser of
Templeton Global Infrastructure Fund, Templeton Americas
Government Securities Fund and Templeton Latin America Fund)
are described in Parts A and B of this Registration Statement.
For information relating to the investment advisers' officers
and directors, reference is made to Forms ADV filed under the
Investment Advisers Act of 1940 by Templeton Global Advisors
Limited and Templeton Investment Counsel, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Franklin Templeton Distributors, Inc. also acts as
principal underwriter of shares of:
Franklin Templeton Japan Fund
Templeton American Trust, Inc.
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund, Inc.
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, Inc.
Templeton Variable Products Series Fund
Franklin Asset Allocation Fund
Franklin California Tax Free Income Fund, Inc.
Franklin California Tax Free Trust
Franklin Custodian Funds, Inc.
Franklin Equity Fund
Franklin Federal Money Fund
Franklin Federal Tax-Free Income Fund
Franklin Gold Fund
Franklin Government Securities Trust
Franklin High Income Trust
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Mutual Series Fund, Inc.
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Trust
Franklin Real Estate Securities Fund
Franklin Strategic Mortgage Series
Franklin Strategic Series
Franklin Tax Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Fund Allocator Series
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Institutional Fiduciary Trust
(b) The directors and officers of FTD, located at 777 Mariners Island
Blvd., San Mateo, California 94404, are as follows:
<TABLE>
<CAPTION>
Position with
NAME POSITION WITH UNDERWRITER THE REGISTRANT
<S> <C> <C>
Charles B. Johnson Chairman of the Board and Director Trustee, Chairman and Vice
President
Gregory E. Johnson President None
Rupert H. Johnson, Jr. Executive Vice President and Director Vice President
Harmon E. Burns Executive Vice President and Director Vice President
Daniel T. O'Lear Executive Vice President None
Peter Jones Executive Vice President None
700 Central Avenue
St. Petersburg, FL
Edward V. McVey Senior Vice President None
Richard C. Stoker Senior Vice President None
Charles E. Johnson Senior Vice President Vice President
500 E Broward Blvd.
Ft. Lauderdale, FL
Deborah R. Gatzek Senior Vice President and Assistant Vice President
Secretary
Richard O. Conboy Senior Vice President None
H. G. Mumford, Jr. Senior Vice President None
James A. Escobedo Vice President None
Loretta Fry Vice President None
Robert N. Geppner Vice President None
Mike Hackett Vice President None
Bret W. Feuss Vice President None
Philip J. Kearns Vice President None
Ken Leder Vice President None
Jack Lemein Vice President None
John R. McGee Vice President None
Vivian J. Palmieri Vice President None
Sarah Stypa Vice President None
Laura Komar Vice President None
Kent P. Strazza Vice President None
Alison Hawksley Assistant Vice President None
John R. Kay Assistant Vice President Vice President
500 E Broward Blvd.
Ft. Lauderdale, FL
Franice Arnone Assistant Vice President None
Virginia Marans Assistant Vice President None
Bernadette Marino Howard Assistant Vice President None
Susan Thompson Assistant Vice President None
Mark Rankin Assistant Vice President None
Leslie M. Kratter Secretary None
Kenneth A. Lewis Treasurer None
Philip A. Scatena Assistant Treasurer None
Karen P. DeBellis Assistant Treasurer Assistant Treasurer
700 Central Avenue
St. Petersburg, FL
</TABLE>
(c) Not Applicable (Information on unaffiliated underwriters).
ITEM 29. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books, and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of Franklin Templeton Services,
Inc., 500 East Broward Blvd., Fort Lauderdale, Florida 33394.
<PAGE>
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS.
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant undertakes to call a meeting of Shareholders
for the purpose of voting upon the question of removal of a
Trustee or Trustees when requested to do so by the holders of
at least 10% of the Registrant's outstanding shares of
beneficial interest and in connection with such meeting to
comply with the shareholder communications provisions of
Section 16(c) of the Investment Company Act of 1940.
(d) Registrant undertakes to furnish to each person to whom
its Prospectus is provided a copy of its latest Annual Report,
upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the District of Columbia the 31st
day of July, 1997.
TEMPLETON GLOBAL INVESTMENT TRUST
(REGISTRANT)
By:
Mark G. Holowesko*
President
*By:/s/JEFFREY L. STEELE
Jeffrey L. Steele
attorney-in-fact**
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
____________________ President (Chief July 31, 1997
Mark G. Holowesko* Executive Officer)
____________________ Trustee July 31, 1997
Charles B. Johnson*
____________________ Trustee July 31, 1997
Martin L. Flanagan*
____________________ Trustee July 31, 1997
Betty P. Krahmer*
___________________ Trustee July 31, 1997
Fred R. Millsaps*
____________________ Trustee July 31, 1997
Harris J. Ashton*
____________________ Trustee July 31, 1997
S. Joseph Fortunato*
____________________ Trustee July 31, 1997
Andrew H. Hines, Jr.*
____________________ Trustee July 31, 1997
John Wm. Galbriath*
____________________ Trustee July 31, 1997
Gordon S. Macklin*
____________________ Trustee July 31, 1997
Nicholas F. Brady*
____________________ Trustee July 31, 1997
Edith E. Holiday*
____________________ Treasurer (Chief July 31, 1997
James R. Baio* Financial and
Accounting Officer)
</TABLE>
*By:/s/JEFFREY L. STEELE
Jeffrey L. Steele
Attorney-in-fact**
** Powers of Attorney were previously filed in Post-Effective Amendment No.10
to the Registration Statement on Form N-1A of Templeton Global Investment Trust
(File No. 33-73244), filed on December 31, 1996.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
FILED WITH
POST-EFFECTIVE AMENDMENT NO. 11 TO
REGISTRATION STATEMENT
ON
FORM N-1A
TEMPLETON GLOBAL INVESTMENT TRUST
<PAGE>
EXHIBIT LIST
( 9)(A) Fund Administration Agreement
( 9)(B) Amended and Restated Transfer Agent Agreement
(11) Consent of Independent Public Accountants
(18)(B) Form of Multiclass Plan - Templeton Latin America Fund
(18)(C) Form of Multiclass Plan - Templeton Greater European Fund
(27) Financial Data Schedules
FUND ADMINISTRATION AGREEMENT BETWEEN
TEMPLETON GLOBAL INVESTMENT TRUST
AND
FRANKLIN TEMPLETON SERVICES, INC.
AGREEMENT dated as of October 1, 1996, and amended June 1,
1997, between Templeton Global Investment Trust (the "Investment Company"), an
investment company registered under the Investment Company Act of 1940 ("1940
Act"), on behalf of Templeton Growth and Income Fund, Templeton Global
Infrastructure Fund, Templeton Americas Government Securities Fund, Templeton
Greater European Fund, and Templeton Latin America Fund (each a "Fund"),
separate series of the Investment Company, and Franklin Templeton Services, Inc.
("FTS" or "Administrator").
