FRANKLIN TEMPLETON GLOBAL TRUST, 497, 1995-02-21

FRANKLIN TEMPLETON GLOBAL TRUST
497, 1995-02-21

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SUPPLEMENT DATED FEBRUARY 1, 1995

TO THE PROSPECTUS OF

THE FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND

DATED SEPTEMBER 1, 1994

The following sections of the prospectus are revised to reflect changes to the
operational policies of the Funds, effective February 1, 1995:

1. EXPENSE TABLE

Revised to reflect that investments of $1,000,000 or more are not subject to a
front-end sales charge but a contingent deferred sales charge of 1% will be
imposed on certain redemptions within 12 months of the calendar month following
such investments. See "How to Sell Shares of the Fund - Contingent Deferred
Sales Charge."

2. MANAGEMENT OF THE FUND

Revised to add the definition "Franklin Templeton Group" to describe the
subsidiaries of Resources.

3. HOW TO BUY SHARES OF THE FUND

a) Add the following language as paragraph two:

The Fund may impose a $10 charge for each returned item, against any
shareholder account which, in connection with the purchase of Fund shares,
submits a check or a draft which is returned unpaid to the Fund.

b) Substitute the following for the sales charge table and the ensuing two
paragraphs:

<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------------------
AS A AS A DEALER CONCESSION
SIZE OF TRANSACTION PERCENTAGE OF PERCENTAGE OF NET AS A PERCENTAGE
AT OFFERING PRICE OFFERING PRICE AMOUNT INVESTED OF OFFERING PRICE*,***
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000..................................... 3.00% 3.09% 2.60%
$50,000 but less than $100,000........................ 2.50% 2.56% 2.25%
$100,000 but less than $250,000....................... 2.00% 2.04% 1.85%
$250,000 but less than $500,000....................... 1.50% 1.52% 1.40%
$500,000 but less than $750,000....................... 1.00% 1.01% 1.00%
$750,000 but less than $1,000,000..................... 0.75% 0.76% 0.75%
$1,000,000 or more.................................... none none See below**
</TABLE>

*Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
**The following commissions will be paid by Distributors, out of its own
resources, to securities dealers who initiate and are responsible for purchases
of $1 million or more: 0.75% on sales of $1 million but less than $2 million,
plus 0.60% on sales of $2 million but less than $3 million, plus 0.50% on sales
of $3 million but less than $50 million, plus 0.25% on sales of $50 million but
less than $100 million, plus 0.15% on sales of $100 million or more. Dealer
concession breakpoints are reset every 12 months for purposes of additional
purchases.
***At the discretion of Distributors, all sales charges may at times be allowed
to the securities dealer. If 90% or more of the sales commission is allowed,
such securities dealer may be deemed to be an underwriter as that term is
defined in the Securities Act of 1933, as amended.

<PAGE>

and (c) the U.S. mutual funds in the Templeton Group of Funds except Templeton
American Trust, Inc., Templeton Capital Accumulator Fund, Inc., Templeton
Variable Annuity Fund, and Templeton Variable Products Series Fund (the
"Templeton Funds"). (Franklin Funds and Templeton Funds are collectively
referred to as the "Franklin Templeton Funds.") Sales charge reductions based
upon aggregate holdings of (a), (b) and (c) above ("Franklin Templeton
Investments") may be effective only after notification to Distributors that the
investment qualifies for a discount. References throughout the Prospectus, for
purposes of aggregating assets or describing the exchange privilege, refer to
the above descriptions.

Distributors, or one of its affiliates, may make payments, out of its own
resources, of up to 0.75% of the amount purchased to securities dealers who
initiate and are responsible for purchases made at net asset value by
non-designated retirement plans, and up to 1% of the amount purchased to
securities dealers who initiate and are responsible for purchases made at net
asset value by certain designated retirement plans (excluding IRA and IRA
rollovers), certain trust company and trust departments of banks and certain
retirement plans of organizations with collective retirement plan assets of $10
million or more. See definitions under "Description of Special Net Asset Value
Purchases" and as set forth in the SAI.

c) Substitute the following for the current "Purchases at Net Asset Value"
subsection:

PURCHASES AT NET ASSET VALUE

Shares of the Fund may be purchased without the imposition of either a
front-end sales load ("net asset value") or a contingent deferred sales charge
by (1) officers, trustees, directors, and full-time employees of the Trust, any
of the Franklin Templeton Funds, or of the Franklin Templeton Group, and by
their spouses and family members; (2) companies exchanging shares with or
selling assets pursuant to a merger, acquisition or exchange offer; (3)
insurance company separate accounts for pension plan contracts; (4) accounts
managed by the Franklin Templeton Group; (5) Shareholders of Templeton
Institutional Funds, Inc. reinvesting redemption proceeds from that fund under
an employee benefit plan qualified under Section 401 of the Internal Revenue
Code of 1986, as amended, in shares of the Funds; (6) certain unit investment
trusts and unit holders of such trusts reinvesting their distributions from the
trusts in the Fund; (7) registered securities dealers and their affiliates, for
their investment account only, and (8) registered personnel and employees of
securities dealers and by their spouses and family members, in accordance with
the internal policies and procedures of the employing securities dealer.

Shares of the Fund may be purchased at net asset value by persons who have
redeemed, within the previous 120 days, their shares of the Fund or another of
the Franklin Templeton Funds which were purchased with a front-end sales charge
or assessed a contingent deferred sales charge on redemption. An investor may
reinvest an amount not exceeding the redemption proceeds. While credit will be
given for any contingent deferred sales charge paid on the shares redeemed, a
new contingency period will begin. Shares of the Fund redeemed in connection
with an exchange into another fund (see "Exchange Privilege") are not
considered "redeemed" for this privilege. In order to exercise this privilege,
a written order for the purchase of shares of the Fund must be received by the
Fund or the Fund's Shareholder Services Agent within 120 days after the
redemption. The 120 days, however, do not begin to run on redemption proceeds
placed immediately after redemption in a Franklin Bank Certificate of Deposit
("CD") until the CD (including any rollover) matures. Reinvestment at net asset
value may also be handled by a securities dealer or other financial
institution, who may charge the shareholder a fee for this service. The
redemption is a taxable transaction but reinvestment without a sales charge may
affect the amount of gain or loss recognized and the tax basis of the shares
reinvested. If there has been a loss on the redemption, the loss may be
disallowed if a reinvestment in the same fund is made within a 30-day period.
Information regarding the possible tax consequences of such a reinvestment is
included in the tax section of this Prospectus and the SAI.

Dividends and capital gains received in cash by the shareholder may also be
used to purchase shares of the Fund or another of the Franklin Templeton Funds
at net asset value and without the imposition of a contingent deferred sales
load within 120 days of the payment date of such distribution. To exercise this
privilege, a written request to reinvest the distribution must accompany the
purchase order. Additional information may be obtained from Shareholder
Services at 1-800/632-2301. See "Distributions in Cash" under "Distributions to
Shareholders."

<PAGE>

Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales load by investors who have, within
the past 60 days, redeemed an investment in an unaffiliated mutual fund which
charged the investor a contingent deferred sales charge upon redemption and
which has investment objectives similar to those of the Fund.

Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales load by registered investment
advisors and/or their affiliated broker-dealers, who have entered into a
supplemental agreement with Distributors, on behalf of their clients who are
participating in a comprehensive fee program (also known as a wrap fee
program).

Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales load by anyone who has taken a
distribution from an existing retirement plan already invested in the Franklin
Templeton Funds (including former participants of the Franklin Templeton Profit
Sharing 401(k) plan), to the extent of such distribution. In order to exercise
this privilege a written order for the purchase of shares of the Fund must be
received by Franklin Templeton Trust Company (the "Trust Company"), the Fund or
Investor Services, within 120 days after the plan distribution. A prospectus
outlining the investment objectives and policies of a fund in which the
shareholder wishes to invest may be obtained by calling toll free at 1-800/DIAL
BEN (1-800/342-5236).

Shares of the Fund may also be purchased at net asset value and without the
imposition of a contingent deferred sales load by any state, county, or city,
or any instrumentality, department, authority or agency thereof which has
determined that the Fund is a legally permissible investment and which is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any registered
management investment company ("an eligible governmental authority"). SUCH
INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER AND TO
WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM.
Municipal investors considering investment of proceeds of bond offerings into
the Fund should consult with expert counsel to determine the effect, if any, of
various payments made by the Fund or its investment manager on arbitrage rebate
calculations. If an investment by an eligible governmental authority at net
asset value is made through a securities dealer who has executed a dealer
agreement with Distributors, Distributors or one of its affiliates may make a
payment, out of their own resources, to such securities dealer in an amount not
to exceed 0.25% of the amount invested. Contact Franklin's Institutional Sales
Department for additional information.

Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales load by certain fiduciary entities
(such as registered investment advisers, bank trust departments and bank
custodians) or by financial services companies acting as intermediaries for
such fiduciary entities buying on behalf of a client, provided that the
fiduciary entity has a pre-existing investment advisory relationship with the
investor under which the investor compensates the fiduciary entity through
payment of an investment advisory fee and the qualifying investment in the Fund
is made within the context of that investment advisory relationship. Shares
acquired pursuant to this provision are not eligible for exchange at net asset
value into another of the Franklin Templeton Funds.

DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES.

Shares of the Fund may also be purchased at net asset value and without the
imposition of a contingent deferred sales charge by certain designated
retirement plans, including, profit sharing, pension, 401(k) and simplified
employee pension plans ("designated plans"), subject to minimum requirements
with respect to number of employees or amount of purchase, which may be
established by Distributors. Currently those criteria require that the employer
establishing the plan have 200 or more employees or that the amount invested or
to be invested during the subsequent 13-month period in the Fund or in any of
the Franklin Templeton Investments totals at least $1,000,000. Employee benefit
plans not designated above or qualified under Section 401 of the Code
("non-designated plans") may be afforded the same privilege if they meet the
above requirements as well as the uniform criteria for qualified groups
previously described under "Group Purchases" which enable Distributors to
realize economies of scale in its sales efforts and sales related expenses.

<PAGE>

agency, advisory, custodial or similar capacity. Such purchases are subject to
minimum requirements with respect to amount of purchase, which may be
established by Distributors. Currently, those criteria require that the amount
invested or to be invested during the subsequent 13-month period in this Fund
or any of the Franklin Templeton Investments must total at least $1,000,000.
Orders for such accounts will be accepted by mail accompanied by a check or by
telephone or other means of electronic data transfer directly from the bank or
trust company, with payment by federal funds received by the close of business
on the next business day following such order.

Shares of the Fund may be purchased at net asset value by trustees or other
fiduciaries purchasing securities for certain retirement plans of organizations
with collective retirement plan assets of $10 million or more, without regard
to where such assets are currently invested. Refer to the SAI for further
information.

4. EXCHANGE PRIVILEGE

a) Add the following paragraph under "Exchanges by Telephone":

The automatic TeleFACTS(R) system at 1-800/247-1753 is available for processing
exchanges (day or night.) During periods of drastic economic or market changes,
however, this option may not be available, in which event the shareholder
should follow other exchange procedures discussed in the section.

b) Add the following paragraph under the subsection "Additional Information
Regarding Exchanges":

A contingent deferred sales charge will not be imposed on exchanges. If,
however, the exchanged shares were subject to a contingent deferred sales
charge in the original fund purchased, and shares are subsequently redeemed
within the contingency period, a contingent deferred sales charge will be
imposed. The contingency period will be tolled (or stopped) for the period such
shares are exchanged into and held in a Franklin or Templeton money market
fund. See also "How to Sell Shares of the Fund - Contingent Deferred Sales
Charge."

5. HOW TO SELL SHARES OF THE FUND

Add the following subsection:

CONTINGENT DEFERRED SALES CHARGE

In order to recover commissions paid to securities dealers on qualified
investments of $1 million or more, a contingent deferred sales charge of 1%
applies to redemptions of those investments within the contingency period of 12
months of the calendar month of their purchase. The charge is 1% of the lesser
of the value of the shares redeemed (exclusive of reinvested dividends and
capital gain distributions) or the total cost of such shares, and is retained
by Distributors. In determining if a charge applies, shares not subject to a
contingent deferred sales charge are deemed to be redeemed first, in the
following order: (i) Shares representing amounts attributable to capital
appreciation of those shares held less than 12 months; (ii) shares purchased
with reinvested dividends and capital gain distributions; and (iii) other
shares held longer than 12 months; and followed by any shares held less than 12
months, on a "first in, first out" basis.

The contingent deferred sales charge is waived for: exchanges; distributions to
participants in Trust Company retirement plan accounts due to death, disability
or attainment of age 59 1/2; tax-free returns of excess contributions to
employee benefit plans; distributions from employee benefit plans, including
those due to plan termination or plan transfer; redemptions through a
Systematic Withdrawal Plan set up prior to February 1, 1995 and, for Systematic
Withdrawal Plans set up thereafter, redemptions of up to 1% monthly of an
account's net asset value (3% quarterly, 6% semiannually or 12% annually); and
redemptions initiated by the Fund due to a shareholder's account falling below
the minimum specified account size.

Requests for redemptions for a specified dollar amount will result in
additional shares being redeemed to cover any applicable contingent deferred
sales charge while requests for redemption of a specific number of shares will
result in the applicable contingent deferred sales charge being deducted from
the total dollar amount redeemed.

<PAGE>

Franklin/Templeton
German Government
Bond Fund

PROSPECTUS September 1, 1994

[LOGO]

777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777 1-800/DIAL BEN

This Prospectus pertains to the Franklin/Templeton German Government Bond Fund
(the "Fund"), a non-diversified series of Franklin/Templeton Global Trust (the
"Trust"), formerly known as the Huntington Funds, an open-end management
investment company consisting of four separate series. The Fund's investment
objective is to seek, over the long term, total return through investment in a
managed portfolio of German government bonds. Total return consists of a
combination of interest income, capital appreciation and currency gains.

This Prospectus is intended to set forth in a clear and concise manner
information about the Fund that a prospective investor should know before
investing. After reading the Prospectus, it should be retained for future
reference; it contains information about the purchase and sale of shares and
other items which a prospective investor will find useful to have.

A Statement of Additional Information ("SAI") concerning the Fund, dated
September 1, 1994, as may be amended from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which may be
of interest to some investors. It has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated herein by reference. A copy is
available without charge from the Fund or the Fund's principal underwriter,
Franklin/Templeton Distributors, Inc. ("Distributors"), at the address or
telephone number listed above.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.

This Prospectus is not an offering of the securities herein described in any
state in which the offering is not authorized. No sales representative, dealer,
or other person is authorized to give any information or make any
representations other than those contained in this Prospectus. Further
information may be obtained from the underwriter.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

<TABLE>
<CAPTION>
CONTENTS PAGE
<S> <C>
Expense Table................................... 2
Financial Highlights............................ 3
About the Fund.................................. 4
Investment Objective
and Policies of the Fund....................... 4
Risks of Investing in the Fund.................. 9
Management of the Fund.......................... 13
Distributions to Shareholders................... 15
Taxation of the Fund
and Its Shareholders........................... 16
How to Buy Shares of the Fund................... 18
Purchasing Shares of the Fund
in Connection with Retirement Plans
Involving Tax-Deferred Investments............. 25
Other Programs and Privileges
Available to Fund Shareholders................. 26
Exchange Privilege.............................. 28
How to Sell Shares of the Fund.................. 30
Telephone Transactions.......................... 33
Valuation of Fund Shares........................ 34
How to Get Information
Regarding an Investment in the Fund............ 36
Performance..................................... 36
General Information............................. 37
Account Registrations........................... 38
Important Notice Regarding
Taxpayer IRS Certifications.................... 39
Portfolio Operations............................ 39
</TABLE>

EXPENSE TABLE

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder will bear directly or
indirectly in connection with an investment in the Fund. These figures are
restated based on the aggregate operating expenses of the Fund which
would have been in effect if the Fund had been managed by Franklin
Advisers, Inc. for the entire fiscal year ended April 30, 1994.

<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)....................... 3.00%
Maximum Sales Charge Imposed on Reinvested Dividends................................................ NONE
Deferred Sales Charge............................................................................... NONE
Redemption Fees..................................................................................... NONE
Exchange Fee (per transaction)*..................................................................... $5.00*
ESTIMATED ANNUAL FUND OPERATING EXPENSES
Management Fees..................................................................................... 0.55%
Rule 12b-1 Fees..................................................................................... 0.25%+
Other Expenses:
Reports to Shareholders.................................................................... 0.14%
Registration Fees.......................................................................... 0.19%
Other...................................................................................... 0.29%
-----
Total Other Expenses................................................................................ 0.62%
-------
Total Fund Operating Expenses....................................................................... 1.42%
=======
</TABLE>

*$5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.
+Consistent with National Association of Securities Dealers, Inc.'s rules, it
is possible that the combination of front-end sales charges and Rule 12b-1 fees
could cause long-term shareholders to pay more than the economic equivalent of
the maximum front-end sales charges permitted under those same rules. Given the
Fund's maximum initial sales charge and the rate of the Fund's Rule 12b-1 fee,
however, it is estimated that this would take a substantial number of years.

<PAGE>
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. For a more detailed discussion of these matters, investors should
refer to the appropriate sections of this Prospectus.

EXAMPLE

As required by regulations of the SEC, the following example illustrates the
expenses, including the initial sales charge, that apply to a $1,000 investment
in the Fund over various time periods assuming (1) a 5% annual rate of return
and (2) redemption at the end of each time period. As noted in the table above,
the Fund charges no redemption fees.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$44 $74 $105 $195
</TABLE>

THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES, INCLUDING
FEES SET BY CONTRACT, AS SHOWN ABOVE, AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE
SHOWN. The operating expenses are borne by the Fund and only indirectly by
shareholders as a result of their investment in the Fund. In addition, federal
regulations require the example to assume an annual return of 5%, but the
Fund's actual return may be more or less than 5%.

FINANCIAL HIGHLIGHTS

Set forth below is a table containing the financial highlights for a share of
the Fund from the effective date of registration, as indicated below, through
the fiscal year ended April 30, 1994. The information for the fiscal year ended
April 30, 1994 has been audited by Coopers & Lybrand, independent auditors,
whose audit report appears in the financial statements in the SAI. The previous
fiscal year of the Fund was audited by other independent auditors whose
opinions are not included herein. See also "Report to Shareholders" under
"General Information."

