Schedule 14A Information

Proxy Statement Pursuant to Section 14(A) of the Securities Exchange Act of 1934
(Amendment No. _)

Check the appropriate box:

FRANKLIN CALIFORNIA TAX-FREE INCOME FUND

FRANKLIN CALIFORNIA TAX-FREE TRUST

FRANKLIN CUSTODIAN FUNDS

FRANKLIN FEDERAL TAX-FREE INCOME FUND

FRANKLIN FUND ALLOCATOR SERIES

FRANKLIN GLOBAL TRUST

FRANKLIN GOLD AND PRECIOUS METALS FUND

FRANKLIN HIGH INCOME TRUST

FRANKLIN INVESTORS SECURITIES TRUST

FRANKLIN MUNICIPAL SECURITIES TRUST

FRANKLIN NEW YORK TAX-FREE INCOME FUND

FRANKLIN NEW YORK TAX-FREE TRUST

FRANKLIN REAL ESTATE SECURITIES TRUST

FRANKLIN STRATEGIC MORTGAGE PORTFOLIO

FRANKLIN STRATEGIC SERIES

FRANKLIN TAX-FREE TRUST

FRANKLIN TEMPLETON GLOBAL TRUST

FRANKLIN TEMPLETON INTERNATIONAL TRUST

FRANKLIN TEMPLETON MONEY FUND TRUST

FRANKLIN U.S. GOVERNMENT MONEY FUND

INSTITUTIONAL FIDUCIARY TRUST

THE MONEY MARKET PORTFOLIOS

TEMPLETON CHINA WORLD FUND

TEMPLETON FUNDS

TEMPLETON GLOBAL INVESTMENT TRUST

TEMPLETON GLOBAL OPPORTUNITIES TRUST

TEMPLETON GLOBAL SMALLER COMPANIES FUND

TEMPLETON INCOME TRUST

TEMPLETON INSTITUTIONAL FUNDS

(Name of Registrant as Specified in its Charter)

Name of Person(s) Filing Proxy Statement, other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

Franklin California Tax-Free Income Fund Franklin California Tax-Free Trust Franklin Custodian Funds Franklin Federal Tax-Free Income Fund Franklin Fund Allocator Series Franklin Global Trust Franklin Gold and Precious Metals Fund Franklin High Income Trust Franklin Investors Securities Trust Franklin Municipal Securities Trust

Franklin New York Tax-Free Income Fund Franklin New York Tax-Free Trust Franklin Real Estate Securities Trust Franklin Strategic Mortgage Portfolio Franklin Strategic Series Franklin Tax-Free Trust Franklin Templeton International Trust Franklin Templeton Global Trust Franklin Templeton Money Fund Trust Franklin U.S. Government Money Fund

Institutional Fiduciary Trust The Money Market Portfolios Templeton China World Fund Templeton Funds Templeton Global Investment Trust Templeton Global Opportunities Trust Templeton Global Smaller Companies Fund Templeton Income Trust Templeton Institutional Funds

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Q&A

 

IMPORTANT SHAREHOLDER INFORMATION

 

These materials are for a Special Joint Meeting of Shareholders of the Franklin and Templeton registered investment companies listed above, including their various series (the "Funds"), scheduled for October 30, 2017 at 10:00 a.m., Pacific time. The enclosed materials discuss several proposals (the "Proposals" or, each, a "Proposal") to be voted on at the meeting, and contain the Notice of Special Joint Meeting of Shareholders, proxy statement and proxy card(s). A proxy card is, in essence, a ballot. When you vote your proxy, it tells us how you wish to vote on important issues relating to the Funds in which you are invested. If you specify a vote on all Proposals on which you are entitled to vote, your proxy will be voted as you indicate. If you specify a vote for one or more Proposals on which you are entitled to vote, but not all, your proxy will be voted as specified on such Proposals and, on the Proposal(s) for which no vote is specified, your proxy will be voted in accordance with the Trustees' recommendations beginning on page __ of the proxy statement.  If you simply sign, date and return the proxy card(s), but do not specify a vote on any Proposal, your proxy will be voted in accordance with the Trustees' recommendations beginning on page __ of the proxy statement.

 

We urge you to spend a few minutes reviewing the Proposals in the proxy statement. Then, please fill out and sign the proxy card(s) and return it (them) to us so that we know how you would like to vote. When shareholders return their proxies promptly, the Funds may be able to save money by not having to conduct additional solicitations, including other mailings.  If you own shares of more than one Fund, you will receive a proxy card FOR EACH FUND in which you own shares.  PLEASE COMPLETE, SIGN AND RETURN each proxy card you receive.

 

We welcome your comments. If you have any questions or would like to quickly vote your shares, call AST Fund Solutions, LLC, our proxy solicitor, toll free at 800-967-5068.  Agents are available 9:00 a.m. – 10:00 p.m., Eastern time, Monday through Friday, and 10:00 a.m. – 4:00 p.m., Eastern time, Saturday.

 

TELEPHONE AND INTERNET VOTING

 

For your convenience, you may be able to vote by telephone or through the Internet,

24 hours a day. If your account is eligible, separate instructions are enclosed.

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NOTICE OF SPECIAL JOINT MEETING OF SHAREHOLDERS

 

A Special Joint Meeting of Shareholders (the "Meeting") of certain U.S. registered Franklin and Templeton Funds listed above (together, the "Trusts," and each, a "Trust"),¹ including their various series (together, the "Funds," and each, a "Fund") will be held at the Trusts' offices located at One Franklin Parkway, San Mateo, California 94403-1906 on October 30, 2017 at 10:00 a.m., Pacific time.

 

During the Meeting, shareholders of the Trusts will vote on the following Proposals and Sub-Proposals:

 

1.

To elect a Board of Trustees for each Trust.

2.

For each Fund,2 to approve the use of a "manager of managers" structure whereby the Fund's investment manager would be able to hire and replace subadvisers without shareholder approval.

3.

For all Funds, to approve an amended fundamental investment restriction regarding investments in commodities.

4.

For Franklin Small-Mid Cap Growth Fund, Templeton Global Balanced Fund and Templeton Emerging Markets Small Cap Fund, to approve an amended fundamental investment restriction regarding lending.

5.

For Franklin Small-Mid Cap Growth Fund, to approve amendments to certain fundamental investment restrictions of such Fund (includes six (6) Sub-Proposals) as follows:

1

Along with Franklin Templeton Variable Insurance Products Trust, Franklin ETF Trust, Franklin Managed Trust, Templeton Developing Markets Trust, Emerging Markets Series of Templeton Institutional Funds and Templeton Frontier Markets Fund of Templeton Global Investment Trust, which are issuing separate proxy solicitation materials.

2

Excluding Franklin Corefolio Allocation Fund, Franklin Focused Growth Fund, Franklin Flexible Alpha Bond Fund, Franklin Founding Funds Allocation Fund, Franklin Global Listed Infrastructure Fund, Franklin India Growth Fund, Franklin LifeSmart Retirement Income Fund, Franklin NextStep Funds, Franklin Payout Funds, Franklin Templeton Money Fund Trust, Franklin U.S. Government Money Fund, Institutional Fiduciary Trust, Templeton Foreign Smaller Companies Fund, Templeton Global Currency Fund and Templeton Global Smaller Companies Fund.

a.

To amend the fundamental investment restriction regarding borrowing;

b.

To amend the fundamental investment restriction regarding underwriting;

c.

To amend the fundamental investment restriction regarding investments in real estate;

d.

To amend the fundamental investment restriction regarding issuing senior securities;

e.

To amend the fundamental investment restriction regarding industry concentration; and

f.

To amend the fundamental investment restriction regarding diversification of investments.

6.

For Franklin Small-Mid Cap Growth Fund, to approve the elimination of certain fundamental investment restrictions (includes eight (8) Sub-Proposals).

7a-7c.

If properly presented, for Franklin High Yield Tax-Free Income Fund, Templeton Global Bond Fund and Franklin High Income Fund, a shareholder proposal that such Funds' Boards of Trustees institute procedures to prevent holding investments in companies that, in the judgment of the Board, substantially contribute to genocide or crimes against humanity.

8a-8e.

If properly presented, for Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin Growth Fund, Franklin Income Fund, Franklin High Income Fund and Franklin California Tax-Free Income Fund, a shareholder proposal that such Funds' Boards of Trustees institute transparent procedures to prevent holding investments in companies that, in the judgment of management, substantially contribute to genocide or crimes against humanity.

August __, 2017

 

Please sign and promptly return all of the proxy card(s) or voting instruction form(s) in the enclosed self-addressed envelope, or, if eligible, vote your shares by telephone or through the Internet, regardless of the number of shares you own.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL JOINT SHAREHOLDER MEETING TO BE HELD ON OCTOBER 30, 2017 The Notice of Special Joint Meeting of Shareholders, proxy statement and form of proxy card are available on the Internet at http://www.proxyonline.com/docs/FTproxy. The form of proxy card on the Internet site cannot be used to cast your vote.

If you have any questions, would like to vote your shares, or wish to obtain directions to be able to attend the Meeting and vote in person, please call AST Fund Solutions, LLC, our proxy solicitor, toll free at 800-967-5068.

PROXY STATEMENT

 

TABLE OF CONTENTS

 

PROXY STATEMENT

 

¨	INFORMATION ABOUT VOTING

 

Who is asking for my vote?

 

The Boards of Trustees (the "Boards" or "Trustees") of the U.S. registered Franklin and Templeton funds listed above (collectively, the "Trusts" and, individually, a "Trust"), including their various series (collectively, the "Funds" and, individually, a "Fund"),¹ in connection with a Special Joint Meeting of Shareholders of the Trusts to be held on October 30, 2017 (the "Meeting"), have requested your vote on several matters (the "Proposals" or, each, a "Proposal").

In addition, if you are a shareholder of Franklin Templeton U.S. Government Money Fund, Franklin U.S. Government Money Fund or Money Market Portfolio (a series of Institutional Fiduciary Trust), each of which is a "feeder fund," you are being requested to provide voting instructions to such Fund on how it should vote the shares it owns in The U.S. Government Money Market Portfolio, as the "master portfolio," as more fully described below under "On what issues am I being asked to vote? – Master-Feeder Fund Structure."

 

Who is eligible to vote?

 

Shareholders of record at the close of business on August 21, 2017 are entitled to be present and to vote at the Meeting or any adjourned Meeting (and, in the case of shareholders of a feeder fund, to provide voting instructions to such feeder fund). Each share of record of a Fund is

¹Other than Emerging Markets Series of Templeton Institutional Funds and Templeton Frontier Markets Fund of Templeton Global Investment Trust, which are issuing separate proxy solicitation materials.

entitled to one vote (and a proportionate fractional vote for each fractional share) on each matter relating to that Fund presented at the Meeting. The Notice of Special Joint Meeting of Shareholders, the proxy cards or voting instruction forms, and the proxy statement were first mailed to shareholders of record on or about August __, 2017.

 

On what issues am I being asked to vote?

 

Shareholders are being asked to vote on the following Proposals:

 

1.

For each Trust, to elect a Board of Trustees of the Trust;

2.

For each Fund2, to approve the use of a "manager of managers" structure whereby the Fund's investment manager would be able to hire and replace subadvisers without shareholder approval;

3.

For all Funds, to approve an amended fundamental investment restriction regarding investments in commodities;

4.

For Franklin Small-Mid Cap Growth Fund, Templeton Global Balanced Fund and Templeton Emerging Markets Small Cap Fund, to approve an amended fundamental investment restriction regarding lending;

5.

For Franklin Small-Mid Cap Growth Fund, to approve amendments to certain fundamental investment restrictions, as more fully specified in Exhibit G to this proxy statement (includes six (6) Sub-Proposals);

6.

For Franklin Small-Mid Cap Growth Fund, to approve the elimination of certain fundamental investment restrictions, as more fully specified in Exhibit H to this proxy statement (includes eight (8) Sub-Proposals);

7a-7c.

If properly presented, for Franklin High Yield Tax-Free Income Fund, Templeton Global Bond Fund and Franklin High Income Fund, a shareholder proposal that such Funds' Boards of Trustees institute procedures to prevent holding investments in companies that, in the judgment of the Board, substantially contribute to genocide or crimes against humanity; and

8a-8e.

If properly presented, for Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin Growth Fund, Franklin Income Fund, Franklin High Income Fund and Franklin California Tax-Free Income Fund, a shareholder proposal that such Funds' Boards of Trustees institute transparent procedures to prevent holding investments in companies

2

Excluding Franklin Corefolio Allocation Fund, Franklin Focused Growth Fund, Franklin Flexible Alpha Bond Fund, Franklin Founding Funds Allocation Fund, Franklin Global Listed Infrastructure Fund, Franklin India Growth Fund, Franklin LifeSmart Retirement Income Fund, Franklin NextStep Funds, Franklin Payout Funds, Franklin Templeton Money Fund Trust, Franklin U.S. Government Money Fund, Institutional Fiduciary Trust, Templeton Foreign Smaller Companies Fund, Templeton Global Currency Fund and Templeton Global Smaller Companies Fund.

that, in the judgment of management, substantially contribute to genocide or crimes against humanity.

Master-Feeder Fund Structure.  Each of Franklin Templeton U.S. Government Money Fund, Franklin U.S. Government Money Fund and Money Market Portfolio (individually, a "Feeder Fund" and collectively, the "Feeder Funds") operates in a master-feeder arrangement in which each Feeder Fund invests all of its assets in The Money Market Portfolio (the "Master Portfolio"), which has the same investment goal as the Feeder Funds and invests directly in securities and other investments.

As shareholders in the Master Portfolio, the Feeder Funds have been asked to vote on the proposals described in this proxy statement as they relate to the Master Portfolio.  Under the Investment Company Act of 1940, as amended (the "1940 Act"), with respect to master-feeder fund arrangements, each Feeder Fund must (i) pass through to the Feeder Fund's own shareholders voting rights with respect to the Master Portfolio shares it holds and (ii) vote its Master Portfolio shares in accordance with the voting instructions of such Feeder Fund's shareholders. As a result, in addition to your vote on these proposals as they relate to a Fund in which you own shares, the Boards of the Feeder Funds need, and you are asked for, your voting instructions on these matters as to how your Feeder Fund should vote its Master Portfolio shares.

How does the Board of my Trust recommend that I vote?

 

The Boards of the Trusts unanimously recommend that you vote:

 

1.

For all Trusts: FOR the election of all nominees as Trustees of the Trust;

2.

For all Funds3: FOR the approval of the use of a manager of managers structure;

3.

For all Funds:  FOR the approval of an amended fundamental investment restriction regarding investments in commodities;

4.

For Franklin Small-Mid Cap Growth Fund, Templeton Global Balanced Fund and Templeton Emerging Markets Small Cap Fund:  FOR the amendment of the fundamental investment restriction regarding lending;

5.