In consideration of the mutual promises herein made the
parties hereby agree as follows:
(1) The Administrator agrees, during the life of this Agreement, to
provide the following services to each Fund:
(a) providing office space, telephone, office equipment and supplies for the
Fund;
(b) providing trading desk facilities for the Fund, unless these facilities are
provided by the Fund's investment adviser;
(c) authorizing expenditures and approving bills for payment on behalf of the
Fund;
(d) supervising preparation of periodic reports to
shareholders, notices of dividends, capital gains distributions and tax credits;
and attending to routine correspondence and other communications with individual
shareholders when asked to do so by the Fund's shareholder servicing agent or
other agents of the Fund;
(e) coordinating the daily pricing of the Fund's investment
portfolio, including collecting quotations from pricing services engaged by the
Fund; providing fund accounting services, including preparing and supervising
publication of daily net asset value quotations, periodic earnings reports and
other financial data; and coordinating trade settlements;
(f) monitoring relationships with organizations serving the
Fund, including custodians, transfer agents, public accounting firms, law firms,
printers and other third party service providers;
(g) supervising compliance by the Fund with recordkeeping
requirements under the federal securities laws, including the 1940 Act and the
rules and regulations thereunder, and under other applicable state and federal
laws; and maintaining books and records for the Fund (other than those
maintained by the custodian and transfer agent);
(h) preparing and filing of tax reports including the Fund's
income tax returns, and monitoring the Fund's compliance with subchapter M of
the Internal Revenue Code, as amended, and other applicable tax laws and
regulations;
(i) monitoring the Fund's compliance with: 1940 Act and other
federal securities laws, and rules and regulations thereunder; state and foreign
laws and regulations applicable to the operation of investment companies; the
Fund's investment objectives, policies and restrictions; and the Code of Ethics
and other policies adopted by the Investment Company's Board of Trustees
("Board") or by the Fund's investment adviser and applicable to the Fund;
(j) providing executive, clerical and secretarial personnel needed to carry out
the above responsibilities;
(k) preparing and filing regulatory reports, including without limitation Forms
N-1A and N-SAR, proxy statements, information statements and U.S. and foreign
ownership reports; and
(l) providing support services incidental to carrying out these duties.
Nothing in this Agreement shall obligate the Investment Company or any Fund to
pay any compensation to the officers of the Investment Company. Nothing in this
Agreement shall obligate FTS to pay for the services of third parties, including
attorneys, auditors, printers, pricing services or others, engaged directly by
the Fund to perform services on behalf of the Fund.
(2) The Investment Company agrees, during the life of this Agreement,
to pay to FTS as compensation for the foregoing a monthly fee equal on an annual
basis to 0.15% of the first $200 million of the combined daily net assets of all
Funds in the Investment Company during the month preceding each payment, reduced
as follows: on such net assets in excess of $200 million up to $700 million, a
monthly fee equal on an annual basis to 0.135%; on such net assets in excess of
$700 million up to $1.2 billion, a monthly fee equal on an annual basis to
0.10%; and on such net assets in excess of $1.2 billion, a monthly fee equal on
an annual basis to 0.075%.
From time to time, FTS may waive all or a portion of its fees provided for
hereunder and such waiver shall be treated as a reduction in the purchase price
of its services. FTS shall be contractually bound hereunder by the terms of any
publicly announced waiver of its fee, or any limitation of each affected Fund's
expenses, as if such waiver or limitation were fully set forth herein.
(3) This Agreement shall remain in full force and effect through for
one year after its execution and thereafter from year to year to the extent
continuance is approved annually by the Board of the Investment Company.
(4) This Agreement may be terminated by the Investment Company at any
time on sixty (60) days' written notice without payment of penalty, provided
that such termination by the Investment Company shall be directed or approved by
the vote of a majority of the Board of the Investment Company in office at the
time or by the vote of a majority of the outstanding voting securities of the
Investment Company (as defined by the 1940 Act); and shall automatically and
immediately terminate in the event of its assignment (as defined by the 1940
Act).
(5) In the absence of willful misfeasance, bad faith or gross
negligence on the part of FTS, or of reckless disregard of its duties and
obligations hereunder, FTS shall not be subject to liability for any act or
omission in the course of, or connected with, rendering services hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers.
FRANKLIN TEMPLETON SERVICES, INC.
By: /s/MARTIN L. FLANAGAN
Martin L. Flanagan
President
TEMPLETON GLOBAL INVESTMENT TRUST
By:/s/JOHN R. KAY
John R. Kay
Vice President
TRANSFER AGENT AGREEMENT BETWEEN
TEMPLETON GLOBAL INVESTMENT TRUST AND
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
AGREEMENT dated as of March 14, 1994 and amended and restated June 27,
1994, May 7, 1995, August 10, 1995 and July 1, 1996, between TEMPLETON GLOBAL
INVESTMENT TRUST, a registered open-end investment company with offices at 700
Central Avenue, St. Petersburg, Florida 33701 (the "Trust"), and FRANKLIN
TEMPLETON INVESTOR SERVICES, INC., a registered transfer agent with offices at
700 Central Avenue, St. Petersburg, Florida 33701 ("FTIS").
W I T N E S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Trust on behalf of Templeton Global Infrastructure Fund, Templeton
Growth and Income Fund, Templeton Americas Government Securities Fund, Templeton
Greater European Fund, and Templeton Latin America Fund (each a "Fund", and
collectively the "Funds") and FTIS agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Declaration of Trust" shall mean the Declaration of Trust of the Trust as
the same may be amended from time to time;
(b) "Authorized Person" shall be deemed to include any person,
whether or not such person is an officer or employee of the Trust, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Trust as indicated in a certificate furnished to FTIS pursuant to Section 4(c)
hereof as may be received by FTIS from time to time;
(c) "Custodian" refers to the custodian and any sub-custodian
of all securities and other property which each Fund may from time to time
deposit, or cause to be deposited or held under the name or account of such
custodian pursuant to the Custody Agreement;
(d) "Oral Instructions" shall mean instructions, other than
written instructions, actually received by FTIS from a person reasonably
believed by FTIS to be an Authorized Person;
(e) "Shares" refers to shares of beneficial interest, par value $.01 per share,
of each Fund; and
(f) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by FTIS to be an Authorized Person and
actually received by FTIS.
2. APPOINTMENT OF FTIS. The Trust on behalf of the Funds hereby
appoints and constitutes FTIS as transfer agent for Shares of each Fund and as
shareholder servicing agent for each Fund, and FTIS accepts such appointment and
agrees to perform the duties hereinafter set forth.
3. COMPENSATION.
(a) Each Fund will compensate or cause FTIS to be compensated
for the performance of its obligations hereunder in accordance with the fees set
forth in the written schedule of fees annexed hereto as Schedule A and
incorporated herein. Schedule A does not include out-of-pocket disbursements of
FTIS for which FTIS shall be entitled to bill each Fund separately. FTIS will
bill each Fund as soon as practicable after the end of each calendar month, and
said billings will be detailed in accordance with Schedule A. Each Fund will
promptly pay to FTIS the amount of such billing.
Out-of-pocket disbursements shall include, but shall not be
limited to, the items specified in the written schedule of out-of-pocket
expenses annexed hereto as Schedule B and incorporated herein. Schedule B may be
modified by FTIS upon not less than 30 days' prior written notice to the Trust.
Unspecified out-of-pocket expenses shall be limited to those out-of-pocket
expenses reasonably incurred by FTIS in the performance of its obligations
hereunder. Reimbursement by each Fund for expenses incurred by FTIS in any month
shall be made as soon as practicable after the receipt of an itemized bill from
FTIS.
(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A of this Agreement a revised Fee
Schedule.
4. DOCUMENTS. In connection with the appointment of FTIS, each Fund
shall, on or before the date this Agreement goes into effect, but in any case,
within a reasonable period of time for FTIS to prepare to perform its duties
hereunder, deliver or cause to be delivered to FTIS the following documents:
(a) If applicable, specimens of the certificates for Shares of each Fund;
(b) All account application forms and other documents relating to Shareholder
accounts or to any plan, program or service offered by each Fund;
(c) A certificate identifying the Authorized Persons and specimen signatures of
Authorized Persons who will sign Written Instructions; and
(d) All documents and papers necessary under the laws of
Florida, under the Trust's Declaration of Trust, and as may be required for the
due performance of FTIS's duties under this Agreement or for the due performance
of additional duties as may from time to time be agreed upon between the Trust
and FTIS.