PER SHARE OPERATING PERFORMANCE+
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET NET DISTRIBUTIONS DISTRIBUTIONS NET ASSETS
YEAR VALUE AT NET REALIZED OR TOTAL FROM FROM NET DISTRIBUTIONS FROM VALUE
ENDED BEGINNING INVESTMENT UNREALIZED INVESTMENT INVESTMENT FROM RETURN OF TOTAL AT END
APRIL 30 OF YEAR INCOME GAIN (LOSS) OPERATIONS INCOME CAPITAL GAINS CAPITAL DISTRIBUTIONS OF YEAR
- -------- --------- ---------- ------------ ---------- ------------- ------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993(1) $12.50 $.27 $ .56 $.83 $(.25) $ -- $ -- $(.25) $13.08
1994(2) 13.08 .78 (.72) .06 (.39) (.06) (.40) (.85) 12.29

<CAPTION>
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
YEAR AT END EXPENSES INCOME TO PORTFOLIO
ENDED TOTAL OF YEAR TO AVERAGE AVERAGE TURNOVER
APRIL 30 RETURN++ (IN 000'S) NET ASSETS** NET ASSETS RATE
- -------- -------- ---------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
1993(1) $6.15% $10,738 .87%* 6.06%* 190.89%*
1994(2) .45 13,341 1.00 4.74 185.66
</TABLE>

(1) For the period December 31, 1992 (effective date of registration) to April
30, 1993.
(2) On November 12, 1993, the investment adviser changed to Franklin Advisers,
Inc.
+ Selected data for a share of beneficial interest outstanding throughout the
period.
++ Total return measures the change in value of an investment over the periods
indicated. It does not include the maximum 3.0% initial sales charge and
assumes reinvestment of dividends and capital gains at net asset value.
* Annualized
** During the periods indicated, the investment manager reduced its
management fees and reimbursed other expenses incurred by the Fund. Had such
action not been taken, the ratios of expenses to average net assets would
have been as follows:

<TABLE>
<CAPTION>
RATIO OF
EXPENSES
TO AVERAGE
NET ASSETS
----------
<S> <C>
1993(1) .................................... 1.73%*
1994 ....................................... 1.83
</TABLE>

<PAGE>

ABOUT THE FUND

The Trust, organized as a Massachusetts business trust on November 6, 1985, is
an open-end, management investment company, known as a mutual fund, and has
registered with the SEC under the Investment Company Act of 1940, as amended
(the "1940 Act"). The Fund, a non-diversified series of the Trust, is managed
by Franklin Advisers, Inc. (the "Manager" or "Adviser"). Templeton Investment
Counsel, Inc. ("TICI" or the "Subadviser") serves as the subadviser under a
contract with the Manager (together, the "Fund's Advisers"). TICI is an
indirect subsidiary of Templeton Worldwide, Inc., which is a direct,
wholly-owned subsidiary of Franklin Resources, Inc. ("Resources"). (See
"Management of the Fund.")

Shares of the Fund may be purchased (minimum investment of $100 initially and
$25 thereafter) at the current public offering price, which is equal to the
Fund's net asset value (see "Valuation of Fund Shares") plus a sales charge
based upon a variable percentage (ranging from 3.00% to zero) depending upon
the amount invested. (See "How to Buy Shares of the Fund.")

INVESTMENT OBJECTIVE AND POLICIES OF THE FUND

The Fund's investment objective is to seek, over the long-term, total return
through investment in a managed portfolio of German government bonds. The Fund
is designed for United States ("U.S.") investors who wish to invest in German
government bonds for the purpose of seeking one or more of the following
potential benefits:

o Higher current yields than may be available on U.S. government bonds

o Capital appreciation resulting from a decline in German interest rates and
a corresponding increase in German government bond prices

o Currency gains from an increase in the value of the German mark relative
to the U.S. dollar

o Safety of principal due to the high credit quality of German government
bonds

o Portfolio diversification outside of the U.S. through German currency and
interest rate exposure

o Protection of global purchasing power in the event of higher U.S.
inflation rates and/or depreciation of the U.S. dollar relative to the
German mark

The Fund's investment objective is a fundamental policy of the Fund and
may not be changed without shareholder approval. There can be no assurance that
the objective will be achieved or that any of the potential benefits listed
above will be realized. In addition, there are significant risk considerations
relevant to an investment in the Fund, as described below.

INVESTMENT POLICIES

Under normal market conditions, the Fund invests between 75% and 100% of its
total assets in debt obligations issued or guaranteed by the Federal
Republic of Germany, its agencies, instrumentalities and political subdivisions
("German government obligations"). The German government obligations in which
the Fund invests are denominated in the German mark and are rated at time of
purchase triple A by a U.S. nationally recognized rating service, such as
Standard & Poor's Corporation ("S&P") or Moody's Investors Service ("Moody's"),
or, if unrated, are considered by the Fund's Advisers to be of a quality
comparable to a triple A rated instrument. See "Investing in German Government
Obligations."

<PAGE>
Consistent with its investment objective, the Fund may also invest up to 25% of
its total assets in (i) German mark-denominated bonds and other debt
instruments issued by sovereign governments other than the Federal Republic of
Germany and by supranational organizations (such as the World Bank) which are
rated at time of purchase triple A by a U.S. nationally recognized rating
service, such as S&P or Moody's, or which, if unrated, are considered by the
Fund's Advisers to be of a quality comparable to a triple A rated instrument;
and (ii) cash and money market instruments denominated in the German mark which
are rated at time of purchase A-1+ by S&P and/or P-1 by Moody's, or which, if
unrated, are considered by the Fund's Advisers to be of comparable high
quality.

Under normal market conditions, the Fund may have up to 5% of its
total assets invested in U.S. dollar denominated cash and money market
instruments, such as U.S. Treasury bills, to provide extra liquidity for
meeting shareholder redemptions and exchanges.

Under normal market conditions, the Fund will invest at least 65% of its total
assets in debt obligations issued or guaranteed by the Federal Republic of
Germany, its agencies, instrumentalities and political subdivisions. While the
Fund does not anticipate that it will have less than 75% of its total assets
invested in German government obligations under normal market conditions, the
Fund reserves the right to reduce its investment in German government
obligations to 65% of its total assets (with a corresponding increase in the
amount it invests in other German mark-denominated securities and cash) if such
investment allocation is deemed to be in the Fund's best interest by the Fund's
Advisers. Investors should understand that in order to preserve its favorable
tax status, the Fund may regularly hold 25% or less of its assets in
obligations issued or guaranteed by the Federal Republic of Germany even while
holding 65% or more of its total assets in German government obligations (as
defined above). In addition, as a temporary measure, the Fund may also reduce
its investment in German government obligations and/or increase its investment
in U.S. government and agency securities from time to time to preserve its
favorable tax status.

The rate of exchange between the U.S. dollar and the German mark fluctuates. As
a result, the Fund generally will experience gains and losses attributable to
those fluctuations. The Fund does not generally position hedge or otherwise
attempt to limit its exposure to German mark currency risk and, therefore, is
designed for investors who are prepared to accept the risk of currency
fluctuations.

Changes in German market interest rates will affect the market value of the
Fund. When German market interest rates rise, the market value of the Fund's
securities generally will decline. Conversely, when German market interest
rates decline, the market value of the Fund's securities generally will rise.
The Fund's Advisers will actively manage the Fund's portfolio maturity
structure in an attempt to achieve positive returns for the Fund over time from
changes in interest rates. See "Risks of Investing in the Fund."

It is anticipated that under normal market conditions, the Fund's weighted
average portfolio maturity will be at least five years. For temporary,
defensive purposes, however, the Fund's weighted average portfolio maturity may
be less than five years.

The Fund's Advisers invest the Fund's assets on the basis of a
number of factors, including, (i) the current level of interest rates on German
government obligations of various maturities and (ii) its view of future
movements of those interest rates. In determining the Fund's maturity
structure, the Fund's
5

<PAGE>
Advisers consider many factors pertaining to the German economy, including the
current stage of the economic cycle, government fiscal and monetary policy,
inflation expectations, the relationship of interest rates of varying
maturities, (i.e., the slope of the yield curve), currency market outlook, and
economic growth prospects within Germany and around the world.

Any policy or technique that is described in this Prospectus or in the Fund's
Statement of Additional Information, unless identified as a fundamental policy
requiring shareholder approval to change, may be changed by the Board of
Trustees without shareholder approval.

The Fund is subject to a number of additional investment restrictions, some of
which may be changed only with the approval of shareholders, which limit its
activities to some extent. For a list of these restrictions and more
information concerning the policies discussed herein, please see the Statement
of Additional Information.

INVESTING IN GERMAN GOVERNMENT OBLIGATIONS

German government obligations generally are considered by rating agencies to be
among the highest credit quality debt instruments worldwide.

In addition, the Bundesbank (the German central bank) generally is viewed as
among the most disciplined and ardent central banks in the world in its
policies of fighting domestic inflation and protecting the international value
of the German mark.

The German bond market is the third largest in the world and currently also one
of the fastest growing. The fall of the Berlin Wall in 1989 and the subsequent
reunification of what were previously East Germany and West Germany in 1990
have significantly increased German public sector financing requirements and
caused substantial recent growth of the German government bond market.

According to Salomon Brothers, the face amount of German mark-denominated bonds
outstanding as of December 31, 1992, was approximately 2.27 trillion marks
($1.40 trillion). Of this total, German government and agency bonds accounted
for 755 billion marks ($468.1 billion), or about 33% of the total market.
Liquidity in the German government bond market is considered by the Fund's
Advisers to be very high.

The table below shows publicly issued German bonds outstanding, by issuer type,
as of December 31, 1992. U.S. bond market statistics are also provided for
comparison purposes.

COMPARATIVE BOND MARKET STATISTICS
(in U.S. $billions)

<TABLE>
<CAPTION>
ISSUER TYPE GERMANY U.S.
- ----------- ------- --------
<S> <C> <C>
Central government.............. $ 410.2 $2,096.4
Central government agency
& government guaranteed........ 57.9 1,735.5
State and local................. 47.6 940.8
Corporates...................... 1.8 1,289.5
Other, foreign, international
and Euros...................... 889.4 814.2
Total........................... $1,407.0 $6,876.4
</TABLE>

Source: Salomon Brothers

Certain German government obligations are issued or otherwise guaranteed by the
Federal Republic of Germany. These obligations carry the explicit full faith
and credit backing of the German government and include direct obligations of
the government (Bunds), as well as certain government agency issues, such as
the German Unity Fund (Fonds Deutsche Einheit), established to help pay for the
reconstruction of former East Germany's economy, and the Treuhandanstalt,
established to facilitate the privatization of assets of former East Germany.

Other German government obligations are guaranteed by their issuing agency,
instrumentality or political subdivision, but do not carry the explicit full

<PAGE>
faith and credit guarantee of the German government. The Fund will invest only
in such obligations which the Fund's Advisers consider to be of credit quality
substantially equivalent to direct obligations of the German government.
Issuers presently satisfying this criterion include the German Federal Railways
(Bundesbahn), the German Post Office (Bundespost), the Kreditanstalt fur
Wiederaufbau ("KFW"), as well as certain of the 16 separate federal states
(Lander) of which Germany comprises.

FORWARDS, FUTURES AND OPTION CONTRACTS

The Fund may use forward foreign currency exchange contracts ("forwards"),
futures contracts ("futures"), option contracts on futures and over-the-counter
options (collectively, "options") in the management of its investment
portfolio.

A forward is individually negotiated and privately traded by currency traders
(usually large commercial banks) and their customers. There are generally no
deposit requirements, and the contracts are traded at a net price without
commission. A forward involves an obligation to exchange one specific currency
for another specific currency (e.g., an obligation to exchange U.S. dollars for
German marks) at an agreed-upon rate of exchange at a future date, which may be
any fixed number of days from the date of the contract. The market for forwards
involving the exchange of U.S. dollars and German marks is highly liquid.

A bond (or currency) future is an agreement to buy or sell a specified quantity
of such bonds (or currency) at an agreed-upon price on a specified date. Upon
entering into a future, the Fund makes a margin deposit, which is adjusted to
reflect changes in the value of the contract and which continues until the
contract is terminated. Futures are transacted through established futures
exchanges.

An option gives the holder (buyer) of the option the right, but not
the obligation, to buy from (in the case of a call option) or sell to (in the
case of a put option) the seller of the option a specified amount of a
particular security or currency (such as German government obligations or
German marks), or a specified number of futures on such security or currency,
on a specified date in the future at a specified price. The option buyer pays
the option seller a negotiated premium upon the establishment of the contract.
Options on futures are transacted through established exchanges. Options on
German government obligations and on German marks are transacted
over-the-counter directly between the buyer and seller. The staff of the SEC
has taken the position that purchased over-the-counter options and the assets
used as "cover" for written over-the-counter options are illiquid securities.
However, the Fund may treat the securities it uses as cover for written
over-the-counter options as liquid provided that the Fund follows certain
procedures. The Fund may sell over-the-counter options only to qualified
dealers who agree that the Fund may repurchase any over-the-counter options it
writes for a maximum price to be calculated by a predetermined formula. In such
cases, the option would be considered illiquid only to the extent that the
maximum repurchase price under the formula exceeds the intrinsic value of the
option.

When the Fund agrees to buy or sell a security denominated in the
German mark, it may enter into forwards in order to "lock in" the U.S. dollar
price of the security. By entering into a forward calling for the receipt or
delivery, for a fixed amount of U.S. dollars, of the amount of German marks
involved in the underlying security transactions, the Fund will be able to
protect itself against a change in the relationship between the U.S. dollar and
the German mark during the period between the date

<PAGE>
the security is purchased or sold and the date on which payment is made or
received.

For investment purposes, the Fund may use forwards, futures and options to
establish Fund exposure to the German mark, and futures and options to
establish Fund exposure to German government obligations, in a fast and
cost-effective way. This may be necessary either when the Fund has a
substantial U.S. dollar account receivable for Fund shares sold or when the
Fund's Advisers require extra time to invest cash balances in German
mark-denominated securities. In each of these cases, the Fund's use of
forwards, futures and options is temporary and for the purpose of maintaining
the Fund's intended ongoing exposure to the German mark and to German
government obligations.

The Fund may from time to time also use forwards calling for the future
purchase of German marks, in conjunction with U.S. dollar-denominated cash or
money market instruments, for the purpose of obtaining an investment result
that is substantially equivalent to a direct investment in a German
mark-denominated money market instrument.

Although permitted to do so, the Fund does not currently intend to enter into
currency futures contracts or options on currency futures.

As indicated earlier, the Fund may, under extraordinary circumstances and for
temporary, defensive purposes only, employ forwards, futures and options for
hedging the Fund's German bond and currency exposure.

The use of forwards, futures and options by the Fund involves investment risks
to which the Fund would not be subject absent its use of such instruments. The
risks inherent in the use of forwards, futures and options include: (1)
dependence on the ability of the Fund's Advisers correctly to predict movements
in the direction of interest rates, securities prices and currency rates; (2)
imperfect correlation between the price of options and futures and in the
prices of the securities or the currencies underlying the options and futures;
(3) that the skills needed to use these instruments are different from those
needed to select portfolio securities; (4) the possible absence of a liquid
secondary market for any particular instrument at any particular time; (5) the
possible loss by the Fund of margin deposits or collateral in the event of
bankruptcy of a broker with whom the Fund has an open position in a future or
an option; and (6) the possible need to defer closing out certain hedged
positions to avoid adverse tax consequences. The Fund's ability to enter into
certain futures and options is also limited by the requirements of the Internal
Revenue Code of 1986, as amended (the "Code") for qualification of the Fund as
a regulated investment company. These securities may also require the
application of complex and special tax rules and elections which may affect the
amount, timing and character of distributions to shareholders. These
investments and transactions are discussed further in the tax section included
in this Prospectus and in the Statement of Additional Information.

WHEN-ISSUED AND FIRM COMMITMENT AGREEMENTS

The Fund may invest up to 25% of its assets in securities on a "when-issued" or
"firm commitment" basis, for payment and delivery at a later date. Under these
arrangements, the securities' prices and yields are fixed on the date of the
commitment, but payment and delivery are scheduled for a future time.

At the time of settlement (normally within 30 to 60 days after the day of the
agreement or purchase), the market value of the security may be more or less
than its purchase or sale price and the Fund, as purchaser, assumes the risk of
any decline in value of the security beginning on the date of the

<PAGE>
agreement or purchase. There is also a risk that the party with whom the Fund
enters into such transaction may default. Failure of the other party to perform
its part of the commitment could result in a loss of income to the Fund. The
Fund will make commitments to purchase or sell only securities which are
eligible for inclusion in its portfolio.

While the Fund normally enters into these transactions with the
intention of actually receiving or delivering the securities, it may sell the
securities before the settlement date or enter into a new commitment to extend
the delivery date further into the future if the Fund's Advisers consider it
advisable as a matter of investment strategy.

Between the time of purchase and settlement, no payment is made and no interest
on securities purchased for future delivery is received by the Fund. If the
assets of the Fund were held in cash pending the settlement of a transaction,
the Fund would earn no income. The Fund, however, intends to be fully invested
to the extent practicable.

When the Fund enters into a when-issued purchase or a firm commitment
to purchase securities, the Fund will maintain, in a segregated account with
its custodian, cash or high-grade marketable securities having an aggregate
value equal to the amount of such purchase commitments until payment is made.
These procedures are designed to help insure that the Fund maintains sufficient
assets at all times to cover its obligations under when-issued purchases and
firm commitments.

PORTFOLIO TURNOVER

The Fund's annual portfolio turnover rate is not expected to exceed 200%.
Turnover rates in excess of 100% often result in higher portfolio brokerage,
execution and transaction costs, which will be borne by the Fund. The higher
the portfolio turnover rate, the greater the likelihood that capital gains or
losses and foreign exchange gains or losses may be realized by the Fund, which
would affect taxable distributions paid to the shareholders. (See "Taxation of
the Fund and Its Shareholders" below and "Additional Information Regarding
Taxation" in the Statement of Additional Information.) Because transaction
costs are normally higher for non-U.S. bonds than for U.S. bonds, the higher
anticipated portfolio turnover rate may also have a larger negative impact on
Fund returns than would be the case with a mutual fund investing primarily in
U.S. bonds. For the period ended April 30, 1993 and the fiscal year ended April
30, 1994, the annualized portfolio turnover rate was 191% and 186%,
respectively.

OTHER PORTFOLIO SECURITIES AND PRACTICES

Although permitted to do so, the Fund does not currently intend to enter into
repurchase agreements or lend its portfolio securities. The Fund will not
borrow money, except from banks for temporary or emergency purposes in amounts
not exceeding 331/3% of the total value of its assets (no additional
investments may be made while any such borrowings exceed 5% of the Fund's total
assets). The Fund may invest in time deposits of commercial banks having
short-term deposit ratings of A-1+ (by S&P) and/or P-1 (by Moody's), but will
limit its investment in such time deposits maturing in more than seven days as
described in the Fund's Statement of Additional Information. The Fund will not
otherwise invest in illiquid securities.

RISKS OF INVESTING IN THE FUND

The primary risk factors associated with investment in German government
obligations arise in connection with market fluctuations in the level of German
interest rates and in the exchange rate be-

<PAGE>
tween the U.S. dollar and the German mark. At any given point in time, the
impact of interest rate and currency exchange rate changes on the Fund's share
price may be reinforcing or offsetting. These risks are described in more
detail below.

The yield and total return of the Fund may be higher or lower
than the yield and total return of a fund investing in U.S. dollar-denominated
bonds of comparable maturity and quality. In addition, investors should
recognize that due to periodic interest rate and exchange rate volatility, the
Fund's share price is likely to experience significant volatility from time to
time, and this volatility may be greater than would be experienced by a
comparable U.S. dollar-denominated bond fund.

The Fund is intended to be only one part of an investor's international and
global diversification program, and holding shares of the Fund should not be
considered a complete investment program.

INTEREST RATE RISK

Bond prices move inversely to the direction of changes in interest rates. When
interest rates rise, bond prices generally decline, and when interest rates
decline, bond prices generally rise. For any given change in market interest
rates, bonds having longer maturities generally will experience greater price
movements.

It is anticipated that under normal market conditions, the Fund's weighted
average portfolio maturity will be at least five years and may be as long as
ten years. Therefore, a significant rise in German bond market interest rates
can generally be expected to cause a significant decline in the Fund's net
asset value per share. Conversely, a large decline in German bond market
interest rates can generally be expected to cause the Fund's share price to
rise significantly.

