Simplified Prospectus

Transcription

1 Simplified Prospectus MAY 29, 2014 Templeton Templeton Asian Growth Fund (Series O units) Templeton Asian Growth Corporate Class (Series A, F, I and O shares) Templeton BRIC Corporate Class (Series A, F, I and O shares) Templeton Canadian Balanced Fund (Series A, F, O and T units) Templeton Canadian Stock Fund Templeton Canadian Stock Corporate Class Templeton EAFE Developed Markets Fund Templeton Emerging Markets Fund (Series A, F, I and O units) Templeton Emerging Markets Corporate Class Templeton Frontier Markets Fund (Series O units) Templeton Frontier Markets Corporate Class Templeton Global Balanced Fund (Series A, F, O, S, T and T-USD units) Templeton Global Bond Fund (Series A, F, I and O units) Templeton Global Bond Fund (Hedged) (Series A, F, I and O units) Templeton Global Bond Hedged Yield Class (Series A, F, I, O, R, S and T shares) Templeton Global Smaller Companies Fund (Series A, F, I and O units) Templeton Global Smaller Companies Corporate Class (Series A, F, I and O shares) Templeton Growth Fund, Ltd. (Series A, A (Hedged), F, I and O shares) Templeton Growth Corporate Class (Series A, F, I and O shares) Templeton International Stock Fund (Series A, F, I, O and T units) Templeton International Stock Corporate Class (Series A, F, I, O and T shares) Franklin Franklin Flex Cap Growth Fund Franklin Flex Cap Growth Corporate Class Franklin High Income Fund (Series A, F, I and O units) Franklin Income Fund (Series A, F, I, O, R, S, T and T-USD units) Franklin Income Corporate Class (Series A, F, I, O, R, S, T and T-USD shares) Franklin Income Hedged Corporate Class (Series A, F, I, O, R, S and T shares) Franklin Strategic Income Fund (Series A, F, I and O units) Franklin U.S. Core Equity Fund Franklin U.S. Rising Dividends Fund (Series A, F, O and T units) Franklin U.S. Rising Dividends Corporate Class (Series A, F, O and T shares) Franklin U.S. Rising Dividends Hedged Corporate Class (Series A, F, O and T shares) Franklin World Growth Fund (Series A, F, O and T units) Franklin World Growth Corporate Class (Series A, F, O and T shares) Franklin Bissett Franklin Bissett All Canadian Focus Fund (Series A, F, I and O units) Franklin Bissett All Canadian Focus Corporate Class (Series A, F, I and O shares) Franklin Bissett Bond Fund (Series A, F, I and O units) Franklin Bissett Bond Corporate Class (Series A, F, I and O shares) Franklin Bissett Bond Yield Class (Series A, F, I and O shares) Franklin Bissett Canadian All Cap Balanced Fund (Series A, F, I, O and T units) Franklin Bissett Canadian All Cap Balanced Corporate Class (Series A, F, I, O and T shares) Franklin Bissett Canadian Balanced Fund (Series A, F, I, O and T units) Franklin Bissett Canadian Balanced Corporate Class (Series A, F, O and T shares) Franklin Bissett Canadian Dividend Fund Franklin Bissett Canadian Dividend Corporate Class (Series A, F, I, O, R, S and T shares) Franklin Bissett Canadian Equity Fund (Series A, F, I and O units) Franklin Bissett Canadian Equity Corporate Class (Series A, F, I, O, R and T shares) Franklin Bissett Canadian High Dividend Fund (Series A, F, I and O units) Franklin Bissett Canadian High Dividend Corporate Class (Series A, F, I, O and T shares) Franklin Bissett Canadian Short Term Bond Fund Franklin Bissett Canadian Short Term Bond Yield Class (Series A, F, I and O shares) Franklin Bissett Corporate Bond Fund (Series A, F, I and O units) Franklin Bissett Corporate Bond Yield Class (Series A, F, I, O and T shares) Franklin Bissett Dividend Income Fund (Series A, F, I, O and T units) Franklin Bissett Dividend Income Corporate Class (Series A, F, I, O and T shares) Franklin Bissett Energy Corporate Class Franklin Bissett Microcap Fund Franklin Bissett Money Market Fund (Series A, F, I and O units) Franklin Bissett Money Market Corporate Class (Series A, F, I and O shares) Franklin Bissett Money Market Yield Class (Series A, F, I and O shares) Franklin Bissett Small Cap Fund Franklin Bissett Small Cap Corporate Class Franklin Bissett Strategic Income Fund (Series A, F, I and O units) Franklin Bissett Strategic Income Corporate Class (Series A, F, I, O, R, S and T shares) Franklin Bissett Treasury Bill Fund (Series A, F, I and O units) Franklin Bissett U.S. Focus Fund (Series O units) Franklin Bissett U.S. Focus Corporate Class Franklin Mutual Series Franklin Mutual U.S. Shares Fund (formerly Franklin Mutual Beacon Fund) (Series A, F, I, O and T units) Franklin Mutual U.S. Shares Corporate Class (formerly Franklin Mutual Beacon Corporate Class) (Series A, F, I, O and T shares) Franklin Mutual Global Discovery Fund (Series A, F, I, O, T and T-USD units) Franklin Mutual Global Discovery Corporate Class (Series A, F, I, O, T and T-USD shares) Franklin Templeton Solutions Franklin Quotential Balanced Growth Portfolio (Series A, F, I, O, R, S and T units) Franklin Quotential Balanced Growth Corporate Class Portfolio (Series A, F, I, O, R, S and T shares) Franklin Quotential Balanced Income Portfolio (Series A, F, I, O, R, S and T units) Franklin Quotential Balanced Income Corporate Class Portfolio (Series A, F, I, O, R, S and T shares) Franklin Quotential Diversified Equity Portfolio (formerly Franklin Quotential Global Growth Portfolio) (Series A, F, I, O, R, T and T-USD units) Franklin Quotential Diversified Equity Corporate Class Portfolio (formerly Franklin Quotential Global Growth Corporate Class Portfolio) (Series A, F, I, O, R, S, T and T-USD shares) Franklin Quotential Diversified Income Portfolio (Series A, F, I, O, S and T units) Franklin Quotential Diversified Income Corporate Class Portfolio (Series A, F, I, O, R, S, T and T-USD shares) Franklin Quotential Growth Portfolio (Series A, F, I, O, R and T units) Franklin Quotential Growth Corporate Class Portfolio (Series A, F, I, O, S and T shares) Franklin Templeton Canadian Core Equity Fund (Series O units) Franklin Templeton Canadian Large Cap Fund (Series O units) Offering Series A, F and O units or shares, except where indicated. No securities regulatory authority has expressed an opinion about these units and shares. It is an offence to claim otherwise. The Funds and the securities offered under this prospectus are not registered with the United States Securities and Exchange Commission and they are sold in the United States only in reliance on exemptions from registration.