5. DISTRIBUTIONS PAYABLE IN SHARES. In the event that the Board of
Trustees of the Trust shall declare a distribution payable in Shares, the Trust
shall deliver or cause to be delivered to FTIS written notice of such
declaration signed on behalf of the Trust by an officer thereof, upon which FTIS
shall be entitled to rely for all purposes, certifying (i) the number of Shares
involved, and (ii) that all appropriate action has been taken.
6. DUTIES OF THE TRANSFER AGENT. FTIS shall be responsible for
administering and/or performing transfer agent functions; for acting as service
agent in connection with dividend and distribution functions; and for performing
shareholder account and administrative agent functions in connection with the
issuance, transfer and redemption or repurchase (including coordination with the
Custodian) of Shares. The operating standards and procedures to be followed
shall be determined from time to time by agreement between the Trust and FTIS.
Without limiting the generality of the foregoing, FTIS agrees to perform the
specific duties listed on Schedule C.
7. RECORDKEEPING AND OTHER INFORMATION. FTIS shall create and maintain all
necessary records in accordance with all applicable laws, rules and regulations.
8. OTHER DUTIES. In addition, FTIS shall perform such other duties and
functions, and shall be paid such amounts therefor, as may from time to time be
agreed upon in writing between the Trust and FTIS. Such other duties and
functions shall be reflected in a written amendment to Schedule C, and the
compensation for such other duties and functions shall be reflected in a written
amendment to Schedule A.
9. RELIANCE BY TRANSFER AGENT; INSTRUCTIONS.
(a) FTIS will be protected in acting upon Written or Oral
Instructions reasonably believed to have been executed or orally communicated by
an Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from an
officer of the Trust. FTIS will also be protected in processing Share
certificates which it reasonably believes to bear the proper manual or facsimile
signatures of the officers of the Trust and the proper countersignature of FTIS.
(b) At any time FTIS may apply to any Authorized Person of the
Trust's for Written Instructions and may seek advice at the Trust's expense from
legal counsel for the Trust or from its own legal counsel, with respect to any
matter arising in connection with this Agreement, and it shall not be liable for
any action taken or not taken or suffered by it in good faith in accordance with
such Written Instructions or in accordance with the opinion of counsel for the
Trust or for FTIS. Written Instructions requested by FTIS will be provided by
the Trust within a reasonable period of time. In addition, FTIS, or its
officers, agents or employees, shall accept Oral Instructions or Written
Instructions given to them by any person representing or acting on behalf of
either Fund only if said representative is known by FTIS, or its officers,
agents or employees, to be an Authorized Person.
10. ACTS OF GOD, ETC. FTIS will not be liable or responsible for delays
or errors by reason of circumstances beyond its control, including acts of civil
or military authority, national emergencies, labor difficulties, fire,
mechanical breakdown beyond its control, flood or catastrophe, acts of God,
insurrection, war, riots or failure beyond its control of transportation,
communication or power supply.
11. TERM AND TERMINATION.
(a) This Agreement shall be effective as of the date first
written above and shall continue until July 31, 1995 and thereafter shall
continue automatically for successive annual periods ending on July 31st of each
year, provided such continuance is specifically approved at least annually by
(i) the Trust's Board of Trustees or (ii) a vote of a "majority" (as defined in
the Investment Company Act of 1940 (the "1940 Act")) of each Fund's outstanding
voting securities, provided that in either event the continuance is also
approved by a majority of the Board of Trustees who are not "interested persons"
(as defined in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting such approval.
(b) Either party hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than 60 days after the date of receipt of such notice.
In the event such notice is given by the Trust, it shall be accompanied by a
resolution of the Board of Trustees of the Trust, certified by the Secretary of
the Trust, designating a successor transfer agent or transfer agents. Upon such
termination and at the expense of the Trust, FTIS will deliver to such successor
a certified list of Shareholders of the Funds (with names and addresses), an
historical record of the account of each Shareholder and the status thereof, and
all other relevant books, records, correspondence, and other data established or
maintained by FTIS under this Agreement in a form reasonably acceptable to the
Trust, and will cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from FTIS's personnel in the establishment
of books, records and other data by such successor or successors.
12. AMENDMENT. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
13. SUBCONTRACTING. The Trust agrees that FTIS may, in its discretion,
subcontract for certain of the services described under this Agreement or the
Schedules hereto; provided that the appointment of any such agent shall not
relieve FTIS of its responsibilities hereunder.
14. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Trust or FTIS shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
To the Trust:
Templeton Global Investment Trust
700 Central Avenue
St. Petersburg, Florida 33701
To FTIS:
Franklin Templeton Investor Services, Inc.
700 Central Avenue
St. Petersburg, Florida 33701
(b) This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable without the written consent
of the other party.
(c) This Agreement shall be construed in accordance with the laws of the State
of Florida.
(d) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
(e) The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized as of
the day and year first above written.
TEMPLETON GLOBAL INVESTMENT TRUST
BY: /s/JOHN R. KAY
John R. Kay
Vice President
FRANKLIN TEMPLETON INVESTOR SERVICES, INC.
BY: /s/MARTIN L. FLANAGAN
Martin L. Flanagan
Vice President
<PAGE>
Schedule A
FEES
Shareholder account maintenance $15.64 adjusted as of
(per annum, prorated payable monthly) February 1 of each year to
for Templeton Americas Government reflect changes in the
Securities Fund Department of Labor Consumer
Price Index.
Shareholder account maintenance (per $14.54
, adjusted as of
annum, prorated payable monthly) February 1 of each year to
for Templeton Growth and Income reflect changes in the
Fund, Templeton Global Infrastructure Department of Labor Consumer
Fund, Templeton Greater European Price Index.
Fund and Templeton Latin America Fund
Cash withdrawal program No charge to the Funds.
Retirement Plans No charge to the Funds.
Wire orders or express mailings of $15.00 fee may be charged
redemption proceeds for each wire order and
each express mailing.
February 1, 1997
<PAGE>
B-1
Schedule B
OUT-OF-POCKET EXPENSES
The Funds shall reimburse FTIS monthly for the following out-of-pocket
expenses:
o postage and mailing
o forms
o outgoing wire charges
o telephone
o Federal Reserve charges for check clearance
o if applicable, magnetic tape and freight
o retention of records
o microfilm/microfiche
o stationery
o insurance
o if applicable, terminals, transmitting lines and any expenses
incurred in connection with such terminals and lines
o all other miscellaneous expenses reasonably incurred by FTIS
The Funds agree that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with FTIS. In addition, the Funds will
promptly reimburse FTIS for any other expenses incurred by FTIS as to which the
Funds and FTIS mutually agree that such expenses are not otherwise properly
borne by FTIS as part of its duties and obligations under the Agreement.
Out-of-Pocket disbursements may also include payments made by FTIS to
entities including affiliated entities which provide sub-shareholder services,
recordkeeping and/or transfer agency services to beneficial owners of the Funds,
where such services are substantially similar to the services provided by FTIS
to account holders of record. The amount of these disbursements per benefit plan
participant fund account per year shall not exceed the per account transfer
agency fees payable by the Funds to FTIS in connection with maintaining actual
shareholder accounts. On an annual basis, FTIS shall provide a report to the
Board showing, with respect to each entity receiving such fees, the number of
beneficial owners serviced by such entity and the value of the assets in the
Funds represented by such accounts.