The Fund's Advisers actively manage the average maturity of the Fund's
investments, shortening the Fund's maturity when it is expected that German
interest rates will rise and lengthening the maturity when it is expected that
German interest rates will decline. This active management of the Fund's
maturity structure is intended to improve the long-term performance of the Fund
on a total return basis relative to that of an unmanaged portfolio of German
government obligations. Of course, there can be no assurance that active
management will achieve the desired result.

CURRENCY RISK

The value of German government obligations, when expressed in U.S. dollars,
will fluctuate with changes in the exchange rate between the U.S. dollar and
the German mark. A decline in the mark relative to the dollar will generally
result in a decline in the Fund's share price (which is determined on a U.S.
dollar basis). Conversely, if the mark appreciates relative to the U.S. dollar
(i.e., the U.S. dollar declines), the Fund's share price generally can be
expected to rise.

To give U.S. dollar-based investors the opportunity to achieve more fully the
benefit of German mark currency diversification, the Fund does not engage in
hedging strategies to minimize or eliminate Fund share price fluctuations
arising from changes in the exchange rate between the U.S. dollar and the
German mark. Such hedging strategies could reduce the currency risk of
investing in German government obligations, but would also reduce the potential
benefits or gains that can be achieved.

Because of its investment primarily in German mark-denominated obligations and
its policy of not hedging currency risk, the Fund's share price will likely
exhibit greater day-to-day volatility than a fund which diversifies its
currency risk across multiple currencies and/or regularly hedges its currency

<PAGE>
risk. Investors in the Fund should also recognize that even though interest
rates on German government obligations may from time to time exceed the rates
on U.S. dollar-denominated bonds of comparable maturity and quality, a decline
in the German mark relative to the U.S. dollar over any given period could more
than offset any such interest rate advantage, resulting in a negative total
return for the Fund over that period.

In the event of an extraordinary political or world development which, in the
view of the Fund's Advisers, threatens the social or political stability of
Germany or the viability of the German government, the Fund may invest in U.S.
government securities and U.S. dollar-denominated cash equivalents or otherwise
hedge its German bond and currency risk, without limitation, but only for
temporary, defensive purposes.

OTHER RISK FACTORS

Foreign taxes can adversely affect the Fund's performance, though it is
anticipated that the Fund will invest only in debt obligations which are not
subject to foreign tax withholding. For more information on tax issues
affecting the Fund, see "Taxation of the Fund and Its Shareholders" in this
Prospectus and "Additional Information Regarding Taxation" in the Statement of
Additional Information.

The Fund is a "non-diversified" fund and, as such, there is no restriction
under the 1940 Act on the percentage of assets that may be invested at any time
in the securities of any one issuer. However, as a non-diversified fund, and as
a fund that concentrates its investments primarily in German government
obligations denominated in German marks, the Fund may be subject to greater
risk with respect to its portfolio securities than a mutual fund that has a
broader range of investments. Although the Fund is "non-diversified" for
purposes of the 1940 Act, it nevertheless must meet certain diversification
standards to qualify as a regulated investment company under the Code. If the
Fund is unable to meet such diversification standards, the Fund may be subject
to taxation as a corporation. The diversification standards require the Fund to
invest no more than 25% of its total assets in a single issuer and, with
respect to at least 50% of its total assets, to invest in cash, U.S. Government
securities, securities of other regulated investment companies, and other
securities as to which the Fund invests no more than 5% of its assets in the
securities of any one issuer or holds not more than 10% of the outstanding
voting securities of any one issuer. The Fund's manager and the Fund's
investment adviser believe the Fund will be able to meet these diversification
standards following its normal investment policies. As necessary to satisfy
such diversification standards, the Fund may invest a significant portion of
its assets in German government obligations other than those issued or
guaranteed by the Federal Republic of Germany and in German mark-denominated
obligations issued by other sovereign governments and supranational
organizations. To the extent the Fund is not fully diversified, it may be more
susceptible to adverse economic, political or regulatory developments affecting
a single issuer than would be the case if it were more broadly diversified.

A mutual fund can incur significant transaction costs in its purchases and
sales of foreign securities and currencies. Due to the highly liquid nature of
the German government obligation and foreign exchange markets, however, it is
anticipated that Fund transaction costs will be minimal and will not have a
material impact on the Fund's performance.

The Fund's custody and portfolio accounting expenses may be higher than
those experienced by a fund investing solely in U.S. dollar-denominated bonds.

<PAGE>
Investing in non-U.S. securities generally may be subject to certain risk
factors not thought to be present in the U.S. These include expropriation of
foreign-owned assets, confiscatory taxation, exchange controls, political and
social instability, and the difficulty of enforcing obligations in other
countries. See "Investing in Foreign Securities" in the Statement of Additional
Information for a more detailed discussion of those risk factors.

GERMAN ECONOMIC RISK FACTORS

The following information is a brief summary of factors affecting the Fund and
does not purport to be a complete description of such factors. The information
is based primarily upon information derived from public documents relating to
securities offerings of issuers of such German government obligations, from
independent credit reports and historically reliable sources, but has not been
independently verified by the Fund.

The Federal Republic of Germany, which comprises what was formerly the nations
of East Germany and West Germany, is considered by the rating agencies and by
the Fund's Advisers to be among the world's most creditworthy issuers of debt
obligations. Both S&P and Moody's have assigned their highest ratings (AAA/Aaa)
to obligations of the Federal Republic of Germany.

The German mark is considered to be the primary reserve currency of Europe and,
along with the Japanese yen, has increasingly been used as a reserve currency
worldwide, sharing the traditional role of the U.S. dollar. Because of
Germany's strong record of economic growth and responsible fiscal and monetary
policy, the mark has been among the strongest of the world's major currencies
in the period dating back to the return of freely floating exchange rates in
the early 1970s. Of course, there can be no assurance that the German mark will
perform or be regarded in the future as it has in the past.

The Bundesbank (the German central bank) operates largely independently of
Germany's political system and is charged with responsibility for protecting
the international value of the German mark. In response to the high levels of
unification-related public and private expenditures and the inflationary
pressures arising from these expenditures, the Bundesbank has maintained a
tight monetary policy in recent years, resulting in interest rates well above
those in the U.S., Japan and other countries outside Europe. In mid-1992,
German interest rates began to decline as continued tight monetary policy
created expectations of economic slowing. This decline in German rates
continued through the end of 1993 as the German economy suffered a significant
recession and the Bundesbank accelerated the easing process. During the first
quarter of 1994, German yields began to rise as signs of economic growth
emerged in the German economy.

The unification of East Germany and West Germany and the ensuing efforts to
raise living standards and modernize infrastructure in what was previously East
Germany have been a costly undertaking for Germany. Much of the cost of
unification has been financed through deficit spending, resulting in
significantly increased public-sector borrowing requirements since 1989. The
ongoing high levels of public sector borrowing and spending in Germany
resulting from unification may cause German interest rates and inflation rates
to be higher than would otherwise be the case. This, in turn, may adversely
affect the total returns on German government obligations. Unification has
placed great pressure on the German economy and, although progress has recently
been made to improve German government finances, these pressures may adversely
affect monetary policy as conducted by the Bundesbank as well as the credit
quality of German government obligations.

<PAGE>
In addition to unification, the disintegration of the Soviet Union and its
sphere of influence also may have an adverse impact on the German economy. In
particular, Germany may be subject to increased immigration pressures and
social discord. Germany also faces uncertainty with respect to repayment of
government-guaranteed loans made to former eastern bloc countries.

MANAGEMENT OF THE FUND

The Board of Trustees has the primary responsibility for the overall management
of the Trust and for electing the officers of the Trust who are responsible for
administering the day-to-day operations of the Fund.

Adviser is a wholly-owned subsidiary of Resources, a publicly owned holding
company, the principal shareholders of which are Charles B. Johnson, Rupert H.
Johnson, Jr. and R. Martin Wiskemann, who own approximately 20%, 16% and 10%,
respectively, of Resources' outstanding shares. Through its subsidiaries,
Resources is engaged in various aspects of the financial services industry.
Adviser acts as investment manager to 34 U.S. registered investment companies
(112 separate series) with aggregate assets of over $75 billion.

Under the management agreement between Adviser and the Trust on behalf of the
Fund, dated November 12, 1993 (the "Management Agreement"), the Fund is
obligated to pay Adviser a fee computed at the close of business on the first
business day of each month equal to an annual rate of 0.55% of the value of the
average daily net assets of the Fund.

The Management Agreement specifies that the management fee will be
reduced to the extent necessary to comply with the most stringent limits on the
expenses which may be borne by the Fund as prescribed by any state in which the
Fund's shares are offered for sale. Currently, the most restrictive of such
provisions limits a fund's allowable expenses as a percentage of its average
net assets for each fiscal year to 2 1/2% of the first $30 million in assets, 2%
of the next $70 million, and 1 1/2% of assets in excess of $100 million. In
addition, the Manager has elected to reduce the fees payable under the
Management Agreement and to assume responsibility for making payments, if
necessary, to offset certain operating expenses otherwise payable by the Fund
so that total ordinary operating expenses do not exceed 1% of the Fund's
average net assets. This arrangement may be continued or terminated by the
Manager at any time.

During the fiscal year ended April 30, 1994, fees totaling 0.55%, of the
average net assets of the Fund would have accrued to Adviser. Total operating
expenses, including management fees, would have represented 1.83% of the
average net assets of the Fund. Pursuant to an agreement by Adviser to limit
its fees, the Fund paid zero management fees and operating expenses totaling
1.00.%, respectively, of the average net assets of the Fund.

The Subadviser is an indirect subsidiary of Templeton Worldwide, Inc.,
which, operating through its subsidiaries, is a major investment management
organization with approximately $37 billion of assets currently under
management and a long history of global investing.

TICI serves as the subadviser under a contract with the Manager dated November
12, 1993, providing services similar to those previously provided by Bankers
Trust Company. Pursuant to the subadvisory agreement between the Manager and
TICI, and subject to the overall policies, control, direction and review of the
Board of Trustees and to the instructions and supervision of the Manager, TICI
will provide day-to-day portfolio management for the Fund.

<PAGE>
Pursuant to the subadvisory agreement between TICI and the Manager, TICI will
receive a fee from the Manager equal to an annual rate of 0.25% of the value of
the average daily net assets of the Fund, payable monthly. TICI's fee will not
be paid by the Fund.

Prior to November 12, 1993, Huntington Advisers, Inc., 251 South Lake Avenue,
Suite 600, Pasadena, California 91101, an indirect wholly-owned subsidiary of
Long Beach Bank, a federal savings bank, served as the Fund's manager and was
responsible for the overall administration of all operations of the Fund.
Bankers Trust Company, 280 Park Avenue, New York, New York 10015, a
wholly-owned subsidiary of Bankers Trust New York Corporation, served as the
Fund's investment adviser, responsible for carrying out the day-to-day
portfolio management of the Fund.

The Fund is responsible for its own operating expenses, including, but not
limited to, the Manager's fee; taxes, if any; custodian, legal and auditing
fees; fees and expenses of trustees who are not members of, affiliated with, or
interested persons of the Fund's Advisers; salaries of any personnel not
affiliated with the Fund's Advisers; insurance premiums; trade association
dues; expenses of obtaining quotations for calculating the value of the Fund's
net assets; printing and other expenses which are not expressly assumed by the
Manager.

Pursuant to the Management Agreement and the sub-advisory agreement, the Fund's
Advisers supervise and implement the Fund's investment activities and provide
certain administrative services and facilities which are necessary to conduct
the Fund's business.

The selection of brokers and dealers through whom transactions in the Fund's
portfolio securities will be effected will be done by the Fund's Advisers. The
Fund's Advisers try to obtain the best execution on all such transactions. If
it is felt that more than one broker is able to provide the best execution, the
Fund's Advisers will consider the furnishing of quotations and of other market
services, research, statistical and other data for the Fund's Advisers and
affiliates, as well as the sale of shares of the Fund, as factors in selecting
a broker. Further information is included under "The Fund's Policies Regarding
Brokers Used on Portfolio Transactions" in the Statement of Additional
Information.

Shareholder accounting and many of the clerical functions for the Fund are
performed by Franklin/Templeton Investor Services, Inc. ("Investor Services" or
"Shareholder Services Agent"), in its capacity as transfer agent and
dividend-paying agent. Investor Services is a wholly-owned subsidiary of
Resources.

PLAN OF DISTRIBUTION

The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under the
1940 Act (the "Plan"), whereby it may reimburse Distributors or others for all
expenses incurred by Distributors or others in the promotion and distribution
of the Fund's shares. Such expenses may include, but are not limited to, the
printing of prospectuses and reports used for sales purposes, expenses of
preparing and distributing sales literature and related expenses,
advertisements, and other distribution-related expenses, including a prorated
portion of Distributors' overhead expenses attributable to the distribution of
Fund shares, as well as any distribution or service fees paid to securities
dealers or their firms or others who have executed a servicing agreement with
the Fund, Distributors or its affiliates. The maximum amount which the Fund may
pay to Distributors or others for such distribution expenses is 0.25% per annum
of the average daily net assets of the Fund, payable on a quarterly basis. All
expenses of distribution and marketing in excess of 0.25% per annum will be
borne by

<PAGE>
Distributors, or others who have incurred them, without reimbursement from the
Fund. The Plan also covers any payments to or by the Fund, Distributors, or
other parties on behalf of the Fund or Distributors, to the extent such
payments are deemed to be for the financing of any activity primarily intended
to result in the sale of shares issued by the Fund within the context of Rule
12b-1. The payments under the Plan are included in the maximum operating
expenses which may be borne by the Fund.

DISTRIBUTIONS TO SHAREHOLDERS

There are two types of distributions which the Fund may make to its
shareholders.

1. Income dividends. The Fund receives income generally in the form of interest
and other income derived from its investments. This income, less the expenses
incurred in the Fund's operations, is its net investment income from which
income dividends may be distributed. Thus, the amount of dividends paid per
share may vary with each distribution.

2. Capital gain distributions. The Fund may derive capital gains or losses in
connection with sales or other dispositions of its portfolio securities.
Distributions by the Fund derived from net short-term and net long-term capital
gains (after taking into account any net capital loss carryovers) may generally
be made once a year in December to reflect any net short-term and net long-term
capital gains realized by the Fund as of October 31 of the current fiscal year
and any undistributed net capital gains from the prior fiscal year. These
distributions, when made, will generally be fully taxable to the Fund's
shareholders. The Fund may make more than one distribution derived from net
short-term and net long-term capital gains in any year or to adjust the timing
of these distributions for operational or other reasons.

DISTRIBUTION DATE

Although subject to change by the Board of Trustees without prior notice to, or
approval by, shareholders, the Fund's current policy is to declare income
dividends by the Fund monthly for shareholders of record generally on the first
business day preceding the 15th of the month, payable on or about the last
business day of that month. The amount of income dividend payments by the Fund
is dependent upon the amount of net income received by the Fund from its
portfolio holdings, is not guaranteed or otherwise insured and is subject to
the discretion of the Board of Trustees. Fund shares are quoted ex-dividend on
the first business day following the record date. THE FUND DOES NOT PAY
"INTEREST" OR GUARANTEE ANY FIXED RATE OF RETURN ON AN INVESTMENT IN ITS
SHARES.

In order to be entitled to a dividend, an investor must have acquired Fund
shares prior to the close of business on the record date. An investor
considering purchasing Fund shares shortly before the record date of a
distribution should be aware that because the value of the Fund's shares is
based directly on the amount of its net assets, rather than on the principle of
supply and demand, any distribution of income or capital gain will result in a
decrease in the value of the Fund's shares equal to the amount of the
distribution. While a dividend or capital gain distribution received shortly
after purchasing shares represents, in effect, a return of a portion of the
shareholder's investment, it may be taxable as dividend income or capital gain.

DIVIDEND REINVESTMENT

Unless requested otherwise in writing or on the Shareholder Application, income
dividends and capital gain distributions, if any, will be automatically
reinvested in the shareholder's account in the

<PAGE>
form of additional shares, valued at the closing net asset value (without sales
charge) on the dividend reinvestment date. Shareholders have the right to
change their election with respect to the receipt of distributions by notifying
the Fund, but any such change will be effective only as to distributions for
which the record date is seven or more business days after the Fund has been
notified. See the Statement of Additional Information for more information.

Many of the Fund's shareholders receive their distributions in the form of
additional shares. This is a convenient way to accumulate additional shares and
maintain or increase the shareholder's earnings base. Of course, any shares so
acquired remain at market risk.

DISTRIBUTIONS IN CASH

A shareholder may elect
to receive income dividends, or both income dividends and capital gain
distributions, in cash. By completing the "Special Payment Instructions for
Distributions" section of the Shareholder Application included with this
Prospectus, a shareholder may direct the selected distributions to another fund
in the Franklin Group of Funds(R) or the Templeton Group, to another person, or
directly to a checking account. If the bank at which the account is maintained
is a member of the Automated Clearing House, the payments may be made
automatically by electronic funds transfer. If this last option is requested,
the shareholder should allow at least 15 days for initial processing. Dividends
which may be paid in the interim will be sent to the address of record.
Additional information regarding automated fund transfers may be obtained from
Franklin's Shareholder Services Department. Dividend and capital gain
distributions are eligible for investment in another fund in the Franklin Group
of Funds or the Templeton Group at net asset value.

HOW SHAREHOLDERS PARTICIPATE IN THE RESULTS OF THE FUND'S ACTIVITIES

The assets of the Fund are invested in portfolio securities. If the securities
owned by the Fund increase in value, the value of the shares of the Fund which
the shareholder owns will increase. If the securities owned by the Fund
decrease in value, the value of the shareholder's shares will also decline. In
this way, shareholders participate in any change in the value of the securities
owned by the Fund.

TAXATION OF THE FUND AND ITS SHAREHOLDERS

The Fund has elected to be treated as a regulated investment company under
Subchapter M of the Code, qualified as such, and intends to continue to so
qualify. By distributing all of its net investment income, net foreign currency
gains characterized as ordinary income and net realized short-term and
long-term capital gain for a fiscal year in accordance with the timing
requirements imposed by the Code and by meeting certain other requirements
relating to the sources of its income and diversification of its assets, the
Fund will not be liable for federal income or excise taxes.

For federal income tax purposes, any income dividends which the shareholder
receives from the Fund, as well as any distributions derived from the excess of
net short-term capital gain over net long-term capital loss, are treated as
ordinary income whether the shareholder has elected to receive them in cash or
in additional shares.

Distributions derived from the excess of net long-term capital gain over net
short-term capital loss are treated as long-term capital gain regardless of the
length of time the shareholder has owned Fund shares and regardless of whether
such distributions are received in cash or in additional shares.

<PAGE>

Pursuant to the Code, certain distributions which are declared in October,
November or December but which, for operational reasons, may not be paid to the
shareholder until the following January, will be treated for tax purposes as if
received by the shareholder on December 31 of the calendar year in which they
are declared.

Redemptions and exchanges of Fund shares are taxable events on which a
shareholder may realize a gain or loss. Any loss incurred on sale or exchange
of the Fund's shares, held for six months or less, will be treated as a
long-term capital loss to the extent of capital gain dividends received with
respect to such shares. All or a portion of the sales charge incurred in
purchasing shares of the Fund will not be included in the federal tax basis of
such shares sold or exchanged within ninety (90) days of their purchase (for
purposes of determining gain or loss with respect to such shares) if the sales
proceeds are reinvested in the Fund or in another fund in the
Franklin/Templeton Group (defined under "How to Buy Shares of the Fund") and a
sales charge which would otherwise apply to the reinvestment is reduced or
eliminated. Any portion of such sales charge excluded from the tax basis of the
shares sold will be added to the tax basis of the shares acquired in the
reinvestment. Shareholders should consult with their tax advisors concerning
the tax rules applicable to the redemption or exchange of fund shares.