2 Table of contents 1 INTRODUCTION 2 WHAT IS A MUTUAL FUND AND WHAT ARE THE RISKS OF INVESTING IN A MUTUAL FUND? 2 What is a mutual fund? 2 The value of a mutual fund 2 The risks of investing in mutual funds 2 Different kinds of mutual funds have different kinds of risks 3 Equity risk 3 Foreign investment risk 3 Interest rate risk 3 Emerging markets risk 3 Smaller companies risk 3 Liquidity risk 3 Low-rated security risk 4 Regulatory risk 4 Credit risk 4 Reinvestment risk 4 Concentration risk 4 Capital depletion risk 4 Derivative risk 4 Repurchase/reverse repurchase agreements risk 4 Securities lending risk 5 Short selling risk 5 Underlying fund risk 5 Asset allocation risk 5 Portfolio management risk 5 Series risk 5 Corporate class fund risk 5 Large investor risk 5 Specialization risk 5 Tracking risk 6 Asset-backed and mortgage-backed securities risk 6 Tax risk 7 ORGANIZATION AND MANAGEMENT OF THE FRANKLIN TEMPLETON INVESTMENTS FUNDS AND PORTFOLIOS 8 Fund on Fund Structures 9 PURCHASES, SWITCHES AND REDEMPTIONS 9 Classes and Series 11 The price of a Fund or Portfolio 12 Opening a Franklin Templeton Investments Account 12 How to buy, switch or redeem Funds and Portfolios 12 Buying Funds and Portfolios 13 How to Switch to other Funds or Portfolios 13 How to Switch to another Series 14 Switch fees 14 Processing your switch order 14 Redeeming Funds or Portfolios 16 General information on processing purchases, switches and redemptions 17 OPTIONAL SERVICES 17 Systematic investment program 17 Systematic withdrawal program (SWP) 17 Automatic rebalancing service 18 Registered plans 19 FEES AND EXPENSES 19 Fees and expenses payable by the Fund or Portfolio 27 Fees and expenses payable directly by you 28 Impact of sales charges 29 DEALER COMPENSATION 29 Sales commissions 29 Trailing commissions 31 Inter-company service fee 31 Marketing support programs 32 DEALER COMPENSATION FROM MANAGEMENT FEES 32 INCOME TAX CONSIDERATIONS FOR INVESTORS 32 For Funds or Portfolios held in a registered plan 33 For Funds or Portfolios not held in a registered plan 34 Dispositions and Switches of Funds or Portfolios not held in a registered plan 35 ADDITIONAL INFORMATION 35 Notice with respect to the Managed Yield Class Funds 35 WHAT ARE YOUR LEGAL RIGHTS? 36 SPECIFIC INFORMATION ABOUT EACH OF THE MUTUAL FUNDS DESCRIBED IN THIS DOCUMENT 36 Introduction 36 Fund details 36 What does the fund invest in? 36 Investments in Derivatives 37 Securities lending, repurchase and reverse transactions 37 Short selling 37 Portfolio turnover rate greater than 70% 37 What are the risks of investing in the fund? 37 Who should invest in this Fund? 38 Investment risk classification methodology 38 Distribution policy 38 Fund expenses indirectly borne by investors TEMPLETON 40 Templeton Asian Growth Fund 42 Templeton Asian Growth Corporate Class 43 Templeton BRIC Corporate Class 44 Templeton Canadian Balanced Fund 45 Templeton Canadian Stock Fund 46 Templeton Canadian Stock Corporate Class 47 Templeton EAFE Developed Markets Fund 48 Templeton Emerging Markets Fund 49 Templeton Emerging Markets Corporate Class 50 Templeton Frontier Markets Fund 52 Templeton Frontier Markets Corporate Class 53 Templeton Global Balanced Fund 55 Templeton Global Bond Fund 56 Templeton Global Bond Fund (Hedged) 58 Templeton Global Bond Hedged Yield Class 60 Templeton Global Smaller Companies Fund 62 Templeton Global Smaller Companies Corporate Class 63 Templeton Growth Fund, Ltd. 65 Templeton Growth Corporate Class 66 Templeton International Stock Fund 68 Templeton International Stock Corporate Class FRANKLIN 71 Franklin Flex Cap Growth Fund 72 Franklin Flex Cap Growth Corporate Class 73 Franklin High Income Fund 75 Franklin Income Fund 77 Franklin Income Corporate Class 78 Franklin Income Hedged Corporate Class 80 Franklin Strategic Income Fund 82 Franklin U.S. Core Equity Fund 83 Franklin U.S. Rising Dividends Fund 85 Franklin U.S. Rising Dividends Corporate Class 86 Franklin U.S. Rising Dividends Hedged Corporate Class 87 Franklin World Growth Fund 89 Franklin World Growth Corporate Class FRANKLIN BISSETT 91 Franklin Bissett All Canadian Focus Fund 92 Franklin Bissett All Canadian Focus Corporate Class 93 Franklin Bissett Bond Fund 95 Franklin Bissett Bond Corporate Class 96 Franklin Bissett Bond Yield Class 98 Franklin Bissett Canadian All Cap Balanced Fund 100 Franklin Bissett Canadian All Cap Balanced Corporate Class 101 Franklin Bissett Canadian Balanced Fund 102 Franklin Bissett Canadian Balanced Corporate Class 103 Franklin Bissett Canadian Dividend Fund 104 Franklin Bissett Canadian Dividend Corporate Class 105 Franklin Bissett Canadian Equity Fund 106 Franklin Bissett Canadian Equity Corporate Class 107 Franklin Bissett Canadian High Dividend Fund 108 Franklin Bissett Canadian High Dividend Corporate Class 109 Franklin Bissett Canadian Short Term Bond Fund 111 Franklin Bissett Canadian Short Term Bond Yield Class 113 Franklin Bissett Corporate Bond Fund 115 Franklin Bissett Corporate Bond Yield Class 117 Franklin Bissett Dividend Income Fund 118 Franklin Bissett Dividend Income Corporate Class 119 Franklin Bissett Energy Corporate Class 120 Franklin Bissett Microcap Fund 121 Franklin Bissett Money Market Fund 122 Franklin Bissett Money Market Corporate Class 123 Franklin Bissett Money Market Yield Class 125 Frankin Bissett Small Cap Fund 126 Franklin Bissett Small Cap Corporate Class 127 Franklin Bissett Strategic Income Fund 129 Franklin Bissett Strategic Income Corporate Class 131 Franklin Bissett Treasury Bill Fund 132 Franklin Bissett U.S. Focus Fund 133 Franklin Bissett U.S. Focus Corporate Class FRANKLIN MUTUAL SERIES 135 Franklin Mutual U.S. Shares Fund (formerly Franklin Mutual Beacon Fund) 137 Franklin Mutual U.S. Shares Corporate Class (formerly Franklin Mutual Beacon Corporate Class) 138 Franklin Mutual Global Discovery Fund 140 Franklin Mutual Global Discovery Corporate Class FRANKLIN TEMPLETON SOLUTIONS 142 Franklin Quotential Balanced Growth Portfolio 144 Franklin Quotential Balanced Growth Corporate Class Portfolio 146 Franklin Quotential Balanced Income Portfolio 148 Franklin Quotential Balanced Income Corporate Class Portfolio 150 Franklin Quotential Diversified Equity Portfolio (formerly Franklin Quotential Global Growth Portfolio) 152 Franklin Quotential Diversified Equity Corporate Class Portfolio (formerly Franklin Quotential Global Growth Corporate Class Portfolio) 154 Franklin Quotential Diversified Income Portfolio 156 Franklin Quotential Diversified Income Corporate Class Portfolio 158 Franklin Quotential Growth Portfolio 160 Franklin Quotential Growth Corporate Class Portfolio 162 Franklin Templeton Canadian Core Equity Fund 163 Franklin Templeton Canadian Large Cap Fund 164 GLOSSARY 164 Book value 164 Capping a Fund or Portfolio or series of a Fund or Portfolio 164 Class 164 Closing a Fund or Portfolio or series of a Fund or Portfolio 164 Corporate Class Funds 165 Deferred sales charge option 165 Dealers 165 Equities, stocks, or shares 165 Fixed income securities 165 Front-load option 165 Low-load option 165 Managed Yield Class Funds 165 Management expense ratio (MER) 165 Money market securities 165 Portfolio turnover rate 166 Franklin Quotential Portfolios or Portfolios 166 Series 166 Term 166 Underlying Funds to Franklin Quotential Portfolios 166 Underlying Funds to Corporate Class Funds 166 Units

3 Introduction In this document, we, us, Manager and Franklin Templeton Investments each refers to Franklin Templeton Investments Corp., the manager of the Franklin Templeton Investments Funds and Franklin Quotential Portfolios (which we refer to generally as the Funds and Portfolios ), and you refers to anyone who invests or is interested in investing in the Funds and Portfolios. This prospectus contains selected important information to help you make informed decisions about investing in the Funds and Portfolios and to help you understand your rights as a mutual fund investor. LOOK FOR THESE BOXES To make this document and our Funds and Portfolios even easier to understand, we have included educational material about the Funds and Portfolios. When you see a box like this one, look for supplementary details about the information in the main text. This document is divided into two parts. The first part, from page 1 to page 35, contains general information that applies to all Funds and Portfolios. The second part, from page 36 to page 163, provides specific information about each Fund and Portfolio described in this document. Additional information about each Fund and Portfolio is available in the following documents: the annual information form ( AIF ); the most recently filed Fund Facts; the most recently filed annual financial statements; any interim financial statements filed after the annual financial statements; the most recently filed annual management report of fund performance; and any interim management report of fund performance filed after that annual management report of fund performance. These documents are incorporated by reference into this prospectus, which means that they legally form part of this document, just as if they were printed as a part of this document. You can request a free copy of any or all of these documents: from your Dealer by calling toll-free by contacting us at service@franklintempleton.ca These documents and other information about the Funds and Portfolios are also available on our website at or at THE PROSPECTUS AND THE AIF The prospectus provides you with information you will need to make an informed investment decision. The AIF provides additional information for investors, such as details about the manager of the Funds and Portfolios, the operations of the Funds and Portfolios, and the directors, officers and trustee of the Funds and Portfolios. Like our prospectus, the AIF is written in plain language. If you would like a copy, let us know. Franklin Templeton investments 1

4 What is a mutual fund and what are the risks of investing in a mutual fund? The Funds and the Portfolios described in this prospectus are all mutual funds. What is a mutual fund? A mutual fund is a pool of money contributed by people with similar investment objectives. A fund is managed by investment professionals who select the securities that are held by the fund. Investors in a fund share the fund s income, expenses, and any gains and losses the fund makes on its investments in proportion to the units they own. By owning units of a mutual fund, investors can have the kind of diversification and professional investment management that is normally only available to institutional investors and wealthy individuals. The value of a mutual fund The value of a mutual fund is its net asset value (NAV). We calculate the NAV of each series of each Fund and Portfolio. The NAV of each series is determined by taking the series proportionate share of all of the assets of the Fund or the Portfolio (the cash and securities in its portfolio), subtracting the series liabilities and the series proportionate share of common liabilities, and dividing by the total number of units of that series that are outstanding. The risks of investing in mutual funds Mutual funds own different types of investments, depending on their investment objectives. The value of the investments a mutual fund owns will vary from day to day, reflecting changes in interest rates, economic conditions, and market and company news. As a result, the value of a mutual fund s units may go up and down, and the value of your investment in a mutual fund may be more or less when you redeem it than when you purchased it. The full amount of your investment in any Fund or Portfolio is not guaranteed. Unlike bank accounts or GICs, mutual fund units and shares are not covered by the Canada Deposit Insurance Corporation or any other government deposit insurer. In certain exceptional circumstances, a mutual fund may suspend redemptions. We describe these circumstances on page 14 under Redeeming Funds or Portfolios. Different kinds of mutual funds have different kinds of risks A mutual fund may own securities of different types, or from different asset classes equities, bonds, cash depending on the fund s investment objectives. For example, a fund whose objective is long-term capital gain will likely invest mostly in equities. A fund whose main objective is to preserve capital in the short term will likely have most of its holdings in money market securities. Different investments have different types of investment risk. Mutual funds also have different kinds of risk, depending on the securities they own. Below is a summary of the various types of investment risk that may be applicable to the Fund or the Portfolio that you decide to purchase. It is important to realize that the Corporate Class Funds (other than Templeton BRIC Corporate Class, Franklin Bissett Energy Corporate Class and the Managed Yield Class Funds), Franklin Bissett Canadian Balanced Fund, Franklin Bissett Strategic Income Fund and the Portfolios (collectively, the Top Funds ) are subject to all the same risks applicable to any of the Funds held or tracked by the Top Funds. The Fund and Portfolio descriptions will tell you which specific risks apply to each Fund or Portfolio. 2 Franklin Templeton investments