<PAGE>
C-1
Schedule C
DUTIES
AS TRANSFER AGENT FOR INVESTORS IN THE TRUST, FTIS WILL:
o Record in its transfer record, countersign as transfer agent,
and deliver certificates signed manually or by facsimile, by
the President or a Vice-President and by the Secretary or the
Treasurer of the Trust, in such names and for such number of
authorized but hitherto unissued Shares of the Funds as to
which FTIS shall receive instructions; and
o Transfer on its records from time to time, when presented to
it for that purpose, certificates of said Shares, whether now
outstanding or hereafter issued, when countersigned by a duly
authorized transfer agent, and upon the cancellation of the
old certificates, record and countersign new certificates for
a corresponding aggregate number of Shares and deliver said
new certificates.
AS SHAREHOLDER SERVICE AGENT FOR INVESTORS IN THE FUNDS, FTIS WILL:
o Receive from the Funds, from the Trust's Principal Underwriter
or from a Shareholder, on a form acceptable to FTIS,
information necessary to record sales and redemptions and to
generate sale and/or redemption confirmations;
o Mail sale and/or redemption confirmations using standard forms;
o Accept and process cash payments from investors, and clear
checks which represent payments for the purchase of Shares;
o Requisition Shares in accordance with instructions of the
Principal Underwriter of the Shares of the Funds;
o Produce periodic reports reflecting the accounts receivable
and the paid pending (free stock) items;
o Open, maintain and close Shareholder accounts;
o Establish registration of ownership of Shares in accordance
with generally accepted form;
o Maintain monthly records of (i) issued Shares and (ii) number
of Shareholders and their aggregate Shareholdings classified
according to their residence in each State of the United
States or foreign country;
o Accept and process telephone exchanges for Shares in
accordance with the Funds' Telephone Exchange Privilege as
described in the each Fund's current prospectus;
o Maintain and safeguard records for each Shareholder showing
name(s), address, number of any certificates issued, and
number of Shares registered in such name(s), together with
continuous proof of the outstanding Shares, and dealer
identification, and reflecting all current changes; on
request, provide information as to an investor's qualification
for Cumulative Quantity Discount; and provide all accounts
with confirmation statements reflecting the most recent
transactions, and also provide year-end historical
confirmation statements;
o Provide on request a duplicate set of records for file
maintenance in the Trust's office in St. Petersburg, Florida;
o Out of money received in payment for Share sales, pay to the
Trust's Custodian Account with the Custodian, the net asset
value per Share and pay to the Principal Underwriter its
commission;
o Redeem Shares and prepare and mail liquidation checks;
o Pass upon the adequacy of documents submitted by a Shareholder
or his legal representative to substantiate the transfer of
ownership of Shares from the registered owner to transferees;
o From time to time, make transfers upon the books of the Funds
in accordance with properly executed transfer instructions
furnished to FTIS and make transfers of certificates for such
Shares as may be surrendered for transfer properly endorsed,
and countersign new certificates issued in lieu thereof;
o Upon receipt of proper documentation, place stop transfers,
obtain necessary insurance forms, and reissue replacement
certificates against lost, stolen or destroyed Share
certificates;
o Check surrendered certificates for stop transfer restrictions.
Although FTIS cannot insure the genuineness of certificates
surrendered for cancellation, it will employ all due
reasonable care in deciding the genuineness of such
certificates and the guarantor of the signature(s) thereon;
o Cancel surrendered certificates and record and countersign
new certificates;
o Certify outstanding Shares to auditors;
o In connection with any meeting of Shareholders, upon receiving
appropriate detailed instructions and written materials
prepared by the Funds and proxy proofs checked by the Trust,
print proxy cards; deliver to Shareholders all reports,
prospectuses, proxy cards and related proxy materials of
suitable design for enclosing; receive and tabulate executed
proxies; and furnish a list of Shareholders for the meeting;
o Answer routine correspondence and telephone inquiries about
individual accounts; prepare monthly reports for
correspondence volume and correspondence data necessary for
the Trust's Semi-Annual Report on Form N-SAR;
o Prepare and mail dealer commission statements and checks;
o Maintain and furnish each Fund and its Shareholders with such
information as each Fund may reasonably request for the
purpose of compliance by the Trust with the applicable tax and
securities laws of applicable jurisdictions;
o Mail confirmations of transactions to investors and dealers
in a timely fashion;
o Pay or reinvest income dividends and/or capital gains
distributions to Shareholders of record, in accordance with
the Funds' and/or Shareholder's instructions, provided that:
(a) Each Fund shall notify FTIS in writing
promptly upon declaration of any such
dividend and/or distribution, and in any
event at least forty-eight (48) hours before
the record date;
(b) Such notification shall include the
declaration date, the record date, the
payable date, the rate, and, if applicable,
the reinvestment date and the reinvestment
price to be used; and
(c) Prior to the payable date, each Fund shall
furnish FTIS with sufficient fully and
finally collected funds to make such
distribution.
o Prepare and file annual United States information returns of
dividends and capital gains distributions (Form 1099) and mail
payee copies to Shareholders; report and pay United States
income taxes withheld from distributions made to nonresidents
of the United States; and prepare and mail to Shareholders the
notice required by the U.S. Internal Revenue Code as to
realized capital gains distributed and/or retained, and their
proportionate share of any foreign taxes paid by the Funds;
o Prepare transfer journals;
o Set up wire order trades on file;
o Receive payment for trades and update the trade file;
o Produce delinquency and other trade file reports;
o Provide dealer commission statements and payments thereof for
the Principal Underwriter;
o Sort and print Shareholder information by state, social code,
price break, etc.; and
o Mail promptly the Statement of Additional Information of the
Trust to each Shareholder who requests it, at no cost to the
Shareholder.
In connection with the Trust's Cash Withdrawal Program, FTIS will:
o Make payment of amounts withdrawn periodically by the
Shareholder pursuant to the Program by redeeming Shares, and
confirm such redemptions to the Shareholder; and
o Provide confirmations of all redemptions, reinvestment of
dividends and distributions, and any additional investments in
the Program, including a summary confirmation at the year-end.
In connection with Tax Deferred Retirement Plans involving the Funds,
FTIS will:
o Receive and process applications, accept contributions, record
Shares issued and dividends reinvested;
o Make distributions when properly requested; and
o Furnish reports to regulatory authorities as required.
MCGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated April 25, 1997 on the
financial statements of Templeton Americas Government Securities Fund, Templeton
Global Infrastructure Fund, Templeton Growth and Income Fund, Templeton Greater
European Fund and Templeton Latin America Fund, series of Templeton Global
Investment Trust, referred to therein, which appear in the 1997 Annual Reports
to Shareholders and which are incorporated herein by reference, in
Post-Effective Amendment No. 11 to the Registration Statement on Form N-1A, File
No. 33-73244 as filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus under
the caption "Financial Highlights" and in the Statement of Additional
Information under the caption "Independent Accountants".
/s/ McGladrey & Pullen, LLP
New York, New York
July 15, 1997
TEMPLETON GLOBAL INVESTMENT TRUST
TEMPLETON LATIN AMERICA FUND
MULTIPLE CLASS PLAN
This Multiple Class Plan (the "Plan") has been adopted by a
majority of the Board of Trustees of Templeton Global Investment Trust (the
"Trust") on behalf of Templeton Latin America Fund (the "Fund"). The Board has
determined that the Plan is in the best interests of each class of the Fund as a
whole. The Plan sets forth the provisions relating to the establishment of
multiple classes of shares of the Fund.