For Franklin Small-Mid Cap Growth Fund:  FOR the approval of each of the proposed amendments to certain of the Fund's fundamental investment restrictions; and

6.

For Franklin Small-Mid Cap Growth Fund:  FOR the approval of the elimination of certain of the Fund's fundamental investment restrictions.

3

Excluding Franklin Corefolio Allocation Fund, Franklin Focused Growth Fund, Franklin Flexible Alpha Bond Fund, Franklin Founding Funds Allocation Fund, Franklin Global Listed Infrastructure Fund, Franklin India Growth Fund, Franklin LifeSmart Retirement Income Fund, Franklin NextStep Funds, Franklin Payout Funds, Franklin Templeton Money Fund Trust, Franklin U.S. Government Money Fund, Institutional Fiduciary Trust, Templeton Foreign Smaller Companies Fund, Templeton Global Currency Fund and Templeton Global Smaller Companies Fund.

7a-7c.

For Franklin High Yield Tax-Free Income Fund, Templeton Global Bond Fund and Franklin High Income Fund:  AGAINST a shareholder proposal that such Funds' Boards of Trustees institute procedures to prevent holding investments in companies that, in the judgment of the Board, substantially contribute to genocide or crimes against humanity.

8a-8e.

For Franklin Federal Intermediate-Term Tax-Free Income Fund, Franklin Growth Fund, Franklin Income Fund, Franklin High Income Fund and Franklin California Tax-Free Income Fund:  AGAINST a shareholder proposal that such Funds' Boards of Trustees institute transparent procedures to prevent holding investments in companies that, in the judgment of management, substantially contribute to genocide or crimes against humanity.

How do I ensure that my vote is accurately recorded?

 

You may submit your proxy card(s) or voting instruction form(s) in one of four ways:

·

By Internet (if eligible).  The web address and instructions for voting can be found on the enclosed proxy card(s) or voting instruction form(s).  You will be required to provide your control number located on the proxy card(s) or voting instruction form(s).

·

By Telephone (if eligible).  The toll-free number for telephone voting can be found on the enclosed proxy card(s) or voting instruction form(s).  You will be required to provide your control number located on the proxy card(s) or voting instruction form(s).

·

By Mail.  Mark the enclosed proxy card(s) or voting instruction form(s), sign and date it (them), and return it (them) in the postage-paid envelope we provided.  A proxy card with respect to shares held by joint owners may be signed by just one of them, unless at or prior to exercise of such proxy the Fund receives a specific written notice to the contrary from any one of the joint owners.

·

In Person at the Meeting.  You can vote your shares in person at the Meeting.

If you require additional information regarding the Meeting you may contact AST Fund Solutions, LLC (the "Solicitor"), the proxy solicitor, toll-free at 800-967-5068.  Please see the section entitled "FURTHER INFORMATION ABOUT VOTING AND THE MEETING" for more information on the Solicitor.

Proxy cards that are properly signed, dated and received at or prior to the Meeting will be voted as specified.  If you specify a vote on any of the Proposals, your proxy will be voted as you indicate.  If you specify a vote on one or more Proposals but not the other Proposals, your proxy will be voted as specified on such Proposal(s) and, on the Proposal(s) for which no vote is specified, your proxy will be voted in accordance with the Trustees' recommendations beginning on page __ of this proxy statement.  If you simply sign, date and return the proxy card, but do not specify a vote on any of the Proposals on which you are entitled to vote, your proxy will be voted in accordance with the Trustees' recommendations beginning on page __ of this proxy statement.

May I revoke my proxy?

 

You may revoke your proxy at any time before it is voted by forwarding a written revocation or a later-dated proxy card to the appropriate Fund that is received by the Fund at or prior to the Meeting, or by attending the Meeting and voting in person.

 

May I attend the Meeting in person?

Shareholders of record at the close of business on August 21, 2017 are entitled to attend the Meeting.  Eligible shareholders who intend to attend the Meeting in person will need to bring proof of share ownership, such as a shareholder statement or letter from a custodian or broker-dealer confirming ownership, as of August 21, 2017 and a valid picture identification, such as a driver's license or passport, for admission to the Meeting.  Seating is very limited.  Shareholders without proof of ownership and identification will not be admitted.

 

What if my shares are held in a brokerage account?

 

If your shares are held by your broker, then in order to vote in person at the Meeting, you will need to obtain a "Legal Proxy" from your broker and present it to the Inspector of Elections at the Meeting.  Also, in order to revoke your proxy, you may need to forward your written revocation or a later-dated proxy card/voting instruction form to your broker rather than to the appropriate Fund.

¨	THE PROPOSALS

 

How are nominees selected?

The Board of each Trust has a Nominating Committee. The Nominating Committee for each Franklin Fund is comprised of John B. Wilson (Chair), Harris J. Ashton, Mary C. Choksi, Edith E. Holiday, J. Michael Luttig, and Larry D. Thompson.  The Nominating Committee for each Templeton Fund is comprised of Edith E. Holiday (Chair), J. Michael Luttig and Larry D. Thompson.  None of the members of the Nominating Committees of the Trusts is an "interested person" of that Trust as defined by the 1940 Act.  Trustees who are not interested persons of a Trust are referred to as the "Independent Trustees," and Trustees who are interested persons of a Trust are referred to as the "Interested Trustees."

Each Trust's Nominating Committee is responsible for selecting candidates to serve as Trustees for that Trust and recommending such candidates:  (a) for selection and nomination as Independent Trustees by the incumbent Independent Trustees and the full Board; and (b) for selection and nomination as Interested Trustees by the full Board. In considering a candidate's qualifications, the Nominating Committee generally considers the potential candidate's educational background, business or professional experience, and reputation. In addition, the Nominating Committee has established as minimum qualifications for Board membership as an Independent Trustee:  (1) that such candidate be independent from relationships with the Trust's

investment manager(s) and other principal service providers both within the terms and the spirit of the statutory independence requirements specified under the 1940 Act and the rules thereunder; (2) that such candidate demonstrate an ability and willingness to make the considerable time commitment, including personal attendance at Board meetings, believed necessary to his or her function as an effective Board member; and (3) that such candidate have no continuing relationship as a director, officer or board member of any open-end or closed-end investment company other than those within the Franklin Templeton Investments fund complex or a closed-end business development company primarily investing in non-public entities.  Each Trust's Nominating Committee has not adopted any specific policy on the issue of diversity, but will take this into account, among other factors, in its consideration of new candidates to the Board.

When a Trust's Board has or expects to have a vacancy, the Nominating Committee receives and reviews information on individuals qualified to be recommended to the full Board as nominees for election as Board members, including any recommendations by "Qualifying Fund Shareholders" (as defined below). Such individuals are evaluated based upon the criteria described above. To date, each Trust's Nominating Committee has been able to identify, and expects to continue to be able to identify, from its own resources, an ample number of qualified candidates.  A Trust's Nominating Committee, however, will review recommendations from Qualifying Fund Shareholders to fill vacancies on the Board if these recommendations are submitted in writing and addressed to the Nominating Committee at the Trust's offices and are presented with appropriate background material concerning the candidate that demonstrates his or her ability to serve as a Board member, including as an Independent Trustee, of the Trust. A Qualifying Fund Shareholder is a shareholder who:  (i) has continuously owned of record, or beneficially through a financial intermediary, shares of such Trust having a net asset value of not less than two hundred and fifty thousand dollars ($250,000) during the twenty-four (24) month period prior to submitting the recommendation; and (ii) provides a written notice to the Nominating Committee containing the following information:  (a) the name and address of the Qualifying Fund Shareholder making the recommendation; (b) the number of shares of the Trust which are owned of record and beneficially by the Qualifying Fund Shareholder and the length of time that such shares have been so owned by the Qualifying Fund Shareholder; (c) a description of all arrangements and understandings between such Qualifying Fund Shareholder and any other person or persons (naming such person or persons) pursuant to which the recommendation is being made; (d) the name, age, date of birth, business address and residence address of the person or persons being recommended; (e) such other information regarding each person recommended by such Qualifying Fund Shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the U.S. Securities and Exchange Commission ("SEC") had the nominee been nominated by the Board; (f) whether the shareholder making the recommendation believes the person recommended would or would not be an "interested person" of the Trust, as defined in the 1940 Act; and (g) the written consent of each person recommended to serve as a Trustee of the Trust if so nominated and elected/appointed.

A Trust's Nominating Committee may amend these procedures from time to time, including the procedures relating to the evaluation of nominees and the process for submitting recommendations to the Nominating Committee.

Each Board has adopted and approved a formal written Charter for its Nominating Committee.  A copy of the Charter is attached to this proxy statement as Exhibit A.

Who are the nominees for Trustee of my Trust?

The Boards of the Franklin Funds⁴ currently are identical and comprised of eight Trustees.  The Boards of the Templeton Funds⁵ currently are identical⁶ and comprised of eleven Trustees (ten Trustees for TGIT), seven of whom also serve on the Boards of the Franklin Funds.

Shareholders of each Trust are being asked to vote only for the election of the Trustees that will supervise their Trust (including the Funds therein).  The nominees for Independent Trustee and Interested Trustee of each Trust are listed below.  All of the nominees, with the exception of Terrence J. Checki, currently serve on one or more Boards of Trustees/Directors of the funds within the Franklin Templeton Investments fund complex.  Mr. Checki does not currently serve on the Board of any Trust or of any other fund within the Franklin Templeton Investments fund complex.  Among the nominees, Gregory E. Johnson and Rupert H. Johnson, Jr. are deemed to be Interested Trustee nominees.

Independent Trustee Nominees:

Interested Trustee Nominees:

Independent Trustee Nominees:

Interested Trustee Nominees:

4	For purposes of this proxy statement, the "Franklin Funds" refer to all of the Funds except the Templeton Funds (as defined below).

5

For purposes of this proxy statement, the "Templeton Funds" refer to Franklin Templeton Global Trust, Templeton China World Fund, Templeton Funds, Templeton Global Investment Trust, Templeton Global Opportunities Trust, Templeton Global Smaller Companies Fund, Templeton Income Trust and Templeton Institutional Funds.

6	Except for Templeton Global Investment Trust ("TGIT"), which has all the same Trustees as the other Templeton Funds, excluding Ms. Choksi.

If elected, each nominee will hold office until the next meeting of shareholders at which Trustees are elected and until his or her successor shall be elected and qualify, or until his or her earlier death, resignation or removal.

Interested Trustees of the Trusts hold director and/or officer positions with, or are stockholders of, Franklin Resources, Inc. ("Resources") and its affiliates.  Resources, a global investment management organization operating as Franklin Templeton Investments, is primarily engaged, through various subsidiaries, in providing investment management, share distribution, transfer agent and administrative services to a family of investment companies. Resources is a New York Stock Exchange ("NYSE") listed holding company (NYSE: BEN). Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson, both nominees for Interested Trustee of the Trusts. There are no other family relationships among the officers or nominees for Trustee.

Each nominee currently is available and has consented to serve if elected. If any of the nominees should become unavailable, the designated proxy holders will vote in their discretion for another person or persons who may be nominated to serve as Trustee(s).

Set forth in the table below are the nominees who are standing for election by shareholders for the first time, the Board(s) to which they are nominated to serve and the person(s) who initially recommended them for consideration as nominees for Board membership:

Information regarding the nominees appears below, including information on the business activities of the nominees during the past five years and beyond. In addition to personal qualities,

such as integrity, the role of an effective Board member inherently requires the ability to comprehend, discuss and critically analyze materials and issues presented in exercising judgments and reaching informed conclusions relevant to his or her duties and fiduciary obligations. Each Trust's Board believes that the specific background of each nominee for Trustee evidences such ability and is appropriate to his or her serving on the applicable Trust's Board. As indicated below, Harris J. Ashton has served as a chief executive officer of NYSE-listed public corporations; Ann Torre Bates has served as chief financial officer of a major corporation and as a board member of a number of public companies; Larry D. Thompson and Edith E. Holiday each have legal backgrounds, including high level legal positions with departments of the U.S. Government; Mary C. Choksi has an extensive background in asset management, including founding an investment management firm; J. Michael Luttig has fifteen years of judicial experience as a Federal Appeals Court Judge; David W. Niemiec has been a chief financial officer of a major corporation; Constantine D. Tseretopoulos has professional and executive experience as founder and Chief of Staff of a hospital; Robert E. Wade has had more than thirty years' experience as a practicing attorney; John B. Wilson has served as a chief executive officer of an NYSE-listed public corporation as well as a chief financial officer of a NASDAQ-listed public corporation; Terrence J. Checki has served as a senior executive of a Federal Reserve Bank and has vast experience evaluating economic forces and their impacts on markets, including emerging markets; and Gregory E. Johnson and Rupert H. Johnson, Jr. are both high ranking executive officers of Franklin Templeton Investments.

Listed below with the business activities of the nominees are their names and years of birth, the Board(s) on which they serve or are nominated to serve, their positions and length of service on the Board(s), and the number of Fund portfolios in the Franklin Templeton Investments fund complex that they oversee.

Nominees for Independent Trustee:

Nominees for Interested Trustee:

*	If a Board member has served for different periods of time for different Trusts, the earliest applicable date is shown.

**	The number of portfolios is based on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment manager or affiliated investment manager, and also may share a common underwriter.

***

Gregory E. Johnson and Rupert H. Johnson, Jr. are "interested persons" of the Trusts as defined by the 1940 Act. The 1940 Act limits the percentage of interested persons who can comprise a trust's board of trustees. Gregory E. Johnson and Rupert H. Johnson, Jr. are considered to be interested persons of the Trusts due to their positions as officers, directors and/or shareholders of Resources. Gregory E. Johnson is the nephew of Rupert H. Johnson, Jr. The remaining nominees are Independent Trustee nominees.

How often does a Trust's Board meet and what are Board Members paid?

The role of a Trust's Board is to provide general oversight of the Trust's business and to ensure that the Trust and its Funds are operated for the benefit of all Fund shareholders. The Boards of the Franklin Funds met eight times during the prior fiscal year and generally anticipate meeting at least eight times during the current fiscal year, and more frequently as necessary.  The Boards of the Templeton Funds met five times during the prior fiscal year and anticipate meeting at least five times during the current fiscal year, and more frequently as necessary.  The Boards also oversee the services furnished to the Trusts and the Funds by the investment managers to the Funds (together, the "Investment Managers") and various other service providers.  All of the current Independent Trustees serve as Board members of more than one Trust and, in some

cases, of other Franklin Templeton funds that are not participating in the Meeting, some of which may hold meetings at different dates and times.

The Board members and management believe that having the same individuals serving on the boards of multiple Franklin Templeton funds enhances the ability of each Trust to obtain, at a relatively modest cost to each separate Trust, the services of high caliber, experienced and knowledgeable Independent Trustees who can bring their experience and talents to, and effectively oversee the management of, several Trusts and their Funds.