5 What is a mutual fund and what are the risks of investing in a mutual fund? We describe the most common risks associated with all of the Funds and Portfolios first. Risks that are specific to fewer Funds or Portfolios, or that affect only a small portion of investments held within a Fund or Portfolio, are described later. EQUITY RISK The value of Funds that invest in equity securities, also called stocks or shares, will be affected by changes in the market price of those securities. The value of Top Funds, whose underlying funds invest in equity securities, will also be affected. The price of a share is influenced by the outlook for the company that issued it and by general economic, industry and market trends. When the economy is strong, the outlook for many companies will be good, and share prices will generally rise. So will the value of mutual funds that own these shares. On the other hand, share prices usually decline with a general economic or industry downturn. FOREIGN INVESTMENT RISK Includes: Foreign equity risk The value of foreign securities may be influenced by the policies of foreign governments and by political, economic or social instability. There may be less information about foreign companies than Canadian firms and there may be lower standards of government supervision and regulation in foreign financial markets. A Fund or Portfolio that holds these securities may have difficulty enforcing legal rights in jurisdictions outside Canada. Foreign currency risk The value of securities issued in foreign currencies, or of securities that pay income in foreign currencies, is affected by changes in the value of the Canadian dollar relative to those currencies. As a result, currency fluctuations may indirectly affect the value of a Fund s investments and, in turn, may also adversely affect the value of Fund securities held by an investor. For example, if the U.S. dollar rises relative to the Canadian dollar, U.S. shares will be worth more in Canadian dollars. On the other hand, if the U.S. dollar falls, U.S. shares will be worth less in Canadian dollars. Funds or series whose strategy includes currency hedging will seek to minimize this risk. To the extent that a Fund does not hedge its foreign currency risk, the value of that Fund s assets and income could be adversely affected by currency exchange rate movements. Foreign currency hedging risk Certain Funds will invest in derivatives, such as forward contracts, to attempt to eliminate the effect of changes in exchange rates, however there is no guarantee that attempts to hedge currency risk will be successful and no hedging strategy can eliminate currency risk entirely. There may be an imperfect historical correlation between the behavior of the derivative instrument and the currency being hedged. Any historical correlation may not continue for the period during which the hedge is in place. In addition, the inability to close out derivative positions could prevent the Fund from investing in derivatives to effectively hedge its currency exposure. Should a hedging strategy be incomplete or unsuccessful, the value of that Fund s assets and income can remain vulnerable to fluctuations in currency exchange rates. There may be circumstances in which a hedging transaction may reduce currency gains that would otherwise arise in the valuation of the relevant Fund. The gains or losses on and the costs of such hedging transactions will accrue solely to the relevant series of the Funds. INTEREST RATE RISK The interest rate on a bond is set when it is issued. When interest rates fall, the price of existing bonds will rise because existing bonds pay higher rates than new bonds, and are therefore worth more. On the other hand, when interest rates rise, the price of existing bonds will fall. The value of Funds that invest in bonds will be affected by changes in interest rates and so will the value of Top Funds whose underlying funds hold such bonds. The value of debt securities that pay a floating or variable rate of interest are generally less price sensitive to interest rate changes. Funds that invest in convertible securities also carry interest rate risk. These securities provide a fixed income stream, so their value varies inversely with interest rates, just like bond prices. However, because they can be converted into common shares, convertible securities are less affected by interest rate fluctuations than bonds. EMERGING MARKETS RISK In emerging market countries, securities markets may be smaller than in more developed countries, making it more difficult to sell securities in order to take profits or avoid losses. Companies in these markets may have limited product lines, markets or resources, making it difficult to measure the value of the company. Political instability and possible corruption, as well as lower standards of regulation for business practices increase the possibility of fraud and other legal problems. The value of Funds that buy these investments and of Top Funds holding underlying funds that buy such investments may rise and fall substantially. SMALLER COMPANIES RISK The share price of smaller companies is usually more volatile than that of more established larger companies. Smaller companies may be developing new products which have not yet been tested in the marketplace or their products may quickly become obsolete. They may have limited resources, including limited access to funds or unproven management, and may trade less frequently and in smaller volume than shares of large companies. They may have few shares outstanding, so a sale or purchase of shares will have a greater impact on the share price. The value of Top Funds, whose underlying funds buy these investments, may rise and fall substantially. LIQUIDITY RISK Illiquid securities are securities with a limited trading market. They may be difficult to value accurately or to sell, and may trade at a price significantly lower than their value. The value of Top Funds, whose underlying funds buy these investments, may rise and fall substantially. To mitigate this risk, a mutual fund is restricted from purchasing additional illiquid securities if more than 10% of its assets based on market value are already invested in illiquid securities. LOW-RATED SECURITY RISK Some investments offer a better return than others because they carry higher risk. They may have a credit rating below investment grade or be unrated. These investments may be hard to value because market quotations are unavailable, and they may be less Franklin Templeton investments 3

6 What is a mutual fund and what are the risks of investing in a mutual fund? liquid than higher-grade investments. They have the potential for substantial loss as well as gain, as will the Top Funds that hold Funds, which invest in low-rated securities. REGULATORY RISK Some industries, such as health care and telecommunications, are heavily-regulated and may receive government funding. Investments in these sectors may be substantially affected by changes in government policy, such as deregulation or reduced government funding. The value of Top Funds, whose underlying funds buy these investments, may rise and fall substantially. CREDIT RISK This is the risk that an issuer of a bond or other fixed income security will not be able to pay interest or repay the principal when it is due. This risk is generally lower if the issuer has a high credit rating from an independent credit rating agency while it is generally higher if the issuer has a low credit rating or no credit rating. The prices of securities with lower ratings tend to fluctuate more than prices of securities with higher ratings. REINVESTMENT RISK A Fund that invests in bonds and other fixed income securities may carry the risk that interest income or principal repayments from the Fund s investments will be reinvested at lower interest rates in the event of a declining rate environment. CONCENTRATION RISK A Fund that has invested a larger portion of its assets in a single issuer may be less diversified and may experience larger fluctuations in value as a result of the price volatility of that issuer. In addition, the Fund may not be able to sell its full investment in that issuer at current prices if there is a shortage of buyers willing to purchase those securities. Consequently, it could be more difficult for the Fund to obtain a reasonable price for that issuer s securities. To mitigate this risk, subject to certain exceptions, a mutual fund is restricted from purchasing additional securities if more than 10% of its assets based on market value are already invested in an issuer. Certain of the Funds have received an exemption from this restriction. CAPITAL DEPLETION RISK Certain Funds, as well as Series R, S, T and T-USD units of the Funds and Portfolios, may make distributions comprised in whole or in part, of return of capital. A return of capital distribution reduces the amount of your original investment and may result in the return to you of the entire amount of your original investment. This distribution should not be confused with yield or income. Return of capital distributions that are not reinvested will reduce the net asset value of the Fund or Portfolio, which could reduce the Fund s or Portfolio s ability to generate future distributions. DERIVATIVE RISK Although derivatives are often used by mutual funds to avoid risk, they have their own kinds of risk. Any Fund or Portfolio that invests in derivatives, or that holds other Funds, which invest in derivatives would also be subject to these risks: The use of derivatives for hedging may not be effective. Some derivatives may limit a Fund s or Portfolio s potential for gain as well as loss. The cost of entering and maintaining derivative contracts may reduce the Fund s or Portfolio s total return to investors. The price of a derivative may not accurately reflect the value of the underlying currency or security. This could prevent the Fund or Portfolio from making a profit or limiting its losses. When entering into a derivative contract, a Fund or Portfolio may be required to deposit funds or securities with the counterparty. If the counterparty goes bankrupt, the Fund or Portfolio could lose or be delayed in recovering these deposits. If a Fund or Portfolio gives a security interest to the counterparty, it may be enforced against the fund s assets. There is no guarantee a market will exist when a Fund or Portfolio wants to close its derivative contract. This could prevent the Fund or Portfolio from making a profit or limiting its losses. The exchanges on which the derivatives are traded may set daily trading limits, preventing a Fund or Portfolio from closing out a contract. If derivatives are being traded on foreign markets, it may be more difficult and take longer to complete the transaction. Foreign derivatives can also be more risky than derivatives traded on North American markets. If the other party to a derivative contract is unable to meet its obligations, the Fund or Portfolio may experience a loss. To minimize this risk, the Fund or Portfolio will select counterparties with a credit rating at least as high as the minimum credit rating required under securities legislation. Where a market change is expected, a Fund or Portfolio may not be able to find a suitable counterparty against which to hedge the market risk REPURCHASE/REVERSE REPURCHASE AGREEMENTS RISK A repurchase agreement involves selling a security at one price and simultaneously agreeing to buy it back at a fixed price. A reverse repurchase agreement involves buying a security at one price and simultaneously agreeing to sell it back at a higher price. A Fund or Portfolio may suffer a loss if the other party to the agreement becomes insolvent. The value of the purchased securities may drop or the value of the sold securities may rise between the time the other party becomes insolvent and the time the Fund or Portfolio recovers its investment. The Fund or Portfolio reduces this risk by holding enough of the other party s securities or cash as collateral to cover its commitments in the agreements. This means the Fund or Portfolio will never have to borrow to meet its obligations under the agreements. To limit the risks associated with repurchase and reverse repurchase transactions, the Funds or Portfolios require the other party to put up collateral the value of which must be at least 102% of the market value of the security sold (for a repurchase transaction) or cash loaned (for a reverse repurchase transaction). The value of the collateral is confirmed and reset daily. A Fund or Portfolio cannot lend more than 50% of the total value of its assets through securities lending or repurchase transactions. SECURITIES LENDING RISK Securities lending involves lending portfolio securities held by a Fund or Portfolio to qualified borrowers who have posted collateral for a fee and a set period of time. In lending its securities, a Fund or Portfolio is subject to the risk that the borrower may not fulfill its obligations leaving the Fund or Portfolio holding collateral worth less than the securities it has lent, resulting in a loss to the Fund or Portfolio that holds the Fund or Portfolio. To limit this risk a Fund or Portfolio must hold collateral worth no less than 102% of the value of the loaned securities and the amount of collateral is adjusted 4 Franklin Templeton investments