1. The Fund shall offer three classes of shares, to be known
as Templeton Global Investment Trust - Templeton Latin America Fund Class I
shares ("Class I Shares"), Templeton Global Investment Trust - Templeton Latin
America Fund Class II shares ("Class II Shares") and Templeton Global Investment
Trust - Templeton Latin America Fund Advisor Class Shares ("Advisor Class
Shares").
2. Class I Shares shall carry a front-end sales charge ranging
from 0% - 5.75%, and Class II Shares shall carry a front-end sales charge of
1.00%. Advisor Class Shares shall not be subject to any front-end sales charges.
3. Class I Shares shall not be subject to a contingent
deferred sales charge ("CDSC") except in the following limited circumstances. On
investments of $1 million or more, a contingent deferred sales charge of 1.00%
of the lesser of the then-current net asset value or the original net asset
value at the time of purchase applies to redemptions of those investments within
the contingency period of 12 months from the calendar month following their
purchase. The CDSC is waived in certain circumstances, as described in the
Fund's prospectus.
Class II Shares redeemed within 18 months of their purchase
shall be assessed a CDSC of 1.00% on the lesser of the then-current net asset
value or the original net asset value at the time of purchase. The CDSC is
waived in certain circumstances as described in the Fund's prospectus.
Advisor Class Shares shall not be subject to any CDSC.
4. The distribution plan adopted by the Fund pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended, (the "Rule 12b-1
Plan") associated with the Class I Shares may be used to reimburse Franklin
Templeton Distributors, Inc. (the "Distributor") or others for expenses incurred
in the promotion and distribution of the Class I Shares. Such expenses include,
but are not limited to, the printing of prospectuses and reports used for sales
purposes, expenses of preparing and distributing sales literature and related
expenses, advertisements, and other distribution-related expenses, including a
prorated portion of the Distributor's overhead expenses attributable to the
distribution of the Class I Shares, as well as any distribution or service fees
paid to securities dealers or their firms or others who have executed a
servicing agreement with the Fund for the Class I Shares, the Distributor or its
affiliates.
The Rule 12b-1 Plan associated with the Class II Shares has
two components. The first component is a shareholder servicing fee, to be paid
to broker-dealers, banks, trust companies and others who provide personal
assistance to shareholders in servicing their accounts. The second component is
an asset-based sales charge to be retained by the Distributor during the first
year after the sale of shares, and, in subsequent years, to be paid to dealers
or retained by the Distributor to be used in the promotion and distribution of
Class II Shares, in a manner similar to that described above for Class I Shares.
No Rule 12b-1 Plan has been adopted on behalf of the Advisor
Class Shares, and therefore, the Advisor Class Shares shall not be subject to
deductions relating to Rule 12b-1 fees.
The Rule 12b-1 Plans for the Class I and Class II Shares shall
operate in accordance with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., Article III, section 26(d).
5. The only difference in expenses as between Class I, Class
II and Advisor Class Shares shall relate to differences in the Rule 12b-1 plan
expenses of each class, as described in any class' applicable Rule 12b-1 Plan.
6. There shall be no conversion features associated with the
Class I, Class II and Advisor Class Shares.
7. Class I Shares of the Fund may only be exchanged for Class
I Shares of any other fund or series in the Franklin Templeton Group and may not
be exchanged into the Franklin Templeton Money Fund II of the Franklin Templeton
Money Fund Trust. Class II Shares of the Fund may only be exchanged for Class II
Shares of any other fund or series in the Franklin Templeton Group and may also
be exchanged into the Franklin Templeton Money Fund II of the Franklin Templeton
Money Fund Trust. Advisor Class Shares of the Fund may only be exchanged for
Advisor Class shares of any other fund or series in the Franklin Templeton
Group, Class I shares of any other fund or series in the Franklin Templeton
Group that does not offer Advisor Class shares, and Class Z shares of Franklin
Mutual Series Fund, Inc.
8. Each class will vote separately with respect to any Rule
12b-1 Plan related to that class.
9. On an ongoing basis, the Trustees, pursuant to their
fiduciary responsibilities under the 1940 Act and otherwise, will monitor the
Fund for the existence of any material conflicts between the interests of the
various classes of shares. The Trustees, including a majority of the independent
Trustees, shall take such action as is reasonably necessary to eliminate any
such conflict that may develop. The Fund's Investment Manager and Franklin
Templeton Distributors, Inc. shall be responsible for alerting the Board to any
material conflicts that arise.
10. All material amendments to this Plan must be approved by a
majority of the Trustees of the Trust, including a majority of the Trustees who
are not interested persons of the Trust.
TEMPLETON GLOBAL INVESTMENT TRUST
TEMPLETON GREATER EUROPEAN FUND
MULTIPLE CLASS PLAN
This Multiple Class Plan (the "Plan") has been adopted by a
majority of the Board of Trustees of Templeton Global Investment Trust (the
"Trust") on behalf of Templeton Greater European Fund (the "Fund"). The Board
has determined that the Plan is in the best interests of each class of the Fund
as a whole. The Plan sets forth the provisions relating to the establishment of
multiple classes of shares of the Fund.
1. The Fund shall offer three classes of shares, to be known
as Templeton Global Investment Trust - Templeton Greater European Fund Class I
shares ("Class I Shares"), Templeton Global Investment Trust - Templeton Greater
European Fund Class II shares ("Class II Shares") and Templeton Global
Investment Trust - Templeton Greater European Fund Advisor Class Shares
("Advisor Class Shares").
2. Class I Shares shall carry a front-end sales charge ranging
from 0% - 5.75%, and Class II Shares shall carry a front-end sales charge of
1.00%. Advisor Class Shares shall not be subject to any front-end sales charges.
3. Class I Shares shall not be subject to a contingent
deferred sales charge ("CDSC") except in the following limited circumstances. On
investments of $1 million or more, a contingent deferred sales charge of 1.00%
of the lesser of the then-current net asset value or the original net asset
value at the time of purchase applies to redemptions of those investments within
the contingency period of 12 months from the calendar month following their
purchase. The CDSC is waived in certain circumstances, as described in the
Fund's prospectus.
Class II Shares redeemed within 18 months of their purchase
shall be assessed a CDSC of 1.00% on the lesser of the then-current net asset
value or the original net asset value at the time of purchase. The CDSC is
waived in certain circumstances as described in the Fund's prospectus.
Advisor Class Shares shall not be subject to any CDSC.
4. The distribution plan adopted by the Fund pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended, (the "Rule 12b-1
Plan") associated with the Class I Shares may be used to reimburse Franklin
Templeton Distributors, Inc. (the "Distributor") or others for expenses incurred
in the promotion and distribution of the Class I Shares. Such expenses include,
but are not limited to, the printing of prospectuses and reports used for sales
purposes, expenses of preparing and distributing sales literature and related
expenses, advertisements, and other distribution-related expenses, including a
prorated portion of the Distributor's overhead expenses attributable to the
distribution of the Class I Shares, as well as any distribution or service fees
paid to securities dealers or their firms or others who have executed a
servicing agreement with the Fund for the Class I Shares, the Distributor or its
affiliates.
