FRANkLiN TEMPLETON INVESTMENT FUNDS - Citibank

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PROSPECTUS OF FRANKLIN TEMPLETON INVESTMENT FUNDS “UCITS” shall mean an undertaking for collective investment in transferable securities authorised according to Council Directive 85/611/EEC of December 20, 1985, as amended; “other UCI” shall mean an undertaking for collective investment or investment fund within the meaning of the first and second indents of Article 1. I (2) of Council Directive 85/611/EEC of December 20, 1985, as amended. (vii) deposits with credit institutions which are repayable on demand or have the right to be withdrawn, and maturing in no more than 12 months, provided that the credit institution has its registered office in an E.U. Member State or, if the registered office of the credit institution is situated in a non- Member State, provided that it is subject to prudential rules considered by the Luxembourg supervisory authority as equivalent to those laid down in Community law; (viii) financial derivative instruments, including equivalent cash- settled instruments, dealt in on a regulated market referred to in subparagraph (i) to (v) above, and/or financial derivative instruments dealt in over- the-counter (“OTC derivatives”), provided that: and/or • the underlying consists of instruments covered by this appendix under 1. a), financial indices, interest rates, foreign exchange rates or currencies, in which the Fund may invest according to its investment objectives, • the counterparties to OTC derivative transactions are institutions subject to prudential supervision, and belonging to the categories approved by the Luxembourg supervisory authority, • the OTC derivatives are subject to reliable and verifiable valuation on a daily basis and can be sold, liquidated or closed by an offsetting transaction at any time at their fair value at the Company’s initiative, (ix) money market instruments other than those dealt in on a regulated market and which fall under 1. a), if the issue or the issuer of such instruments are themselves regulated for the purpose of protecting investors and savings, and provided that such instruments are: • issued or guaranteed by a central, regional or local authority or by a central bank of a Member State, the European Central Bank, the European Union or the European Investment Bank, a non- Member State or, in case of a Federal State, by one of the members making up the federation, or by a public international body to which one or more Member States belong, or • issued by an undertaking any securities of which are dealt in on regulated markets referred to above, or • issued or guaranteed by an establishment subject to prudential supervision in accordance with criteria defined by the Community law, or by an establishment which is subject to and complies with prudential rules considered by the Luxembourg supervisory authority to be at least as stringent as those laid down by Community law, or • issued by other bodies belonging to the categories approved by the Luxembourg supervisory authority provided that investments in such instruments are subject to investor protection equivalent to that laid down in the first, the second or the third indent and provided that the issuer is a company whose capital and reserves amount to at least 10 million euro and which presents and publishes its annual accounts in accordance with the fourth directive 78/660/EEC, is an entity which, within a group of companies which include one or several listed companies, is dedicated to the financing of the group or is an entity which is dedicated to the financing of securitisation vehicles which benefit from a banking liquidity line. b) The Company may invest up to 10% of the net assets of any Fund in transferable securities and money market instruments other than those referred to in (a) above; 72 Franklin Templeton Investment Funds
PROSPECTUS OF FRANKLIN TEMPLETON INVESTMENT FUNDS c) Each Fund of the Company may hold ancillary liquid assets; d) (i) Each Fund of the Company may invest no more than 10% of its net assets in transferable securities and money market instruments issued by the same body. Each Fund of the Company may not invest more than 20% of its net assets in deposits made with the same body. The risk exposure to a counterparty of a Fund in an OTC derivative transaction may not exceed 10% of its assets when the counterparty is a credit institution referred to in 1. a) (vii) above or 5 % of its net assets in other cases. (ii) The total value of the transferable securities and money market instruments held in the issuing bodies in each of which any Fund invests more than 5% of its net assets must not exceed 40 % of the value of it assets. This limitation does not apply to deposits and OTC derivative transactions made with financial institutions subject to prudential supervision. Notwithstanding the individual limits laid down in paragraph 1. d) (i), a Fund may not combine: • investments in transferable securities or money market instruments issued by a single body, • deposits made with a single body, and/or • exposures arising from OTC derivative transactions undertaken with a single body, in excess of 20% of its assets. (iii) The limit laid down under the first sentence of paragraph 1. d) (i) above shall be of 35% where the Fund has invested in transferable securities or money market instruments issued or guaranteed by a E.U. Member State, by its local authorities, by a non- Member State or by public international bodies of which one or more Member States are members. (iv) The limit laid down under the first sentence of paragraph 1. d) (i) above shall be of 25% for bonds issued by a credit institution which has its registered office in a E.U. Member State and is subject by law, to special public supervision designed to protect bondholders. In particular, sums deriving from the issue of these bonds must be invested in conformity with the law in assets which, during the whole period of validity of the bonds, are capable of covering claims attaching to the bonds and which, in case of bankruptcy of the issuer, would be used on a priority basis for the repayment of principal and payment of the accrued interest. If a Fund invests more than 5% of its net assets in the bonds above and issued by one issuer, the total value of such investments may not exceed 80% of the value of the assets of the Fund. (v) The transferable securities and money market instruments referred to in paragraphs 1. d) (iii) and 1. d) (iv) are not included in the calculation of the limit of 40% referred to in paragraph 1. d) (ii). The limit set out above under 1. d) (i), (ii), (iii) and (iv) may not be combined, and thus investments in transferable securities or money market instruments issued by the same body, in deposits or derivative instruments made with this body carried out in accordance with section 1. d) (i), (ii), (iii) and (iv) may not exceed a total of 35% of the assets of the Fund. Companies which are included in the same group for the purposes of consolidated accounts, as defined in accordance with Directive 83/349/EEC or in accordance with recognised international accounting rules, are regarded as a single body for the purpose of calculating the limits contained under 1. d). A Fund may cumulatively invest up to 20% of its net assets in transferable securities and money market instruments within the same group. (vi) Without prejudice to the limits laid down in paragraph e), the limits laid down in this paragraph d) shall be 20% for investments in Shares and/or bonds issued by the same body when the aim of a Fund’s investment policy is to replicate the composition of a certain stock or bond index which is recognised by the Luxembourg supervisory authority, provided www.franklintempleton.lu 73
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FRANkLiN TEMPLETON INVESTMENT FUNDS - Citibank

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