7 What is a mutual fund and what are the risks of investing in a mutual fund? daily to ensure this level is maintained, the collateral may only consist of cash, qualified securities or securities that can be immediately converted into identical securities to those that have been loaned, a Fund or Portfolio cannot lend more than 50% of the total value of its assets through securities lending or repurchase transactions and a Fund s or Portfolio s total exposure to any one borrower in securities, derivative transactions and securities lending must be less than 10% of the total value of the Fund s or Portfolio s assets. SHORT SELLING RISK Certain Funds may engage in a limited amount of short selling. A short sale is where a Fund borrows securities from a lender and sells them in the open market ( short sale ). The Fund must repurchase the securities at a later date in order to return them to the lender. In the interim, the proceeds from the short sale are deposited with the lender and the Fund pays interest to the lender on the borrowed securities. If the value of the securities declines between the time of the initial short sale and the time it repurchases and returns the securities, the Fund makes a profit for the difference (less any interest paid by the Fund to the lender). If the price of the borrowed securities rises, however, a loss to the Fund results. There are risks associated with short selling, namely that the borrowed securities will rise in value or not decline enough to cover the Fund s borrowing costs. The Fund may also experience difficulties in repurchasing the borrowed securities if a liquid market for the securities does not exist. In addition, the lender from whom the Fund has borrowed securities may become bankrupt, causing the borrowing Fund to lose the collateral it deposited with the lender. To limit the risks associated with short sale transactions, a Fund will adhere to controls and limits that are intended to offset these risks by short selling only securities of larger issuers for which a liquid market is expected to be maintained and by limiting the amount of exposure for short sales. A Fund will also deposit collateral only with lenders that meet certain criteria for creditworthiness and only up to certain limits. Although some Top Funds may not engage in short selling directly, they may be exposed to short selling because the Underlying Funds in which they invest, or the Fund s whose returns they track, may be engaged in short selling. UNDERLYING FUND RISK Franklin Templeton Investments Corp. and unaffiliated third parties may offer investment products which use a fund on fund structure whereby a Top Fund invests all or a significant portion of its assets in a bottom or underlying fund. Depending on the size of the investment being made by a Top Fund in an underlying fund and the timing of the redemption of this investment, an underlying fund could be forced to alter its portfolio assets significantly to accommodate a large redemption order. This could negatively impact the performance of an underlying fund as it may have to dispose prematurely of portfolio assets that have not yet reached a desired market value, resulting in a loss to the underlying fund. ASSET ALLOCATION RISK Funds and Portfolios that use a fund on fund structure allocate their assets among underlying funds with the goal of ensuring that the asset class, investment style, geographic and market capitalization allocation for each Fund or Portfolio is optimal. There can be no guarantee that a Fund or Portfolio will allocate its assets successfully. Similarly, there can be no guarantee against losses resulting from the asset allocation. PORTFOLIO MANAGEMENT RISK All actively managed mutual funds are dependent on their portfolio advisor(s) to select individual securities or other investments and, therefore, are subject to the risk that poor security selection or market allocation will cause a mutual fund to underperform relative to its benchmark or other mutual funds with similar investment objectives. SERIES RISK All of the Funds and Portfolios are available in more than one series of units. Each series has its own fees and expenses which each Fund and each Portfolio tracks separately. If a Fund or Portfolio cannot pay the expenses of one series using that series proportionate share of the Fund or Portfolio assets, it may have to pay those expenses out of the other series proportionate share of the assets, which could lower the investment return of those other series. CORPORATE CLASS FUND RISK While the assets and liabilities of each Corporate Class Fund are tracked separately, Franklin Templeton Corporate Class Ltd. as a whole is responsible for all of the financial obligations of the Corporate Class Funds combined. If a Corporate Class Fund cannot pay its expenses using its proportionate share of the assets, Franklin Templeton Corporate Class Ltd. may have to pay those expenses out of the other Corporate Class Funds assets which could lower the investment return of those other Corporate Class Funds. As well, the tax consequences of an investment in a Corporate Class Fund will depend in part on the tax position of Franklin Templeton Corporate Class Ltd. as a whole and will differ from an investment in a mutual fund that is not part of a multi-class structure. Please see the Glossary on page 164 and Corporate Class Funds on page 13 for more information on the Corporate Class Funds. LARGE INVESTOR RISK Securities of the Funds or Portfolios may be purchased and redeemed by large investors, such as financial institutions or other mutual funds. These investors may purchase or redeem large numbers of securities of a Fund or Portfolio at one time. The purchase or redemption of a substantial number of securities of a Fund or Portfolio may require the portfolio advisor to change the composition of a portfolio significantly or may force the portfolio advisor to buy or sell investments at unfavourable prices, which can affect Fund or Portfolio performance and may increase realized capital gains of the Fund or Portfolio. SPECIALIZATION RISK Some funds specialize in investing in a particular industry or region of the world. This allows the portfolio advisor to focus on the potential of that industry or geographic area, but it also means that the fund may be more volatile if there is a downturn in the industry or the geographic area since there are relatively few other investments to offset the downturn. These specialty funds must continue to invest in a particular industry or geographic area even if it is performing poorly. TRACKING RISK Certain mutual funds (the Tracking Funds ) may seek to have all or a substantial portion of their returns linked to the performance of units of one or more mutual fund(s) (the Reference Fund ) by either directly purchasing the appropriate securities or by entering into forward contracts and other derivative instruments. The return (performance) of a Tracking Fund may be lower than that of its respective Reference Fund because the Tracking Fund bears its own Franklin Templeton investments 5

8 What is a mutual fund and what are the risks of investing in a mutual fund? fees and expenses, including the costs of any forward contracts and other derivatives that it may use to achieve its investment objectives. Additionally, there may be a delay between the time an investor buys units of a Tracking Fund and the time the Tracking Fund gets additional exposure to the Reference Fund. During this delay, the Tracking Fund may be unable to track the performance of its corresponding Reference Fund. Such performance lags and tracking errors could result in the unit or share price of the Tracking Fund not precisely tracking the unit or share price of its Reference Fund. ASSET-BACKED AND MORTGAGE-BACKED SECURITIES RISK Asset-backed securities are debt obligations that are backed by pools of consumer or business loans. Some asset-backed securities are short-term debt obligations, called asset-backed commercial paper ( ABCP ). Mortgage-backed securities are debt obligations backed by pools of mortgages on commercial or residential real estate. If there are changes in the market perception of the issuers of these types of securities, or in the creditworthiness of the parties involved, then the value of the securities may be affected. In addition, for ABCP, there is a risk that there may be a mismatch in timing between the cash flow of the underlying assets backing the security and the repayment obligation of the security upon maturity. In the use of mortgage-backed securities, there is also a risk that there may be a drop in the interest rates charged on the mortgages, a mortgagor may default on its obligations under a mortgage or there may be a drop in the value of the property secured by the mortgage. TAX RISK Templeton Growth Fund, Ltd. and Franklin Templeton Corporate Class Ltd. may become subject to tax on certain income earned by the corporation. Where either of these corporations become subject to tax, the board of directors of the corporation will allocate the tax payable by the corporation against the net asset value of such Series of the corporation (in the case of Templeton Growth Fund, Ltd.), or such Series of such Corporate Class Funds that make up the corporation (in the case of Franklin Templeton Corporate Class Ltd.) as it, in its absolute discretion, determines to be fair and equitable. 6 Franklin Templeton investments

9 Organization and management of the Franklin Templeton Investments Funds and Portfolios MANAGER Franklin Templeton Investments Corp Yonge Street Suite 900 Toronto, Ontario M2N 0A7 The manager is responsible for the business and operation of the Funds and Portfolios. We provide all general administrative and management services, such as: calculating net asset values and preparing financial statements calculating and arranging for payment of distributions to investors and commissions to Dealers making regulatory and tax filings providing or coordinating all other services required by the Funds and Portfolios office space, facilities and administrative support. These services are offered to Series O and Series R investors under agreements between the investor and the Manager. PORTFOLIO ADVISORS Except in respect of Franklin Templeton Canadian Core Equity Fund and Franklin Templeton Canadian Large Cap Fund, all of the portfolio advisors or sub-advisors are affiliates or part of the Manager. Acuity Investment Management Inc., Toronto, Ontario, is the sub-advisor to Franklin Templeton Canadian Core Equity Fund and Foyston, Gordon & Payne Inc., Toronto, Ontario, is the sub-advisor to Franklin Templeton Canadian Large Cap Fund. The portfolio advisors manage the investment portfolios of the Funds and Portfolios. Franklin Bissett Investment Management is part of the Manager. Some of the Funds use sub-advisors appointed by us to provide advice for a portion or for the entire portfolio. If a sub-advisor has been appointed, they are named in the Fund Details section for the Fund in the Fund Specific Information section of the prospectus. Under securities law, we are required to advise you that where portfolio management services are provided by an advisor or sub-advisor located outside of Canada, it may be difficult to enforce any legal rights against them because all or substantially all of their assets are located outside of Canada. International sub-advisors are not fully subject to the requirements of Canadian securities legislation and we are responsible for the investment advice provided by the following entities in their capacity as sub-advisors to the Funds: Templeton Global Advisors Limited, Templeton Asset Management Ltd., Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Mutual Advisers, LLC and Franklin Templeton Institutional, LLC. Franklin Advisers, Inc., Franklin Mutual Advisers, LLC and Franklin Templeton Institutional, LLC have received an exemption from the Commodity Futures Act (Ontario) (the CFA ) registration requirements in respect of any trades made by the Funds they advise in commodity futures contracts and commodity futures options traded on commodity futures exchanges outside of Canada and cleared through clearing corporations outside of Canada. Accordingly, they will not be CFA registrants and the protections available to CFA registered clients will not be available to investors in the Funds they advise. Franklin Templeton investments 7

10 Organization and management of the Franklin Templeton Investments Funds and Portfolios PRINCIPAL DISTRIBUTORS Franklin Templeton Investments Corp. Toronto, Ontario FTC Investor Services Inc. ( FTC ISI ) Toronto, Ontario (for Series F, O, R and S units) As the principal distributors, we and FTC ISI market the Funds and Portfolios and arrange for sale of their units through Dealers across Canada. We may retain companies to assist in the sale of the Funds and Portfolios under the deferred sales charge options. CUSTODIAN Templeton Growth Fund, Ltd. Templeton Global Bond Fund JPMorgan Chase Bank New York, New York All Franklin Mutual Series Funds, Franklin Funds (other than Franklin World Growth Fund and Franklin World Growth Corporate Class), Templeton Global Balanced Fund and each of their respective Corporate Class Funds (where applicable) CIBC Mellon Trust Company Toronto, Ontario All other Funds and Portfolios J.P. Morgan Bank Canada Toronto, Ontario The custodian, or any sub-custodian it may appoint, has physical custody of the investments made for the Funds and Portfolios. REGISTRAR AND TRANSFER AGENT Franklin Templeton Investments Corp. Toronto, Ontario The registrar and transfer agent: maintains account records of the owners of Fund and Portfolio units carries out all purchase, redemption, conversion and switch orders provides reporting and statements to investors and Dealers TRUSTEE Franklin Templeton Investments Corp. Toronto, Ontario For Funds and Portfolios that are organized as trusts, the trustee holds title to the securities owned by the Funds and Portfolios on behalf of unitholders. AUDITOR PricewaterhouseCoopers LLP Chartered Professional Accountants Toronto, Ontario The auditor audits the annual financial statements of the Funds and the Portfolios. Unitholder approval will not be required for a change in the auditor of a Fund or Portfolio provided the Independent Review Committee has approved such change and unitholders receive notice 60 days in advance of any such change in auditor. INDEPENDENT REVIEW COMMITTEE In accordance with National Instrument Independent Review Committee for Mutual Funds, the Manager has established an Independent Review Committee ( IRC ) to provide impartial judgment on conflicts of interest matters related to the operations of the Funds and Portfolios. The IRC prepares at least annually, a report of its activities for unitholders which is available on our website at or, at your request and at no cost, by calling toll-free or by at service@franklintempleton.ca. Currently, the members of the IRC are D. George Kelly (Chair), Bruce Galloway and Gary Norton. Additional information about the IRC is available in the Annual Information Form. In certain circumstances, your approval may not be required under securities legislation to effect a fund merger provided that the IRC has approved such change and unitholders receive notice 60 days in advance of any such fund merger. Fund on Fund Structures Each of the Top Funds invests in other mutual funds, including mutual funds managed by the Manager. Shareholders or unitholders of a Top Fund have no rights of ownership in the securities of the underlying fund(s). Where the Manager is the manager of both the Top Fund and the underlying funds in which the Top Fund invests, it will not vote the securities of the underlying funds. The Manager is permitted to arrange for these securities to be voted by the beneficial unitholders of the applicable Top Fund. However, given the complexity and costs associated with implementing a flow-through voting structure, it is unlikely that we will arrange for a flow-through of voting rights. 8 Franklin Templeton investments