The Rule 12b-1 Plan associated with the Class II Shares has
two components. The first component is a shareholder servicing fee, to be paid
to broker-dealers, banks, trust companies and others who provide personal
assistance to shareholders in servicing their accounts. The second component is
an asset-based sales charge to be retained by the Distributor during the first
year after the sale of shares, and, in subsequent years, to be paid to dealers
or retained by the Distributor to be used in the promotion and distribution of
Class II Shares, in a manner similar to that described above for Class I Shares.
No Rule 12b-1 Plan has been adopted on behalf of the Advisor
Class Shares, and therefore, the Advisor Class Shares shall not be subject to
deductions relating to Rule 12b-1 fees.
The Rule 12b-1 Plans for the Class I and Class II Shares shall
operate in accordance with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., Article III, section 26(d).
5. The only difference in expenses as between Class I, Class
II and Advisor Class Shares shall relate to differences in the Rule 12b-1 plan
expenses of each class, as described in any class' applicable Rule 12b-1 Plan.
6. There shall be no conversion features associated with the
Class I, Class II and Advisor Class Shares.
7. Class I Shares of the Fund may only be exchanged for Class
I Shares of any other fund or series in the Franklin Templeton Group and may not
be exchanged into the Franklin Templeton Money Fund II of the Franklin Templeton
Money Fund Trust. Class II Shares of the Fund may only be exchanged for Class II
Shares of any other fund or series in the Franklin Templeton Group and may also
be exchanged into the Franklin Templeton Money Fund II of the Franklin Templeton
Money Fund Trust. Advisor Class Shares of the Fund may only be exchanged for
Advisor Class shares of any other fund or series in the Franklin Templeton
Group, Class I shares of any other fund or series in the Franklin Templeton
Group that does not offer Advisor Class shares, and Class Z shares of Franklin
Mutual Series Fund, Inc.
8. Each class will vote separately with respect to any Rule
12b-1 Plan related to that class.
9. On an ongoing basis, the Trustees, pursuant to their
fiduciary responsibilities under the 1940 Act and otherwise, will monitor the
Fund for the existence of any material conflicts between the interests of the
various classes of shares. The Trustees, including a majority of the independent
Trustees, shall take such action as is reasonably necessary to eliminate any
such conflict that may develop. The Fund's Investment Manager and Franklin
Templeton Distributors, Inc. shall be responsible for alerting the Board to any
material conflicts that arise.
10. All material amendments to this Plan must be approved by a
majority of the Trustees of the Trust, including a majority of the Trustees who
are not interested persons of the Trust.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON GROWTH AND INCOME FUND MARCH 31, 1997 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0000916488
<NAME>TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER> 021
<NAME> TEMPLETON GROWTH AND INCOME FUND CLASS I
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 27738254
<INVESTMENTS-AT-VALUE> 31127164
<RECEIVABLES> 368049
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 29170
<TOTAL-ASSETS> 31524383
<PAYABLE-FOR-SECURITIES> 369161
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 118074
<TOTAL-LIABILITIES> 487235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27320632
<SHARES-COMMON-STOCK> 1931885
<SHARES-COMMON-PRIOR> 1030458
<ACCUMULATED-NII-CURRENT> 106689
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 220917
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3388910
<NET-ASSETS> 31037148
<DIVIDEND-INCOME> 372524
<INTEREST-INCOME> 354507
<OTHER-INCOME> 0
<EXPENSES-NET> 288444
<NET-INVESTMENT-INCOME> 438587
<REALIZED-GAINS-CURRENT> 343441
<APPREC-INCREASE-CURRENT> 2327516
<NET-CHANGE-FROM-OPS> 3109544
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (316069)
<DISTRIBUTIONS-OF-GAINS> (66904)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1122620
<NUMBER-OF-SHARES-REDEEMED> (249794)
<SHARES-REINVESTED> 28601
<NET-CHANGE-IN-ASSETS> 17099981
<ACCUMULATED-NII-PRIOR> 52562
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (47494)
<GROSS-ADVISORY-FEES> 157964
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 497198
<AVERAGE-NET-ASSETS> 17086120
<PER-SHARE-NAV-BEGIN> 11.39
<PER-SHARE-NII> .22
<PER-SHARE-GAIN-APPREC> 1.60
<PER-SHARE-DIVIDEND> (.22)
<PER-SHARE-DISTRIBUTIONS> (.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.95
<EXPENSE-RATIO> 1.25<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>The expense ratio without reimbursement would have been 2.24%
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON GROWTH AND INCOME FUND MARCH 31, 1997 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0000916488
<NAME>TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER> 022
<NAME> TEMPLETON GROWTH AND INCOME FUND CLASS II
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 27738254
<INVESTMENTS-AT-VALUE> 31127164
<RECEIVABLES> 368049
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 29170
<TOTAL-ASSETS> 31524383
<PAYABLE-FOR-SECURITIES> 369161
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 118074
<TOTAL-LIABILITIES> 487235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27320632
<SHARES-COMMON-STOCK> 468483
<SHARES-COMMON-PRIOR> 194620
<ACCUMULATED-NII-CURRENT> 106689
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 220917
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3388910
<NET-ASSETS> 31037148
<DIVIDEND-INCOME> 372524
<INTEREST-INCOME> 354507
<OTHER-INCOME> 0
<EXPENSES-NET> 288444
<NET-INVESTMENT-INCOME> 438587
<REALIZED-GAINS-CURRENT> 343441
<APPREC-INCREASE-CURRENT> 2327516
<NET-CHANGE-FROM-OPS> 3109544
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (59789)
<DISTRIBUTIONS-OF-GAINS> (16728)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 291798
<NUMBER-OF-SHARES-REDEEMED> (23460)
<SHARES-REINVESTED> 5525
<NET-CHANGE-IN-ASSETS> 17099981
<ACCUMULATED-NII-PRIOR> 52562
<ACCUMULATED-GAINS-PRIOR> (47494)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 157964
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 497198
<AVERAGE-NET-ASSETS> 3975785
<PER-SHARE-NAV-BEGIN> 11.33
<PER-SHARE-NII> .21
<PER-SHARE-GAIN-APPREC> 1.52
<PER-SHARE-DIVIDEND> (.18)
<PER-SHARE-DISTRIBUTIONS> (.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.84
<EXPENSE-RATIO> 1.90<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1> The expense ratio without reimbursement would bae been 2.89%.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON GLOBAL INFRASTRUCTURE FUND MARCH 31, 1997 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0000916488
<NAME>TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER> 011
<NAME> TEMPLETON GLOBAL INFRASTRUCTURE CLASS I
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 27735326
<INVESTMENTS-AT-VALUE> 30830120
<RECEIVABLES> 346261
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 30896
<TOTAL-ASSETS> 31207277
<PAYABLE-FOR-SECURITIES> 91405
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 261125
<TOTAL-LIABILITIES> 352530
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27343637
<SHARES-COMMON-STOCK> 2427291
<SHARES-COMMON-PRIOR> 2150454
<ACCUMULATED-NII-CURRENT> 279647
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 136669
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3094794
<NET-ASSETS> 30854747
<DIVIDEND-INCOME> 874960
<INTEREST-INCOME> 113649
<OTHER-INCOME> 0