Each nominee for Trustee currently in office attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by all committees of the Board on which the nominee for Trustee served during such Trust's most recent fiscal year.  The number of meetings held by the Audit and Nominating Committees of each Trust during such Trust's last fiscal year (ended on or before May 31, 2017) is set forth in Exhibit B to this proxy statement.  None of the Trusts currently has a formal policy regarding Trustee attendance at annual shareholders' meetings.  Except for Franklin Templeton Global Trust and Templeton Global Smaller Companies Fund, none of the Trusts held, or were required to hold, an annual meeting at which Trustees were elected during its last fiscal year.

Franklin Funds.  The Independent Trustees of the Franklin Funds constitute the sole independent board members of 26 investment companies in the Franklin Templeton Investments complex for which each Independent Trustee currently is paid a $247,000 annual retainer fee, together with a $7,000 per meeting fee for attendance at each regularly scheduled board meeting, a portion of which is allocated to each Franklin Fund. To the extent held, compensation may also be paid for attendance at specially held board meetings. The Franklin Funds' lead Independent Trustee is paid an annual supplemental retainer of $25,000 for services to such investment companies, a portion of which is allocated to each Franklin Fund.  Board members who serve on the Audit Committees of the Franklin Funds, receive a flat fee of $3,000 per Committee meeting attended in person and $2,000 per telephonic meeting, a portion of which is allocated to each Franklin Fund. John B. Wilson, who serves as chairman of the Audit Committees of the Franklin Funds, receives an additional fee of $50,000 per year, a portion of which is allocated to each Franklin Fund. Members of the Committees are not separately compensated for any committee meeting held on the day of a regularly scheduled board meeting.

Templeton Funds.  The Independent Trustees of the Templeton Funds constitute the sole independent board members of 14 investment companies in the Franklin Templeton Investments complex for which each Independent Trustee currently is paid a $155,000 annual retainer fee, together with a $7,000 per meeting fee for attendance at each regularly scheduled board meeting, a portion of which fees are allocated to each Templeton Fund. To the extent held, compensation may also be paid for attendance at specially held board meetings. The Templeton Funds' lead Independent Trustee is paid an annual supplemental retainer of $25,000 for services to such investment companies, a portion of which is allocated to each Templeton Fund. Board members who serve on the Audit Committees of the Templeton Funds, receive a flat fee of $3,000 per Committee meeting attended in person and $2,000 per telephonic meeting, a portion of which is allocated to each Templeton Fund. David W. Niemiec, who serves as chairman of the Audit Committees of the Templeton Funds, receives an additional fee of $15,000 per year, a portion of

which is allocated to the each Templeton Fund. Members of the Committees are not separately compensated for any committee meeting held on the day of a regularly scheduled board meeting.

All Trusts.  Independent Trustees are also reimbursed for expenses incurred in connection with attending Board meetings by each fund in Franklin Templeton Investments for which they serve as a Board member. The Interested Trustees and certain officers of the Trusts who are shareholders of Resources are not compensated by the Trusts for their services, but may be deemed to receive indirect remuneration due to their participation in management fees and other fees received by the Investment Managers and their affiliates from the Franklin Templeton funds. The Investment Managers or their affiliates pay the salaries and expenses of the officers and the Interested Trustees. No pension or retirement benefits are accrued as part of Fund expenses.

The table below indicates the amount each Independent Trustee received from each Trust and from all funds in the Franklin Templeton Investments fund complex as a whole during the 12 months ended May 31, 2017, as well as the estimated annual benefits, if any, upon retirement.

*	Compensation received for the 12 months ended May 31, 2017.

**

We base the number of Boards on the number of U.S. registered investment companies in the Franklin Templeton Investments fund complex.  This number does not include the total number of series within each investment company for which the Board members are responsible.  The Franklin Templeton Investments fund complex currently includes 45 U.S. registered investment companies, with approximately 166 U.S. based funds or series.

***

Ms. Bates and Mr. Wade are also independent Board members of Franklin Mutual Series Funds and may, in the future, receive payments pursuant to a discontinued retirement plan that generally provides payments to independent Board members who have served seven years or longer for such funds prior to the date the plan was discontinued.

****	Mr. Checki is a nominee for Independent Trustee and has not yet served on any Trust's Board.

Board members of the Franklin Funds and of the Templeton Funds historically have followed a policy of having substantial investments in one or more of the Franklin Funds or Templeton Funds, as is consistent with their individual financial goals. In February 1998, this policy was formalized for the Franklin Funds and Templeton Funds through the adoption of a requirement that each Board member invest one-third of fees received for serving as a director or trustee of a Templeton Fund (excluding Committee fees) in shares of one or more Templeton Funds and one-third of fees received for serving as trustee of a Franklin Fund (excluding Committee fees) in shares of one or more Franklin Funds until the value of such investments equals or exceeds five times the annual retainer and regular Board meeting fees paid to such Board member. Investments in the name of family members or entities controlled by a Board member constitute Fund holdings of such Board member for purposes of this policy, and a three year phase-in period applies to such investment requirements for newly elected Board members. In implementing such policy, a Board member's fund holdings existing on February 27, 1998 are valued as of such date with subsequent investments valued at cost.

The following tables provide the dollar range of equity securities of the Trusts and their Funds and of all funds in the Franklin Templeton Investments fund complex overseen by the Board nominees that are beneficially owned by them as of May 31, 2017.  The aggregate dollar range of equity securities in all portfolios overseen by the Board member in the Franklin Templeton Fund Complex was over $100,000 for each Board Nominee, other than Mr. Checki.

 

 

 

Who are the Executive Officers of the Trusts?

Officers of the Trusts are appointed by their respective Boards and serve at the pleasure of the Boards.  Listed below for the Executive Officers that are common to all of the Trusts are their names, years of birth and addresses, as well as their positions and length of service with the Trusts, and principal occupations during the past five years.

Executive Officers Common to the Trusts:

*	If a person has held positions or offices for different Trusts for different periods of time, the earliest applicable date is shown.

**	Mr. Rupert H. Johnson, Jr. serves as Vice President of Franklin California Tax-Free Income Fund, Franklin Custodian Funds, Franklin Investors Securities Trust, Franklin New York Tax-Free Income Fund and each Templeton Fund.

Additional Executive Officers

In addition to the common Executive Officers listed above, each Trust has additional Executive Officers which are set forth in Exhibit D – Additional Executive Officers to this proxy statement.  The additional Executive Officers often serve in the same capacity for multiple Trusts.  If an Executive Officer has held an office for different Trusts for different periods of time, the earliest applicable date is shown.

What are the Standing Committees of the Boards?

In addition to the Nominating Committee, each Board has a standing Audit Committee. Each Trust's Audit Committee is responsible for the appointment, compensation and retention of the Trust's independent registered public accounting firm ("auditors"), including evaluating their independence, recommending the selection of the Trust's auditors to the full Board and meeting with such auditors to consider and review matters relating to the Trust's financial reports and internal auditing. The Audit Committees for the Franklin Funds are comprised of Mary C. Choksi, Edith E. Holiday, J. Michael Luttig, Larry D. Thompson and John B. Wilson (Chair).  The Audit Committees for the Templeton Funds are comprised of Ann Torre Bates, J. Michael Luttig, David W. Niemiec (Chair), and Constantine D. Tseretopoulos.  All of the members of the Audit Committees are Independent Trustees.

 

Selection of Auditors.  The Audit Committees and the Boards of the Trusts have selected the firm of PricewaterhouseCoopers LLP ("PwC") as the independent auditors for the Trusts' current fiscal years.  Representatives of PwC are not expected to be present at the Meeting, but will have the opportunity to make a statement if they wish, and will be available should any matter arise requiring their presence.

Audit Fee Information

Audit Fees.  The aggregate fees paid to PwC for professional services rendered by PwC for the audit of the Funds' annual financial statements or for services that are normally provided by PwC in connection with statutory and regulatory filings or engagements for the last two fiscal years (ended on or before May 31, 2017) for the Funds are set forth in Exhibit E to this proxy statement.  

Audit-Related Fees.  The fees paid to PwC for assurance and related services provided by PwC that are reasonably related to the performance of the audit or review of the Funds' financial statements and not reported under "Audit Fees" above for the last two fiscal years (ended on or before May 31, 2017) for the Funds are set forth in Exhibit E to this proxy statement.

In addition, the Audit Committees of the Trusts pre-approve PwC's engagement for audit-related services with the Investment Managers and certain entities controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds, which engagements relate directly to the operations and financial reporting of the Funds. There were no fees paid for these services for the twelve month periods ended May 31, 2017 and May 31, 2016.

 

Tax Fees.   PwC did not render any tax compliance, tax advice or tax planning services ("tax services") to any Fund for its last two fiscal years (ended on or before May 31, 2017).

In addition, the Audit Committees of the Trusts pre-approve PwC's engagement for tax services to be provided to the Investment Managers and certain entities controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds, which engagements relate directly to the operations and financial reporting of the Funds. There were no fees paid for these tax services for the twelve month periods ended May 31, 2017 and May 31, 2016.

All Other Fees.  The aggregate fees paid for products and services provided by PwC to the Funds, other than the services reported above, for the last two fiscal years  (ended on or before May 31, 2017) are set forth in Exhibit E to this proxy statement. The services for which these fees were paid included review of materials provided to the Boards in connection with the investment management contract renewal process.

In addition, the Audit Committees of the Trusts pre-approve PwC's engagement for other services with the Investment Managers and certain entities controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Trusts and their Funds, which engagements relate directly to the operations and financial reporting of the Funds. The aggregate fees paid to PwC for the twelve month periods ended May 31, 2017 and May 31, 2016 for such other services and not reported above were $258,717 and $678,071, respectively. The services for which these fees were paid included review of materials provided to the Boards in connection with the investment management contract renewal process

Aggregate Non-Audit Fees.  The aggregate fees paid to PwC for non-audit services to the Funds for their last two fiscal years (ended on or before May 31, 2017) and to the Investment Managers or to any entity controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds for the twelve month periods ended May 31, 2017 and May 31, 2016 are set forth in Exhibit E to this proxy statement.  

The Audit Committees of the Trusts have determined that the provision of the non-audit services, including tax-related services, that were rendered to the Investment Managers and to any entities controlling, controlled by, or under common control with the Investment Managers that provide ongoing services to the Funds is compatible with maintaining PwC's independence.

Pre-Approval Policies and Procedures.  As of the date of this proxy statement, no Audit Committee has adopted written pre-approval policies and procedures within the meaning of Regulation S-X. As a result, all such services described above and provided by PwC must be pre-approved by the applicable Audit Committee(s) or by a designated member of the applicable Audit Committee(s).

What is the Boards' Role in Risk Oversight?

Each Board, as a whole, considers risk management issues as part of its general oversight responsibilities throughout the year at regular Board meetings, through regular reports that have been developed by management, in consultation with each Board and its counsel. These reports address certain investment, valuation and compliance matters. Each Board also may receive special written reports or presentations on a variety of risk issues, either upon the Board's request or upon the Investment Manager's initiative. In addition, the Audit Committee of each Board meets regularly with the Investment Managers' internal audit group to review reports on its examination of functions and processes within Franklin Templeton Investments that affect the Trust and its Funds, and reviews and discusses the Trust's and its Funds', as applicable, processes with respect to risk assessment and risk management.

With respect to investment risk, each Board receives regular written reports describing and analyzing the investment performance of the Fund(s) which the Board oversees. In addition, the portfolio managers of each Fund meet regularly with the Boards to discuss portfolio performance, including investment risk. To the extent that a Fund changes a particular investment strategy that could have a material impact on the Fund's risk profile, the Board generally is consulted with respect to such change. To the extent that a Fund invests in certain complex securities, including derivatives, the Board receives periodic reports containing information about exposure of the Fund to such instruments. In addition, each Investment Manager's investment risk personnel meet regularly with the applicable Board(s) to discuss a variety of issues, including the impact on a Fund of the investment in particular securities or instruments, such as derivatives and commodities.

With respect to valuation, each Trust's administrator provides regular written reports to the Board that enable the Board to monitor the number of fair valued securities in a particular portfolio, the reasons for the fair valuation and the methodology used to arrive at the fair value. Such reports also include information concerning illiquid securities within a Fund's portfolio.

Each Board also reviews dispositional analysis information on the sale of securities that require special valuation considerations such as illiquid or fair valued securities. In addition, each Trust's Audit Committee reviews valuation procedures and results with the Trust's independent auditors in connection with such Committee's review of the results of the audit of the Trust's year-end financial statements.

With respect to compliance risks, each Board receives regular compliance reports prepared by each Investment Manager's compliance group and meets regularly with a Trust's Chief Compliance Officer ("CCO") to discuss compliance issues, including compliance risks. In accordance with SEC rules, the Independent Trustees meet regularly in executive session with the CCO, and a Trust's CCO prepares and presents an annual written compliance report to the Board.  Each Trust's Board adopts compliance policies and procedures for the Trust and approves such procedures for the Trust's service providers. The compliance policies and procedures are specifically designed to detect and prevent violations of the federal securities laws.  Franklin Templeton Investments periodically provides an enterprise risk management presentation to the Board to describe the way in which risk is managed on a complex-wide level. Such presentation covers such areas as investment risk, reputational risk, operational risk, personnel risk, and business continuity risk.

What is the Leadership Structure of the Boards?

Seventy-five percent or more of each Board's members consist of Independent Trustees who are not deemed to be "interested persons" by reason of their relationship with the Trusts' management or otherwise as provided under the 1940 Act. While the Chairman of each Board is an interested person, each Board is also served by a Lead Independent Trustee. The Lead Independent Trustee, together with independent counsel, reviews proposed agendas for Board meetings and generally acts as a liaison with Trust management with respect to questions and issues raised by the Independent Trustees. The Lead Independent Trustee also presides at separate meetings of Independent Trustees held in advance of each scheduled Board meeting where various matters, including those being considered at such Board meeting, are discussed. It is believed such structure and activities assure that proper consideration is given at Board meetings to matters deemed important to the Trust and its shareholders.

What is the Required Vote on Proposal 1?

For Proposal 1, the Trustee Nominees will be elected to the Board of each Trust by the affirmative vote of a plurality of votes cast collectively by the shareholders of all of the Funds of such Trust⁸, regardless of the results of the votes cast by the shareholders of each individual Fund.  This means that the Trustee Nominees receiving the largest number of votes will be elected to fill the available positions.

8	Including, for Templeton Institutions Funds-Emerging Market Series, and for Templeton Global Investment Trust-Templeton Frontier Markets Fund, each of which is issuing separate proxy solicitations materials.