11 Purchases, switches and redemptions Classes and Series In this prospectus, we use the term series of units of mutual fund trusts in a general way which includes series of shares of mutual fund corporations. All of the Funds and Portfolios (other than Templeton Growth Fund, Ltd. and the Corporate Class Funds) are organized as mutual fund trusts. Templeton Growth Fund, Ltd. and Franklin Templeton Corporate Class Ltd. are mutual fund corporations. The Corporate Class Funds are actually different classes of shares of Franklin Templeton Corporate Class Ltd. The Corporate Class Funds are structured to provide some potential tax benefits to investors when switching between Corporate Class Funds. See Corporate Class Funds on page 13 and Income tax considerations for investors on page 32 for more details. The Funds or Portfolios in this prospectus offer up to nine series of units Series A, A (Hedged), F, I, O, R, S, T and T-USD. The table below sets out the availability of Funds and Portfolios in each series: Series Funds or Portfolios Available Series Funds or Portfolios Available A All Funds and Portfolios A (Hedged) Templeton Growth Fund, Ltd. F All Funds and Portfolios I Templeton Asian Growth Corporate Class Templeton BRIC Corporate Class Templeton Emerging Markets Fund Templeton Global Bond Fund Templeton Global Bond Fund (Hedged) Templeton Global Bond Hedged Yield Class Templeton Global Smaller Companies Fund and its respective Corporate Class Fund Templeton Growth Fund, Ltd. and its respective Corporate Class Fund Templeton International Stock Fund and its respective Corporate Class Fund Franklin High Income Fund Franklin Income Fund and its respective Corporate Class Fund Franklin Income Hedged Corporate Class Franklin Strategic Income Fund Franklin Bissett All Canadian Focus Fund and its respective Corporate Class Fund Franklin Bissett Bond Fund and its respective Corporate Class Fund Franklin Bissett Bond Yield Class Franklin Bissett Canadian All Cap Balanced Fund and its respective Corporate Class Fund Franklin Bissett Canadian Balanced Fund Franklin Bissett Canadian Dividend Corporate Class Franklin Bissett Canadian Equity Fund and its respective Corporate Class Fund Franklin Bissett Canadian High Dividend Fund and its respective Corporate Class Fund Franklin Bissett Canadian Short Term Bond Yield Class Franklin Bissett Corporate Bond Fund Franklin Bissett Corporate Bond Yield Class Franklin Bissett Dividend Income Fund and its respective Corporate Class Fund O R Franklin Bissett Money Market Fund and its respective Corporate Class Fund Franklin Bissett Money Market Yield Class Franklin Bissett Strategic Income Fund Franklin Bissett Strategic Income Corporate Class Franklin Bissett Treasury Bill Fund Franklin Mutual Global Discovery Fund and its respective Corporate Class Fund Franklin Mutual U.S. Shares Fund and its respective Corporate Class Fund Franklin Quotential Balanced Growth Portfolio Franklin Quotential Balanced Growth Corporate Class Portfolio Franklin Quotential Balanced Income Portfolio Franklin Quotential Balanced Income Corporate Class Portfolio Franklin Quotential Diversified Equity Portfolio Franklin Quotential Diversified Equity Corporate Class Portfolio Franklin Quotential Diversified Income Portfolio Franklin Quotential Diversified Income Corporate Class Portfolio Franklin Quotential Growth Portfolio Franklin Quotential Growth Corporate Class Portfolio All Funds and Portfolios Templeton Global Bond Hedged Yield Class Franklin Income Fund and its respective Corporate Class Fund Franklin Income Hedged Corporate Class Franklin Bissett Canadian Dividend Corporate Class Franklin Bissett Canadian Equity Corporate Class Franklin Bissett Strategic Income Corporate Class Franklin Quotential Balanced Growth Portfolio Franklin Quotential Balanced Growth Corporate Class Portfolio Franklin Quotential Balanced Income Portfolio Franklin Quotential Balanced Income Corporate Class Portfolio Franklin Quotential Diversified Equity Portfolio Franklin Quotential Diversified Equity Corporate Class Portfolio Franklin Quotential Growth Portfolio Franklin Quotential Diversified Income Corporate Class Portfolio Franklin Templeton investments 9

12 Purchases, switches and redemptions Series Funds or Portfolios Available Series Funds or Portfolios Available S T Templeton Global Balanced Fund Templeton Global Bond Hedged Yield Class Franklin Income Fund and its respective Corporate Class Fund Franklin Income Hedged Corporate Class Franklin Bissett Canadian Dividend Corporate Class Franklin Bissett Strategic Income Corporate Class Franklin Quotential Balanced Growth Portfolio Franklin Quotential Balanced Growth Corporate Class Portfolio Franklin Quotential Balanced Income Portfolio Franklin Quotential Balanced Income Corporate Class Portfolio Franklin Quotential Diversified Equity Corporate Class Portfolio Franklin Quotential Diversified Income Portfolio Franklin Quotential Diversified Income Corporate Class Portfolio Franklin Quotential Growth Corporate Class Portfolio Templeton Canadian Balanced Fund Templeton Global Balanced Fund Templeton Global Bond Hedged Yield Class Templeton International Stock Fund and its respective Corporate Class Fund Franklin Bissett Canadian All Cap Balanced Fund and its respective Corporate Class Fund Franklin Bissett Canadian Balanced Fund and its respective Corporate Class Fund Franklin Bissett Canadian Dividend Corporate Class Franklin Bissett Canadian Equity Corporate Class Franklin Bissett Canadian High Dividend Corporate Class Franklin Bissett Corporate Bond Yield Class T T-USD Franklin Bissett Dividend Income Fund and its respective Corporate Class Fund Franklin Bissett Strategic Income Corporate Class Franklin Income Fund and its respective Corporate Class Fund Franklin Income Hedged Corporate Class Franklin U.S. Rising Dividends Fund and its respective Corporate Class Fund Franklin U.S. Rising Dividends Hedged Corporate Class Franklin World Growth Fund and its respective Corporate Class Fund Franklin Mutual Global Discovery Fund and its respective Corporate Class Fund Franklin Mutual U.S. Shares Fund and its respective Corporate Class Fund Franklin Quotential Balanced Growth Portfolio Franklin Quotential Balanced Growth Corporate Class Portfolio Franklin Quotential Balanced Income Portfolio Franklin Quotential Balanced Income Corporate Class Portfolio Franklin Quotential Diversified Equity Portfolio Franklin Quotential Diversified Equity Corporate Class Portfolio Franklin Quotential Growth Portfolio Franklin Quotential Diversified Income Portfolio Franklin Quotential Diversified Income Corporate Class Portfolio Franklin Quotential Growth Corporate Class Portfolio Templeton Global Balanced Fund Franklin Income Fund and its respective Corporate Class Fund Franklin Mutual Global Discovery Fund and its respective Corporate Class Fund Franklin Quotential Diversified Equity Portfolio Franklin Quotential Diversified Equity Corporate Class Portfolio Franklin Quotential Diversified Income Corporate Class Portfolio ABOUT SERIES A, A (HEDGED), F, I, O, R, S, T AND T-USD UNITS For minimum investments required to purchase Series A, A (Hedged), F, I, O, R, S, T and T-USD units of the Funds or the Portfolios, please see Buying Funds and Portfolios and Minimum investments on page 12 for details. To determine which particular series of Funds or Portfolios is right for you, please see below. SERIES A UNITS Series A units are available to all investors, subject to certain minimum investment requirements. SERIES A (HEDGED) UNITS Series A (Hedged) units are available to all investors who are interested in investing in Templeton Growth Fund, Ltd., subject to certain minimum investment requirements. Templeton Growth Fund, Ltd. holds a significant portion of securities traded in currencies ( Currencies of Investment ) other than the Canadian dollar. The value of such securities may decrease if the Currencies of Investment fall relative to the Canadian dollar. Therefore, a hedging strategy is employed by the Fund that seeks to reduce, as far as possible, the influence of changes in the exchange rate between the Canadian dollar and the currencies of securities held by Templeton Growth Fund, Ltd. on the portion of the Fund s net assets attributable to the Series A (Hedged) units outstanding. SERIES F UNITS Series F units are available to investors who qualify as Series F investors as determined by the Manager in its discretion, including: investors who participate in dealer-sponsored fee-for-service or wrap programs and who pay their advisor an hourly fee or annual asset-based fee rather than commissions on each transaction investors whose Dealer is FTC Investor Services Inc. investors who purchase, sell or hold their securities through a discount brokerage account any other groups of investors for whom we do not incur distribution costs. Investors wishing to purchase Series F units must also meet the minimum investment requirements. Series F units are designed for investors participating in programs that do not require us to incur distribution costs in the form of trailing commissions to Dealers. We are able to reduce our management fee on the Series F units because our costs to distribute these units are lower. Participation in Series F units is only available with the consent of your Dealer. 10 Franklin Templeton investments