<EXPENSES-NET> 573176
<NET-INVESTMENT-INCOME> 415433
<REALIZED-GAINS-CURRENT> 145720
<APPREC-INCREASE-CURRENT> 3342267
<NET-CHANGE-FROM-OPS> 3903420
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (154491)
<DISTRIBUTIONS-OF-GAINS> (111693)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1086417
<NUMBER-OF-SHARES-REDEEMED> (832421)
<SHARES-REINVESTED> 22841
<NET-CHANGE-IN-ASSETS> 7885036
<ACCUMULATED-NII-PRIOR> 22609
<ACCUMULATED-GAINS-PRIOR> 110477
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 202081
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 573176
<AVERAGE-NET-ASSETS> 24922497
<PER-SHARE-NAV-BEGIN> 10.04
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> 1.45
<PER-SHARE-DIVIDEND> (.07)
<PER-SHARE-DISTRIBUTIONS> (.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.54
<EXPENSE-RATIO> 2.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON GLOBAL INFRASTRUCTURE FUND MARCH 31, 1997 ANNUAL REPORT AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0000916488
<NAME>TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER> 012
<NAME> TEMPLETON GLOBAL INFRASTRUCTURE CLASS II
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 27735326
<INVESTMENTS-AT-VALUE> 30830120
<RECEIVABLES> 346261
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 30896
<TOTAL-ASSETS> 31207277
<PAYABLE-FOR-SECURITIES> 91405
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 261125
<TOTAL-LIABILITIES> 352530
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27343637
<SHARES-COMMON-STOCK> 248095
<SHARES-COMMON-PRIOR> 138034
<ACCUMULATED-NII-CURRENT> 279647
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 136669
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3094794
<NET-ASSETS> 30854747
<DIVIDEND-INCOME> 874960
<INTEREST-INCOME> 113649
<OTHER-INCOME> 0
<EXPENSES-NET> 573176
<NET-INVESTMENT-INCOME> 415433
<REALIZED-GAINS-CURRENT> 145720
<APPREC-INCREASE-CURRENT> 3342267
<NET-CHANGE-FROM-OPS> 3903420
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3904)
<DISTRIBUTIONS-OF-GAINS> (7835)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 129229
<NUMBER-OF-SHARES-REDEEMED> (20235)
<SHARES-REINVESTED> 1067
<NET-CHANGE-IN-ASSETS> 7885036
<ACCUMULATED-NII-PRIOR> 22609
<ACCUMULATED-GAINS-PRIOR> 110477
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 202081
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 573176
<AVERAGE-NET-ASSETS> 2021617
<PER-SHARE-NAV-BEGIN> 9.99
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> 1.43
<PER-SHARE-DIVIDEND> (.02)
<PER-SHARE-DISTRIBUTIONS> (.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.46
<EXPENSE-RATIO> 2.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON AMERICAS GOVERNMENT SECURITIES FUND MARCH 31, 1997 ANNUAL
REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<CIK>0000916488
<NAME> TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER> 001
<NAME>TEMPLETON AMERICAS GOVERNMENT SECURITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 5743322
<INVESTMENTS-AT-VALUE> 5750953
<RECEIVABLES> 301843
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 81582
<TOTAL-ASSETS> 6134378
<PAYABLE-FOR-SECURITIES> 456446
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50853
<TOTAL-LIABILITIES> 507299
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5402907
<SHARES-COMMON-STOCK> 529005
<SHARES-COMMON-PRIOR> 347193
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 216541
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7631
<NET-ASSETS> 5627079
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 382575
<OTHER-INCOME> 0
<EXPENSES-NET> 56852
<NET-INVESTMENT-INCOME> 325723
<REALIZED-GAINS-CURRENT> 338392
<APPREC-INCREASE-CURRENT> (12040)
<NET-CHANGE-FROM-OPS> 652075
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (333384)
<DISTRIBUTIONS-OF-GAINS> (157434)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 265772
<NUMBER-OF-SHARES-REDEEMED> (126942)
<SHARES-REINVESTED> 42982
<NET-CHANGE-IN-ASSETS> 2086906
<ACCUMULATED-NII-PRIOR> 20642
<ACCUMULATED-GAINS-PRIOR> 22602
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 27267
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 126880
<AVERAGE-NET-ASSETS> 4548501
<PER-SHARE-NAV-BEGIN> 10.20
<PER-SHARE-NII> 0.74
<PER-SHARE-GAIN-APPREC> 0.85
<PER-SHARE-DIVIDEND> (0.77)
<PER-SHARE-DISTRIBUTIONS> (0.38)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.64
<EXPENSE-RATIO> 1.25<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1> NET OF REIMBURSEMENT.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON LATIN AMERICA FUND MARCH 31, 1997 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0000916488
<NAME>TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER> 051
<NAME> TEMPLETON LATIN AMERICA FUND - CLASS I
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 21701851
<INVESTMENTS-AT-VALUE> 23251487
<RECEIVABLES> 447732
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 248845
<TOTAL-ASSETS> 23948064
<PAYABLE-FOR-SECURITIES> 983221
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 446686
<TOTAL-LIABILITIES> 1429907
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20966249
<SHARES-COMMON-STOCK> 1533851
<SHARES-COMMON-PRIOR> 489226
<ACCUMULATED-NII-CURRENT> 3128
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (856)
<ACCUM-APPREC-OR-DEPREC> 1549636
<NET-ASSETS> 22518157
<DIVIDEND-INCOME> 216811
<INTEREST-INCOME> 87245
<OTHER-INCOME> 0
<EXPENSES-NET> 264465
<NET-INVESTMENT-INCOME> 39591
<REALIZED-GAINS-CURRENT> 25594
<APPREC-INCREASE-CURRENT> 1357093
<NET-CHANGE-FROM-OPS> 1422278
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (47435)
<DISTRIBUTIONS-OF-GAINS> (20552)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1760552
<NUMBER-OF-SHARES-REDEEMED> (721346)
<SHARES-REINVESTED> 5419
<NET-CHANGE-IN-ASSETS> 16016700
<ACCUMULATED-NII-PRIOR> 13836
<ACCUMULATED-GAINS-PRIOR> 512
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 133551
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 346589
<AVERAGE-NET-ASSETS> 8523992
<PER-SHARE-NAV-BEGIN> 10.53
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 1.86
<PER-SHARE-DIVIDEND> (.08)
<PER-SHARE-DISTRIBUTIONS> (.03)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.34
<EXPENSE-RATIO> 2.35<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1> THE EXPENSE RATIO WITHOUT REIMBURSEMENT WOULD HAVE BEEN 3.10%.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON LATIN AMERICA FUND MARCH 31, 1997 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0000916488
<NAME>TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER> 052
<NAME> TEMPLETON LATIN AMERICA FUND - CLASS II
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 21701851
<INVESTMENTS-AT-VALUE> 23251487
<RECEIVABLES> 447732
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 248845
<TOTAL-ASSETS> 23948064
<PAYABLE-FOR-SECURITIES> 983221
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 446686
<TOTAL-LIABILITIES> 1429907
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20966249
<SHARES-COMMON-STOCK> 286940
<SHARES-COMMON-PRIOR> 128824
<ACCUMULATED-NII-CURRENT> 3128
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (856)
<ACCUM-APPREC-OR-DEPREC> 1549636
<NET-ASSETS> 22518157
<DIVIDEND-INCOME> 216811
<INTEREST-INCOME> 87245
<OTHER-INCOME> 0
<EXPENSES-NET> 264465
<NET-INVESTMENT-INCOME> 39591
<REALIZED-GAINS-CURRENT> 25594
<APPREC-INCREASE-CURRENT> 1357093
<NET-CHANGE-FROM-OPS> 1422278
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3376)
<DISTRIBUTIONS-OF-GAINS> (5898)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 173080
<NUMBER-OF-SHARES-REDEEMED> (15804)
<SHARES-REINVESTED> 840
<NET-CHANGE-IN-ASSETS> 16016700