The Fund's investments in options, futures contracts and forward contracts may
give rise to taxable income, gain or loss and will be subject to special tax
treatment under certain mark-to-market and straddle rules, the effect of which
may be to accelerate income to the Fund, defer Fund losses and cause
adjustments in the holding periods of Fund securities. These rules could
therefore, affect the amount, timing and character of distributions to
shareholders. Certain elections may be available to the Fund to mitigate some
of the unfavorable consequences of the provisions described in this paragraph.
These investments and transactions are discussed in the Statement of Additional
Information.

The Fund may be subject to foreign withholding taxes on income from certain of
its foreign securities. If more than 50% of the total assets of the Fund at the
end of its fiscal year are invested in securities of foreign corporations, the
Fund may elect to pass through to its shareholders the pro rata share of
foreign taxes paid by the Fund. If this election is made, shareholders will be
(i) required to include in their gross income their pro rata share of foreign
source income (including any foreign taxes paid by the fund), and (ii) entitled
to either deduct their share of such foreign taxes in computing their taxable
income or to claim a credit for such taxes against their U.S. income tax,
subject to certain limitations under the Code. Shareholders will be informed by
the Fund at the end of each calendar year regarding the availability of any
credits and the amount of foreign source income (including any foreign taxes
paid by the Fund) to be included on their income tax returns.

Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currencies, foreign currency payables or
receivables, foreign currency-denominated debt securities, foreign currency
forward contracts, and options or futures contracts on foreign currencies are
subject to special tax rules which may cause such gains and losses to be
treated as ordinary income and losses rather than capital gains and losses and
may affect the amount and timing of the Fund's income or loss from such
transactions and in turn its distributions to shareholders. These rules are
discussed in the Statement of Additional Information.

<PAGE>

The Fund will inform shareholders of the source of their dividends and
distributions at the time they are paid and will, promptly after the close of
each calendar year, advise them of the tax status for federal income tax
purposes of such dividends and distributions.

Shareholders who are not U.S. persons for purposes of federal income taxation
should consult with their financial or tax advisors regarding the applicability
of U.S. withholding or other taxes to distributions received by them from the
Fund and the application of foreign tax laws to these distributions.

HOW TO BUY SHARES OF THE FUND

Shares of the Fund are continuously offered through securities dealers which
execute an agreement with Distributors, the principal underwriter of the Fund's
shares. The use of the term "securities dealer" shall include other financial
institutions which, pursuant to an agreement with Distributors (directly or
through affiliates), handle customer orders and accounts with the Fund. Such
reference, however, is for convenience only and does not indicate a legal
conclusion of capacity. The minimum initial investment is $100 and subsequent
investments must be $25 or more. These minimums may be waived when the shares
are purchased through plans established at Franklin. The Fund and Distributors
reserve the right to refuse any order for the purchase of shares.

PURCHASE PRICE OF FUND SHARES

Shares of the Fund are offered at the public offering price, which is the net
asset value per share plus a sales charge, next computed (1) after the
shareholder's securities dealer receives the order which is promptly
transmitted to the Fund or (2) after receipt of an order by mail from the
shareholder directly in proper form (which generally means a completed
Shareholder Application accompanied by a negotiable check). The sales charge is
a variable percentage of the offering price depending upon the amount of the
sale. On orders for 100,000 shares or more, the offering price will be
calculated to four decimal places. On orders for less than 100,000 shares, the
offering price will be calculated to two decimal places using standard rounding
criteria. A description of the method of calculating net asset value per share
is included under the caption "Valuation of Fund Shares."

Set forth below is a table of total sales charges or underwriting commissions
and dealer concessions.

<TABLE>
<CAPTION>
TOTAL SALES CHARGE
---------------------------------------------------------------
AS A PERCENTAGE DEALER CONCESSION
SIZE OF TRANSACTION AS A PERCENTAGE OF NET AMOUNT AS A PERCENTAGE
AT OFFERING PRICE OF OFFERING PRICE INVESTED OF OFFERING PRICE*
------------------- ----------------- ----------------- ------------------
<S> <C> <C> <C>
Less than $50,000 3.00% 3.09% 2.60%
$50,000 but less than $100,000 2.50% 2.56% 2.25%
$100,000 but less than $250,000 2.00% 2.04% 1.85%
$250,000 but less than $500,000 1.50% 1.52% 1.40%
$500,000 but less than $750,000 1.00% 1.01% 1.00%
$750,000 but less than $1,000,000 0.75% 0.76% 0.75%
$1,000,000 or more** None None None
</TABLE>

*Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
**On purchases of $1,000,000 or more made through selected securities dealers
or agents, the Manager may pay the dealer or agent, from its own resources, a
one-time fee of up to 0.25% of the amount invested.

<PAGE>

Through September 30, 1994, all sales charges on the purchase of shares will be
paid to the securities dealer, if any, involved in the trade, who may therefore
be deemed an "underwriter" under the Securities Act of 1933, as amended.

The size of a transaction which determines the applicable sales charge on the
purchase of Fund shares is determined by adding the amount of the shareholder's
current purchase plus the cost or current value (whichever is higher) of a
shareholder's existing investment in one or more of the many of the funds in
the Franklin Group of Funds(R) and the Templeton Group of Funds. Included for
these purposes are (a) the open-end investment companies in the Franklin Group
(except Franklin Valuemark II and Franklin Government Securities Trust) (the
"Franklin Group of Funds"), (b) other investment products in the Franklin Group
underwritten by Distributors or its affiliates (although certain investments
may not have the same schedule of sales charges and/or may not be subject to
reduction) (the products in subparagraphs (a) and (b) are referred to as the
"Franklin Group") and (c) the open-end U.S. registered investment companies in
the Templeton Group of Funds except Templeton American Trust, Inc., Templeton
Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund, and Templeton
Variable Products Series Fund (the "Templeton Group"). Purchases pursuant to
the Rights of Accumulation will be at the applicable sales charge of 0.75% or
more until the additional purchase, plus the value of the account or the amount
previously invested, less redemptions, exceeds $1,000,000, and not subject to
any sales charge on the excess over that amount. Sales charge reductions based
upon purchases in more than one of the funds in the Franklin Group or Templeton
Group (the "Franklin/Templeton Group") may be effective only after notification
to Distributors that the investment qualifies for a discount.

Distributors or its affiliates, at their expense, may also provide additional
compensation to dealers in connection with sales of shares of the Fund and
other funds in the Franklin Group of Funds or the Templeton Group. Compensation
may include financial assistance to dealers in connection with conferences,
sales or training programs for their employees, seminars for the public,
advertising, sales campaigns and/or shareholder services and programs regarding
one or more of the Franklin Group of Funds or the Templeton Group and other
dealer-sponsored programs or events. In some instances, this compensation may
be made available only to certain dealers whose representatives have sold or
are expected to sell significant amounts of such shares. Compensation may
include payment for travel expenses, including lodging, incurred in connection
with trips taken by invited registered representatives and members of their
families to locations within or outside of the United States for meetings or
seminars of a business nature. Dealers may not use sales of the Fund's shares
to qualify for this compensation to the extent such may be prohibited by the
laws of any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc. None of the aforementioned additional
compensation is paid for by the Fund or its shareholders.

Certain officers and trustees of the Trust are also affiliated with
Distributors. A detailed description is included in the Statement of Additional
Information.

QUANTITY DISCOUNTS IN SALES CHARGES

<PAGE>

may be combined with those of the investor's spouse and children under the age
of 21. In addition, the aggregate investments of a trustee or other fiduciary
account (for an account under exclusive investment authority) may be considered
in determining whether a reduced sales charge is available, even though there
may be a number of beneficiaries of the account.

In addition, an investment in the Fund may qualify for a reduction in the
sales charge under the following programs:

1. Rights of Accumulation. The cost or current value (whichever is higher) of
existing investments in the Franklin/Templeton Group may be combined with the
amount of the current purchase in determining the sales charge to be paid.

2. Letter of Intent. An investor may immediately qualify for a reduced sales
charge on a purchase of shares of the Fund by completing the Letter of Intent
section of the Shareholder Application (the "Letter of Intent" or "Letter"). By
completing the Letter, the investor expresses an intention to invest during the
next 13 months a specified amount which if made at one time would qualify for a
reduced sales charge. At any time within 90 days after the first investment
which the investor wants to qualify for the reduced sales charge, a signed
Shareholder Application, with the Letter of Intent section completed, may be
filed with the Fund. After the Letter of Intent is filed, each additional
investment made will be entitled to the sales charge applicable to the level of
investment indicated on the Letter of Intent as described above. Sales charge
reductions based upon purchases in more than one company in the
Franklin/Templeton Group will be effective only after notification to
Distributors that the investment qualifies for a discount. The shareholder's
holdings in the Franklin/Templeton Group acquired more than 90 days before the
Letter of Intent is filed will be counted towards completion of the Letter of
Intent but will not be entitled to a retroactive downward adjustment of sales
charge. Any redemptions made by the shareholder during the 13-month period will
be subtracted from the amount of the purchases for purposes of determining
whether the terms of the Letter of Intent have been completed. If the Letter of
Intent is not completed within the 13-month period, there will be an upward
adjustment of the sales charge as specified below, depending upon the amount
actually purchased (less redemptions) during the period.

AN INVESTOR ACKNOWLEDGES AND AGREES TO THE FOLLOWING PROVISIONS BY COMPLETING
THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION: Five percent (5%)
of the amount of the total intended purchase will be reserved in shares of the
Fund, registered in the investor's name, to assure that the full applicable
sales charge will be paid if the intended purchase is not completed. The
reserved shares will be included in the total shares owned as reflected on
periodic statements; income and capital gain distributions on the reserved
shares will be paid as directed by the investor. The reserved shares will not
be available for disposal by the investor until the Letter of Intent has been
completed or the higher sales charge paid. If the total purchases, less
redemptions, equal the amount specified under the Letter, the reserved shares
will be deposited to an account in the name of the investor or delivered to the
investor or the investor's order. If the total purchases, less redemptions,
exceed the amount specified under the Letter and is an amount which would
qualify for a further quantity discount, a retroactive price adjustment will be
made by Distributors and the dealer through whom purchases were made pursuant
to the Letter of Intent (to reflect such further quantity discount) on
purchases made within 90 days before and on

<PAGE>

those made after filing the Letter. The resulting difference in offering price
will be applied to the purchase of additional shares at the offering price
applicable to a single purchase or the dollar amount of the total purchases. If
the total purchases, less redemptions, are less than the amount specified under
the Letter, the investor will remit to Distributors an amount equal to the
difference in the dollar amount of sales charge actually paid and the amount of
sales charge which would have applied to the aggregate purchases if the total
of such purchases had been made at a single time. Upon such remittance the
reserved shares held for the investor's account will be deposited to an account
in the name of the investor or delivered to the investor or to the investor's
order. If within 20 days after written request such difference in sales charge
is not paid, the redemption of an appropriate number of reserved shares to
realize such difference will be made. In the event of a total redemption of the
account prior to fulfillment of the Letter of Intent, the additional sales
charge due will be deducted from the proceeds of the redemption, and the
balance will be forwarded to the investor. By completing the Letter of Intent
section of the Shareholder Application, an investor grants to Distributors a
security interest in the reserved shares and irrevocably appoints Distributors
as attorney-in-fact with full power of substitution to surrender for redemption
any or all shares for the purpose of paying any additional sales charge due.
Purchases under the Letter of Intent will conform with the requirements of Rule
22d-1 under the 1940 Act. The investor or the investor's securities dealer must
inform Investor Services or Distributors that this Letter is in effect each
time a purchase is made.

Additional terms concerning the offering of the Fund's shares are included in
the Statement of Additional Information.

GROUP PURCHASES

An individual who is a member of a qualified group may also purchase shares of
the Fund at the reduced sales charge applicable to the group as a whole. The
sales charge is based upon the aggregate dollar value of shares previously
purchased and still owned by the group, plus the amount of the current
purchase. For example, if members of the group had previously invested and
still held $40,000 of Fund shares and now were investing $20,000, the sales
charge would be 2.50%. Information concerning the current sales charge
applicable to a group may be obtained by contacting Distributors.

A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund shares at a discount and
(iii) satisfies uniform criteria which enable Distributors to realize economies
of scale in its costs of distributing shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Fund or Distributors and the members, must agree to
include sales and other materials related to the Fund in its publications and
mailings to members at reduced or no cost to Distributors, and must seek to
arrange for payroll deduction or other bulk transmission of investments to the
Fund.

If an investor selects a payroll deduction plan, subsequent investments will be
automatic and will continue until such time as the investor notifies the Fund
and the investor's employer to discontinue further investments. Due to the
varying procedures used to prepare, process and forward the payroll deduction
information to the Fund, there may be a delay between the time of the payroll
deduction and the time the money reaches the Fund. The investment in the Fund
will be made at the offering

<PAGE>

price per share determined on the day that both the check and payroll deduction
data are received in required form by the Fund.

PURCHASES AT NET ASSET VALUE

Dealers may place trades to purchase shares of the
Fund at net asset value on behalf of investors who have, within the past 60
days, redeemed an investment in a registered management investment company
which charges a contingent deferred sales charge, and which has investment
objectives similar to those of the Fund.

Shares of the Fund may be purchased at net asset value (without sales charge)
by employee benefit plans qualified under Section 401 of the Code, including
salary reduction plans qualified under Section 401(k) of the Code, subject to
minimum requirements with respect to number of employees or amount of purchase,
which may be established by Distributors. Currently those criteria require that
the employer establishing the plan have 500 or more employees or that the
amount invested or to be invested during the subsequent 13-month period in the
Fund or another company or companies in the Franklin/Templeton Group totals at
least $1,000,000. Employee savings plans and employee benefit plans not
qualified under Section 401 of the Code may be afforded the same privilege if
they meet the above requirements as well as the uniform criteria for qualified
groups previously described under Group Purchases which enable Distributors to
realize economies of scale in its sales efforts and sales related expenses. If
investments by employee benefit plans at net asset value are made through a
dealer who has executed a dealer agreement with Distributors, Distributors or
one of its affiliates may make a payment, out of their own resources, to such
dealer in an amount not to exceed 1.00% of the amount invested. Contact
Franklin's Institutional Sales Department for additional information.

Shares of the Fund may be purchased at net asset value by trust companies and
bank trust departments for funds over which they exercise exclusive
discretionary investment authority and which are held in a fiduciary, agency,
advisory, custodial or similar capacity. Such purchases are subject to minimum
requirements with respect to amount of purchase, which may be established by
Distributors. Currently, those criteria require that the amount invested or to
be invested during the subsequent 13-month period in this Fund or any other
company in the Franklin/Templeton Group must total at least $1,000,000. Orders
for such accounts will be accepted by mail accompanied by a check or by
telephone or other means of electronic data transfer directly from the bank or
trust company, with payment by federal funds received by the close of business
on the next business day following such order. If an investment by a trust
company or bank trust department at net asset value is made through a dealer
who has executed a dealer agreement with Distributors, Distributors or one of
its affiliates may make payment, out of their own resources, to such dealer in
an amount not to exceed 0.25% of the amount invested. Contact Franklin's
Institutional Sales Department for additional information.

Shares of the Fund may be purchased at net asset value by certain
fiduciary entities (such as registered investment advisers, bank trust
departments and bank custodians) or by financial services companies acting as
intermediaries for such fiduciary entities buying on behalf of a client,
provided that the fiduciary entity has a pre-existing investment advisory
relationship with the investor under which the investor compensates the
fiduciary entity through payment of an investment advisory fee and the
qualifying investment in the Fund is made

<PAGE>

within the context of that investment advisory relationship. SHARES ACQUIRED
PURSUANT TO THIS PROVISION ARE NOT ELIGIBLE FOR EXCHANGE AT NET ASSET VALUE
INTO ANOTHER FUND IN THE FRANKLIN GROUP OF FUNDS OR THE TEMPLETON GROUP.

Shares of the Fund may be purchased at net asset value by persons who
have redeemed, within the previous 120 days, their shares of the Fund or
another fund in the Franklin Group of Funds or the Templeton Group which were
purchased with a sales charge. An investor may reinvest an amount not exceeding
the redemption proceeds. Shares of the Fund redeemed in connection with an
exchange into another fund (see "Exchange Privilege") are not considered
"redeemed" for this privilege. In order to exercise this privilege, a written
order for the purchase of shares of the Fund must be received by the Fund or
the Fund's Shareholder Services Agent within 120 days after the redemption. The
120 days, however, do not begin to run on redemption proceeds placed
immediately after redemption in a Franklin Bank Certificate of Deposit ("CD")
until the CD (including any rollover) matures. Reinvestment at net asset value
may also be handled by a securities dealer or other financial institution, who
may charge the shareholder a fee for this service. The redemption is a taxable
transaction but reinvestment without a sales charge may affect the amount of
gain or loss recognized and the tax basis of the shares reinvested. If there
has been a loss on the redemption, the loss may be disallowed if a reinvestment
in the same fund is made within a 30-day period. Information regarding the
possible tax consequences of such a reinvestment is included in the tax section
of this Prospectus and the Statement of Additional Information.

Shares of the Fund may also be purchased at net asset value by (1) officers,
trustees or directors and full-time employees of the Fund or any fund in the
Franklin Group of Funds or the Templeton Group, the Manager and Distributors
and affiliates of such companies, if they have been such for at least 90 days,
and by their spouses and family members, (2) former participants in the
Franklin/Templeton Profit Sharing/401(k) plan, who elect to make a direct
rollover of all, or a portion of, their eligible distribution account balance
from such plan, (3) registered securities dealers and their affiliates, for
their investment account only, and (4) registered personnel and employees of
securities dealers and by their spouses and family members, in accordance with
the internal policies and procedures of the employing securities dealer. Such
sales are made upon the written assurance of the purchaser that the purchase is
made for investment purposes and that the securities will not be transferred or
resold except through redemption or repurchase by or on behalf of the Fund.
Employees of securities dealers must obtain a special application from their
employers or from Franklin's Sales Department in order to qualify.

Shares of the Fund may also be purchased at net asset value by any
state, county, or city, or any instrumentality, department, authority or agency
thereof which has determined that the Fund is a legally permissible investment
and which is prohibited by applicable investment laws from paying a sales
charge or commission in connection with the purchase of shares of any
registered management investment company ("an eligible governmental
authority"). SUCH INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO
DETERMINE WHETHER AND TO WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL
INVESTMENTS FOR THEM. Municipal investors considering investment of proceeds of
bond offerings into the Fund should consult with expert counsel to determine
the effect, if any, of various

<PAGE>

payments made by the Fund or its investment manager on arbitrage rebate
calculations. If an investment by an eligible governmental authority at net
asset value is made through a dealer who has executed a dealer agreement with
Distributors, Distributors or one of its affiliates may make a payment, out of
their own resources, to such dealer in an amount not to exceed 0.25% of the
amount invested. Contact Franklin's Institutional Sales Department for
additional information.

PURCHASING WITH GERMAN MARKS

Shareholders having other German mark-denominated assets may wish to purchase
Fund shares with German marks in order to avoid the cost and inconvenience of
first converting their German marks into U.S. dollars. Investors wishing to
purchase Fund shares with German marks normally must add to an existing Fund
account. The minimum required Fund purchase that may be made in this manner is
10,000 German marks. New accounts may not be opened in this manner without the
prior consent of Distributors. Investments in the Fund may not be made in
currencies other than the U.S. dollar or the German mark without the prior
consent of Distributors.