13 Purchases, switches and redemptions SERIES I UNITS Series I units are available to investors who have in total invested a minimum of $100,000 with the Manager. The Series I units are designed for certain investors who have made an arrangement with their Dealer to purchase a series of units with reduced management fees because of the lower trailing commissions paid to Dealers on Series I units. SERIES O UNITS Series O units are available to certain investors at the Manager s discretion, including: certain investors who invest at least $500,000, within a period of six months from initial purchase of Series O units, with the Manager any related Funds and certain other third party mutual funds that use a fund on fund structure and who meet the Series O guidelines established by the Manager the Corporate Class Funds that purchase units in the Underlying Funds to the Corporate Class Funds Franklin Bissett Canadian Balanced Fund and Franklin Bissett Strategic Income Fund that each purchases units in a number of Funds the Franklin Quotential Portfolios that purchase units in a number of Underlying Funds to Franklin Quotential Portfolios the counterparties to derivatives contracts entered into by the Funds directors and employees of the Funds, the Portfolios, the Manager or its affiliates other specific classes of investors who meet the Series O guidelines established by the Manager. To qualify to purchase Series O units, you must also have entered into a Series O unit agreement with the Manager. SERIES R UNITS Series R units are designed for investors seeking regular monthly cash flows from a Portfolio. Monthly distributions for each Portfolio will consist of net income and/or a return of capital, which can either be reinvested in additional units or paid in cash (except for units held in a Franklin Templeton Investments registered plan which must be invested in additional units of the Fund or Portfolio). Any net income not distributed during the year, as well as capital gains, will be distributed annually in December and must be reinvested in additional units of the Portfolio. Series R units are available to certain investors at the Manager s discretion, including: certain investors who invest at least $500,000, within a period of six months from initial purchase of Series R units, with the Manager directors and employees of the Funds, the Portfolios, the Manager or its affiliates other specific classes of investors who meet the Series R guidelines established by the Manager. To qualify to purchase Series R units, you must also have entered into a Series R agreement with the Manager. SERIES S UNITS Series S units are available to all investors subject to certain minimum investment requirements. Series S units are designed for investors seeking regular monthly cash flows from a Fund or Portfolio. Monthly distributions for each Fund or Portfolio will consist of net income and/or a return of capital, which can either be reinvested in additional units or paid in cash (except for units held in a Franklin Templeton Investments registered plan which must be invested in additional units of the Fund or Portfolio). Any net income not distributed during the year, as well as capital gains, will be distributed annually in December and must be reinvested in additional units of the Fund or Portfolio. Series S units are available to investors who qualify as Series S investors as determined by the Manager in its discretion, including: investors who participate in dealer-sponsored fee-for-service or wrap programs and who pay their advisor an hourly fee or annual asset-based fee rather than commissions on each transaction investors whose Dealer is FTC Investor Services Inc. investors who purchase, sell or hold their securities through a discount brokerage account any other groups of investors for whom we do not incur distribution costs. Series S units are designed for investors participating in programs that do not require us to incur distribution costs in the form of trailing commissions to Dealers. We are able to reduce our management fee on the Series S units because our costs to distribute these units are lower. Participation in Series S units is only available with our prior consent and the consent of your Dealer organization. SERIES T UNITS (INCLUDING SERIES T-USD UNITS) Series T units are available to all investors, subject to certain minimum investment requirements. Series T units are designed for investors seeking regular monthly cash flows from a Fund or Portfolio. Monthly distributions for each Fund or Portfolio will consist of net income and/or a return of capital, which can either be reinvested in additional units or paid in cash (except for units held in a Franklin Templeton Investments registered plan which must be invested in additional units of the Fund or Portfolio). With our Flexible Series T solution, you also have the option of choosing to have a portion of your dividends or distributions paid out as cash and the remainder reinvested. Please speak with your investment advisor for more information on Flexible Series T. Any net income not distributed during the year, as well as capital gains, will be distributed annually in December and must be reinvested in additional units of the Fund or Portfolio. Monthly distributions for Series T-USD are an amount fixed in U.S. dollars and will therefore not fluctuate based on the exchange rate of the Canadian dollar. Accordingly, the distributions for Series T-USD units and the net asset value ( NAV ) will differ from that of the Canadian dollar Series T units. The price of a Fund or Portfolio We calculate the net asset value ( NAV ) for each series of units of each Fund or Portfolio at the close of trading on The Toronto Stock Exchange ( TSX ) every business day (usually 4 p.m. ET). For Funds and Portfolios available in U.S. dollars, we calculate the NAV in Canadian dollars and convert it into U.S. dollars using that day s exchange rate. Although Series T-USD units are denominated in Canadian dollars, the monthly distributions for Series T-USD units are an amount fixed in U.S. dollars and will therefore not fluctuate based on the exchange rate of the Canadian dollar. The distributions for Series T-USD units (and the NAV) will therefore differ from that of the Canadian dollar Series T units. If we receive your transaction request in good order by the close of trading on the TSX, we will process your order at the NAV (and the exchange rate, if applicable) on that date. Otherwise, we will process your order on the next business day. Franklin Templeton investments 11

14 Purchases, switches and redemptions THE PRICE OF A MUTUAL FUND The NAV of any mutual fund is calculated by: adding up the fund s assets (its holdings in equity, fixed income and money market securities, cash, and receivables) subtracting the fund s liabilities (any money the fund owes, for example, accrued management fees) The NAV in respect of a series of units is called its series net asset value per unit: assets attributable liabilities attributable to the series to the series = price of a unit = NAV per unit number of units of the series For example: $24,000,000 $4,000,000 = $20 per unit 1,000,000 units The prices change daily with changes in the market value of the securities each Fund or Portfolio holds. Opening a Franklin Templeton Investments Account You can open a new account by contacting your investment advisor and completing an application. If you do not have an investment advisor, you may call our Client Services team at We will be pleased to provide you with options available in your area. THE KNOW YOUR CLIENT RULE Franklin Templeton Investments Funds and Franklin Quotential Portfolios are sold through Dealers. The know your client rule ensures that your investment advisor knows about your investment needs and objectives and about your level of investment knowledge. With this information and his or her own expertise, your advisor can recommend the selection of Funds or Portfolios that is best for you. How to buy, switch or redeem Funds and Portfolios You can buy, switch or redeem Funds and Portfolios through Dealers across Canada. Your Dealer may place an order with us by: electronic transmission written request via mail or courier phone or fax. You buy, switch or redeem Funds or Portfolios at their NAV per unit of that particular series. Buying Funds and Portfolios WHO CAN BUY THE FUNDS AND PORTFOLIOS? The Funds and Portfolios are offered for sale to residents of Canada on a continuous basis, which means, subject to certain restrictions, you can buy, switch or redeem any number of units or shares at any time. We reserve the right, from time to time, to cap or close a Fund or Portfolio or any series of a Fund or Portfolio if it is determined to be in the best interest of the Fund or Portfolio or series of the Fund or Portfolio and the unitholders. If we do cap or close a Fund or Portfolio or a series of a Fund or Portfolio it may be re-opened for investment at our discretion. Any capping or closing of a Fund or Portfolio or any series of a Fund or Portfolio will not impact redemption rights of unitholders. Units of the Funds and Portfolios are not registered for sale in any jurisdiction outside Canada. You may not purchase units of the Funds or Portfolios: outside Canada for yourself if you live outside Canada on behalf of a person living outside Canada if this practice is against the law where you or the other person resides, or such foreign residency has negative legal, regulatory or tax implications for a Fund or Portfolio. In some jurisdictions outside Canada, a purchase of Fund or Portfolio units is not against the law as long as the purchase is unsolicited. In these jurisdictions, you and your Dealer are responsible for submitting only those purchase orders that have been initiated by you. U.S. Persons (as defined by Regulation S of the U.S. Securities Act of 1933, or by the U.S. Commodity Futures Trading Commission) are not eligible to invest in the Funds or Portfolios. In the absence of written notice to the Funds or Portfolios to the contrary, the provision by a potential investor of a non-u.s. address on the application form for investment in a Fund or Portfolio will be deemed to be a representation and warranty from such investor that he/she/it is not a U.S. Person and that such investor will continue to be a non-u.s. Person unless and until the Fund or Portfolio is otherwise notified of a change in the investor s U.S. Person status. MINIMUM INVESTMENTS The table below sets out the minimum investments required to purchase Series A, A (Hedged), F, I, O, R, S, T or T-USD units of the Funds or Portfolios: Minimum investment table Series Initial Investment Additional Investments A $500 $100 $50 A (Hedged)* $500 $100 $50 F** $500 $100 $50 I** $100,000 No minimum N/A O** $500,000 No minimum N/A R** $500,000 No minimum N/A S** $5,000 $100 $50 T $5,000 $100 $50 T-USD $5,000 $100 $50 Pre-authorized Chequing Plans (PACs) * Only available for Templeton Growth Fund, Ltd. ** When purchasing Series F, I, O, R or S units of the Funds or Portfolios, investors must also meet the additional eligibility criteria for the series. For more information see Classes and Series on page 9. We reserve the right to change or waive the minimum investment requirements to purchase any series of the Funds or Portfolios. PURCHASE OPTIONS For Series A (including A (Hedged)) and T (including T-USD) units of the Funds and Portfolios, you can purchase units in one of three ways: On a front-load basis. You may pay a sales commission which you negotiate with your Dealer when you buy the Funds or Portfolios. On a low-load basis. You do not pay a sales commission when you buy the Fund or Portfolio. You may be charged a redemption fee if you redeem your units within three years of buying them. See Calculating the redemption fee on page 15. On a deferred sales charge basis. You do not pay a sales commission when you buy the Fund or Portfolio. You may be charged a redemption fee if you redeem your units within six years of buying them. See Calculating the redemption fee on page Franklin Templeton investments

15 Purchases, switches and redemptions Series I units of all Funds and Portfolios are sold only on a front-load basis. Series F, O, R and S units of all Funds and Portfolios are sold only on a no-load basis, which means that you pay no sales charge when you buy or sell. Your choice will affect the fees you pay and the compensation your Dealer receives. See Fees and expenses on page 19 and Dealer compensation on page 29 for more information. FUNDS AND PORTFOLIOS AVAILABILITY IN CANADIAN AND U.S. DOLLARS All Funds and Portfolios are denominated in Canadian dollars. The following Funds and Portfolios are also available in U.S. dollars: Templeton Funds: Templeton Growth Fund, Ltd. and its respective Corporate Class Fund, Templeton International Stock Fund and its respective Corporate Class Fund, Templeton Emerging Markets Fund and its respective Corporate Class Fund, Templeton Global Smaller Companies Fund and its respective Corporate Class Fund, Templeton Global Bond Fund, Templeton Global Bond Hedged Yield Class (Series A, F, I and O shares), Templeton BRIC Corporate Class, Templeton Global Balanced Fund, Templeton EAFE Developed Markets Fund, Templeton Asian Growth Fund and its respective Corporate Class Fund and Templeton Frontier Markets Fund and its Corporate Class Fund All of the Franklin Funds, except Franklin U.S. Rising Dividends Hedged Corporate Class and Franklin Income Hedged Corporate Class Franklin Bissett Funds: Franklin Bissett U.S. Focus Fund and its Corporate Class Fund All of the Franklin Mutual Series Funds Franklin Quotential Portfolios: Franklin Quotential Growth Portfolio, Franklin Quotential Growth Corporate Class Portfolio, Franklin Quotential Diversified Equity Portfolio, Franklin Quotential Diversified Equity Corporate Class Portfolio, Franklin Quotential Diversified Income Corporate Class Portfolio (Series A, F, I and O shares), Franklin Quotential Balanced Income Portfolio (Series A, F, I and O units) and Franklin Quotential Balanced Income Corporate Class Portfolio (Series A, F, I and O shares) You can use U.S. dollars to purchase U.S. denominated Funds and Portfolios as well as Funds and Portfolios available in U.S. dollars with U.S. dollars. This option is provided as a convenience only. Purchasing Funds and Portfolios with U.S. dollars will have no impact on the overall performance of your investment within the Fund or Portfolio and does not act as a hedge against currency fluctuations between the Canadian and United States dollars. Units purchased in United States dollars may not be held in Franklin Templeton registered plans. PROCESSING YOUR ORDER TO BUY If you would like to buy our Funds or Portfolios, please contact your Dealer. Your Dealer will: deliver your order to us with your payment in full, or place an order with us electronically, or by phone or fax, with payment to follow. You must pay your Dealer when you buy your units. If you are purchasing units of Franklin Bissett Treasury Bill Fund or Franklin Bissett Money Market Fund, your Dealer must pay us within one business day of delivering or placing your order. For purchases of any other Fund or Portfolio, your Dealer must pay us within three business days of delivering or placing your order. If your Dealer places your purchase order electronically and we do not receive payment for your units within the periods listed above, we will redeem your units on the next business day. Pursuant to securities regulations, if the proceeds are: greater than the amount you owe us, the Fund or Portfolio keeps the difference; less than the amount you owe, your Dealer will owe the difference to the Fund or Portfolio. Your Dealer may be entitled to recover any losses from you. If you purchase Series O or Series R units and, within 10 days of your purchase, you have not signed a Series O or Series R agreement with us, you agree that we may, at our discretion, proceed to bill your account in accordance with our standard terms for investment in Series O or Series R units. Alternatively, we may switch you into Series A (including A (Hedged)) or Series T (including T-USD) units of the same Fund or Portfolio. How to Switch to other Funds or Portfolios You can switch from one Fund or Portfolio to another Fund or Portfolio through your Dealer. SWITCHES BETWEEN FUNDS THAT ARE TRUSTS A switch from one Fund or Portfolio to another Fund or Portfolio is a purchase and a redemption resulting in a disposition of the units switched, meaning you will likely incur a capital gain or loss for tax purposes if you hold your units outside a registered plan. CORPORATE CLASS FUNDS The distinction between the Corporate Class Funds and the regular Funds that are structured as trusts is important when considering the tax consequences of switching from one Fund to another Franklin Templeton Investments mutual fund. A conversion from one Corporate Class Fund to another Corporate Class Fund is not a taxable transaction to you because you still own shares of Franklin Templeton Corporate Class Ltd. This means you will not have to pay capital gains tax at the time of the conversion, although in certain circumstances the conversion may accelerate the time at which Franklin Templeton Corporate Class Ltd. realizes gains and pays capital gains dividends. A switch from a Corporate Class Fund to a regular Fund will be a redemption of shares of the Corporate Class Fund and a purchase of units of the other Fund which will be a taxable transaction to you. This will likely result in a capital gain or loss for tax purposes if you hold your units outside a registered plan. How to Switch to another Series In addition to switching from one Fund or Portfolio to another Fund or Portfolio, you can also switch from Series A, A (Hedged), F, I, O, R, S, T or T-USD units to a different series of units through your Dealer. You can only switch from one series to another series if you meet the eligibility requirements associated with the series that you wish to switch into. Due to differences in the NAVs of the various series, if you switch from one series to another series, you may receive a different number of units than you originally held. A switch between series of the same Fund or Portfolio that is a trust is a redesignation of your existing units as units of another series. In the case of Templeton Growth Fund, Ltd. and the Corporate Class Funds, a switch between series of the same Fund is a conversion of your existing shares into shares of another series. Franklin Templeton investments 13