THE BOARD OF EACH TRUST UNANIMOUSLY RECOMMENDS

A VOTE "FOR" THE ELECTION OF EACH

OF THE NOMINEES TO THE BOARD

PROPOSAL 2:

TO APPROVE THE USE OF A "MANAGER OF MANAGERS" STRUCTURE WHEREBY THE FUND'S INVESTMENT MANAGER WOULD BE ABLE TO HIRE AND REPLACE SUBADVISERS WITHOUT SHAREHOLDER APPROVAL

(For purposes of Proposal 2, the term "Fund" shall refer to each Fund except Franklin Corefolio Allocation Fund, Franklin Focused Growth Fund, Franklin Flexible Alpha Bond Fund, Franklin Founding Funds Allocation Fund, Franklin Global Listed Infrastructure Fund, Franklin India Growth Fund, Franklin LifeSmart Retirement Income Fund, Franklin NextStep Funds, Franklin Payout Funds, Franklin Templeton Money Fund Trust, Franklin U.S. Government Money Fund, Institutional Fiduciary Trust, Templeton Foreign Smaller Companies Fund, Templeton Global Currency Fund and Templeton Global Smaller Companies Fund.)

Background

Pursuant to an investment management agreement between each Fund and its Investment Manager, the Investment Manager is responsible for, among other items, managing the assets of the Fund and making decisions with respect to the investment of the Fund's assets and purchases and sales of investment securities on behalf of the Fund, subject to the supervision of the Fund's Board.

Each Fund's Investment Manager is directly or indirectly owned by Resources.  Many of Resources' subsidiaries that provide investment management services (together, the "Investment Manager Affiliates," and each, an "Investment Manager Affiliate") are organized under the laws of different jurisdictions throughout the world for sales, client servicing and tax purposes.  Resources operates the Investment Manager Affiliates on a unified basis. For example, the Investment Manager Affiliates generally share order management systems, investment operations support and many compliance policies and procedures. While each Investment Manager Affiliate has its own personnel and resources, including portfolio managers and analysts, and offers specialized management services to clients, the Investment Manager Affiliates generally share support personnel, such as with respect to tax, legal and accounting matters.  Depending on the strategy for a particular Fund, the Fund's Investment Manager may wish to use the portfolio management and trading expertise of personnel employed by an Investment Manager Affiliate in other global locations, thereby providing to Fund shareholders the full benefit of the global resources of Resources.  Alternatively, a Fund's Investment Manager may wish to provide the Fund with the skill and expertise of a subadviser that is not affiliated in any way with Resources or the Fund's Investment Manager.

Provisions of the 1940 Act that apply to the Funds require that investment management agreements between funds and their investment managers (including subadvisers) be approved by shareholders.  The SEC, however, has issued an exemptive order (the "Order") to Franklin Advisers, Inc. ("FAI") that permits FAI, and any Investment Manager Affiliates (such as the Funds' Investment Managers) and any existing or future registered open-end investment

company or series advised by FAI or the Investment Manager Affiliates to hire certain new subadvisers without obtaining shareholder approval (the "Manager of Managers Structure"). Under the Order, the hiring of new subadvisers remains subject to the approval of the Fund's Board, including a majority of the Independent Trustees, as well as certain other conditions.  The Order would allow a Fund's Investment Manager to hire, without shareholder approval, new subadvisers that are affiliated with the Investment Manager (e.g., the Investment Manager and the subadviser are both wholly owned, directly or indirectly, by the same corporate parent), and new subadvisers that are not affiliated with the Investment Manager in any way.  Before a Fund may rely on the Order, the Fund's use of the Manager of Managers Structure must be approved by a "majority of the outstanding voting securities" of the Fund, as defined in the 1940 Act and discussed below.

Certain Funds are already permitted to rely on a previously effective exemptive order issued by the SEC (the "Affiliated Subadviser Order"), which is more limited than the Order.  Under the Affiliated Subadviser Order, a Fund is only permitted to rely on the relief to hire a subadviser without shareholder approval if the subadviser is affiliated with the Fund's Investment Manager.  For each Fund currently permitted to rely on the Affiliated Subadviser Order, the Fund's Board determined to seek shareholder approval of the Manager of Managers Structure in reliance on the Order, which, if approved, would provide such Funds with additional flexibility in hiring subadvisers that are unaffiliated with the Fund's Investment Manager.

Why am I being asked to vote on this Proposal?

Each Fund's Board determined to seek shareholder approval of the Manager of Managers Structure in reliance on the Order in connection with the Meeting, which otherwise was called to elect Trustees and to vote on other matters described in this proxy statement, in order to avoid additional meeting and proxy solicitation costs in the future, in the event that the Fund's Investment Manager, with the approval of the Fund's Board, including a majority of the Independent Trustees, determines that the use of the Manager of Managers Structure is in the best interests of the Fund.  The process of seeking shareholder approval of the Manager of Managers Structure in the future could cause delays in executing changes that a Fund's Board and Investment Manager have determined are in the best interests of the Fund.  Seeking shareholder approval typically involves additional expenses, such as hiring a proxy solicitor.

Any new fund launched by Franklin Templeton Investments typically will allow for the Manager of Managers Structure.  However, because each Fund was launched before the Order was received, shareholder approval is now required for a Fund to use the Manager of Managers Structure in reliance on the Order.

The Investment Managers for the Funds generally do not presently intend to use the Manager of Managers Structure for such Funds because near-term changes to the portfolio management structure for the Funds are not anticipated.  However, as noted above, Resources is a global investment management organization with offices and Investment Manager Affiliates located around the world.  From time to time, a portfolio manager may relocate from one Investment Manager Affiliate to another in order to gain further experience, or if a Fund's Investment Manager believes it would be beneficial to the Fund to have access to the investment management expertise of another Investment Manager Affiliate.  If a Fund were permitted to rely

on the Order, such investment management changes could be effected with Board approval, but without the time and expense associated with obtaining shareholder approval.

How will the Manager of Managers Structure Operate?

Under the Manager of Managers Structure, the Investment Manager of each Fund will be permitted to appoint and replace subadvisers for the Fund and to enter into and approve amendments to subadvisory agreements without first obtaining shareholder approval.  However, the Board of each Fund, including a majority of the Independent Trustees, must approve any new subadviser and any new or amended subadvisory agreement.  In addition, if the Manager of Managers Structure is approved for a Fund, that Fund's investment management agreement will be amended to allow for subadvisory agreements that are not approved by shareholders.

Under the Manager of Managers Structure, a Fund's Investment Manager would have the overall responsibility, subject to oversight by the Fund's Board, to oversee the subadvisers and recommend their hiring, termination and replacement.  Specifically, the Order requires a Fund's Investment Manager to, subject to the review and approval of the Fund's Board, including a majority of the Independent Trustees:  (a) set the Fund's overall investment strategy; (b) evaluate, select and recommend subadvisers to manage all or a portion of the Fund's assets; and (c) implement procedures reasonably designed to ensure that each subadviser complies with the Fund's investment goal, policies and restrictions. In addition, subject to the review by the Fund's Board, the Fund's Investment Manager is required to: (a) when appropriate, allocate and reallocate the Fund's assets among multiple subadvisers; and (b) monitor and evaluate the performance of the subadvisers.  The replacement of a Fund's Investment Manager or the imposition of material changes to the Fund's investment management agreement would, however, require prior shareholder approval.

If a Fund's Investment Manager, with the approval of the Fund's Board, including a majority of the Independent Trustees, determines that the use of the Manager of Managers Structure is in the best interests of the Fund, the Manager of Managers Structure would without obtaining shareholder approval:  (1) enable a new subadviser to commence providing services to a Fund more quickly and with less potential expense to the Fund; (2) permit a Fund's Investment Manager to allocate and reallocate the Fund's assets among itself and one or more subadvisers; and (3) permit a Fund's Board to approve material changes to a subadvisory agreement.

Under the Manager of Managers Structure, upon receiving approval of a Fund's Board, including a majority of the Independent Trustees, subadvisers selected by a Fund's Investment Manager could immediately manage the Fund's assets.  The Fund would, however, inform shareholders of the hiring of any new subadviser within 90 days after hiring the subadviser.

How does this Proposal affect my fees as a shareholder of a Fund?

Approval of this Proposal will not affect your fees as a shareholder of a Fund.  The Manager of Managers Structure will not at any time entail an increase in the investment management fees paid by a Fund.  Further shareholder approval would be necessary to increase the management fees that are payable by a Fund, which is not contemplated.

How does this Proposal affect my right to vote on subadvisory agreements?

If Proposal 2 is approved for a Fund, and the Fund's Board and Investment Manager believe that the use of one or more subadvisers would be in the best interests of the Fund, the Fund's shareholders generally would not be asked to approve hiring a subadviser for the Fund, assuming that the conditions of the Order are met.  Rather, a Fund's Investment Manager, with the approval of the Fund's Board, including a majority of the Independent Trustees, would be able to appoint subadvisers and make appropriate changes to the subadvisory agreements without seeking shareholder approval.  The Fund would, however, inform shareholders of the hiring of any new subadviser within 90 days after the hiring of the subadviser.

Why did each Fund's Board approve the Manager of Managers Structure?

Each Fund's Board, including a majority of the Independent Trustees, approved the Manager of Managers Structure and is recommending that shareholders approve the Manager of Managers Structure in reliance on the Order at the Meeting in order to avoid additional meeting and proxy solicitation costs in the future, in the event that the Fund's Investment Manager, with the approval of the Board, including a majority of the Independent Trustees, determines that it is in the best interests of the Fund to use the Manager of Managers Structure.

What is the Required Vote on Proposal 2?

Proposal 2 will be voted on by shareholders of each Fund.  For Proposal 2, before a Fund may rely on the Order, the operation of the Fund using the Manager of Managers Structure must be approved by the affirmative vote of a "majority of the outstanding voting securities" of the Fund, which is defined in the 1940 Act as the lesser of: (A) 67% or more of the voting securities of the Fund present at the Meeting, if the holders of more than 50% of the outstanding voting securities of such Fund are present or represented by proxy; or (B) more than 50% of the outstanding voting securities of such Fund (a "1940 Act Majority").

If Proposal 2 is not approved by a Fund's shareholders, then the Fund's Investment Manager generally would only be able to enter into new or amended subadvisory agreements with shareholder approval, potentially causing delay and expense in making a change deemed beneficial to the Fund and its shareholders by the Board.

THE BOARD OF EACH TRUST UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" PROPOSAL 2.

PROPOSAL 3:

TO APPROVE AN AMENDED FUNDAMENTAL INVESTMENT RESTRICTION REGARDING INVESTMENTS IN COMMODITIES

Under the 1940 Act, a fund must have a fundamental investment policy governing investments in "commodities."  The 1940 Act does not prohibit a fund from investing in commodities.  The Funds' current fundamental investment restrictions regarding commodities are substantially similar, though not identical, and are detailed in Exhibit F to this proxy statement.  The Funds' Investment Managers and the Boards are recommending that each Fund amend its current fundamental investment restriction regarding investments in commodities to provide the Fund with the flexibility to adapt to continuously changing regulation and to react to changes in the financial markets and the development of new investment opportunities and instruments, in accordance with the Fund's investment goal and subject to oversight by the Fund's Board.  Since the adoption of the Funds' current fundamental investment restrictions regarding commodities, the financial markets and related regulation by the SEC, the U.S. Commodity Futures Trading Commission ("CFTC") and other governmental agencies have evolved, and new types of financial instruments have become available as potential investment opportunities, including commodity-linked instruments.  Under the proposed restriction, if current applicable law were to change, the Funds would be able to conform to any such new law without shareholders taking further action.

The proposed standardized fundamental investment restriction regarding investments in commodities is as follows:

[The Fund may not:]  Purchase or sell commodities, except to the extent permitted by the 1940 Act or any rules, exemptions or interpretations thereunder that may be adopted, granted or issued by the SEC.

What effect will amending the current commodities restriction have on the Funds?

The proposed fundamental investment restriction would clarify the ability of each Fund to engage in transactions involving currencies and other derivative transactions, such as futures contracts, forward contracts, commodity options and swaps, subject to oversight by the Fund's Board.  Notwithstanding the flexibility provided by the proposed fundamental investment restriction, each Fund is subject to limitations established from time to time by the relevant Board regarding the use of derivatives.  In addition, the Funds, to the extent applicable, currently rely on CFTC Rule 4.5 for an exclusion from commodity pool operator registration, and the Investment Managers intend to continue to limit each Fund's use of commodity interests to the trading limitations set forth in the rule.  Therefore, it is not anticipated that the adoption of the proposed investment restriction would involve additional material risk to any Fund or affect the way any Fund is currently managed or operated.

What is the required vote on Proposal 3?

To approve Proposal 3, a Fund must receive the affirmative 1940 Act Majority Vote of its shareholders.

THE BOARD OF EACH FUND UNANIMOUSLY RECOMMENDS

A VOTE "FOR" PROPOSAL 3

INTRODUCTION TO PROPOSALS 4, 5 AND 6

Beginning in 2006, substantially all of the open-end funds within the Franklin Templeton Investments fund complex (the "FT Funds") held shareholder meetings to approve, among other things, the amendment and standardization of various investment restrictions required by the 1940 Act to be designated by the FT Funds as fundamental and the elimination of various investment restrictions that were not required by the federal securities laws – in particular, restrictions that were required by state securities laws that were subsequently preempted by the National Securities Markets Improvement Act of 1996 ("NSMIA").

At the time of the complex-wide adoption of revised fundamental investment restrictions in 2006 and 2007, the Franklin Small-Mid Cap Growth Fund (the "Small-Mid Cap Fund"), a series of Franklin Strategic Series ("FSS"), did not receive sufficient votes from shareholders to amend its own fundamental investment restrictions.  As a result, the Small-Mid Cap Fund currently is subject to a number of fundamental investment restrictions that (i) are more restrictive than those required under present law; (ii) were adopted in response to regulatory, business or industry conditions that no longer exist or no longer apply to the Small-Mid Cap Fund; or (iii) vary only slightly (and not substantively) from what are now considered to be the standard forms of fundamental investment restrictions for all other FT Funds.

In addition, Templeton Global Balanced Fund ("Global Balanced Fund") and Templeton Emerging Markets Small Cap Fund ("TEM Small Cap Fund"), each a series of TGIT, each have a fundamental investment restriction regarding lending that is more restrictive than is required under present law.

Why are the Boards of FSS and TGIT recommending approval of the amendment or elimination of certain fundamental investment restrictions?

The Boards of FSS and TGIT have approved, and are recommending that shareholders of the respective Funds approve, (a) the amendment of certain fundamental investment restrictions for the Small-Mid Cap Fund, Global Balanced Fund and TEM Small Cap Fund and (b) the elimination of certain fundamental investment restrictions for the Small-Mid Cap Fund, principally to (i) update those investment restrictions that are more restrictive than is currently required, are no longer required under the federal securities laws or are not required to be treated as "fundamental;" and (ii) conform and standardize such Funds' fundamental investment restrictions to those of substantially all other FT Funds.