Provided that Distributors receives timely notice as described below, Fund
shares will be purchased at the public offering price in U.S. dollars next
determined after the Fund custodian's correspondent bank in Germany receives
the German marks, using the same exchange rate used to convert the value of the
Fund's German mark-denominated assets into U.S. dollars for portfolio valuation
purposes.

The Fund does not charge a fee for receiving investments in this manner. The
shareholder's bank, however, may impose wire and other fees.

To invest in the Fund with German marks, please follow the directions below:

1. Notify Distributors by phone at 1-800/632-2301 (or 1-415/312-3400) or by fax
at 1-415/312-4175 by 1:00 p.m., Eastern time, at least two business days
prior to the date on which funds are to be wired, that a purchase will be
made with German marks. Alternatively, Distributors may be notified after
1:00 p.m., Eastern time, at least three business days prior to the date on
which funds are to be wired. The following information must be included in
the notice:

Date of Wire (Value Date)
Amount of Wire (in German marks)
Name of Bank Wiring Funds
Shareholder Name
Shareholder Account Number
Wire Control Number (to be assigned each time)

2. At least two/three business days after notifying Distributors of the
shareholder's intent to purchase Fund shares with German marks, the
shareholder should request the bank to transmit, for value, immediately
available funds (German marks) to:

<TABLE>
<S> <C>
Bank................. Chase Bank A.G
Alexandertrasse 59
Postfach 90-01-09
6000 Frankfurt/Main 90
Frankfurt-Rodelheim Germany

Account.............. Chase Manhattan Bank,
London
623 120 0079
Further Credit....... for Franklin/Templeton
German Government
Bond Fund
</TABLE>

<PAGE>

GENERAL

Securities laws of states in which the Fund's shares are offered for sale may
differ from the interpretations of federal law, and banks and financial
institutions selling Fund shares may be required to register as dealers
pursuant to state law.

PURCHASING SHARES OF THE FUND IN CONNECTION WITH RETIREMENT PLANS INVOLVING
TAX-DEFERRED INVESTMENTS

Shares of the Fund may be used for retirement programs providing for
tax-deferred investments for both individuals and businesses. The Fund may be
used as an investment vehicle for an existing retirement plan, or
Franklin/Templeton Trust Company may provide the plan documents and trustee or
custodian services. A plan document must be adopted in order for a plan to be
in existence.

Franklin/Templeton Trust Company, an affiliate of Distributors, can serve as
custodian or trustee for various types of retirement plans. Brochures for each
of the plans sponsored by Franklin contain important information regarding
eligibility, contribution limits and IRS requirements. Please note that the
separate applications other than the one contained in this prospectus must be
used to establish a Franklin/Templeton Trust Company retirement account. To
obtain a retirement plan brochure or application, call toll-free 1-800/DIAL BEN
(1-800/342-5236).

The Franklin IRA is an individual retirement account in which the
contributions, annually limited to the lesser of $2,000 or 100% of an
individual's earned compensation, accumulate on a tax-deferred basis until
withdrawn. Under the current tax law, individuals who (or whose spouses) are
covered by a company retirement plan (termed "active participants") may be
restricted in the amount they may claim as an IRA deduction on their returns.
The IRA deduction is gradually reduced to the extent that a taxpayer's adjusted
gross income exceeds certain specified limits.

Two IRAs, with a combined limit of $2,250 or 100% of earned compensation,
whichever is less, may be established by a married couple in which only one
spouse is a wage earner. The $2,250 may be split between the two IRAs, so long
as no more than $2,000 is contributed to either one for a given tax year.

A Franklin Rollover IRA account is designed to maintain the tax-deferred status
of a qualifying distribution from an employer-sponsored retirement plan, such
as a 401(k) plan or qualified pension plan. Additionally, if the eligible
distribution is directly transferred to a rollover IRA account, the
distribution will be exempt from 20% mandatory federal withholding, a new
withholding law enacted in 1993.

The Franklin Simplified Employee Pension Plan (SEP-IRA) and Salary Reduction
Simplified Employee Pension Plan (SAR-SEP) are for use by small businesses
(generally 25 or fewer employees) to provide a retirement plan for their
employees and, at the same time, provide for a tax-deduction to the employer.
SEP-IRA contributions are made to an employee's IRA, at the discretion of the
employer, up to the lesser of $30,000 or 15% of compensation* per employee. The
SAR-SEP allows employees to contribute a portion of their salary to an IRA on a
pre-tax basis through salary deferrals. The maximum annual salary deferral
limit for a SAR-SEP is the lesser of 15% of compensation (adjusted for
deferrals) or $9,240 (1994 limit; indexed for inflation).

*The limit on compensation for determining SEP and qualified plan contributions
is reduced from $235,840 in 1993 to $150,000 in 1994. The new $150,000 limit
will be adjusted for inflation, but only in $10,000 increments.

<PAGE>

The Franklin 403(b) Retirement Plan is a salary deferral plan for employees of
certain non-profit and educational institutions [ss.501(c)(3) organizations and
public schools]. The 403(b) Plan allows participants to determine the annual
amount of salary they wish to defer. The maximum annual salary deferral amount
is generally the lesser of 25% of compensation (adjusted for deferrals) or
$9,500.

The Franklin Business Retirement Plans provide employer's with additional
retirement plan options and may be used individually, in combination, or with
custom designed features. The Profit Sharing Plan allows an employer to make
contributions, at its discretion, of up to the lesser of $30,000 or 15% of
compensation* per employee each year. The Money Purchase Pension Plan allows
the employer to contribute up to the lesser of $30,000 or 25% of compensation*
per employee; however, contributions are required annually at the rate
(percentage) elected by the employer at the outset of the plan. In order to
achieve a combined contribution rate of 25% while maintaining a certain degree
of flexibility, employers may establish both a Profit Sharing Plan and a Money
Purchase Pension Plan (with a fixed contribution rate of 10%).

Franklin/Templeton Trust Company can add optional provisions to the Profit
Sharing and Money Purchase Pension Plans described above and provide a Defined
Benefit, Target Benefit, and 401(k) Plans on a custom designed basis. Business
Retirement Plans, whether standard or custom designed, may require an annual
report (Form 5500) to be filed with the IRS.

Redemptions from any Franklin retirement plan accounts require the completion
of specific distribution forms to comply with IRS regulations. Please see "How
to Sell Shares of the Fund."

Individuals and employers should consult with a competent tax or financial
advisor before choosing a retirement plan.

OTHER PROGRAMS AND PRIVILEGES AVAILABLE TO FUND SHAREHOLDERS

CERTAIN OF THE PROGRAMS AND PRIVILEGES DESCRIBED IN THIS SECTION MAY NOT BE
AVAILABLE DIRECTLY FROM THE FUND TO SHAREHOLDERS WHOSE SHARES ARE HELD, OF
RECORD, BY A FINANCIAL INSTITUTION OR IN A "STREET NAME" ACCOUNT OR NETWORKED
ACCOUNT THROUGH THE NATIONAL SECURITIES CLEARING CORPORATION ("NSCC") (SEE THE
SECTION CAPTIONED "ACCOUNT REGISTRATIONS" IN THIS PROSPECTUS).

SHARE CERTIFICATES

Shares for an initial investment, as well as subsequent investments, including
the reinvestment of dividends and capital gain distributions, are generally
credited to an account in the name of an investor on the books of the Fund,
without the issuance of a share certificate. Maintaining shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss
or theft of a share certificate. A lost, stolen or destroyed certificate cannot
be replaced without obtaining a sufficient indemnity bond. The cost of such a
bond, which is generally borne by the shareholder, can be 2% or more of the
value of the lost, stolen or destroyed certificate. A certificate will be
issued if requested in writing by the shareholder or by the securities dealer.

CONFIRMATIONS

A confirmation statement will be sent to each shareholder quarterly to reflect
the dividends reinvested during that period and after each other transaction
which affects the shareholder's account. This statement will also show the
total number of shares owned by the shareholder, including the number of shares
in "plan balance" for the account of the shareholder.

<PAGE>

AUTOMATIC INVESTMENT PLAN

Under the Automatic Investment Plan, a shareholder may be able to arrange to
make additional purchases of shares automatically on a monthly basis by
electronic funds transfer from a checking account if the bank which maintains
the account is a member of the Automated Clearing House, or by preauthorized
checks drawn on the shareholder's bank account. A shareholder may, of course,
terminate the program at any time. The Shareholder Application included with
this Prospectus contains the requirements applicable to this program. In
addition, shareholders may obtain more information concerning this program from
their securities dealers or from Distributors.

The market value of the Fund's shares is subject to fluctuation. Before
undertaking any plan for systematic investment, the investor should keep in
mind that such a program does not assure a profit or protect against a loss.

SYSTEMATIC WITHDRAWAL PLAN

A shareholder may establish a Systematic Withdrawal Plan and receive regular
periodic payments from the account, provided that the net asset value of the
shares held by the shareholder is at least $5,000. There are no service charges
for establishing or maintaining a Systematic Withdrawal Plan. The minimum
amount which the shareholder may withdraw is $50 per withdrawal transaction,
although this is merely the minimum amount allowed under the plan and should
not be mistaken for a recommended amount. The plan may be established on a
monthly, quarterly, semiannual or annual basis. If the shareholder establishes
a plan, any capital gain distributions and income dividends paid by the Fund
will be reinvested for the shareholder's account in additional shares at net
asset value. Payments will then be made from the liquidation of shares at net
asset value on the day of the transaction (which is generally the first
business day of the month in which the payment is scheduled) with payment
generally received by the shareholder three to five days after the date of
liquidation. By completing the "Special Payment Instructions for Distributions"
section of the Shareholder Application included with this Prospectus, a
shareholder may direct the selected withdrawals to another fund in the Franklin
Group of Funds or the Templeton Group, to another person, or directly to a
checking account. If the bank at which the account is maintained is a member of
the Automated Clearing House, the payments may be made automatically by
electronic funds transfer. If this last option is requested, the shareholder
should allow at least 15 days for initial processing. Withdrawals which may be
paid in the interim will be sent to the address of record. Liquidation of
shares may reduce or possibly exhaust the shares in the shareholder's account,
to the extent withdrawals exceed shares earned through dividends and
distributions, particularly in the event of a market decline. If the withdrawal
amount exceeds the total plan balance, the account will be closed and the
remaining balance will be sent to the shareholder. As with other redemptions, a
liquidation to make a withdrawal payment is a sale for federal income tax
purposes. Because the amount withdrawn under the plan may be more than the
shareholder's actual yield or income, part of the payment may be a return of
the shareholder's investment.

The maintenance of a Systematic Withdrawal Plan concurrently with purchases of
additional shares of the Fund would be disadvantageous because of the sales
charge on the additional purchases. The shareholder should ordinarily not make
additional investments of less than $5,000 or three times the annual
withdrawals under the plan during the time such a plan is in effect. A
Systematic Withdrawal

<PAGE>

Plan may be terminated on written notice by the shareholder or the Fund, and it
will terminate automatically if all shares are liquidated or withdrawn from the
account, or upon the Fund's receipt of notification of the death or incapacity
of the shareholder. Shareholders may change the amount (but not below the
specified minimum) and schedule of withdrawal payments, or suspend one such
payment by giving written notice to Investor Services at least seven business
days prior to the end of the month preceding a scheduled payment. Share
certificates may not be issued while a Systematic Withdrawal Plan is in effect.

INSTITUTIONAL ACCOUNTS

There may be additional methods of purchasing, redeeming or exchanging shares
of the Fund available to institutional accounts. For further information,
contact Franklin's Institutional Services Department at 1-800/321-8563.

EXCHANGE PRIVILEGE

The Franklin Group of Funds(R) and the Templeton Group consist of a number of
investment companies with various investment objectives or policies. The shares
of most of these investment companies are offered to the public with a sales
charge. If a shareholder's investment objective or outlook for the securities
markets changes, the Fund shares may be exchanged for shares of other mutual
funds in the Franklin Group of Funds or the Templeton Group (as defined under
"How to Buy Shares of the Fund") which are eligible for sale in the
shareholder's state of residence and in conformity with such fund's stated
eligibility requirements and investment minimums. Investors should review the
prospectus of the fund they wish to exchange from and the fund they wish to
exchange into for all specific requirements or limitations on exercising the
exchange privilege, for example, minimum holding periods or applicable sales
charges. Exchanges may be made in any of the following ways:

EXCHANGES BY MAIL

Send written instructions signed by all account owners and accompanied by any
outstanding share certificates properly endorsed. The transaction will be
effective upon receipt of the written instructions together with any
outstanding share certificates.

EXCHANGES BY TELEPHONE

SHAREHOLDERS, OR THEIR INVESTMENT REPRESENTATIVE OF RECORD, IF ANY, MAY
EXCHANGE SHARES OF THE FUND BY TELEPHONE BY CALLING INVESTOR SERVICES AT
1-800/632-2301. IF THE SHAREHOLDER DOES NOT WISH THIS PRIVILEGE EXTENDED TO A
PARTICULAR ACCOUNT, THE FUND OR INVESTOR SERVICES SHOULD BE NOTIFIED.

The Telephone Exchange Privilege allows a shareholder to effect exchanges from
the Fund into an identically registered account in one of the other available
funds in the Franklin Group of Funds or the Templeton Group. The Telephone
Exchange Privilege is available only for uncertificated shares or those which
have previously been deposited in the shareholder's account. The Fund and
Investor Services will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Please refer to "Telephone
Transactions - Verification Procedures."

During periods of drastic economic or market changes, it is possible that the
Telephone Exchange Privilege may be difficult to implement. In this event,
shareholders should follow the other exchange procedures discussed in this
section, including the procedures for processing exchanges through securities
dealers.

<PAGE>

EXCHANGES THROUGH SECURITIES DEALERS

As is the case with all purchases and redemptions of the Fund's shares,
Investor Services will accept exchange orders by telephone or by other means of
electronic transmission from securities dealers who execute a dealer or similar
agreement with Distributors. See also "Exchanges by Telephone" above. Such a
dealer-ordered exchange will be effective only for uncertificated shares on
deposit in the shareholder's account or for which certificates have previously
been deposited. A securities dealer may charge a fee for handling an exchange.

ADDITIONAL INFORMATION REGARDING EXCHANGES

Exchanges are made on the basis of the net asset values of the funds involved,
except as set forth below. Exchanges of shares of the Fund which were purchased
without a sales charge will be charged a sales charge in accordance with the
terms of the prospectus of the fund being purchased, unless the investment on
which no sales charge was paid was transferred in from a fund on which the
investor paid a sales charge. Exchanges of shares of the Fund which were
purchased with a lower sales charge to a fund which has a higher sales charge
will be charged the difference, unless the shares were held in the Fund for at
least six months prior to executing the exchange. When an investor requests the
exchange of the total value of the Fund account, declared but unpaid income and
capital gain dividends will be transferred to the fund being exchanged into and
will be invested at net asset value. Because the exchange is considered a
redemption and purchase of shares, the shareholder may realize a gain or loss
for federal income tax purposes. Backup withholding and information reporting
may also apply. Information regarding the possible tax consequences of such an
exchange is included in the tax section in this Prospectus and in the Statement
of Additional Information.

There are differences among the many funds in the Franklin Group of Funds and
the Templeton Group. Before making an exchange, a shareholder should obtain and
review a current prospectus of the fund into which the shareholder wishes to
transfer.

If a substantial portion of the Fund's shareholders should, within a short
period, elect to redeem their shares of the Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of the
Fund to initially invest this money in short-term, interest-bearing money
market instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objectives exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.

The Exchange Privilege may be modified or discontinued by the Fund at any time
upon 60 days' written notice to shareholders.

RETIREMENT ACCOUNTS

The equivalent of an exchange involving retirement accounts (including IRAs)
between the Franklin Group of Funds and the Templeton Group can be accomplished
through a trustee-to-trustee transfer and requires the completion of additional
documentation before it can be effected. Franklin/Templeton IRA and 403(b)
retirement accounts may accomplish exchanges directly after August 30, 1994.
Certain restrictions may apply to other types of retirement plans. See
"Restricted Accounts" under "Telephone Transactions."

<PAGE>

TIMING ACCOUNTS

Accounts which are administered by allocation or market timing services to
purchase or redeem shares based on predetermined market indicators ("Timing
Accounts") will be charged a $5.00 administrative service fee per each such
exchange. All other exchanges are without charge.

RESTRICTIONS ON EXCHANGES

In accordance with the terms of their respective prospectuses, certain funds do
not accept or may place differing limitations than those below on exchanges by
Timing Accounts.

The Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing Account
or any person whose transactions seem to follow a timing pattern who: (i) make
an exchange request out of the Fund within two weeks of an earlier exchange
request out of the Fund, or (ii) make more than two exchanges out of the Fund
per calendar quarter, or (iii) exchange shares equal in value to at least $5
million dollars, or more than 1% of the Fund's net assets. Accounts under
common ownership or control, including accounts administered so as to redeem or
purchase shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.

The Fund reserves the right to refuse the purchase side of exchange requests by
any Timing Account, person, or group if, in the Manager's judgment, the Fund
would be unable to invest effectively in accordance with its investment
objectives and policies, or would otherwise potentially be adversely affected.
A shareholder's purchase exchanges may be restricted or refused if the Fund
receives or anticipates simultaneous orders affecting significant portions of
the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the Fund and therefore may be
refused.

The Fund and Distributors also, as indicated in "How to Buy Shares of the
Fund," reserve the right to refuse any order for the purchase of shares.

HOW TO SELL SHARES OF THE FUND

A shareholder may at any time liquidate shares owned and receive from the Fund
the value of the shares. Shares may be redeemed in any of the following ways:

REDEMPTIONS BY MAIL

Send a written request, signed by all registered owners, to Investor Services,
at the address shown on the back cover of this Prospectus, and any share
certificates which have been issued for the shares being redeemed, properly
endorsed and in order for transfer. The shareholder will then receive from the
Fund the value of the shares based upon the net asset value per share next
computed after the written request in proper form is received by Investor
Services. Redemption requests received after the time at which the net asset
value is calculated (at 1:00 p.m. Pacific time) each day that the New York
Stock Exchange (the "Exchange") is open for business will receive the price
calculated on the following business day. Shareholders are requested to provide
a telephone number(s) where they may be reached during business hours, or in
the evening if preferred. Investor Services' ability to contact a shareholder
promptly when necessary will speed the processing of the redemption.

TO BE CONSIDERED IN PROPER FORM, SIGNATURE(S) MUST BE GUARANTEED IF THE
REDEMPTION REQUEST INVOLVES ANY OF THE FOLLOWING:

(1) the proceeds of the redemption are over $50,000;

<PAGE>

(2) the proceeds (in any amount) are to be paid to someone other than the
registered owner(s) of the account;

(3) the proceeds (in any amount) are to be sent to any address other than the
shareholder's address of record, preauthorized bank account or brokerage
firm account;

(4) share certificates, if the redemption proceeds are in excess of $50,000;
or

(5) the Fund or Investor Services believes that a signature guarantee would
protect against potential claims based on the transfer instructions,
including, for example, when (a) the current address of one or more joint
owners of an account cannot be confirmed, (b) multiple owners have a
dispute or give inconsistent instructions to the Fund, (c) the Fund has
been notified of an adverse claim, (d) the instructions received by the
Fund are given by an agent, not the actual registered owner, (e) the Fund
determines that joint owners who are married to each other are separated
or may be the subject of divorce proceedings, or (f) the authority of a
representative of a corporation, partnership, association, or other entity
has not been established to the satisfaction of the Fund.