<ACCUMULATED-NII-PRIOR> 13836
<ACCUMULATED-GAINS-PRIOR> 512
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 133551
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 346589
<AVERAGE-NET-ASSETS> 2148061
<PER-SHARE-NAV-BEGIN> 10.49
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> 1.85
<PER-SHARE-DIVIDEND> (.02)
<PER-SHARE-DISTRIBUTIONS> (.03)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.28
<EXPENSE-RATIO> 3.00<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1> THE EXPENSE RATIO WITHOUT REIMBURSEMENT WOULD HAVE BEEN 3.84%.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON LATIN AMERICA FUND MARCH 31, 1997 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000916488
<NAME> TEMPLETON LATIN AMERICA FUND
<SERIES>
<NUMBER> 003
<NAME> TEMPLETON LATIN AMERICA FUND - ADVISOR CLASS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 21701851
<INVESTMENTS-AT-VALUE> 23251487
<RECEIVABLES> 447732
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 248845
<TOTAL-ASSETS> 23948064
<PAYABLE-FOR-SECURITIES> 983221
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 446686
<TOTAL-LIABILITIES> 1429907
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20966249
<SHARES-COMMON-STOCK> 5759
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3128
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (856)
<ACCUM-APPREC-OR-DEPREC> 1549636
<NET-ASSETS> 22518157
<DIVIDEND-INCOME> 216811
<INTEREST-INCOME> 87245
<OTHER-INCOME> 0
<EXPENSES-NET> 264465
<NET-INVESTMENT-INCOME> 39591
<REALIZED-GAINS-CURRENT> 25594
<APPREC-INCREASE-CURRENT> 1357093
<NET-CHANGE-FROM-OPS> 1422278
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6077
<NUMBER-OF-SHARES-REDEEMED> (318)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16016700
<ACCUMULATED-NII-PRIOR> 13836
<ACCUMULATED-GAINS-PRIOR> 512
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 133551
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 346589
<AVERAGE-NET-ASSETS> 50034
<PER-SHARE-NAV-BEGIN> 10.92
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 1.41
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.35
<EXPENSE-RATIO> 2.08 <F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1> THE EXPENSE RATIO WITHOUT REIMBURSEMENT WOULD HAVE BEEN 2.08%(ANNUALIZED).
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON GREATER EUROPEAN FUND MARCH 31,1997 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0000916488
<NAME>TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER>042
<NAME> TEMPLETON GREATER EUROPEAN CLASS I
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 10716928
<INVESTMENTS-AT-VALUE> 11885463
<RECEIVABLES> 64852
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 41081
<TOTAL-ASSETS> 11991396
<PAYABLE-FOR-SECURITIES> 155425
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 107524
<TOTAL-LIABILITIES> 262949
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10179728
<SHARES-COMMON-STOCK> 750484
<SHARES-COMMON-PRIOR> 414655
<ACCUMULATED-NII-CURRENT> 62137
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 318047
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1168535
<NET-ASSETS> 11728447
<DIVIDEND-INCOME> 197834
<INTEREST-INCOME> 90800
<OTHER-INCOME> 0
<EXPENSES-NET> 156992
<NET-INVESTMENT-INCOME> 131642
<REALIZED-GAINS-CURRENT> 492527
<APPREC-INCREASE-CURRENT> 940661
<NET-CHANGE-FROM-OPS> 1564830
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (68343)
<DISTRIBUTIONS-OF-GAINS> (84294)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 467229
<NUMBER-OF-SHARES-REDEEMED> (143550)
<SHARES-REINVESTED> 12150
<NET-CHANGE-IN-ASSETS> 5990172
<ACCUMULATED-NII-PRIOR> 42720
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (106081)
<GROSS-ADVISORY-FEES> 59263
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 218730
<AVERAGE-NET-ASSETS> 6209161
<PER-SHARE-NAV-BEGIN> 10.39
<PER-SHARE-NII> .14
<PER-SHARE-GAIN-APPREC> 2.09
<PER-SHARE-DIVIDEND> (.13)
<PER-SHARE-DISTRIBUTIONS> (.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.35
<EXPENSE-RATIO> 1.85<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>The expense ratio without reimbursement would have been 2.63%.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON GREATER EUROPEAN FUND, MARCH 31, 1997 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0000916488
<NAME> TEMPLETON GREATER EUROPEAN FUND
<SERIES>
<NUMBER>043
<NAME> TEMPLETON GREATER EUROPEAN FUND CLASS II
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 10716928
<INVESTMENTS-AT-VALUE> 11885463
<RECEIVABLES> 64852
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 41081
<TOTAL-ASSETS> 11991396
<PAYABLE-FOR-SECURITIES> 155425
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 107524
<TOTAL-LIABILITIES> 262949
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10179728
<SHARES-COMMON-STOCK> 197611
<SHARES-COMMON-PRIOR> 138616
<ACCUMULATED-NII-CURRENT> 62137
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 318047
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1168535
<NET-ASSETS> 11728447
<DIVIDEND-INCOME> 197834
<INTEREST-INCOME> 90800
<OTHER-INCOME> 0
<EXPENSES-NET> 156992
<NET-INVESTMENT-INCOME> 131642
<REALIZED-GAINS-CURRENT> 492527
<APPREC-INCREASE-CURRENT> 940661
<NET-CHANGE-FROM-OPS> 1564830
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6497)
<DISTRIBUTIONS-OF-GAINS> (21490)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 151862
<NUMBER-OF-SHARES-REDEEMED> (95315)
<SHARES-REINVESTED> 2448
<NET-CHANGE-IN-ASSETS> 5990172
<ACCUMULATED-NII-PRIOR> 42720
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (106081)
<GROSS-ADVISORY-FEES> 59263
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 218730
<AVERAGE-NET-ASSETS> 1686102
<PER-SHARE-NAV-BEGIN> 10.32
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> 2.02
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> (.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.27
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON GREATER EUROPEAN FUND MARCH 31, 1997 ANNUAL REPORTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIALS STATEMENTS.
</LEGEND>
<CIK> 0000916488
<NAME> TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER> 003
<NAME>TEMPLETON GREATER EUROPEAN ADVISOR CLASS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 10716928
<INVESTMENTS-AT-VALUE> 11885463
<RECEIVABLES> 64852
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 41081
<TOTAL-ASSETS> 11991396
<PAYABLE-FOR-SECURITIES> 155425
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 107524
<TOTAL-LIABILITIES> 262949
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10179728
<SHARES-COMMON-STOCK> 2942
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 62137
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 318047
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1168535
<NET-ASSETS> 11728447
<DIVIDEND-INCOME> 197834
<INTEREST-INCOME> 90800
<OTHER-INCOME> 0
<EXPENSES-NET> 156992
<NET-INVESTMENT-INCOME> 131642
<REALIZED-GAINS-CURRENT> 492527
<APPREC-INCREASE-CURRENT> 940661
<NET-CHANGE-FROM-OPS> 1564830
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2942
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5990172
<ACCUMULATED-NII-PRIOR> 42720
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (106081)
<GROSS-ADVISORY-FEES> 59263
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 218730
<AVERAGE-NET-ASSETS> 32691
<PER-SHARE-NAV-BEGIN> 11.56
<PER-SHARE-NII> .07
<PER-SHARE-GAIN-APPREC> .73
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.36
<EXPENSE-RATIO> 1.50<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>The expense ratio without reimbursement would have been 1.90% Annualized.
</FN>
</TABLE>