The Investment Manager for the Small-Mid Cap Fund believes that its ability to manage the Small-Mid Cap Fund's assets in a changing investment environment may be enhanced because the Small-Mid Cap Fund, to the extent it currently is subject to more restrictive or outdated restrictions, will have greater investment management flexibility to respond to market, industry, regulatory or technical changes by seeking Board, rather than shareholder, approval when necessary.  Standardized fundamental investment restrictions for the Small-Mid Cap Fund, Global Balanced Fund and TEM Small Cap Fund are also expected to enable such Funds and their respective Investment Managers to more efficiently and easily monitor portfolio compliance across the entire Franklin Templeton Investments fund complex and will help avoid conflicts among restrictions whose language varies from the other FT Funds.

What effect will amending or eliminating the current fundamental investment restrictions have on the Funds?

The proposed amendment to the fundamental investment restriction regarding lending for the Small-Mid Cap Fund, Global Balanced Fund and TEM Small Cap Fund and many of the proposed amendments to the other fundamental investment restrictions of the Small-Mid Cap Fund would provide the applicable Fund with additional flexibility to pursue certain investments or strategies.  To the extent that a Fund uses such flexibility in the future, the Fund may be subject to some additional costs and risks and will provide applicable disclosure to shareholders regarding such its use of such flexibility, including any additional material risks.  None of the Funds, however, currently anticipates materially changing its investment strategies if the proposed amendments to, or elimination of (as applicable), the fundamental investment restrictions are approved.

The current fundamental investment restrictions of the Small-Mid Cap Fund, Global Balanced Fund and TEM Small Cap Fund that are proposed to be amended, together with the recommended changes to those restrictions, as well as those fundamental investment restrictions of the Small-Mid Cap Fund proposed to be eliminated, are detailed in Exhibits G and H.  If the Funds' shareholders approve Proposals 4 through 6 (including any Sub-Proposals),  the amendments or elimination of these investment restrictions will be made through either (a) a supplement to the applicable Fund's statement of additional information or (b) the annual update to the Fund's registration statement.

What is the required vote on Proposals 4, 5 and 6?

To approve Proposals 4, 5 or 6 (including any Sub-Proposal), the applicable Fund must receive the affirmative 1940 Act Majority Vote of such Fund's shareholders.

If Proposal 4 or a Sub-Proposal within Proposals 5 or 6 is not approved by shareholders of a Fund, the current fundamental investment restriction to which such Proposal or Sub-Proposal relates will remain in effect for that Fund. Whether or not shareholders of one Fund approve Proposal 4 will not affect whether Proposal 4 is approved for another Fund.

PROPOSAL 4:

FOR FRANKLIN SMALL-MID CAP GROWTH FUND, TEMPLETON GLOBAL BALANCED FUND AND TEMPLETON EMERGING MARKETS SMALL CAP FUND, TO APPROVE AN AMENDED FUNDAMENTAL INVESTMENT RESTRICTION REGARDING LENDING

Under the 1940 Act, a fund must describe, and designate as fundamental, its policy with respect to making loans.  In addition to a loan of cash, the term "loan" may, under certain circumstances, be deemed to include certain transactions and investment-related practices.  Among those transactions and practices are the lending of portfolio securities, the purchase of certain debt instruments and entering into repurchase agreements.

The current investment restriction regarding lending for each of the Small-Mid Cap Fund, Global Balanced Fund and TEM Small Cap Fund prohibits the Fund from making loans, except for certain activities that are specifically excluded from the restriction.

The proposed standardized fundamental investment restriction on lending, rather than prohibiting lending to other persons, places an overall limit on such lending and provides that the Fund may not make loans if, as a result, more than 33⅓% of its total assets would be lent to other persons (including other investment companies as permitted by the 1940 Act and any exemptions therefrom). The proposed standardized restriction also includes a standardized list of permitted lending activities, some of which are also permitted under the Fund's current restriction: (1) the lending of portfolio securities; (2) the purchase of debt securities, other debt instruments, loan participations and/or engaging in direct corporate loans in accordance with the Fund's investment goals and policies; and (3) repurchase agreements to the extent the entry into a repurchase agreement is deemed to be a loan.

Under SEC staff interpretations, lending by an investment company, under certain circumstances, may also give rise to issues relating to the issuance of senior securities.  To the extent that the Small-Mid Cap Fund, Global Balanced Fund or TEM Small Cap Fund enters into lending transactions under these limited circumstances, such Fund will continue to be subject to the limitations imposed under the 1940 Act regarding the issuance of senior securities and the Fund's fundamental investment restriction regarding issuing senior securities.  In addition, such Fund will disclose to shareholders any additional risks associated with such transactions.

THE FSS AND TGIT BOARDS UNANIMOUSLY RECOMMEND A VOTE

"FOR" PROPOSAL 4

 

PROPOSAL 5:

FOR FRANKLIN SMALL-MID CAP GROWTH FUND, TO APPROVE AMENDMENTS TO CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS (this Proposal involves separate votes on Sub-Proposals 5a–5f)

The FSS Board has approved, and recommends that shareholders approve, amendments to the Small-Mid Cap Fund's fundamental investment restrictions regarding: (a) borrowing, (b) underwriting, (c) investments in real estate, (d) issuing senior securities, (e) industry concentration, and (f) diversification of investments, which are detailed in Exhibit G and are described below.

The 1940 Act imposes certain limitations on the borrowing activities of mutual funds. In addition, borrowing limitations adopted by a fund must be fundamental.  The 1940 Act limitations on borrowing generally are designed to protect shareholders and their investment by restricting a fund's ability to subject its assets to the claims of creditors who, under certain circumstances, might have a claim to the fund's assets that would take precedence over the claims of shareholders upon redemption or liquidation.

The Small-Mid Cap Fund's current investment restriction relating to borrowing permits the Fund to borrow money only from banks and only for temporary purposes.  The restriction also limits the amount of money that may be borrowed by the Fund to 10% of the Fund's total assets (including the amount borrowed) and includes a provision that the Fund will not make any additional investments while the Fund's borrowings exceed 5% of its total assets.  Many funds used to include this provision because of comments from the SEC staff that in the absence of such restriction, a fund must include risk disclosure regarding the fund's ability to engage in "leverage."  However, such comments are generally no longer given by the SEC staff, and the fact that a fund is not subject to this type of restriction does not mean that the fund will in fact engage in leverage.  Currently, the Small-Mid Cap Fund does not intend to use leverage as part of its investment strategies.

The proposed standardized investment restriction would prohibit borrowing money, except to the extent permitted by the 1940 Act or any rule, exemption or interpretation thereunder issued by the SEC.  By so amending the investment restriction, the Small-Mid Cap Fund would not be unnecessarily limited if the Fund's Investment Manager determines that borrowing is in the best interests of the Fund and its shareholders.

Under the 1940 Act, a fund's policy concerning underwriting is required to be fundamental.  Under the federal securities laws, a person or company generally is considered to be an underwriter if the person or company participates in the public distribution of securities of other issuers, which involves purchasing the securities from the issuer with the intention of reselling the securities to the public.  From time to time, a fund may purchase securities in a private transaction for investment purposes and later sell or redistribute the securities to institutional investors.  Under these or other circumstances, the fund could possibly be considered to be within the technical definition of an underwriter under the federal securities laws.  SEC staff interpretations have clarified, however, that resales of privately placed securities

by institutional investors, such as the Small-Mid Cap Fund, do not make the institutional investor an underwriter in these circumstances.  In addition, under certain circumstances, a fund may be deemed to be an underwriter of its own securities.

The Small-Mid Cap Fund's current fundamental investment restriction relating to underwriting prohibits the Fund from acting as an underwriter.  The proposed standardized investment restriction clarifies that the Small-Mid Cap Fund may resell portfolio securities that the Fund owns and that it may also sell its own shares.

The Small-Mid Cap Fund's current fundamental investment restriction regarding underwriting is combined with fundamental investment restrictions relating to investments in restricted securities and investments in unseasoned issuers.  The proposed elimination of those other restrictions is discussed below in Proposal 6.

Under the 1940 Act, a fund's policy regarding investments in real estate must be fundamental. The 1940 Act does not prohibit an investment company from investing in real estate, either directly or indirectly.  The Small-Mid Cap Fund's current fundamental investment restriction relating to real estate generally prohibits the Fund from investing in real estate, although the Fund may invest in marketable securities issued by real estate investment trusts ("REITs").

The proposed standardized investment restriction would continue to permit the Small-Mid Cap Fund to invest in marketable securities issued by REITs.  In addition, the proposed investment restriction would clarify the Small-Mid Cap Fund's ability to invest in securities or other instruments of issuers that invest, deal or otherwise engage in transactions in real estate or interests therein, but also allow the Small-Mid Cap Fund to invest in real estate limited partnership interests and real estate related securities or instruments for which there is a limited or no market.  The proposed restriction would also permit the Small-Mid Cap Fund to hold and sell real estate acquired by the Fund as a result of owning a security or other instrument.  To the extent that the Small-Mid Cap Fund takes advantage of this added flexibility, the Fund may be exposed to certain risks inherent to investments in real estate, such as relative illiquidity, difficulties in valuation and greater price volatility.

The 1940 Act requires a fund to have an investment policy describing its ability to issue senior securities.  A "senior security" is any bond, debenture, note or similar obligation or instrument constituting a security and evidencing indebtedness, and any stock of a class having priority over any other class as to distribution of assets or payment of dividends.  The 1940 Act generally prohibits an open-end fund from issuing senior securities in order to limit a fund's ability to use leverage.

The proposed standardized restriction would permit the Small-Mid Cap Fund to issue senior securities as permitted under the 1940 Act or any relevant rule, exemption or interpretation thereunder issued by the SEC. The proposed restriction also would clarify that the Small-Mid Cap Fund may engage in those types of transactions that have been interpreted by the SEC Staff as not constituting senior securities, such as covered repurchase transactions, futures, writing options and short sales.

Under the 1940 Act, a fund's policy regarding concentration of investments in the securities of companies in any particular industry must be fundamental. The SEC staff takes the position that a fund "concentrates" its investments if it invests more than 25% of its "net" assets (exclusive of certain items such as cash, U.S. government securities, securities of other investment companies, and certain tax-exempt securities) in any particular industry. A fund is not permitted to concentrate its investments in any particular industry unless it discloses its intention to do so, and the SEC staff generally takes the position that a fund may not reserve the right to concentrate its investments in the future.

The proposed standardized concentration restriction for the Small-Mid Cap Fund is substantially the same as the Fund's current restriction; however, the changes will conform the Fund's fundamental policy on concentration to that of the other FT Funds, which do not apply the concentration policy to U.S. government securities or securities of other investment companies.

The 1940 Act requires each investment company to recite in its registration statement such investment company's status as either a "diversified" or "non-diversified" fund.  If a fund is "diversified," then it may not purchase the securities of any one issuer if, at the time of purchase, with respect to 75% of the fund's total assets, more than 5% of its total assets would be invested in the securities of that issuer, or the fund would own or hold more than 10% of the outstanding voting securities of that issuer.  Up to 25% of a fund's total assets may be invested without regard to these limitations.  Under the 1940 Act, these limitations do not apply to securities issued or guaranteed as to principal or interest by the U.S. government or any of its agencies or instrumentalities, or to the securities of other investment companies.

The Small-Mid Cap Fund's current fundamental investment restriction regarding diversification is more restrictive than the requirements of the 1940 Act, as the investment restriction applies the 5% and 10% limitations to 100% of the Fund's assets, rather than to 75% of total assets as permitted for diversified funds under the 1940 Act.  Second, the current 5% and 10% limitations do not exclude securities of other investment companies, as permitted by the 1940 Act. 

THE FSS BOARD UNANIMOUSLY RECOMMENDS

THAT SHAREHOLDERS VOTE "FOR" SUB-PROPOSALS 5a–5f

PROPOSAL 6:

FOR FRANKLIN SMALL-MID CAP GROWTH FUND, TO APPROVE THE ELIMINATION OF CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS (this Proposal involves separate votes on Sub-Proposals 6a-6h)

The FSS Board has approved, and recommends that shareholders approve, the elimination of certain fundamental investment restrictions for the Small-Mid Cap Fund, which are detailed in Exhibit H and are described below.

Why is the FSS Board recommending that certain fundamental investment restrictions be eliminated and what effect will their elimination have on the Small-Mid Cap Fund?

Certain fundamental investment restrictions of the Small-Mid Cap Fund (e.g., purchasing securities on margin, engaging in short sales and pledging, mortgaging or hypothecating assets) are either restatements of restrictions that are already included within the 1940 Act or are more restrictive than current SEC rules or SEC staff interpretations.  Other fundamental investment restrictions proposed to be eliminated were originally adopted to comply with various state securities laws and regulations (e.g., investing in other investment companies and investments in oil, gas and mineral interests).  Due to the passage of NSMIA, these fundamental investment restrictions are no longer required.  All of the fundamental investment restrictions proposed to be eliminated have been removed for substantially all other FT Funds.

Accordingly, the FSS Board has approved and recommends that shareholders approve the elimination of the following fundamental investment restrictions that prohibit: (i) engaging in short sales and use of margin; (ii) investments in oil, gas and other mineral programs; (iii) use of options; (iv) investment in restricted securities; (v) investment in unseasoned issuers; (vi) investing for purposes of exercising control; (vii) investing in other investment companies; and (viii) management ownership of securities and principal transactions with management.

The Small-Mid Cap Fund currently has a fundamental investment restriction that generally prohibits the Small-Mid Cap Fund from engaging in short sales or using margin.  Certain 1940 Act provisions on issuing senior securities, as described above, will continue to limit the Small-Cap Cap Fund's ability to engage in short sales and to purchase securities on margin.

The Small-Mid Cap Fund currently has a fundamental investment restriction that prohibits the Fund from investing in oil, gas and other mineral exploration or development programs.  This restriction was originally adopted to comply with certain state securities laws and regulations that have since been preempted by NSMIA.  However, to the extent that the Small-Mid Cap Fund were to ever invest in such programs, it would remain subject to any applicable 1940 Act limitations, including the limit on the Fund's ability to purchase illiquid or restricted securities.

The Small-Mid Cap Fund currently has a fundamental investment restriction that limits the Small-Mid Cap Fund's ability to invest in options, including puts, calls, straddles, spreads or any combination thereof.  The 1940 Act does not require a fund to adopt a fundamental investment restriction regarding investment in options, except to the extent that these transactions may result in the creation of senior securities.  If this fundamental investment restriction is eliminated, the Small-Mid Cap Fund will remain subject to the 1940 Act's limitations on the issuance of senior securities and the Small-Mid Cap Fund's related fundamental policy.