Signature(s) must be guaranteed by an "eligible guarantor institution" as
defined under Rule 17Ad-15 under the Securities Exchange Act of 1934.
Generally, eligible guarantor institutions include (1) national or state banks,
savings associations, savings and loan associations, trust companies, savings
banks, industrial loan companies and credit unions; (2) national securities
exchanges, registered securities associations and clearing agencies; (3)
securities dealers which are members of a national securities exchange or a
clearing agency or which have minimum net capital of $100,000; or (4)
institutions that participate in the Securities Transfer Agent Medallion
Program ("STAMP") or other recognized signature guarantee medallion program. A
notarized signature will not be sufficient for the request to be in proper
form.

Where shares to be redeemed are represented by share certificates, the request
for redemption must be accompanied by the share certificate and a share
assignment form signed by the registered shareholders exactly as the account is
registered, with the signature(s) guaranteed as referenced above. Shareholders
are advised, for their own protection, to send the share certificate and
assignment form in separate envelopes if they are being mailed in for
redemption.

Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction require the following
documentation to be in proper form:

Corporation - (1) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (2) a corporate resolution.

Partnership - (1) Signature guaranteed letter of instruction from a general
partner and (2) pertinent pages from the partnership agreement identifying the
general partners or a certification for a partnership agreement.

Trust - (1) Signature guaranteed letter of instruction from the trustee(s) and
(2) a copy of the pertinent pages of the trust document listing the trustee(s)
or a Certification for Trust if the trustee(s) are not listed on the account
registration.

Custodial (other than a retirement account) - Signature guaranteed letter of
instruction from the custodian.

Accounts under court jurisdiction - Check court documents and the applicable
state law since these accounts have varying requirements, depending upon the
state of residence.

<PAGE>

Payment for redeemed shares will be sent to the shareholder within seven days
after receipt of the request in proper form.

REDEMPTIONS BY TELEPHONE

Shareholders who file a Telephone Transaction Application (the "Application")
may redeem shares of the Fund by telephone, subject to the Restricted Account
exception noted under "Telephone Transactions - Restricted Accounts." THE
APPLICATION MAY BE OBTAINED BY WRITING TO THE FUND OR INVESTOR SERVICES AT THE
ADDRESS SHOWN ON THE COVER OR BY CALLING 1-800/632-2301. THE FUND AND INVESTOR
SERVICES WILL EMPLOY REASONABLE PROCEDURES TO CONFIRM THAT INSTRUCTIONS GIVEN
BY TELEPHONE ARE GENUINE. SHAREHOLDERS, HOWEVER, BEAR THE RISK OF LOSS IN
CERTAIN CASES AS DESCRIBED UNDER "TELEPHONE TRANSACTIONS - VERIFICATION
PROCEDURES."

For shareholder accounts with a completed Application on file, redemptions of
uncertificated shares or shares which have previously been deposited with the
Fund or Investor Services may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before 1:00 p.m. Pacific time
on any business day will be processed that same day. The redemption check will
be sent within seven days, made payable to all the registered owners on the
account, and will be sent only to the address of record. Redemption requests by
telephone will not be accepted within 30 days following an address change by
telephone. In that case, a shareholder should follow the other redemption
procedures set forth in this Prospectus. Institutional accounts (certain
corporations, bank trust departments, government entities, and qualified
retirement plans which qualify to purchase shares at net asset value pursuant
to the terms of this Prospectus) which wish to execute redemptions in excess of
$50,000 must complete an Institutional Telephone Privileges Agreement, which is
available from Franklin's Institutional Services Department by telephoning
1-800/321-8563.

REDEEMING SHARES THROUGH SECURITIES DEALERS

The Fund will accept redemption orders by telephone or other means of
electronic transmission from securities dealers who have entered into a dealer
or similar agreement with Distributors. This is known as a repurchase. The only
difference between a normal redemption and a repurchase is that if the
shareholder redeems shares through a dealer, the redemption price will be the
net asset value next calculated after the shareholder's dealer receives the
order which is promptly transmitted to the Fund, rather than on the day the
Fund receives the shareholder's written request in proper form. These
documents, as described in the preceding section, are required even if the
shareholder's securities dealer has placed the repurchase order. After receipt
of a repurchase order from the dealer, the Fund will still require a signed
letter of instruction and all other documents set forth above. A shareholder's
letter should reference the Fund, the account number, the fact that the
repurchase was ordered by a dealer and the dealer's name. Details of the
dealer-ordered trade, such as trade date, confirmation number, and the amount
of shares or dollars, will help speed processing of the redemption. The
seven-day period within which the proceeds of the shareholder's redemption will
be sent will begin when the Fund receives all documents required to complete
("settle") the repurchase in proper form. The redemption proceeds will not earn
dividends or interest during the time between receipt of the dealer's
repurchase order and the date the redemption is processed upon receipt of all
documents necessary to settle the repurchase. Thus, it is in a shareholder's
best interest to have the required documentation completed and forwarded to the
Fund

<PAGE>

as soon as possible. The shareholder's dealer may charge a fee for handling the
order. The Statement of Additional Information contains more information on the
redemption of shares.

RECEIVING REDEMPTION PROCEEDS IN GERMAN MARKS

Shareholders may elect to have the proceeds of a redemption of Fund shares paid
to them in German marks. To use this service, shareholders must first complete
and return a Foreign Currency Redemption Authorization Form. To request this
form, please call Distributors at 1-800/632-2301 (or 1-415/312-3400) or fax
your request to 1-415/312-4175. As explained more fully in the instructions
accompanying the form, shareholders must have established a German
mark-denominated bank account before using this service. Redemption proceeds
paid in German marks will be calculated using the net asset value per share and
the U.S. dollar-German mark exchange rate next determined after receipt of the
redemption request in proper form.

To receive redemption proceeds in German marks, shareholders must redeem shares
valued at a minimum of $5,000.

ADDITIONAL INFORMATION REGARDING REDEMPTIONS

The Fund may delay the mailing of the redemption check, or a portion thereof,
until the clearance of the check used to purchase Fund shares, which may take
up to 15 days or more. Although the use of a certified or cashier's check will
generally reduce this delay, shares purchased with these checks will also be
held pending clearance. Shares purchased by federal funds wire are available
for immediate redemption. In addition, the right of redemption may be suspended
or the date of payment postponed if the Exchange is closed (other than
customary closing) or upon the determination of the SEC that trading on the
Exchange is restricted or an emergency exists, or if the SEC permits it, by
order, for the protection of shareholders. Of course, the amount received may
be more or less than the amount invested by the shareholder, depending on
fluctuations in the market value of securities owned by the Fund.

RETIREMENT ACCOUNTS

Retirement account liquidations require the completion of certain additional
forms to ensure compliance with IRS regulations. To liquidate a retirement
account, a shareholder or securities dealer may call Franklin's Retirement
Plans Department to obtain the necessary forms.

OTHER

For any information required about a proposed liquidation, a shareholder may
call Franklin's Shareholder Services Department or the securities dealer may
call Franklin's Dealer Services Department.

TELEPHONE TRANSACTIONS

Shareholders of the Fund and their investment representative of record, if any,
may be able to execute various transactions by calling Investor Services at
1-800/632-2301.

All shareholders will be able to: (i) effect a change in address, (ii) change a
dividend option (see "Restricted Accounts" below), (iii) transfer Fund shares
in one account to another identically registered account in the Fund, (iv)
exchange Fund shares as described in this Prospectus by telephone. In addition,
shareholders who complete and file an Application as described under "How to
Sell Shares of the Fund - Redemptions by Telephone" will be able to redeem
shares of the Fund.

<PAGE>

VERIFICATION PROCEDURES

The Fund and Investor Services will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. These will include:
recording all telephone calls requesting account activity by telephone,
requiring that the caller provide certain personal and/or account information
requested by the telephone service agent at the time of the call for the
purpose of establishing the caller's identification, and by sending a
confirmation statement on redemptions to the address of record each time
account activity is initiated by telephone. So long as the Fund and Investor
Services follow instructions communicated by telephone which were reasonably
believed to be genuine at the time of their receipt, neither they nor their
affiliates will be liable for any loss to the shareholder caused by an
unauthorized transaction. Shareholders are, of course, under no obligation to
apply for or accept telephone transaction privileges. In any instance where the
Fund or Investor Services is not reasonably satisfied that instructions
received by telephone are genuine, the requested transaction will not be
executed, and neither the Fund nor Investor Services will be liable for any
losses which may occur because of a delay in implementing a transaction.

RESTRICTED ACCOUNTS

Telephone redemptions and dividend option changes may not be accepted on
Franklin/Templeton Trust Company ("FTTC") retirement accounts. To assure
compliance with all applicable regulations, special forms are required for any
distribution, redemption, or dividend payment. Currently, while the telephone
exchange privilege is extended to these retirement accounts, a
Franklin/Templeton Transfer Authorization Form must be on file in order to
transfer retirement plan assets between a Franklin fund and a Templeton fund
within the same plan type. This authorization form will not be required for
Franklin/Templeton IRA and 403(b) retirement accounts. Certain restrictions may
apply to other types of retirement plans. Changes to dividend options must also
be made in writing.

To obtain further information regarding distribution or transfer procedures,
including any required forms, Franklin/Templeton retirement account
shareholders may call to speak to a Retirement Plan Specialist at
1-800/527-2020 or 1-800/354-9191 (press "2" when prompted to do so).

GENERAL

During periods of drastic economic or market changes, it is possible that the
telephone transaction privileges will be difficult to execute because of heavy
telephone volume. In such situations, shareholders may wish to contact their
investment representative for assistance, or to send written instructions to
the Fund as detailed elsewhere in this Prospectus.

Neither the Fund nor Investor Services will be liable for any losses resulting
from the inability of a shareholder to execute a telephone transaction.

The telephone transaction privilege may be modified or discontinued by the Fund
at any time upon 60 days' written notice to shareholders.

VALUATION OF FUND SHARES

The net asset value per share of the Fund is determined on each day that the
Exchange is open for trading and on which there is a sufficient degree of
trading in the Fund's portfolio securities that the net asset value of the
Fund's shares may be affected. Valuation for the Fund currently is made as of
1:15 p.m. Pacific time. Many newspapers carry daily quotations of the prior
trading day's closing "bid" (net asset value) and "ask" (offering price, which
includes the maximum sales charge of the Fund).

<PAGE>

The net asset value per share of the Fund is determined in the following
manner: The aggregate of all liabilities, including, without limitation, the
current market value of any outstanding options written by the Fund, accrued
expenses and taxes and any necessary reserves, is deducted from the aggregate
gross value of all assets, and the difference is divided by the number of
shares of the Fund outstanding at the time. For the purpose of determining the
aggregate net assets of the Fund, cash and receivables are valued at their
realizable amounts. Interest is recorded as accrued and dividends are recorded
on the ex-dividend date. Portfolio securities listed on a securities exchange
or on the NASDAQ National Market System for which market quotations are readily
available are valued at the last quoted sale price of the day or, if there is
no such reported sale, within the range of the most recent quoted bid and ask
prices. Over-the-counter portfolio securities for which market quotations are
readily available are valued within the range of the most recent bid and ask
prices as obtained from one or more dealers that make markets in the
securities. Portfolio securities which are traded both in the over-the-counter
market and on a stock exchange are valued according to the broadest and most
representative market as determined by the Manager. If the Fund should have an
open option position as to a security, the valuation of the contract is at the
average of the bid and ask prices. Portfolio securities underlying actively
traded call options are valued at their market price as determined above. The
current market value of any option held by the Fund is its last sales price on
the relevant exchange prior to the time when assets are valued. Lacking any
sales that day or if the last sale price is outside the bid and ask prices, the
options are valued within the range of the current closing bid and ask prices
if such valuation is believed to fairly reflect the contract's market value.
Other securities for which market quotations are readily available are valued
at the current market price, which may be obtained from a pricing service based
on a variety of factors, including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific issues. Securities and other assets for which
market prices are not readily available are valued at fair value as determined
following procedures approved by the Board of Trustees. All money market
instruments with a maturity of more than 60 days are valued at current market,
as discussed above. With the approval of trustees, the Fund may utilize a
pricing service, bank or securities dealer to perform any of the above
described functions.

Securities denominated in foreign currencies and traded on foreign exchanges or
in foreign markets will be valued in a similar manner and their value
translated into U.S. dollars at the bid price of their respective currency
denomination against U.S. dollars last quoted by a major bank or, if no such
quotation is available, at the rate of exchange determined in accordance with
policies established in good faith by the Board of Trustees. Because the value
of securities denominated in foreign currencies must be translated into U.S.
dollars, fluctuations in the value of such currencies in relation to the U.S.
dollar will affect the net asset value of Fund shares even though there has not
been any change in the values of such securities.

Because foreign securities markets may close prior to the time the Fund
determines its net asset value, events affecting the value of portfolio
securities occurring between the time prices are determined and the time the
Fund calculates its net asset value will not be reflected in the Fund's
calculation of net asset value unless the Fund's Advisers, under supervision of
the Board of Trustees, determine that the particu-

<PAGE>

lar event would materially affect the Fund's net asset value. The Fund's
portfolio securities listed on foreign exchanges may trade on days other than
the Fund's normal business days, such as Saturdays. As a result, the net asset
value of the Fund may be significantly affected by such trading on days when
shareholders have no access to the Fund.

HOW TO GET INFORMATION REGARDING AN INVESTMENT IN THE FUND

Any questions or communications regarding a shareholder's account should be
directed to Investor Services at the address shown on the back cover of this
Prospectus.

From a touch-tone phone, shareholders may obtain current price, yield or
performance information specific to a fund in the Franklin Group of Funds(R) by
calling the automated Franklin TeleFACTS system (day or night) at
1-800/247-1753. Information about the Fund may be accessed by entering Fund
Code 210 followed by the # sign, when requested to do so by the automated
operator.

To assist shareholders and securities dealers wishing to speak directly with a
representative, the following is a list of the various Franklin departments,
telephone numbers and hours of operation to call. The same numbers may be used
when calling from a rotary phone:

<TABLE>
<CAPTION>
Hours of Operation (Pacific time)
Department Name Telephone No. (Monday through Friday)
--------------- ------------- ---------------------------------
<S> <C> <C> <C>
Shareholder Services 1-800/632-2301 6:00 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 6:00 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 6:00 a.m. to 8:00 p.m.
8:30 a.m. to 5:00 p.m. (Saturday)
Retirement Plans 1-800/527-2020 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 6:00 a.m. to 5:00 p.m.
</TABLE>

PERFORMANCE

Advertisements, sales literature and communications to shareholders may contain
various measures of the Fund's performance, including current yield, various
expressions of total return and current distribution rate. They may
occasionally cite statistics to reflect its volatility or risk.

Average annual total return figures as prescribed by the SEC represent the
average annual percentage change in value of $1,000 invested at the maximum
public offering price (offering price includes sales charge) for one-, five-
and ten-year periods, or portion thereof, to the extent applicable, through the
end of the most recent calendar quarter, assuming reinvestment of all
distributions. The Fund may also furnish total return quotations for other
periods, or based on investments at various sales charge levels or at net asset
value. For such purposes, total return equals the total of all income and
capital gain paid to shareholders, assuming reinvestment of all distributions,
plus (or minus) the change in the value of the original investment, expressed
as a percentage of the purchase price.

Current yield reflects the income per share earned by the Fund's portfolio
investments; it is calculated by dividing the Fund's net investment income per
share during a recent 30-day period by the maxi-

<PAGE>

mum public offering price on the last day of that period and annualizing the
result.

Yield, which is calculated according to a formula prescribed by the SEC (see
the Statement of Additional Information), is not indicative of the dividends or
distributions which were or will be paid to the Fund's shareholders. Dividends
or distributions paid to shareholders are reflected in the current distribution
rate, which may be quoted to shareholders. The current distribution rate is
computed by dividing the total amount of dividends per share paid by the Fund
during the past 12 months by a current maximum offering price. Under certain
circumstances, such as when there has been a change in the amount of dividend
payout, or a fundamental change in investment policies, it might be appropriate
to annualize the dividends paid during the period such policies were in effect,
rather than using the dividends during the past 12 months. The current
distribution rate differs from the current yield computation because it may
include distributions to shareholders from sources other than dividends and
interest, such as premium income from option writing and short-term capital
gain, and is calculated over a different period of time.

In each case, performance figures are based upon past performance, reflect all
recurring charges against Fund income and will assume the payment of the
maximum sales charge on the purchase of shares. The investment results of the
Fund, like all other investment companies, will fluctuate over time; thus,
performance figures should not be considered to represent what an investment
may earn in the future or what the Fund's yield, distribution rate or total
return may be in any future period.

GENERAL INFORMATION

REPORTS TO SHAREHOLDERS

The Fund's fiscal year ends April 30. Annual Reports containing audited
financial statements of the Trust, including the auditors' report, and
Semi-Annual Reports containing unaudited financial statements are automatically
sent to shareholders. Additional copies may be obtained, without charge, upon
request to the Trust at the telephone number or address set forth on the cover
page of this prospectus.

Additional information on Fund performance is included in the Trust's Annual
Report to Shareholders and the Statement of Additional Information.

ORGANIZATION

The Trust was organized as a Massachusetts business trust on November 6, 1985.
The Trust is authorized to issue an unlimited number of shares of beneficial
interest, with a par value of $.01 per share in various series. All shares have
one vote and, when issued, are fully paid, non-assessable, and redeemable.
Currently, the Trust issues shares in four series or funds. Additional series
may be added in the future by the Board of Trustees. Shares have no preemptive
or subscription rights, and are fully transferable. There are no conversion
rights; however, holders of shares of the Fund may invest all or any portion of
the proceeds from the redemption or repurchase of such shares into shares of
any other fund in the Franklin Group of Funds or the Templeton Group as
described under "Exchange Privilege."

VOTING RIGHTS

Shares of each series of the Trust vote separately as to issues affecting that
fund, or the Trust, unless otherwise permitted by the 1940 Act. The shares have
non-cumulative voting rights, which means

<PAGE>

that holders of more than 50% of the shares voting for the election of trustees
can elect 100% of the trustees if they choose to do so. The series of the Trust
do not intend to hold annual meetings; they may, however, hold special
shareholder meetings for such purposes as changing fundamental policies,
approving new management agreements or any other matters which are required to
be acted on by shareholders under the 1940 Act. A meeting may also be called by
a majority of the Board of Trustees or by shareholders of a series of the Trust
holding at least ten percent of the shares entitled to vote at the meeting.
Shareholders of the series of the Trust may receive assistance in communicating
with other shareholders in connection with the election or removal of trustees,
such as that provided in Section 16(c) of the 1940 Act. The Board of Trustees
may from time to time establish other series of the Trust, the assets and
liabilities of which will be separate and distinct from any other fund of the
Trust.

REDEMPTIONS BY THE FUND

The Fund reserves the right to redeem, at net asset value, shares of any
shareholder whose account has a value of less than $50, but only where the
value of such account has been reduced by the shareholder's prior voluntary
redemption of shares and has been inactive (except for the reinvestment of
distributions) for a period of at least six months, provided advance notice is
given to the shareholder. More information is included in the Statement of
Additional Information.

OTHER INFORMATION

Distribution or redemption checks sent to shareholders do not earn interest or
any other income during the time such checks remain uncashed and neither the
Fund nor its affiliates will be liable for any loss to the shareholder caused
by the shareholder's failure to cash such check(s).

"Cash" payments to or from the Fund may be made by check, draft or wire. The
Fund has no facility to receive, or pay out, cash in the form of currency.