16 Purchases, switches and redemptions A redesignation between series of units of the same Fund or a conversion within series of shares of Templeton Growth Fund, Ltd. or the Corporate Class Funds is not considered a disposition for tax purposes. See Income tax considerations for investors on page 32 for more details. If your switch involves both a change in series and a change in Fund or Portfolio, then the switch will be considered a disposition for tax purposes, unless the switch is between Corporate Class Funds. Switch fees The following switches may result in a switch fee payable to your Dealer: switches from units purchased on a front-load basis to units on a no-load basis; switches from units purchased on a front-load basis to units on a front-load basis; switches from units purchased on a low-load basis to units on a low-load basis. You will not be charged a redemption fee until you later redeem your units. The redemption fee will be based on the date and original cost of the low-load units purchased by you before the switch; and switches from units purchased on a deferred sales charge basis to units on a deferred sales charge basis. You will not be charged a redemption fee until you later redeem your units. The redemption fee will be based on the date and original cost of the deferred sales charge units purchased by you before the switch. A switch from Series F units of one Fund or Portfolio to Series F units of another Fund or Portfolio will not be subject to any switch fees. Any other types of switches may result in additional fees, such as redemption fees or sales charges. When your Dealer charges a switch fee on a switch, it will result in a redemption of a sufficient number of your units being switched to pay the switch fee. Processing your switch order We process your switch order as if it were a redemption of the Fund or Portfolio that you are switching out of and a purchase of the Fund or Portfolio that you are switching into. Accordingly, we follow the procedures listed under Processing your order to buy and Processing your redemption order. We may limit the right to switch, limit the amount or number of switches, reject any switch or restrict or refuse purchases if (i) we believe that the Fund or Portfolio would be harmed or unable to invest effectively, or (ii) the Fund or Portfolio receives or anticipates simultaneous orders that may significantly affect the Fund or Portfolio. We do not limit your right to redeem your investment except under the circumstances described under Suspending your right to redeem units. Redeeming Funds or Portfolios You can redeem your Fund or Portfolio units through your Dealer or directly through us. Your redemption order must be in writing, accompanied by any outstanding unit certificates. For your protection, your redemption order (and certificate, if applicable) must be signature guaranteed by a bank, trust company, Dealer or other institution that is satisfactory to us. In some cases, we may also request additional documentation. Your Dealer may place an electronic order, which must be followed by the appropriate documentation. We need written authorization from you on your initial application in order to accept phone and fax orders from you. If your redemption order is by phone or fax, the proceeds will only be payable to you and will be sent to your address of record or to your account at a Canadian bank or trust company. Redemptions by phone or fax are limited to $10,000 per account per day and are not available for: units held in certificate form units held in a registered plan accounts for which there has been a change in address or bank or trust company account within the previous 30 days. PROCESSING YOUR REDEMPTION ORDER If we do not receive all the documentation we need to complete your redemption order, we will contact you or your Dealer. If your Dealer placed your redemption order electronically and upon contacting your Dealer, we are advised that you or your Dealer are unable to provide us with the required documentation, we will immediately repurchase your units. If you or your Dealer advise us that you are able to provide us with the required documentation but you or your Dealer fail to provide it to us within ten business days of us receiving your order, we will repurchase your units. Pursuant to securities regulations, if we repurchase your units and the sale proceeds are: greater than the repurchase amount, the Fund or Portfolio keeps the difference; less than the repurchase amount, we pay the Fund or Portfolio the difference and collect the difference from your Dealer. Your Dealer may be entitled to recover any losses from you. We will pay you the proceeds within three business days of receiving a complete redemption order. We will mail you a cheque unless you tell us to deposit the proceeds to your bank or trust company account by electronic fund transfer (EFT). If you wish to receive your proceeds by EFT, please send us a preprinted void cheque and complete the banking information section of your application at the time of account setup to avoid potential delays on your redemption request. We will keep your banking information on file for future purchases and redemptions. For your protection, we reserve the right to choose the final method of payment, which may include paying the redemption proceeds to your Dealer, in trust for you. SUSPENDING YOUR RIGHT TO REDEEM UNITS As permitted by Canadian securities regulators, we may suspend your right to redeem units: if normal trading is suspended on a stock exchange within or outside Canada on which securities or specified derivatives are traded which represent more than 50% by value of the total assets of that Fund or a Portfolio that holds that Fund and if those securities are not traded on any other exchange that represents a reasonably practical alternative for the Fund with the consent of securities regulators, if the Fund or Portfolio determines that it is not practical to sell the Fund s or Portfolio s securities or fairly determine the value of its net assets of a Corporate Class Fund that invests in units of an Underlying Fund if the right to redeem securities in the Underlying Fund to the Corporate Class Fund is suspended, as the NAV of the Corporate Class Fund would not be available of Franklin Bissett Canadian Balanced Fund and Franklin Bissett Canadian Balanced Corporate Class which invest in units of Underlying Funds if the right to redeem securities in the 14 Franklin Templeton investments

17 Purchases, switches and redemptions Underlying Funds to Franklin Bissett Canadian Balanced Fund and Franklin Bissett Canadian Balanced Corporate Class are suspended, as the NAV of Franklin Bissett Canadian Balanced Fund and Franklin Bissett Canadian Balanced Corporate Class, as the case may be, would not be available of Franklin Bissett Strategic Income Fund and Franklin Bissett Strategic Income Corporate Class which invest in units of Underlying Funds if the right to redeem securities in the Underlying Funds to Franklin Bissett Strategic Income Fund and Franklin Bissett Strategic Income Corporate Class are suspended, as the NAV of Franklin Bissett Strategic Income Fund and Franklin Bissett Strategic Income Corporate Class, as the case may be, would not be available If your right to redeem units is suspended, and you do not withdraw your redemption order, we will redeem your units at their net asset value determined after the suspension ends. SHORT-TERM TRADING Excessive trading can harm Fund or Portfolio performance, operations and all unitholders by increasing trading and other costs, and interfering with the efficient management of a mutual fund s portfolio. We perform ongoing monitoring of trading in units of the Funds and Portfolios in order to identify investor trading patterns that may suggest short-term trading activity. You will be considered to be engaging in short-term trading if you: request a redemption/purchase of a Fund or Portfolio within two weeks of an earlier purchase/redemption of the Fund or Portfolio; redeem or switch units out of the Fund or Portfolio more than twice within a rolling 90 day period; or engage in trades that appear to follow a market timing pattern that may adversely affect the Fund or Portfolio. In determining whether a trade or trading pattern is inappropriate, we consider all relevant factors including good faith changes in investor circumstances or intentions, the nature of the Funds or Portfolios involved, and the investor s past trading pattern, and we may conduct discussions with the investor or the investor s Dealer. If we identify a pattern of short-term trading, we will seek to reject or restrict further trading as described below in greater detail, if in our judgment such trading may adversely affect a Fund or Portfolio. If we, in our sole discretion, reasonably determine that your pattern of trading may adversely affect a Fund or Portfolio, we reserve the right, without prior notice, to: (1) temporarily or permanently reject further trading in a Fund or Portfolio; (2) restrict the amount, number or frequency of any future trades in a Fund or Portfolio. CALCULATING THE REDEMPTION FEE You pay a redemption fee if you redeem Series A (including A (Hedged)) or T (including T-USD) units bought under: the low-load option within three years from the date of original purchase; or the deferred sales charge option within six years from the date of original purchase. The redemption fee is based on the date and original cost of your units. If you have switched to another Fund or Portfolio while remaining within the same purchase option, then your redemption fee is based on the date and original cost of the units before the initial switch. We will redeem units in the following order: (1) units issued through distribution/dividend reinvestment plans (2) free redemption entitlement units (only applicable to low-load sales charge units and deferred sales charge units that remain subject to a redemption fee) (3) matured units (4) units in the order that they were purchased starting with the earliest purchase. The redemption fee for units purchased on a: low-load basis is based on a declining percentage of the original cost of the units if the units are redeemed within three years from the date of original purchase, as shown in the Fees and expenses table on page 27; or deferred sales charge basis declines over a six year period, as shown in the Fees and expenses table on page 27. We will deduct the redemption fee from the proceeds of the redemption. FREE REDEMPTION ENTITLEMENT (only applicable to low-load sales charge units and deferred sales charge units still subject to a redemption fee) You can redeem some of your Series A (including A (Hedged)) or T (including T-USD) units that would otherwise be subject to a redemption fee without paying a fee, even if you have held them for less than three years, in the case of low-load sales charge units, or less than six years, in the case of deferred sales charge units. You can redeem: Deferred sales charge units 10% of the NAV of your deferred sales charge units as of December 31 of the prior calendar year (for units purchased by you after February 28, 1993 and before the current calendar year) + PLUS 10% of the cost of deferred sales charge units purchased by you in the current calendar year LESS cash distributions paid during the prior calendar year, and the value of reinvested units redeemed during the current calendar year. Low-load sales charge units 10% of the NAV of your low-load sales charge units as of December 31 of the prior calendar year + PLUS 10% of the cost of low-load sales charge units purchased by you in the current calendar year LESS cash distributions paid during the prior calendar year, and the value of reinvested units redeemed during the current calendar year. A distribution paid to you in cash will reduce your free redemption entitlement for the following calendar year by the amount of that distribution. You can transfer any unused portion of the free redemption entitlement if you switch deferred sales charge units from one Fund or Portfolio to another, or if you switch low-load sales charge units from one Fund or Portfolio to another, adjusted, in each case, for the NAV of the new Fund or Portfolio units. You may not carry forward this privilege from one year to the next. We may cancel or change this privilege at any time. Franklin Templeton investments 15