The Small-Mid Cap Fund currently has a fundamental investment restriction that limits such Fund's ability to invest in restricted securities.  "Restricted securities" generally include (i) securities that have not been registered under the Securities Act of 1933, as amended, for sale to the public and therefore may only be resold to certain institutional investors under certain circumstances, and (ii) securities that are subject to other contractual restrictions on resale. This fundamental investment restriction is recommended to be eliminated as the Small-Mid Cap Fund is already subject to a non-fundamental 15% limit on the amount of its net assets that can be invested in illiquid securities, consistent with current SEC Staff positions.

The Small-Mid Cap Fund's current fundamental investment restriction limits the Fund's ability to invest in securities of issuers that have been in continuous operation for less than three years.  The 1940 Act does not require, and applicable state law no longer requires, that a fund adopt such a fundamental investment restriction.  In fact, such restriction may prevent the Small-Mid Cap Fund from investing in new and emerging growth companies that would otherwise be appropriate given its investment strategies and goal.

The Small-Mid Cap Fund currently has a fundamental investment restriction that prohibits the Fund from investing in other investment companies except in limited circumstances.  Upon elimination of this restriction, the Small-Mid Cap Fund would remain subject to the restrictions under Section 12(d) of the 1940 Act, and any rules thereunder, relating to the Fund's ability to invest in other investment companies, including open-end and closed-end investment companies, except where the Fund relies on an exemption from the SEC relating to such restrictions.   In addition, eliminating this current restriction on investments in other investment companies would clarify the Small-Mid Cap Fund's ability to invest to a greater extent in the Franklin Templeton money fund used as a cash sweep vehicle.

The Small-Mid Cap Fund currently has a fundamental investment restriction regarding management ownership of securities and principal transactions with management.  This fundamental investment restriction prohibits the Small-Mid Cap Fund from (i) purchasing from or selling to FSS' officers and Trustees (or any firm of which any officer or Trustee is a member) as principal any securities, and (ii) investing in companies in which certain affiliated persons of the Fund have an ownership interest.  The 1940 Act provisions governing transactions in portfolio securities between a fund and its affiliates would continue to apply to the Small-Mid Cap Fund.

 

THE FSS BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS

VOTE "FOR" SUB-PROPOSALS 6a-6h.

PROPOSALS 7a–7c:

SHAREHOLDER PROPOSALS REQUESTING THAT THE FRANKLIN TAX-FREE TRUST, TEMPLETON INCOME TRUST, AND FRANKLIN HIGH INCOME TRUST BOARDS INSTITUTE PROCEDURES TO PREVENT HOLDING INVESTMENTS IN COMPANIES THAT, IN THE JUDGMENT OF THE BOARDS, SUBSTANTIALLY CONTRIBUTE TO GENOCIDE OR CRIMES AGAINST HUMANITY

In 2009, Franklin Tax-Free Trust ("FTFT"), on behalf of Franklin High Yield Tax-Free Income Fund ("FHYTFIF"), Templeton Income Trust ("TIT"), on behalf of Templeton Global Bond Fund ("TGBG") and Franklin High Income Trust ("FHIT"), on behalf of Franklin High Income Fund ("FHIF"), received substantially similar proposals from five shareholders to have you vote on their proposals, as set forth below.  In Proposal 7a, with respect to FHYTFIF, Proposal 7b, with respect to TGBF, and Proposal 7c, with respect to FHIF, such shareholders' proposals request that the FTFT Board, on behalf FHYTFIF, the TIT Board, on behalf of TGBF, and the FHIT Board, on behalf of FHIF, institute procedures to prevent holding investments in companies that, in the judgment of the FTFT, TIT and FHIT Boards, respectively, substantially contribute to genocide or crimes against humanity, the most egregious violations of human rights.  Each of these shareholders will ask you to vote on his or her proposal at the Meeting, if you are a shareholder of the applicable Fund.  Each of these shareholders' proposals is included in this proxy statement and will be presented by these shareholders at the Meeting pursuant to regulatory requirements.  THE TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE AGAINST EACH OF THESE PROPOSALS.

What are the Shareholder Proposals?

7a – Franklin High Yield Tax-Free Income Fund:  Ms. Elizabeth A. Willey and Mr. Stephen F. Willey, 1395 Rolling Thunder Ridge, Sandpoint, ID 83864, shareholders who claim beneficial ownership of approximately 2,782.577 shares of FHYTFIF as of April 24, 2009, submitted on May 4, 2009 the proposal set forth below.

7b – Templeton Global Bond Fund:  John F. McDiarmid, 304 Lawton Street, Falls Church, VA 22046-4510, a shareholder who claims beneficial ownership of approximately 677.392 shares of TGBF as of June 30, 2009, submitted on August 11, 2009 the proposal set forth below.

7c – Franklin High Income Fund:  Ms. Carol Haskell and Mr. Jonathan Seidel, 3373 Guido Street, Oakland, CA 94602, shareholders who claim beneficial ownership of approximately 7,644.896 shares of FHIF as of September 5, 2009, submitted on such date the proposal set forth below.

Genocide-free Investing Shareholder Proposals

WHEREAS:

Franklin Templeton portfolio managers make investment decisions based on financial and legal considerations while seeming to ignore other issues.  Even in the face of the most egregious violations of human rights, such as genocide, Franklin Templeton has released no policy to prevent investments that help fund or support such human rights violations.

Ordinary individuals, through their investments in Franklin Templeton, may inadvertently invest in companies funding genocide because of investment decisions made on their behalf by Franklin Templeton.  With no policy to prevent these problem investments, Franklin Templeton may at any time increase its holdings or involve new funds in such problem investments.

We believe that this problem is not merely theoretical, since [many mutual funds are large holders of]* [Franklin Templeton was one of the largest holders of]** PetroChina, which, through its closely related parent, China National Petroleum Company, is providing funding that the Government of Sudan uses to conduct genocide in Darfur.

We believe that in the face of the most extreme human rights crises investors share responsibility to act, individually and collectively, in addition to the role and responsibility of governments.

We believe that investors do not want their pensions and family savings connected to genocide.  In KRC Research's 2007 study, 71% of respondents said companies should take extreme cases of human rights abuses, such as genocide, into account rather than base investment decisions solely on economic criteria.  Further, over 150,000 people have objected to financial firms about such problem investments.  Reasonable people may disagree about what constitutes socially responsible investing, but few people want their savings to be complicit in genocide.

We believe that negative publicity resulting from the many national press reports and widespread consumer protests can damage the company's reputation, hurt employee morale, increase its cost to acquire customers, and reduce the shareholder base for distributing expenses, all of which can negatively impact Franklin Templeton shareholders.

We see no compelling reason to invest in companies that fund genocide.  We believe there are ample competitive alternatives and flexibility of investment choices, even with index funds.  As noted by Gary Brinson's classic study, investment returns are affected much more by asset allocation than individual security selections, so avoiding a small number of problem companies need not result in any significant effect on performance.

Investor pressure has proven effective in influencing foreign governments.  The campaign against Talisman Energy contributed to the January 2005 Comprehensive Peace Agreement between Khartoum and South Sudan.

*	Language used in the proposals submitted by Elizabeth A. Willey and Stephen F. Willey and John F. McDiarmid.

**	Language used in the proposal submitted by Carol Haskell, Trustee, and Jonathan Seidel, Trustee.

RESOLVED:

Shareholders request that the Board institute procedures to prevent holding investments in companies that, in the judgment of the Board, substantially contribute to genocide or crimes against humanity, the most egregious violations of human rights.

DISCUSSION:

In addition to preventing future investments in problem companies, the proposals call for corrective action to address existing investments in problem companies.  If the fund can effectively influence the problem company's management, then this may be an appropriate action.  If not, the security should be sold.

What is the Recommendation of the Trustees?

THE BOARDS OF FTFT, TIT AND FHIT UNANIMOUSLY RECOMMEND THAT YOU VOTE "AGAINST" EACH OF THESE PROPOSALS

Why do the Trustees Unanimously Recommend a Vote Against all of these Proposals?

The conditions in the Darfur region of Sudan are deplorable, and the FTFT, TIT and FHIT Boards and FAI, the investment manager for each of FHYTFIF, TGBF and FHIF, support efforts toward positive and meaningful reform there. The FTFT, TIT and FHIT Boards and FAI also recognize and are respectful of the fact that there are many different perspectives and opinions on the best way to approach this and similar issues. In FAI's many years of investing experience, it has seen that fostering economic and business development through investment can often help in achieving reforms.

Each of FHYTFIF, TGBF and FHIF must act in what it believes to be the best interests of its respective shareholders and has to make investment decisions that are consistent with the investment guidelines contained in each Fund's prospectus. In keeping with these obligations, FAI considers all material factors in assessing the merits of an investment and seeks to achieve the best investment results, consistent with stated investment goals and policies.

FAI considers these issues on a company-by-company basis as part of the investment management process, as discussed in more detail below.  FAI and the FTFT, TIT and FHIT Boards believe that this investment approach, which considers these issues on an investment-by-investment basis and as part of the overall investment management process, is preferable to the

approach recommended by these shareholder proposals because the issues raised by these proposals are an inextricable part of FAI's investment management process and, therefore, are not well suited for a policy implemented by any board of trustees.  Our public statement regarding investment in PetroChina, which is reproduced below from the Franklin Templeton Investments website, provides an example of the considerations implemented by FAI:

Franklin Templeton Investments: Statement on PetroChina

Several groups that are trying to effect change in the Darfur region of Sudan have asked individual investors and asset managers, such as Franklin Templeton, to sell holdings of companies identified as having business ties to Sudan.  Among the companies being targeted for divestment is PetroChina, which is currently a holding in several of our emerging market funds.  PetroChina, which has stated that they do not conduct business in Sudan itself, is being targeted because its parent company, CNPC, has business interests there.

The conditions in the Darfur region of Sudan are deplorable, and we support efforts toward positive and meaningful reform there.  We also recognize and are respectful of the fact that there are many different perspectives and opinions on the best way to approach this issue.  However, identifying the best way to achieve change continues to be a matter of serious debate.  Some have questioned whether divestment will prove effective and others believe that corporate investment in troubled regions can lead to improved economic growth and reform for the local populace over the long term.  In our more than 25 years of experience investing in emerging markets, we have seen that fostering economic and business development through investment can often help in achieving reforms.

Our investment professionals actively engage company management when they have any concerns with company management or company activities, and PetroChina is no exception to this approach.  As an investment adviser, our fiduciary responsibility to our fund shareholders is to make investment decisions that are consistent with the guidelines in each fund's prospectus.  To achieve this, our investment teams consider all risk factors, including those related to social and political issues, when evaluating a potential holding or making other investment decisions for a given fund.

We appreciate the views of those favoring and opposing divestiture, and our investment groups continue to consider social and political issues in their risk assessment of individual fund holdings.

The U.S. Government maintains a comprehensive set of laws and regulations governing business relationships with countries that are believed to be responsible for egregious violations of human rights.  Additionally, as a global investment management organization, Franklin Templeton is subject not only to the sanctions programs administered by the U.S. Government, but also to sanctions programs adopted and administered by foreign jurisdictions where Franklin

Templeton's investment management services and products are offered and, as such, complies with the prohibitions and restrictions mandated by these sanctions programs and by any foreign jurisdiction when applicable to Franklin Templeton's business activity in that foreign jurisdiction. For example, United States law prohibits investments in companies owned or controlled by the government of Sudan. FAI is committed to complying fully with these laws and any related investment sanctions and any additional investment restrictions that might be enacted with respect to companies doing business in Sudan or any other country.  The FTFT, TIT and FHIT Boards and FAI recognize and respect that investors have other investment opportunities open to them should they wish to avoid investments in certain companies or countries. However, we do not believe that adding additional procedures limiting otherwise lawful investments and FAI's ability to select the best investments for the Funds would be in the best interests of Fund shareholders.

Substantially identical proposals were submitted for the 2013 Annual Meeting of certain Templeton Funds.  Over 80% of each such fund's shares present and voting on the proposal either voted against the proposal or abstained; less than 20% of a fund's shares present and voting on the proposal were voted in favor of the proposal.  In addition, substantially identical proposals were submitted for the 2015 Special Meeting of another Franklin Templeton Fund.  Over 71% of such fund's shares present and voting on the proposal either voted against the proposal or abstained; less than 18% of the fund's shares present and voting on the proposal were in favor of the proposal.

Although the shareholder proposals request adoption of broad procedures to prevent investments in companies believed to contribute substantially to genocide or egregious violations of human rights, the shareholder proposals reference investments in PetroChina.  Management believes that each shareholder proposal was essentially a "form proposal" that was developed and used to submit shareholder proposals to various mutual funds without regard to whether the funds receiving the proposals actually held positions in PetroChina.  Management notes that FHYTFIF, TGBF and FHIF are not investing in PetroChina and, therefore, questions the relevance of these shareholder proposals to FHYTFIF, TGBF and FHIF.  Furthermore, FHYTFIF is not permitted to invest in companies such as PetroChina pursuant to its investment strategies.

What is the Required Vote on Proposals 7a–7c?

Proposals 7a–7c each must be approved by the affirmative vote of a majority of the votes cast by shareholders of the applicable Fund at the Meeting, provided that a quorum is present.  If any of Proposals 7a–7c is not approved by a majority of the votes cast by shareholders of the applicable Fund at the Meeting, no further action will be taken with respect to such shareholder proposal.

THE FTFT, TIT AND FHIT BOARDS RECOMMEND A VOTE "AGAINST" PROPOSALS 7a – 7c.