ACCOUNT REGISTRATIONS

An account registration should reflect the investor's intentions as to
ownership. Where there are two co-owners on the account, the account will be
registered as "Owner 1" and "Owner 2"; the "or" designation is not used except
for money market fund accounts. If co-owners wish to have the ability to redeem
or convert on the signature of only one owner, a limited power of attorney may
be used. Accounts should not be registered in the name of a minor, either as
sole or co-owner of the account. Transfer or redemption for such an account may
require court action to obtain release of the funds until the minor reaches the
legal age of majority. The account should be registered in the name of one
"Adult" as custodian for the benefit of the "Minor" under the Uniform Transfer
or Gifts to Minors Act.

A trust designation such as "trustee" or "in trust for"
should only be used if the account is being established pursuant to a legal,
valid trust document. Use of such a designation in the absence of a legal trust
document may cause difficulties and require court action for transfer or
redemption of the funds. Shares, whether in certificate form or not, registered
as joint tenants or "Jt Ten" shall mean "as joint tenants with rights of
survivorship" and not "as tenants in common."

Except as indicated, a shareholder may transfer an account in the Fund carried
in "street" or "nominee" name by the shareholder's securities dealer to a
comparably registered Fund account maintained by another securities dealer.
Both the delivering and receiving securities dealer must have executed

<PAGE>

dealer agreements on file with Distributors. Unless a dealer agreement has been
executed and is on file with Distributors, the Fund will not process the
transfer and will so inform the shareholder's delivering securities dealer. To
effect the transfer, a shareholder should instruct the securities dealer to
transfer the account to a receiving securities dealer and sign any documents
required by the securities dealer(s) to evidence consent to the transfer. Under
current procedures, the account transfer may be processed by the delivering
securities dealer and the Fund after the Fund receives authorization in proper
form from the shareholder's delivering securities dealer. In the future it may
be possible to effect such transfers electronically through the services of the
NSCC.

The Fund may conclusively accept instructions from an owner or the owner's
nominee listed in publicly available nominee lists, regardless of whether the
account was initially registered in the name of or by the owner, the nominee,
or both. If a securities dealer or other representative is of record on an
investor's account, the investor will be deemed to have authorized the use of
electronic instructions on the account, including, without limitation, those
initiated through the services of the NSCC, to have adopted as instruction and
signature any such electronic instructions received by the Fund and the
Shareholder Services Agent, and to have authorized them to execute the
instructions without further inquiry. At the present time, such services which
are available, or which are anticipated to be made available in the near
future, include the NSCC's "Networking," "Fund/SERV," and "ACATS" systems.

Any questions regarding an intended registration should be answered by the
securities dealer handling the investment, or by calling Franklin's Fund
Information Department.

IMPORTANT NOTICE REGARDING
TAXPAYER IRS CERTIFICATIONS

Pursuant to the Code and U.S. Treasury regulations, the Fund may be required to
report to the Internal Revenue Service ("IRS") any taxable dividend, capital
gain distribution, or other reportable payment (including share redemption
proceeds) and withhold 31% of any such payments made to individuals and other
non-exempt shareholders who have not provided a correct taxpayer identification
number ("TIN") and made certain required certifications that appear in the
Shareholder Application. A shareholder may also be subject to backup
withholding if the IRS or a securities dealer notifies the Fund that the number
furnished by the shareholder is incorrect or that the shareholder is subject to
backup withholding for previous under-reporting of interest or dividend income.

The Fund reserves the right to (1) refuse to open an account for any person
failing to provide a TIN along with the required certifications and (2) close
an account by redeeming its shares in full at the then-current net asset value
upon receipt of notice from the IRS that the TIN certified as correct by the
shareholder is in fact incorrect or upon the failure of a shareholder who has
completed an "awaiting TIN" certification to provide the Fund with a certified
TIN within 60 days after opening the account.

PORTFOLIO OPERATIONS

The following persons are primarily responsible for the day-to-day management
of the Fund's portfolio since November of 1993: Tom Latta and Neil S. Devlin
and since 1994: Donald P. Gould.

Tom Latta, Vice President of Templeton Global Bond Managers and Portfolio
Manager of TICI attended the University of Missouri and New York University.
Mr. Latta joined Templeton in 1991.

<PAGE>

Prior to joining Templeton, Mr. Latta worked as a portfolio manager with
Forester & Hairston, a global fixed-income investment management firm, and
prior thereto, he worked for Merrill Lynch as an investment adviser to a large
mid-east central bank and then within the structured products group.

Donald P. Gould, Portfolio Manager with Adviser, is President and founder of
the Trust. He joined the Franklin/Templeton organization upon its acquisition
of certain assets of Huntington Advisers, Inc., the former manager, in November
1993. For the 1 1/2 years prior to joining Franklin/Templeton, Mr. Gould had
acted as a consultant to the Huntington Funds. Prior to that, he had been
employed for seven years by Huntington Advisers, Inc. He has been in the
securities industry since 1981. Mr. Gould holds a Bachelor of Arts degree in
economics from Pomona College (Claremont, California) and a Masters in Business
Administration from Harvard. He has also studied international economics at
Oxford University.

FTIC P

SUPPLEMENT DATED FEBRUARY 1, 1995
TO THE PROSPECTUS OF
THE FRANKLIN TEMPLETON INTERNATIONAL CURRENCY FUNDS
(FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN TEMPLETON HARD CURRENCY FUND
FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND)
DATED SEPTEMBER 1, 1994

The following sections of the prospectus are revised to reflect changes to the
operational policies of the Funds, effective February 1, 1995:

1. EXPENSE TABLE

2. MANAGEMENT OF THE FUNDS

Revised to add the definition "Franklin Templeton Group" to describe the
subsidiaries of Resources.

3. HOW TO BUY SHARES OF A FUND

a) Add the following language as paragraph two:
The Funds may impose a $10 charge for each returned item, against any
shareholder account which, in connection with the purchase of shares of a
Fund, submits a check or a draft which is returned unpaid to such Fund.

b) Substitute the following for the sales charge table and the ensuing two
paragraphs:

<TABLE>
<CAPTION>
TOTAL SALES CHARGE
-----------------------------------------------------------
AS A AS A DEALER CONCESSION
SIZE OF TRANSACTION PERCENTAGE OF PERCENTAGE OF NET AS A PERCENTAGE
AT OFFERING PRICE OFFERING PRICE AMOUNT INVESTED OF OFFERING PRICE*,***
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000..................................... 3.00% 3.09% 2.60%
$50,000 but less than $100,000........................ 2.50% 2.56% 2.25%
$100,000 but less than $250,000....................... 2.00% 2.04% 1.85%
$250,000 but less than $500,000....................... 1.50% 1.52% 1.40%
$500.000 but less than $750,000....................... 1.00% 1.01% 1.00%
$750,000 but less than $1,000,000..................... 0.75% 0.76% 0.75%
$1,000,000 or more.................................... none none See below**
</TABLE>

No front-end sales charge applies on investments of $1 million or more, but a
contingent deferred sales charge of 1% is imposed on certain redemptions of
investments of $1 million or more within 12 months of the calendar month
following such investments ("contingency period"). See "How to Sell Shares of a
Fund - Contingent Deferred Sales Charge."

<PAGE>
The size of a transaction which determines the applicable sales charge on the
purchase of Fund shares is determined by adding the amount of the shareholder's
current purchase plus the cost or current value (whichever is higher) of a
shareholder's existing investment in one or more of the funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds. Included for these
aggregation purposes are (a) the mutual funds in the Franklin Group of Funds
except Franklin Valuemark Funds and Franklin Government Securities Trust (the
"Franklin Funds"), (b) other investment products underwritten by Distributors
or its affiliates (although certain investments may not have the same schedule
of sales charges and/or may not be subject to reduction) and (c) the U.S.
mutual funds in the Templeton Group of Funds except Templeton American Trust,
Inc., Templeton Capital Accumulator Fund, Inc., Templeton Variable Annuity
Fund, and Templeton Variable Products Series Fund (the "Templeton Funds").
(Franklin Funds and Templeton Funds are collectively referred to as the
"Franklin Templeton Funds.") Sales charge reductions based upon aggregate
holdings of (a), (b) and (c) above ("Franklin Templeton Investments") may be
effective only after notification to Distributors that the investment qualifies
for a discount. References throughout the Prospectus, for purposes of
aggregating assets or describing the exchange privilege, refer to the above
descriptions.

c) Substitute the following for the current "Purchases at Net Asset Value"
subsection:

PURCHASES AT NET ASSET VALUE

Shares of the Funds may be purchased without the imposition of either a
front-end sales charge ("net asset value") or a contingent deferred sales
charge by (1) officers, trustees, directors, and full-time employees of the
Trust, any of the Franklin Templeton Funds, or of the Franklin Templeton Group,
and by their spouses and family members; (2) companies exchanging shares with
or selling assets pursuant to a merger, acquisition or exchange offer; (3)
insurance company separate accounts for pension plan contracts; (4) accounts
managed by the Franklin Templeton Group; (5) Shareholders of Templeton
Institutional Funds, Inc. reinvesting redemption proceeds from that fund under
an employee benefit plan qualified under Section 401 of the Internal Revenue
Code of 1986, as amended, in shares of the Funds; (6) certain unit investment
trusts and unit holders of such trusts reinvesting their distributions from the
trusts in the Fund; (7) registered securities dealers and their affiliates, for
their investment account only, and (8) registered personnel and employees of
securities dealers and by their spouses and family members, in accordance with
the internal policies and procedures of the employing securities dealer.

Shares of a Fund may be purchased at net asset value by persons who have
redeemed, within the previous 120 days, their shares of such Fund or another of
the Franklin Templeton Funds which were purchased with a front-end sales charge
or assessed a contingent deferred sales charge on redemption. An investor may
reinvest an amount not exceeding the redemption proceeds. While credit will be
given for any contingent deferred sales charge paid on the shares redeemed, a
new contingency period will begin. Shares of the Funds redeemed in connection
with an exchange into another fund (see "Exchange Privilege") are not
considered "redeemed" for this privilege. In order to exercise this privilege,
a written order for the purchase of shares of the Fund must be received by the
Fund or the Funds' Shareholder Services Agent within 120 days after the
redemption. The 120 days, however, do not begin to run on redemption proceeds
placed immediately after redemption in a Franklin Bank Certificate of Deposit
("CD")

<PAGE>
until the CD (including any rollover) matures. Reinvestment at net asset value
may also be handled by a securities dealer or other financial institution, who
may charge the shareholder a fee for this service. The redemption is a taxable
transaction but reinvestment without a sales charge may affect the amount of
gain or loss recognized and the tax basis of the shares reinvested. If there
has been a loss on the redemption, the loss may be disallowed if a reinvestment
in the same fund is made within a 30-day period. Information regarding the
possible tax consequences of such a reinvestment is included in the tax section
of this Prospectus and the SAI.

Dividends and capital gains received in cash by the shareholder may also be
used to purchase shares of the Fund or another of the Franklin Templeton Funds
at net asset value and without the imposition of a contingent deferred sales
charge within 120 days of the payment date of such distribution. To exercise
this privilege, a written request to reinvest the distribution must accompany
the purchase order. Additional information may be obtained from Shareholder
Services at 1-800/632-2301. See "Distributions in Cash" under "Distributions to
Shareholders."

Shares of the Funds may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by investors who have, within
the past 60 days, redeemed an investment in an unaffiliated mutual fund which
charged the investor a contingent deferred sales charge upon redemption and
which has investment objectives similar to those of the Fund.

Shares of the Funds may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by registered investment
advisors and/or their affiliated broker-dealers, who have entered into a
supplemental agreement with Distributors, on behalf of their clients who are
participating in a comprehensive fee program (also known as a wrap fee
program).

Shares of the Funds may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by anyone who has taken a
distribution from an existing retirement plan already invested in the Franklin
Templeton Funds (including former participants of the Franklin Templeton Profit
Sharing 401(k) plan), to the extent of such distribution. In order to exercise
this privilege a written order for the purchase of shares of the Fund must be
received by Franklin Templeton Trust Company (the "Trust Company"), the Funds
or Investor Services, within 120 days after the plan distribution. A prospectus
outlining the investment objectives and policies of a fund in which the
shareholder wishes to invest may be obtained by calling toll free at 1-800/DIAL
BEN (1-800/342-5236).

Shares of a Fund may also be purchased at net asset value and without the
imposition of a contingent deferred sales charge by any state, county, or city,
or any instrumentality, department, authority or agency thereof which has
determined that such Fund is a legally permissible investment and which is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of any registered
management investment company ("an eligible governmental authority"). SUCH
INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER AND TO
WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM.
Municipal investors considering investment of proceeds of bond offerings into
the Funds should consult with expert counsel to determine the effect, if any,
of various payments made by a Fund or its investment manager on arbitrage
rebate calculations. If an investment by an eligible governmental authority at
net asset value is made through a securities dealer who has executed a dealer
agreement with Distributors, Distributors or one of its affiliates may make a
payment, out of their own resources, to such securities dealer in an amount not
to exceed 0.25% of the amount invested. Contact Franklin's Institutional Sales
Department for additional information.

Shares of the Funds may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by certain fiduciary entities
(such as registered investment advisers, bank trust departments and bank
custodians) or by financial services companies acting as intermediaries for
such fiduciary entities buying on behalf of a client, provided that the
fiduciary entity has a pre-existing invest-

<PAGE>
ment advisory relationship with the investor under which the investor
compensates the fiduciary entity through payment of an investment advisory fee
and the qualifying investment in the Fund is made within the context of that
investment advisory relationship. SHARES ACQUIRED PURSUANT TO THIS PROVISION
ARE NOT ELIGIBLE FOR EXCHANGE AT NET ASSET VALUE INTO ANOTHER OF THE FRANKLIN
TEMPLETON FUNDS.

DESCRIPTION OF SPECIAL NET ASSET VALUE PURCHASES.

Shares of the Funds may also be purchased at net asset value and
without the imposition of a contingent deferred sales charge by certain
designated retirement plans, including, profit sharing, pension, 401(k) and
simplified employee pension plans ("designated plans"), subject to minimum
requirements with respect to number of employees or amount of purchase, which
may be established by Distributors. Currently those criteria require that the
employer establishing the plan have 200 or more employees or that the amount
invested or to be invested during the subsequent 13-month period in the Funds
or in any of the Franklin Templeton Investments totals at least $1,000,000.
Employee benefit plans not designated above or qualified under Section 401 of
the Code ("non-designated plans") may be afforded the same privilege if they
meet the above requirements as well as the uniform criteria for qualified
groups previously described under "Group Purchases" which enable Distributors
to realize economies of scale in its sales efforts and sales related expenses.

Shares of the Fund may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trust companies and bank
trust departments for funds over which they exercise exclusive discretionary
investment authority and which are held in a fiduciary, agency, advisory,
custodial or similar capacity. Such purchases are subject to minimum
requirements with respect to amount of purchase, which may be established by
Distributors. Currently, those criteria require that the amount invested or to
be invested during the subsequent 13-month period in this Fund or any of the
Franklin Templeton Investments must total at least $1,000,000. Orders for such
accounts will be accepted by mail accompanied by a check or by telephone or
other means of electronic data transfer directly from the bank or trust
company, with payment by federal funds received by the close of business on the
next business day following such order.

Shares of the Funds may be purchased at net asset value and without the
imposition of a contingent deferred sales charge by trustees or other
fiduciaries purchasing securities for certain retirement plans of organizations
with collective retirement plan assets of $10 million or more, without regard
to where such assets are currently invested.

Refer to the SAI for further information.

4. EXCHANGE PRIVILEGE

a) Add the following paragraph under "Exchanges by Telephone":

The automatic TeleFACTS(R) system at 1-800/247-1753 is available for
processing exchanges (day or night). During periods of drastic economic or
market changes, however, this option may not be available, in which event the
shareholder should follow other exchange procedures discussed in the section.

b) Add the following paragraph under the subsection "Additional Information
Regarding Exchanges":

A contingent deferred sales charge will not be imposed on exchanges.
If, however, the exchanged shares were subject to a contingent deferred sales
charge in the original fund purchased, and shares are subsequently redeemed
within the contingency period, a contingent deferred sales charge will be
imposed. The contingency period will be tolled (or stopped) for the period such
shares are exchanged into and held in a Franklin or Templeton money market
fund. See also "How to Sell Shares of the Fund - Contingent Deferred Sales
Charge."

<PAGE>
5. HOW TO SELL SHARES OF A FUND

Add the following subsection:

CONTINGENT DEFERRED SALES CHARGE

In order to recover commissions paid to securities dealers on qualified
investments of $1 million or more, a contingent deferred sales charge of 1%
applies to redemptions of those investments within the contingency period of 12
months of the calendar month following their purchase. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares, and is
retained by Distributors. In determining if a charge applies, shares not
subject to a contingent deferred sales charge are deemed to be redeemed first,
in the following order: (i) Shares representing amounts attributable to capital
appreciation of those shares held less than 12 months; (ii) shares purchased
with reinvested dividends and capital gain distributions; and (iii) other
shares held longer than 12 months; and followed by any shares held less than 12
months, on a "first in, first out" basis.

FRANKLIN/TEMPLETON
INTERNATIONAL
CURRENCY FUNDS

Franklin/Templeton Global Currency Fund
Franklin/Templeton Hard Currency Fund
Franklin/Templeton High Income
Currency Fund

PROSPECTUS SEPTEMBER 1, 1994

[LOGO]

777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777 1-800/DIAL BEN

This Prospectus relates to the Franklin/Templeton Global Currency Fund ("Global
Currency Fund"), the Franklin/Templeton Hard Currency Fund (the "Hard Currency
Fund"), and the Franklin/Templeton High Income Currency Fund (the "High Income
Fund") (individually or collectively the "Fund," "Funds" or the "Currency
Funds"), each a separate non-diversified series of the Franklin/Templeton
Global Trust (the "Trust"), formerly known as the Huntington Funds, an open-end
management investment company consisting of four separate series. The Trust and
its series are also referred to in this document and from time to time in other
communications as the Franklin/Templeton International Currency Funds.

Investors should not consider any of the Currency Funds a money market fund.
The Global Currency Fund invests in high-quality money market instruments
denominated in three or more of the world's Major Currencies (as defined below
under "About the Funds"), with the objective of maximizing total return.

The Hard Currency Fund invests in high-quality money market instruments (and
forward contracts) denominated in foreign Major Currencies which historically
have experienced low rates of inflation and which, in the view of the Trust's
Advisers, are pursuing economic policies conducive to continued low rates of
inflation in the future and currency appreciation versus the U.S. dollar over
the long-term, with the objective of protection against depreciation of the
U.S. dollar relative to other currencies. The Hard Currency Fund endeavors, to
the maximum extent practicable, to maintain foreign currency (non-U.S. dollar)
exposure with respect to 100% of its net assets at all times.

The High Income Fund invests primarily in high-quality money market instruments
denominated in three or more of the ten highest yielding Major Currencies, with
the objective of high current income at a level significantly above that
available on U.S. dollar money market funds. Consistent with this objective,
the High Income Fund may invest up to 25% of its total assets in instruments
denominated in Non-Major Currencies (as defined below under "About the Funds").

Each of the Funds may invest without limitation in U.S. dollar-denominated
money market instruments in combination with forward currency contracts for the
purpose of obtaining an investment result that is substantially equivalent to a
direct investment in a foreign currency-denominated instrument. (See
"Management Policies - Other Investment Policies of the Funds - Currency
Exchange Transactions and Forward Contracts.")