18 Purchases, switches and redemptions MINIMUM BALANCES AND MAINTAINING ELIGIBILITY If, because of redemptions, the market value of your investment in any series falls below the minimum investment balance requirement listed in the table below, we may redeem or redesignate your units to another series, after giving you 30 days notice that your balance has fallen below the minimum. You may invest additional money during this period if you wish to maintain the status of your investment. We will not redeem or redesignate your units if the market value of your investment falls below the minimum investment balance requirements because of a decline in the NAV of the units. If we redesignate your units on this basis, no switch fee will be charged by your Dealer. The table below lists the minimum investment balance requirements for each series and the action we may take if your investment falls below the minimum investment balance requirements: Series *MAINTAINING ELIGIBILITY FOR SERIES F, SERIES R AND SERIES S UNITS In addition to the minimum investment balance requirements for Series F, R and S units, you must also continue to qualify to hold Series F, R and S units after your initial purchase as described under About Series A, A (Hedged), F, I, O, R, S, T and T-USD units. We may redesignate your Series F or Series S units into Series A or I units (if you qualify) or your Series R units into Series A or T units (if you qualify) of the same Fund or Portfolio after giving you 30 days notice that you no longer qualify to hold Series F, R or S units. This switch will not be made if you advise us during the notice period that you are once again eligible to hold Series F, R or S units. If we redesignate your units on this basis, no switch fee will be charged by your Dealer. We reserve the right to change or waive the minimum investment balance requirements for any series of units. ELIGIBILITY TO OWN UNITS We may redeem units in an account if we determine in our discretion that: Minimum investment balance requirement Potential consequences if minimum investment balance requirement not met A $500 per Fund Redeem A (Hedged) $500 per Fund Redeem F* $500 per Fund Redeem I $100,000 per household Redesignate to Series A units of the same Fund or Portfolio O $500,000 per household Redesignate to Series A or to Series I units (if Series I minimum investment requirements are met) of the same Fund or Portfolio R* $500,000 per household Redesignate to Series A or to Series T units (if Series T minimum investment requirements are met) of the same Fund or Portfolio S* $5,000 per Fund Redesignate to Series A units of the same Fund T $5,000 per Fund Redesignate to Series A units of the same Fund T-USD $5,000 per Fund Redesignate to Series A units of the same Fund an investor engages in short-term or excessive trading; an investor becomes a resident for securities laws or tax purposes of a foreign jurisdiction where such foreign residency may have negative legal, regulatory or tax implications on the Fund or Portfolio; or it would be in the best interest of the Fund or Portfolio to do so. Unitholders are responsible for all tax consequences, costs and losses, if any, associated with the redemption of units in a Fund or Portfolio upon the exercise of our right to redeem. ORPHANED ACCOUNTS In order to invest in units of the Funds and Portfolios, an investor s account must have a registered Dealer on file with us. If an active account does not have a registered Dealer on file, we consider the account to be an orphaned account. If we determine in our discretion that an account is orphaned, we may take the following actions: freeze the account and restrict all activities in the account except redemptions (including through systematic withdrawals) and transfers out; notify the orphaned account holder in writing as to the account s status and request that the account(s) be moved to another registered Dealer; and after the notification, redeem the holdings in the orphaned account and mail the proceeds to the orphaned account holder s address of record. Unitholders are responsible for all tax consequences, costs and losses, if any, associated with the redemption of units in a Fund or Portfolio in an orphaned account. General information on processing purchases, switches and redemptions REJECTING ORDERS We have the right to reject any purchase or switch order within one business day of receiving it. If we reject your purchase order, we will return your money without interest. We will not process transactions for: a past date a future date (unless the transaction relates to a PAC or SWP) a specific price any units that have not been paid for in full. CONFIRMATIONS Your Dealer or Franklin Templeton Investments will send you a confirmation once we have processed your purchase, switch or redemption order. For PACs and SWPs, you will only receive a confirmation on your first purchase, switch or redemption. After that, you will either receive a confirmation each time a PAC or SWP runs on your account or you will receive quarterly, semiannual or annual account statements. CERTIFICATES AND ASSIGNMENTS We will not issue certificates for units of Funds or Portfolios unless requested by you or your Dealer. We will also not issue certificates for any units of the Funds or Portfolios held within a registered plan. We will not process your switch or redemption order unless it is accompanied by any outstanding unit certificates representing the units to be switched or redeemed and all assignments on the outstanding units have been cancelled. 16 Franklin Templeton investments

19 Optional services Systematic investment program You can buy units of the Funds and Portfolios regularly through a pre-authorized chequing plan (PAC) from your bank or trust account. The PAC can run weekly, twice monthly, monthly, quarterly, semi-annually or annually and must be at least $50 per Fund or Portfolio. We may, at our discretion, waive the minimum PAC amount. There is no charge for this service other than any applicable sales charges you negotiate with your Dealer (if you purchase units under the low-load or deferred sales charge option, you may pay a redemption fee upon redeeming your units please see Sales Charges on page 27). You may change or cancel the plan at any time by writing to us or your Dealer. Once we receive all required documentation, it may take up to 72 hours for us to process any change or cancellation. If you switch all units from one Fund or Portfolio to another, we will continue your PAC in your new Fund or Portfolio. PACs AND DOLLAR-COST AVERAGING PACs can lower your average cost of investing. It is called dollar-cost averaging and it works like this: You invest the same amount of money in the Fund or Portfolio of your choice at regular intervals. When the NAV of your units is high, your fixed-dollar investment buys fewer units. When the NAV is low, your fixed-dollar investment buys more units. It is an easy way to buy more when prices are down and lower the average cost of your Fund or Portfolio units. And that helps increase your potential gain. The Funds and Portfolios have received relief from the requirement to deliver an annual renewal simplified prospectus and any amendments thereto (the Renewal Prospectus ) to participants in a PAC unless they request it. You can request a copy of a Renewal Prospectus by calling us toll-free at or ing us at service@franklintempleton.ca. You can also find the Renewal Prospectus at or on our website at While you have a statutory right to withdraw from your initial purchase of Funds or Portfolios under a PAC, you will not have a statutory right to withdraw from subsequent purchases of Funds or Portfolios under a PAC. Regardless of whether or not you request the Renewal Prospectus, you will continue to have all other statutory rights under securities law, including a misrepresentation right as described on page 35 under What are your legal rights? You also have the right to terminate your participation in a PAC at any time as described above. Systematic withdrawal program (SWP) Provided you maintain at least $5,000 invested in a Fund or Portfolio, you can set up a systematic withdrawal program to redeem amounts periodically from your investments. You can receive payments weekly, twice monthly, monthly, quarterly, semi-annually or annually. We will automatically redeem enough units to make the payments to you, which may reduce the value of your investment. There is no charge for this service, other than any applicable redemption fees. You may change or cancel the plan at any time by writing to us or your Dealer. It may take up to 72 hours for us to process any change or cancellation. If your regular withdrawals are greater than the net earnings of your Fund or Portfolio, you will eventually use up your original investment. Automatic rebalancing service We offer an automatic rebalancing service to all investors in the Funds and Portfolios. This service monitors when the value of your investments within the Funds or Portfolios deviates from your target asset mix. The automatic rebalancing service is available for all Funds and Portfolios, plans and account types, provided that we receive appropriate authorization. There is no fee for this service. To use the automatic rebalancing service, you and your investment advisor must submit an automatic rebalancing service form and select the following parameters: Target asset mix: You must select the Funds and/or Portfolios and target allocation percentages that will be subject to the automatic rebalancing service. Your selected Funds and/or Portfolios must be within the same currency, the same series or a similar fee structure (Series A/T, Series F/S, Series O/R or Series I) and the same purchase option (front load, low load or deferred sales charge). One automatic rebalancing service may be established per currency per account. Franklin Templeton investments 17

20 Optional services Variance trigger: You must determine the maximum percentage by which any Fund and/or Portfolio in your automatic rebalancing service can deviate from your target asset mix before causing a rebalancing. Rebalancing frequency: You must decide whether you want your account rebalanced on a quarterly, semi-annual or annual basis. Your account will be reviewed and, if necessary, rebalanced on the second last business day of the month ending the quarter, semi-annual period or year. When the current value of your investment in any Fund or Portfolio varies on the rebalancing frequency date by more than the variance trigger you have chosen, we will automatically switch your investments to return to your target asset mix. Once a Fund or Portfolio in your target asset mix has a fund balance of less than one unit and/or 100% of one or more of the Funds or Portfolios in your target asset mix are redeemed, switched or transferred from the account, the service will be discontinued. You and your investment advisor may make changes to your automatic rebalancing service by submitting a new automatic rebalancing service form. As described under How to Switch to other Funds or Portfolios on page 13, in some circumstances a switch between Funds or Portfolios made by the automatic rebalancing service may cause you to realize a taxable capital gain. Registered plans We can set up a: registered retirement savings plan (RRSP) locked-in retirement savings plan (LRSP) spousal registered retirement savings plan (SP RRSP) locked-in retirement account (LIRA) registered education savings plan (RESP) tax-free savings account (TFSA) registered retirement income fund (RRIF) spousal registered retirement income fund (SP RRIF) life income fund (LIF) locked-in retirement income fund (LRIF) restricted life income fund (RLIF), or restricted locked-in savings plan (RLSP) for you, or you can purchase the Funds or Portfolios for your self-directed registered plan. We encourage you to consult your investment or tax advisor about the tax implications of registered plans. 18 Franklin Templeton investments