PROPOSALS 8a–8e:

SHAREHOLDER PROPOSALS REQUESTING THAT THE FRANKLIN TAX-FREE TRUST, FRANKLIN CUSTODIAN FUNDS, FRANKLIN HIGH INCOME TRUST AND FRANKLIN CALIFORNIA TAX-FREE INCOME FUND BOARDS INSTITUTE TRANSPARENT PROCEDURES TO PREVENT HOLDING INVESTMENTS IN COMPANIES THAT, IN THE JUDGMENT OF MANAGEMENT, SUBSTANTIALLY CONTRIBUTE TO GENOCIDE OR CRIMES AGAINST HUMANITY

In 2010, FTFT, on behalf of Franklin Federal Intermediate-Term Tax Free Income Fund ("FFITTFIF"), Franklin Custodian Funds ("FCF"), on behalf Franklin Growth Fund ("FGF") and Franklin Income Fund ("FIF"), FHIT, on behalf of FHIF, and Franklin California Tax-Free Income Fund ("FCTFIF") received substantially similar proposals from six shareholders to have you vote on their proposals, as set forth below.  In Proposal 8a, with respect to FFITTFIF, Proposal 8b, with respect to FGF, Proposal 8c, with respect to FIF, Proposal 8d, with respect to FHIF and Proposal 8e, with respect to FCTFIF, such shareholders request that the Board of each of FTFT, FCF, FHIT and FCTFIF institute transparent procedures to screen out investments in companies that, in the judgment of management, substantially contribute to genocide or crimes against humanity, the most egregious violations of human rights, in order to ensure that Franklin Templeton is an ethically managed company that respects the spirit of international law and is a responsible member of society.  While similar to the shareholder proposals that are discussed in Proposals 7a-7c in this proxy statement, the shareholder proposals discussed in these Proposals 8a-8e are slightly different.  The shareholder proposals in Proposals 7a-7c call on the Board to institute procedures that, in the judgment of the Board, substantially contribute to genocide or crimes against humanity, whereas the shareholder proposals discussed in Proposals 8a-8e call on the Board to institute "transparent" procedures to prevent holding investments in companies that, in management's judgment, substantially contribute to genocide or crimes against humanity.  Each of these shareholders will ask you to vote on his or her proposal at the Meeting, if you are a shareholder of the applicable Fund.  Each of these shareholders' proposals is included in this proxy statement and will be presented by these shareholders at the Meeting pursuant to regulatory requirements.  THE TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE "AGAINST" EACH OF THESE PROPOSALS.

What are the Shareholder Proposals?

8a – Franklin Federal Intermediate-Term Tax-Free Income Fund:  Marjorie Moidel, 4300 NW 30^th Street, #443, Coconut Creek, FL 33066, a shareholder who claims beneficial ownership of approximately 1,177 shares of FFITTFIF as of April 29, 2010, submitted on such date the proposal set forth below.

8b – Franklin Growth Fund:  JoAnn Orr, 1397 Lahard Road, New Lenox, IL 60451, a shareholder who claims beneficial ownership of approximately 186.3 shares of FGF as of March 21, 2010, submitted on such date the proposal set forth below.

8c – Franklin Income Fund:  Eric B. Greenfield, 4080 Terrace Lane, Minnetonka, MN 55305-5124, a shareholder who claims beneficial ownership of approximately 12,844 shares of FIF as of August 3, 2010, submitted on such date the proposal set forth below.

8d – Franklin High Income Fund:  Eric B. Greenfield, 4080 Terrace Lane, Minnetonka, MN 55305-5124, a shareholder who claims beneficial ownership of approximately 11,526 shares of FHIF as of August 3, 2010, submitted on such date the proposal set forth below.

8e – Franklin California Tax-Free Income Fund:  Louise Goldbaum, Nancy Lee Goldbaum Peterson, and Judith S. Goldbaum Blanchard, 3603 Dundee Driveway, Chevy Chase, MD 20815 are shareholders who claim beneficial ownership of approximately 5,000 shares of FCTFIF as of April 15, 2010, submitted on such date the proposal set forth below.

Genocide-free Investing Shareholder Proposals

WHEREAS:

Franklin-Templeton has released no genocide-free investing policy to prevent investments [in companies]+ that contribute to genocide.  It may at any time increase such holdings or involve new mutual funds.  As a result, individuals, through their mutual funds, may inadvertently invest in companies helping to fund genocide because of investment decisions made by Franklin-Templeton.

We believe that:

1)

Investors do not want their pensions and family savings connected to genocide.

a)

Reasonable people may disagree about what constitutes socially responsible investing, but few people want their savings connected to genocide.

b)

In the face of the most extreme human rights crises investment companies share responsibility, along with government, to act.

c)

In KRC Research's [2007]* [2010]+ study, [71%]* [88%]+ of respondents said [companies should consider extreme human rights abuses, such as genocide, when making investment decisions]* [they would like their mutual funds to be genocide-free].+

[d)]+ Millions of people [have]+ voted for [similar]* shareholder proposals [similar to this one],+ submitted by supporters of Investors Against Genocide['s],^ despite active management opposition.

2)

This problem is particularly important to shareholders because Franklin-Templeton:

a)

Has, for years, been a large holder of PetroChina, which, through its closely related parent, China National Petroleum Company, is internationally recognized as the worst offender helping fund the Government of Sudan's genocide in Darfur.

b)

[Actively opposed]* [Failed to act in support of]+ earlier shareholder requests for genocide-free investing.

c)

Continued to buy shares of problem companies even after becoming aware of the investment's connection to the Darfur genocide.

d)

Claimed to have a policy addressing extreme human rights issues, but has taken no

action to avoid problem investments.

3)

A policy against investments in genocide must:

a)

Be clear and transparent.

b)

Apply today and to any future genocide.

c)

Prevent purchasing shares of companies known to substantially contribute to genocide.

d)

Require corrective action for existing problem investments.  If the fund holds problem companies and can effectively influence their behavior, then time-limited engagement may be appropriate.  If not, the problem investments should be sold.

4)

There are no sound financial, fiduciary, or legal reasons that prevent the fund from having a policy against investments in genocide, as TIAA-CREF demonstrated in 2009.

a)

Ample competitive investment choices exist, even with index funds.

b)

Avoiding a small number of problem companies need not have a significant effect on performance, as shown in Gary Brinson's classic asset allocation study.

c)

Even the most conservative legal concerns can be addressed by a small change to the prospectus.

d)

Management can easily obtain independent assessments of problem companies and their connection to genocide.

5)

Investor pressure can help influence foreign governments, as in South Africa.  Similarly, divestment pressure on Talisman Energy helped end the conflict in South Sudan.

RESOLVED:

Shareholders request that the Board institute transparent procedures to prevent holding investments in companies that, in management's judgment, substantially contribute to genocide or crimes against humanity, the most egregious violations of human rights.

+	Language used in the proposals submitted by Marjorie Moidel, Trustee and Eric B. Greenfield, Trustee.

*	Language used in the proposals submitted by JoAnn Orr, and Louise Goldbaum, Nancy Lee Goldbaum Peterson, and Judith S. Goldbaum Blanchard.

^	Language used in the proposal submitted by JoAnn Orr.

What is the Recommendation of the Trustees?

THE BOARDS OF FTFT, FCF, FHIT AND FCTFIF UNANIMOUSLY RECOMMEND THAT YOU VOTE "AGAINST" EACH OF THESE PROPOSALS

Why do the Trustees Unanimously Recommend a Vote Against all of these Proposals?

The conditions in the Darfur region of Sudan are deplorable, and the FTFT, FCF, FHIT and FCTFIF Boards and FAI, the investment manager for each of FFITTFIF, FGF, FIF, FHIF and FCTFIF support efforts toward positive and meaningful reform there. The FTFT, FCF, FHIT

and FCTFIF Boards and FAI also recognize and are respectful of the fact that there are many different perspectives and opinions on the best way to approach this and similar issues. In FAI's many years of investing experience, it has seen that fostering economic and business development through investment can often help in achieving reforms.

Each of FFITFFIF, FGF, FIF, FHIF and FCTFIF must act in what it believes to be the best interests of its respective shareholders and has to make investment decisions that are consistent with the investment guidelines contained in each Fund's prospectus. In keeping with these obligations, FAI considers all material factors in assessing the merits of an investment and seeks to achieve the best investment results, consistent with stated investment goals and policies.

FAI considers these issues on a company-by-company basis as part of the investment management process, as discussed in more detail below.  FAI and the FTFT, FCF, FHIT and FCTFIF Boards believe that this investment approach, which considers these issues on an investment-by-investment basis and as part of the overall investment management process, is preferable to the approach recommended by these shareholder proposals because the issues raised by these proposals are an inextricable part of FAI's investment management process and, therefore, are not well suited for a policy implemented by any board of trustees.  Our public statement regarding investment in PetroChina, which is reproduced below from the Franklin Templeton Investments website, provides an example of the considerations implemented by FAI:

Franklin Templeton Investments: Statement on PetroChina

Several groups that are trying to effect change in the Darfur region of Sudan have asked individual investors and asset managers, such as Franklin Templeton, to sell holdings of companies identified as having business ties to Sudan.  Among the companies being targeted for divestment is PetroChina, which is currently a holding in several of our emerging market funds.  PetroChina, which has stated that they do not conduct business in Sudan itself, is being targeted because its parent company, CNPC, has business interests there.

The conditions in the Darfur region of Sudan are deplorable, and we support efforts toward positive and meaningful reform there.  We also recognize and are respectful of the fact that there are many different perspectives and opinions on the best way to approach this issue.  However, identifying the best way to achieve change continues to be a matter of serious debate.  Some have questioned whether divestment will prove effective and others believe that corporate investment in troubled regions can lead to improved economic growth and reform for the local populace over the long term.  In our more than 25 years of experience investing in emerging markets, we have seen that fostering economic and business development through investment can often help in achieving reforms.

Our investment professionals actively engage company management when they have any concerns with company management or company activities, and PetroChina is no exception to this approach.  As an investment adviser, our fiduciary responsibility to our fund shareholders is to make investment decisions that are consistent with the guidelines in each fund's prospectus.  To achieve this, our investment teams consider all risk factors, including those related to social and political issues, when evaluating a potential holding or making other investment decisions for a given fund.

We appreciate the views of those favoring and opposing divestiture, and our investment groups continue to consider social and political issues in their risk assessment of individual fund holdings.

The U.S. Government maintains a comprehensive set of laws and regulations governing business relationships with countries that are believed to be responsible for egregious violations of human rights.  Additionally, as a global investment management organization, Franklin Templeton is subject not only to the sanctions programs administered by the U.S. Government, but also to sanctions programs adopted and administered by foreign jurisdictions where Franklin Templeton's investment management services and products are offered and, as such, complies with the prohibitions and restrictions mandated by these sanctions programs and by any foreign jurisdiction when applicable to Franklin Templeton's business activity in that foreign jurisdiction. For example, United States law prohibits investments in companies owned or controlled by the government of Sudan. FAI is committed to complying fully with these laws and any related investment sanctions and any additional investment restrictions that might be enacted with respect to companies doing business in Sudan or any other country.  The FTFT, FCF, FHIT and FCTFIF Boards and FAI recognize and respect that investors have other investment opportunities open to them should they wish to avoid investments in certain companies or countries. However, we do not believe that adding additional procedures limiting otherwise lawful investments and FAI's ability to select the best investments for the Funds would be in the best interests of Fund shareholders.

Substantially identical proposals were submitted for the 2013 Annual Meeting of certain Templeton Funds.  Over 80% of each such fund's shares present and voting on the proposal either voted against the proposal or abstained; less than 20% of a fund's shares present and voting on the proposal were voted in favor of the proposal.  In addition, substantially identical proposals were submitted for the 2015 Special Meeting of another Franklin Templeton Fund.  Over 71% of such fund's shares present and voting on the proposal either voted against the proposal or abstained; less than 18% of the fund's shares present and voting on the proposal were in favor of the proposal.

Although the shareholder proposals request adoption of broad procedures to prevent investments in companies believed to contribute substantially to genocide or egregious violations of human rights, the shareholder proposals reference investments in PetroChina.  Management believes that each shareholder proposal was essentially a "form proposal" that was developed and used to submit shareholder proposals to various mutual funds without regard to whether the funds receiving the proposals actually held positions in PetroChina.  Management notes that FFITTFIF, FGF, FIF, FHIF and FCTFIF are not investing in PetroChina and, therefore, questions the relevance of these shareholder proposals to FFITTFIF, FGF, FIF, FHIF and FCTFIF.  Furthermore, FFITTFIF and FCTFIF are not permitted to invest in companies such as PetroChina pursuant to their investment strategies.

What is the Required Vote on Proposals 8a–8e?

Proposals 8a–8e each must be approved by the affirmative vote of a majority of the votes cast by shareholders of the applicable Fund at the Meeting, provided that a quorum is present.  If any of Proposals 8a–8e is not approved by a majority of the votes cast by shareholders of the applicable Fund at the Meeting, no further action will be taken with respect to such shareholder proposal.

THE FTFT, FCF, FHIT AND FCTFIF BOARDS UNANIMOUSLY RECOMMEND
A VOTE "AGAINST" PROPOSALS 8a – 8e.

¨	ADDITIONAL INFORMATION ABOUT THE FUNDS

 

The Investment Managers.    The Investment Managers and any subadviser(s) of the Funds and their principal addresses are listed on Exhibit I to this proxy statement.  Pursuant to an investment management agreement, the Investment Manager for a Fund (along with any sub-adviser) manages the investment and reinvestment of that Fund's assets. Each Investment Manager and subadviser is a direct or indirect, wholly owned or majority owned subsidiary of Resources.

 

The Administrator.    Pursuant to an administration agreement or subcontract for fund administration services with each Fund's Investment Manager, Franklin Templeton Services, LLC ("FT Services") provides certain administrative functions for the Funds.  FT Services, with its principal address at One Franklin Parkway, San Mateo, California 94403-1906, is an indirect, wholly owned subsidiary of Resources and an affiliate of the Investment Managers and the Trusts' principal underwriter.  Except for the Feeder Funds, the fee for administrative services provided by FT Services is paid by each Fund's Investment Manager based on the Fund's average daily net assets, and is not an additional expense of the Fund.

The Underwriter.    The principal underwriter for each Trust, other than the Master Portfolios is Franklin/Templeton Distributors, Inc. ("FT Distributors"), One Franklin Parkway, San Mateo, California 94403-1906.  As principal underwriter, FT Distributors receives (i) underwriting commissions in connection with the sale or redemption of Fund shares and (ii) 12b-

1 fees pursuant to separate Rule 12b-1 plans adopted by the Boards, which fees are used for, among other things, advertising expenses and the costs of printing sales material and prospectuses used to offer shares to the public.

The Transfer Agent.    The transfer agent and shareholder servicing agent for each Trust and Fund is Franklin Templeton Investor Services, LLC ("FTIS"), located at 3344 Quality Drive, Rancho Cordova, California 95670-7313.

The Custodians.    The custodian for each Franklin Fund, Templeton Dynamic Equity Fund, Templeton Global Balanced Fund, Templeton Global Total Return Fund and Templeton International Bond Fund is Bank of New York Mellon, Mutual Funds Division, 100 Church Street, New York, New York 10286.  The custodian for each Templeton Fund, other than, Templeton Dynamic Equity Fund, Templeton Global Balanced Fund, Templeton Global Total Return Fund and Templeton International Bond Fund, is JPMorgan Chase Bank, 270 Park Avenue, New York, New York 10017-2070.

Shareholders Sharing the Same Address.    If two or more shareholders share the same address, only one copy of this proxy statement is being delivered to that address, unless the Fund(s) have received contrary instructions from one or more of the shareholders at that shared address. Upon written or oral request, the Funds will deliver promptly a separate copy of this proxy statement to a shareholder at a shared address. Please call 1-800/DIAL BEN® ((800)342-5236) or forward a written request to Franklin Templeton Investor Services, LLC, P.O. Box 33030, St. Petersburg, Florida 33733-8030, if you would like to (1) receive a separate copy of this proxy statement; (2) receive your annual reports or proxy statements separately in the future; or (3) request delivery of a single copy of annual reports or proxy statements if you are currently receiving multiple copies at a shared address.

 

Outstanding Shares and Principal Shareholders.    The outstanding shares and classes of each Fund as of May 31, 2017 are set forth in Exhibit J. 

 

The names and addresses of shareholders that owned beneficially or of record 5% or more of the outstanding shares of any class or Fund are set forth in Exhibit K.  To the knowledge of the Funds' management, as of May 31, 2017, there were no other shareholders, except as set forth in Exhibit K, owning beneficially or of record more than 5% of the outstanding shares of any class of any Fund.

 

In addition, to the knowledge of the Trusts' management, as of May 31, 2017 and except as noted above under Proposal 1 or noted below, no nominee or Board member of a Trust owned 1% or more of the outstanding shares of the other classes of that Trust or any Fund thereof, and the Board members and officers of that Trust owned, as a group, less than 1% of the outstanding shares of the other classes of that Trust or any Fund thereof.  With respect to Franklin Focused Core Equity Fund, a series of Franklin Strategic Series, the officer and Trustees as a group own in excess of !% of the outstanding Advisor Class shares.

  

¨	FURTHER INFORMATION ABOUT VOTING AND THE MEETING

 

Solicitation of Proxies.    Your vote is being solicited by the Boards.  AST Fund Solutions, LLC (the "Solicitor") has been engaged to assist in the solicitation of proxies. The cost of soliciting proxies, including the fees of a proxy soliciting agent, is estimated to be $16 million and will be borne by the Funds.  To the extent that the costs can be identified for a particular Fund (such as a proposal that affects only one Fund), such costs will be paid by the Fund.  Otherwise, the solicitation costs payable by the Fund for each Proposal will be borne across all Funds included in that Proposal, based upon the number of shareholder accounts in each Fund.

As the date of the Meeting approaches, certain Fund shareholders may receive a telephone call from a representative of the Solicitor if their votes have not yet been received.  FTI and the Funds reimburse brokerage firms and others for their expenses in forwarding proxy materials to the beneficial owners and soliciting them to execute voting instructions. The Trusts expect that the solicitation will be primarily by mail, but may also include telephone, facsimile, electronic or other means of communication.  Trustees and officers of a Trust, and regular employees and agents of a Fund's Investment Manager or its affiliates, involved in the solicitation of the proxies are not reimbursed.

Authorization to permit the Solicitor to execute proxies may be obtained by telephonic instructions from eligible shareholders of the Funds.  Proxies that are obtained telephonically will be recorded in accordance with the procedures set forth below.  The Trusts believe that these procedures are reasonably designed to ensure that both the identity of the shareholder casting the vote and the voting instructions of the shareholder are accurately determined.

In all cases where a telephonic proxy is solicited, the Solicitor representative is required to ask for each shareholder's full name and address and to confirm that the shareholder has received the proxy materials in the mail or by other acceptable means.  If the shareholder is a corporation or other entity, the Solicitor representative is required to ask for the person's title and confirmation that the person is authorized to direct the voting of the shares.  If the information elicited accords with the information provided to the Solicitor, then the Solicitor may ask for the shareholder's instructions on the Proposals.  Although the Solicitor representative is permitted to answer questions about the process, he or she is not permitted to recommend to the shareholder how to vote, other than to read any recommendation set forth in this proxy statement.  The Solicitor will record the shareholder's instructions on the proxy card.  Within 72 hours, the shareholder will be sent a letter to confirm his or her vote and asking the shareholder to call the Solicitor immediately if his or her instructions are not correctly reflected in the confirmation.

A shareholder may also vote by submitting the proxy card(s) or voting instruction form(s) originally sent with this proxy statement by mail, via telephone (if eligible), via the Internet (if eligible) or by attending the Meeting in person.

Voting by Broker-Dealers.    The Trusts expect that, before the Meeting, broker-dealer firms holding shares of the Funds in "street name" for the broker-dealer firms' customers will request voting instructions from their customers and beneficial owners. If these instructions are not received by the date specified in the broker-dealer firms' proxy solicitation/voting instruction materials, the Trusts understand that broker-dealers may vote on Proposal 1- To Elect a Board of Trustees – on behalf of the broker-dealer firms' customers and beneficial owners. Certain broker-dealers may exercise discretion over shares held in the broker-dealer firms' names for which no instructions are received by voting these shares in the same proportion as the broker-dealer firms' vote shares for which they received instructions.

 

Quorum.    For each Trust, holders of 40% of the outstanding shares of the Trust (or if the Proposal is to be voted upon by a Fund thereof separately, holders of 40% of that Fund), present in person or represented by proxy, constitutes a quorum at the Meeting for purposes of acting upon the Proposals applicable to such Trust or Fund. The shares over which broker-dealers have discretionary voting power, the shares that represent "broker non-votes" (i.e., shares held by brokers or nominees as to which (i) instructions have not been received from the beneficial owners or persons entitled to vote, and (ii) the broker or nominee has voted such shares in its discretion on Proposal 1, but (iii) the broker or nominee does not have discretionary voting power on other matters), and the shares whose proxies reflect an abstention on any item will all be counted as shares present and entitled to vote for purposes of determining whether the required quorum of shares exists.

 

Method of Tabulation.    The vote required to approve each Proposal is set forth in the discussion of the Proposal above.  Generally, abstentions and broker non-votes on each Proposal will be treated as votes present at the Meeting, but will not be treated as votes cast.  Therefore, abstentions and broker non-votes may have the same effect as a vote "against" Proposals 2-6 (including any Sub-Proposals), but will not have an effect on Proposal 1, which requires a plurality of votes cast for approval, and on Proposals 7a-7c and 8a-8e, which require a majority of the votes cast.  For the Master Portfolio, whether or not a Proposal is approved by its shareholders will be determined by reference to the shares outstanding of the various Feeder Funds.  Feeder Fund shareholders who do not provide voting instructions to their Feeder Fund will not affect the Feeder Fund's votes at the Meeting with respect to the Master Portfolio.  The percentage of a Feeder Fund's votes representing Feeder Fund shareholders not providing voting instructions will be voted by such Feeder Fund's Board or officers in the same proportion as the Fund shareholders who provide voting instructions.

 

Simultaneous Meetings.    The Meeting is to be held at the same time as meetings of shareholders of Franklin Templeton Variable Insurance Products Trust, Franklin Managed Trust, Franklin ETF Trust, Templeton Developing Markets Trust, Emerging Markets Series of Templeton Institutional Funds and Templeton Frontier Markets Fund of Templeton Global Investment Trust.  If any shareholder at the Meeting objects to the holding of simultaneous

meetings and moves for an adjournment of the Meeting to a time promptly after the simultaneous meetings, the persons designated as proxies will vote in favor of such adjournment.

 

Adjournment.    The Meeting as to any Trust or Fund, whether or not quorum is present,  may be adjourned from time to time for any reason whatsoever by vote of the holders of a majority of the shares present (in person or by proxy and entitled to vote at the Meeting) or by the Chairman of the Board or certain officers. Such authority to adjourn the Meeting may be used in the event that a quorum is not present at the Meeting, or in the event that a quorum is present but sufficient votes have not been received to approve a Proposal, or for any other reason consistent with applicable state law and the Trust's By-Laws, including to allow for the further solicitation of proxies. Any adjournment may be made with respect to any business which might have been transacted at the Meeting, and any adjournment will not delay or otherwise affect the effectiveness and validity of any business transacted at the Meeting prior to adjournment. The persons designated as proxies may use their discretionary authority to vote as instructed by management of the Trusts on questions of adjournment to the extent permitted under applicable federal securities laws, state law, and the Trust's governing instruments.  If the Meeting is adjourned to another time or place, written notice need not be given of the adjourned meeting if the time and place is announced at the Meeting, unless a new record date is fixed or unless the adjournment is for more than sixty days after the date of the original meeting.

 

Shareholder Proposals.    The Trusts are not required and do not intend to hold regular annual meetings of shareholders. A shareholder who wishes to submit a proposal for consideration for inclusion in a Trust's proxy statement for the next meeting of shareholders of that Trust or one or more of its Funds should send his or her written proposal to such Trust's offices: for all Franklin Funds – One Franklin Parkway, San Mateo, California 94403-1906, Attention: Secretary; and for all Templeton Funds – 300 S.E. 2^nd Street, Fort Lauderdale, Florida 33301-1923, Attention: Secretary, so that it is received within a reasonable time before such Trust begins to print and send its proxy materials for such meeting. A shareholder proposal may be presented at a meeting of shareholders only if such proposal concerns a matter that may be properly brought before the meeting under applicable federal securities laws, state law, and the Trust's governing instruments.  Submission of a proposal by a shareholder does not guarantee that the proposal will be included in the Trust's proxy statement or presented at the meeting.

 

No business other than the matters described above is expected to come before the Meeting, but should any other matter requiring a vote of shareholders properly come before the Meeting, including any questions as to an adjournment or postponement of the Meeting, the persons designated as proxies named on the enclosed proxy card will vote on such matters in accordance with the views of management, to the extent permitted under applicable federal securities laws, state law, and the Trust's governing instruments, including proposals for which management of such Trusts did not have timely notice, as set forth in the SEC's proxy rules.

 

August ___, 2017  

---

I.	The Committee.

The Nominating Committee (the "Committee") is a committee of, and established by, the Board of Directors/Trustees of the Fund (the "Board").  The Committee consists of such number of members as set by the Board from time to time and its members shall be selected by the Board.  The Committee shall be comprised entirely of "independent members."  For purposes of this Charter, independent members shall mean members who are not interested persons of the Fund ("Disinterested Board members") as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the "1940 Act").

II.	Board Nominations and Functions.

1.

The Committee shall make recommendations for nominations for Disinterested Board members on the Board to the incumbent Disinterested Board members and to the full Board.  The Committee shall evaluate candidates' qualifications for Board membership and the independence of such candidates from the Fund's investment manager and other principal service providers.  Persons selected must be independent in terms of both the letter and the spirit of the 1940 Act.  The Committee shall also consider the effect of any relationships beyond those delineated in the 1940 Act that might impair independence, e.g., business, financial or family relationships with investment managers or service providers.

2.

The Committee also shall evaluate candidates' qualifications and make recommendations for "interested" members on the Board to the full Board.

3.

The Committee may adopt from time to time specific, minimum qualifications that the Committee believes a candidate must meet before being considered as a candidate for Board membership and shall comply with any rules adopted from time to time by the U.S. Securities and Exchange Commission regarding investment company nominating committees and the nomination of persons to be considered as candidates for Board membership.

4.

The Committee shall review shareholder recommendations for nominations to fill vacancies on the Board if such recommendations are submitted in writing and addressed to the Committee at the Fund's offices.  The Committee shall adopt, by resolution, a policy regarding its procedures for considering candidates for the Board, including any recommended by shareholders.

III.	Committee Nominations and Functions.

The Committee shall make recommendations to the full Board for nomination for membership on all committees of the Board.

IV.	Other Powers and Responsibilities.

1.

The Committee shall meet at least once each year or more frequently in open or executive sessions.  The Committee may invite members of management, counsel, advisers and others to attend its meetings as it deems appropriate.  The Committee shall have separate sessions with management and others, as and when it deems appropriate.

2.

The Committee shall have the resources and authority appropriate to discharge its responsibilities, including authority to retain special counsel and other experts or consultants at the expense of the Fund.

3.

The Committee shall report its activities to the Board and make such recommendations as the Committee may deem necessary or appropriate.

4.

A majority of the members of the Committee shall constitute a quorum for the transaction of business at any meeting of the Committee.  The action of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the action of the Committee.  The Committee may meet in person or by telephone, and the Committee may act by written consent, to the extent permitted by law and by the Fund's by-laws.  In the event of any inconsistency between this Charter and the Fund's organizational documents, the provisions of the Fund's organizational documents shall be given precedence.

5.

The Committee shall review this Charter at least annually and recommend any changes to the full Board.

The Committee shall comply with any rules of any stock exchange, if any, applicable to nominating committees of closed-end funds whose shares are registered thereon.

COMMITTEE MEETINGS

The following table identifies the number of standing committee meetings held during the most recent Fund fiscal year ended on or before May 31, 2017.

*For the fiscal year ended December 31, 2016. Excludes the Franklin Payout Funds and the Franklin Next Step Funds, which have a May 31, 2017 fiscal year. During the fiscal year ended May 31, 2017, there were three audit committee meetings held, and three nominating committee meetings held.

**For the fiscal year ended March 31, 2017. Excludes the Templeton Foreign Smaller Companies Fund, Templeton Emerging Markets Balanced Fund and Templeton Global Balanced Fund, which have different fiscal years. During the last fiscal year ended October 31, 2016, for the Templeton Foreign Smaller Companies Fund there were five audit committee meetings held, and two nominating committee meetings held. Effective December 31, 2016, Templeton Emerging Markets Balanced Fund and Templeton Global Balanced Fund each changed its fiscal year end to December 31. As a result, Templeton Emerging Markets Balanced Fund and Templeton Global Balanced Fund each experienced a shortened fiscal year covering the transitional period between the prior August 31, 2016 fiscal year end and December 31, 2016.  During the fiscal period from September 1, 2016 through December 31, 2016 there were two audit committee meetings held, and one nominating committee meeting held.

***Effective December 31, 2016, Templeton Income Trust's fiscal year end was changed to December 31.  As a result, Templeton Income Trust experienced a shortened fiscal year covering the transitional period between the prior August 31, 2016 fiscal year end and December 31, 2016. Figures provided are for the fiscal period from September 1, 2016 through December 31, 2016.

AGGREGATE INDEPENDENT BOARD MEMBER COMPENSATION

FROM EACH FUND FOR THE 12-MONTH PERIOD

ENDED MAY 31, 2017

¹ Franklin Templeton Global Trust & fund (TMP Hard Currency Fund) reorganized from the Franklin Group Funds Board to the Templeton Funds Board effective 08/19/16 as the Franklin Templeton Global Trust (TMP Global Currency Fund). NOTE: Franklin compensation 06/01-08/31/16 and Templeton compensation 09/01/16-05/31/17.

² The Money Market Portfolios – Director fees not applicable for this trust.

ADDITIONAL EXECUTIVE OFFICERS

Audit Fee Information

CURRENT FUNDAMENTAL INVESTMENT

POLICIES REGARDING INVESTMENTS IN COMMODITIES

Certain Fundamental Investment Restrictions Proposed to Be Amended

Certain Fundamental Investment Restrictions Proposed to Be Eliminated

INVESTMENT MANAGERS OF THE FUNDS