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY

<PAGE>

STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This Prospectus is intended to set forth in a clear and concise manner
information about the Funds that a prospective investor should know before
investing. After reading the Prospectus, it should be retained for future
reference; it contains information about the purchase and sale of shares and
other items which a prospective investor will find useful to have.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.

SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.

A Statement of Additional Information ("SAI") concerning the Funds, dated
September 1, 1994, as may be amended from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which may be
of interest to some investors. It has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated herein by reference. A copy is
available without charge from the Trust or the Trust's principal underwriter,
Franklin/Templeton Distributors, Inc. ("Distributors"), at the address or
telephone number listed above.

<TABLE>
<CAPTION>
CONTENTS PAGE
<S> <C>
Expense Table............................................................. 3
Financial Highlights...................................................... 5
About the Funds........................................................... 6
Investment Objectives and Policies of the Funds........................... 8
Management of the Funds................................................... 18
Distributions to Shareholders............................................. 20
Taxation of the Funds and
Their Shareholders....................................................... 22
How to Buy Shares of a Fund............................................... 23
Purchasing Shares of the Funds in
Connection with Retirement Plans Involving Tax-Deferred Investments...... 29
Other Programs and Privileges Available to Fund Shareholders.............. 31
Exchange Privilege........................................................ 32
How to Sell Shares of a Fund.............................................. 35
Telephone Transactions.................................................... 37
Valuation of Each Fund's Shares........................................... 38
How to Get Information Regarding
an Investment in the Funds............................................... 40
Performance............................................................... 40
General Information....................................................... 41
Account Registrations..................................................... 42
Important Notice Regarding
Taxpayer IRS Certifications.............................................. 43
Portfolio Operations...................................................... 43
</TABLE>

<PAGE>

EXPENSE TABLE

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder will bear directly or indirectly in
connection with an investment in each Fund. These figures are restated based on
the aggregate operating expenses of the Funds which would have been in effect
if the Funds had been managed by Franklin Advisers, Inc. for the entire fiscal
year ended April 30, 1994.

GLOBAL HARD HIGH
CURRENCY CURRENCY INCOME
FUND FUND FUND
-------- -------- ------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering
price).......................................... 3.00% 3.00% 3.00%
Maximum Sales Charge Imposed on
Reinvested Dividends............................ NONE NONE NONE
Deferred Sales Charge............................ NONE NONE NONE
Redemption Fees.................................. NONE NONE NONE
Exchange Fee (per transaction)*.................. $5.00 $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES
Management Fees.................................. 0.65% 0.65% 0.65%
Rule 12b-1 Fees+................................. 0.45% 0.45% 0.45%
Other Expenses................................... 0.27% 0.28% 0.29%
----- ----- -----
Total Fund Operating Expenses.................... 1.37% 1.38% 1.39%
===== ===== =====
</TABLE>

*$5.00 fee imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.

+Consistent with National Association of Securities Dealers, Inc.'s rules, it is
possible that the combination of front-end sales charges and Rule 12b-1 fees
could cause long-term shareholders to pay more than the economic equivalent of
the maximum front-end sales charges permitted under those same rules. Given
each Fund's maximum initial sales charge and the rate of each Fund's Rule 12b-1
fee, however, it is estimated that this would take a substantial number of
years.

Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in a Fund. Rather the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. For a more detailed discussion of these matters, investors should
refer to the appropriate sections of this Prospectus.

<PAGE>

EXAMPLE

<TABLE>
<CAPTION>
GLOBAL HARD HIGH
CURRENCY CURRENCY INCOME
FUND FUND FUND
-------- -------- ------
<S> <C> <C> <C>
1 Year.......................................................... $ 44 $ 44 $ 44
3 Years......................................................... 72 72 73
5 years......................................................... 103 103 104
10 Years........................................................ 190 191 192
</TABLE>
THIS EXAMPLE IS BASED ON THE ESTIMATED ANNUAL OPERATING EXPENSES OF EACH FUND,
INCLUDING FEES SET BY CONTRACT, SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE
SHOWN. The operating expenses are borne by each Fund and only indirectly by
shareholders as a result of their investment in such Fund. In addition, federal
regulations require the example to assume an annual return of 5%, but a Fund's
actual return may be more or less than 5%.

<PAGE>

FINANCIAL HIGHLIGHTS

Set forth below is a table containing the financial highlights for a share of
each Fund for each of the indicated fiscal periods ended April 30. The
information for the fiscal year ended April 30, 1994 has been audited by
Coopers & Lybrand, independent auditors, whose audit report appears in the
financial statements in the SAI. Previous fiscal years of the Funds were
audited by other independent auditors whose opinions are not included herein.
See also "Report to Shareholders" under "General Information."

<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE+
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET NET DISTRIBUTIONS DISTRIBUTIONS
YEAR VALUE AT NET REALIZED & TOTAL FROM FROM NET DISTRIBUTIONS FROM
ENDED BEGINNING INVESTMENT UNREALIZED INVESTMENT INVESTMENT FROM RETURN OF TOTAL
APRIL 30 OF YEAR INCOME GAIN (LOSS) OPERATIONS INCOME CAPITAL GAINS CAPITAL DISTRIBUTIONS
- -------- --------- ---------- ----------- ---------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FRANKLIN/TEMPLETON GLOBAL CURRENCY FUND
1987(1) $12.50 $ .46 $1.29 $1.75 $ (.39) -- -- $ (.39)
1988 13.86 .52 1.10 1.62 (.57) (.15) -- (.72)
1989 14.76 .85 (.54) .31 (.89) (.47) -- (1.36)
1990 13.71 .97 .07 1.04 (.99) (.10) -- (1.09)
1991 13.66 1.07 .57 1.64 (1.07) -- -- (1.07)
1992 14.23 .80 (.22) .58 (.80) -- -- (.80)
1993 14.01 .67 1.01 1.68 (.69) (1.04) -- (1.73)
1994(3) 13.96 .57 (.11) .46 (.57) -- -- (.57)

FRANKLIN/TEMPLETON HARD CURRENCY FUND
1990(2) 12.50 .42 .69 1.11 (.35) (.08) -- (.43)
1991 13.18 .92 .64 1.56 (.95) (.96) -- (1.91)
1992 12.83 .77 .28 1.05 (.76) -- -- (.76)
1993 13.12 .71 1.20 1.91 (.69) (1.34) -- (2.03)
1994(3) 13.00 .50 (.05) .45 (.13) -- (.37) (.50)

FRANKLIN/TEMPLETON HIGH INCOME CURRENCY FUND
19902 12.50 .73 .24 .97 (.62) (.01) -- (.63)
1991 12.84 1.34 .43 1.77 (1.38) (.31) -- (1.69)
1992 12.92 1.09 (.03) 1.06 (1.08) -- -- (1.08)
1993 12.90 .90 (.40) .50 (.94) (.33) -- (1.27)
1994(3) 12.13 .59 (.85) (.26) -- -- (.59) (.59)
</TABLE>

PER SHARE OPERATING
PERFORMANCE+ RATIOS/SUPPLEMENTAL DATA
- ---------------------- ------------------------------------------------------------
RATIO OF NET
NET ASSETS NET ASSETS RATIO OF INVESTMENT
YEAR VALUE AT END EXPENSES INCOME TO PORTFOLIO
ENDED AT END TOTAL OF YEAR TO AVERAGE AVERAGE TURNOVER
APRIL 30 OF YEAR RETURN* (IN 000'S) NET ASSETS** NET ASSETS RATE
- -------- ---------- ------- ----------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
FRANKLIN/TEMPLETON GLOBAL CURRENCY FUND
1987(1) $13.86 16.94% $23,837 2.10%* 3.88%* 71.01%*
1988 14.76 12.12 138,609 2.00 3.70 --
1989 13.71 1.97 112,009 2.10 6.10 --
1990 13.66 7.96 71,615 2.09 7.16 --
1991 14.23 12.21 72,186 1.82 7.36 --
1992 14.01 4.29 63,589 1.82 5.77 --
1993 13.96 13.28 62,355 1.67 4.64 10.39
1994(3) 13.85 3.41 51,539 1.41 2.78 37.16

FRANKLIN/TEMPLETON HARD CURRENCY FUND
1990(2) 13.18 8.88 26,280 1.65* 6.21* --
1991 12.83 11.04 33,599 1.66 6.46 --
1992 13.12 8.40 31,757 1.86 5.85 --
1993 13.00 17.11 49,569 1.75 5.23 4.88
1994(3) 12.95 3.62 35,739 1.47 3.83 --

FRANKLIN/TEMPLETON HIGH INCOME CURRENCY FUND
1990(2) 12.84 7.82 11,808 1.73* 11.01* --
1991 12.92 14.09 52,364 1.59 9.85 --
1992 12.90 8.51 46,575 1.83 8.38 --
1993 12.13 4.49 32,341 1.81 6.86 --
1994(3) 11.28 2.03 16,706 1.59 4.80 --
</TABLE>

(1) For the period June 27, 1986 (inception) to April 30, 1987.

(2) For the period November 17, 1989 (effective date of registration) to
April 30, 1990.

(3) On November 12, 1993, the investment adviser changed to Franklin
Advisers, Inc.

+Selected data for a share of beneficial interest outstanding throughout the
period.

++Total return measures the change in value of an investment over the periods
indicated. It does not include the maximum 3.0% initial sales charge and assumes
reinvestment of dividends and capital gains at net asset value.

*Annualized

**During the periods indicated, the investment manager reduced its management
fees and reimbursed other expenses incurred by the Funds in the Trust. Had such
action not been taken, the ratios of expenses to average net assets would have
been as follows:

<TABLE>
<CAPTION>
RATIO OF EXPENSES TO
AVERAGE NET ASSETS
--------------------
<S> <C>
Franklin/Templeton Global Currency Fund
1994................................... 1.61%
Franklin/Templeton Hard Currency Fund
1994................................... 1.71
Franklin/Templeton High Income Currency Fund
1990(2)................................ 2.04*
1994................................... 1.82
</TABLE>

<PAGE>

ABOUT THE FUNDS

The Trust is an open-end, management investment company, or mutual fund,
organized as a Massachusetts business trust on November 6, 1985, and registered
with the SEC under the Investment Company Act of 1940, as amended (the "1940
Act"). Each Fund represents a separate and distinct series of the Trust's
shares of beneficial interest. The Funds are managed by Franklin Advisers, Inc.
(the "Manager" or "Adviser"). Templeton Investment Counsel, Inc. ("TICI" or the
"Subadviser") serves as the subadviser under a contract with the Manager
(together, the "Trust's Advisers"). TICI is an indirect subsidiary of Templeton
Worldwide, Inc., which is a direct, wholly-owned subsidiary of Franklin
Resources, Inc. ("Resources"). (See "Management of the Funds.")

Shares of the Funds may be purchased (minimum investment of $100 initially and
$25 thereafter) at the current public offering price, which is equal to each
Fund's net asset value (see "Valuation of Each Fund's Shares") plus a sales
charge based upon a variable percentage (ranging from 3.00% to zero) depending
upon the amount invested. (See "How to Buy Shares of a Fund.")

Subject to specific Fund restrictions as described more fully below, the Funds
may invest in money market instruments denominated in the following currencies
(the "Major Currencies"): Australian dollar, Belgian franc, British pound
sterling, Canadian dollar, Danish krone, Netherlands guilder, European Currency
Unit ("ECU"), French franc, German mark, Italian lira, Japanese yen, New
Zealand dollar, Spanish peseta, Swedish krona, Swiss franc and U.S. dollar. The
currencies of various countries may be added to or deleted from the foregoing
list of Major Currencies when, in the opinion of the Trust's Advisers, world
social, economic, financial or political conditions so warrant. The Currency
Funds will revise the Prospectus to reflect any such change. Subject to further
restrictions described more fully below, the High Income Fund may also invest
in money market instruments denominated in currencies other than the Major
Currencies that are freely convertible into one or more of the Major Currencies
(the "Non-Major Currencies").

THE INTERNATIONAL MONEY MARKET

The international money market, including spot and forward currency exchange
transactions, is among the largest and most liquid financial markets in the
world. Various estimates place the market's average turnover at approximately
$1 trillion per day. Originally created to facilitate trade between countries,
the international money market has become a major conduit of world capital
flows. It is estimated that capital-related transactions now account for over
90% of all volume in the international money market.

International money market instruments, like their U.S. counterparts, are
short-term, high-quality debt obligations issued by governments, banks,
corporations and supranational organizations. Because of their high quality and
short maturities or frequent interest rate adjustments (one-year maximum
effective maturity), international money market instruments enable investors to
minimize credit risk and interest rate risk to principal and are considered to
be among the most conservative of international investments.

Like the returns on all non-U.S. dollar denominated investments, international
money market returns, when expressed in U.S. dollars, are significantly
affected by changes in exchange rates between the U.S. dollar and the
currencies in which such instruments are denominated. Interest income
represents the other primary component of the

<PAGE>

total return derived from international money market instruments.

INTERNATIONAL MONEY MARKET INVESTING

Investors may consider international money market investing for a variety of
purposes.

Global Diversification. One of the primary reasons for adding international
securities to a portfolio of U.S. securities is to achieve broader portfolio
diversification. Such diversification can reduce the overall volatility of
portfolio returns to the extent that returns on the international securities
are independent of returns on the U.S. portfolio component.

Returns on international money market instruments historically have exhibited a
low degree of correlation with returns on U.S. stocks and bonds and may,
therefore, offer U.S. dollar-based investors a conservative means for achieving
effective global diversification.

Protection of Global Purchasing Power. Currency exchange rate fluctuations can
have a significant effect on the global purchasing power of investments
denominated in a single currency. For example, depreciation of the U.S. dollar
relative to other currencies generally increases the cost to U.S. consumers of
most imported goods and many domestically produced goods, as well as the cost
of traveling outside the U.S.

In this situation, non-U.S. dollar denominated money market instruments may
provide a degree of global purchasing power protection since dollar
depreciation will tend to enhance the U.S. dollar return on such instruments.

Potential for Higher Current Yields and Higher Total Returns. Investors may
consider international money market instruments for the potentially higher
current yields and/or potentially higher total returns than those that may be
available on comparable U.S. dollar-denominated instruments. An investor
contemplating general depreciation of the U.S. dollar relative to other
currencies may, for example, invest in non-U.S. dollar denominated instruments
in an attempt to participate in currency gains that are expected to result.

Alternatively, an investor expecting general exchange rate stability might
invest in higher yielding international money market instruments in order to
seek to earn a higher rate of interest than may be available on comparable U.S.
dollar denominated instruments.

In either case, the realized total return on international money market
instruments may be higher or lower than that realized on comparable U.S. dollar
denominated instruments.

SELECTING THE APPROPRIATE FUND

Each Fund offers a degree of global diversification, as well as the opportunity
for protecting global purchasing power and achieving higher total returns than
may be available on U.S. money market funds. Selecting the appropriate Fund
depends on the particular priorities of each investor.

The Global Currency Fund employs the most flexible investment strategy of the
Funds and is designed for investors seeking the greatest degree of active
management among the Major Currencies. This Fund invests in money market
instruments denominated in any combination of three or more Major Currencies,
including the U.S. dollar, with the objective of maximizing total return. The
Trust's Advisers may, therefore, vary their emphasis between currency
appreciation and interest income from time to time. The Fund's ability to
achieve its objective may be limited by its restrictive universe of investments
as well as the high quality of such investments. In addition, during periods of
actual or anticipated appreciation of the U.S. dollar relative to other
currencies, the Trust's

<PAGE>

Advisers may invest a substantial portion of this Fund's assets in U.S.
dollar-denominated instruments. For temporary defensive purposes, all of this
Fund's assets may be so invested.

The High Income Fund invests in Major and Non-Major Currencies. Under normal
market conditions, this Fund invests at least 65% of its total assets in money
market instruments denominated in three or more of the ten highest yielding
Major Currencies (excluding the ECU) and the U.S. dollar (whether or not the
U.S. dollar is one of those ten highest yielding Major Currencies). Under
normal market conditions, this Fund may not (i) invest more than 25% of its
total assets in instruments denominated in any one Major Currency, other than
the U.S. dollar, (ii) invest more than 5% of its total assets in instruments
denominated in any one Non-Major Currency, or (iii) invest more than 25% of its
total assets in instruments denominated in Non-Major Currencies.
Notwithstanding the above restrictions, this Fund may temporarily invest its
assets without percentage limitation in instruments denominated in the U.S.
dollar for purposes of preservation of capital or for defensive purposes. This
Fund is designed for investors seeking high current income at a level
significantly above that available on U.S. dollar money market funds. Because
the Trust's Advisers emphasize interest income rather than currency
appreciation, investors in this Fund should expect income to constitute the
primary component of total return in the long run.

Each Fund seeks to minimize credit risk and interest rate risk to principal by
investing only in high quality money market instruments and by maintaining a
weighted average portfolio maturity of 120 days or less.

INVESTMENT OBJECTIVES AND
POLICIES OF THE FUNDS

The investment objective of each Fund is a fundamental policy of that Fund and
may not be changed without the approval of a majority of the Fund's outstanding
voting securities. There can be no assurance that the investment objective of
any Fund will be achieved.

GLOBAL CURRENCY FUND

The investment objective of the Global Currency Fund is to maximize the
investor's total return through a combination of interest income and changes in
the Fund's net asset value due to changes in currency exchange rates. The Fund
seeks to achieve its objective by investing in interest-earning money market
instruments denominated in three or more Major Currencies. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
instruments denominated in three or more Major Currencies, including the U.S.
dollar.

HARD CURRENCY FUND

The investment objective of the Hard Currency Fund is to protect against
depreciation of the U.S. dollar relative to other currencies. The Fund seeks to
achieve its objective by investing in high-quality money market instruments
(and forward contracts) denominated in foreign Major Currencies which
historically have experienced low rates of inflation and which, in the view of
the Trust's

<PAGE>

Advisers, are pursuing economic policies conducive to continued low rates of
inflation in the future and currency appreciation versus the U.S. dollar over
the long-term. Such currencies are often referred to as "hard currencies" and
such economic policies are often referred to as "sound money" policies.

The Hard Currency Fund endeavors, to the maximum extent practicable, to
maintain foreign currency (non-U.S. dollar) exposure with respect to 100% of
its net assets at all times. As described below under "Management Policies,"
this Fund may invest without limitation in U.S. dollar-denominated money market
instruments in combination with forward contracts (calling for the future
acquisition of foreign currencies in exchange for U.S. dollars) for the purpose
of obtaining an investment result that is substantially equivalent to a direct
investment in a foreign currency-denominated instrument.

Under normal market conditions, this Fund will not maintain exposure to a
single foreign currency in excess of 50% of its total assets. For temporary
defensive purposes, however, this Fund may invest without limitation in Swiss
franc-denominated instruments.

The Trust's Advisers actively manage the Hard Currency Fund and will allocate
the Fund's investments based on current social, economic, financial and
political developments which, in the opinion of the Trust's Advisers, may
affect the value of such currencies.

HIGH INCOME CURRENCY FUND

The investment objective of the High Income Fund is to achieve high current
income at a level significantly above that available on U.S. dollar money
market funds. Subject to this investment objective, a secondary consideration
of the Fund is preservation of capital. This Fund seeks to achieve its
objective by investing in interest-bearing money market instruments denominated
in Major and Non-Major Currencies. Under normal market conditions, at least 65%
of this Fund's total assets will be invested in instruments denominated in
three or more of the ten highest yielding Major Currencies (see below)
(excluding the ECU) and the U.S. dollar (whether or not the U.S. dollar is one
of those ten highest yielding Major Currencies). Under normal market
conditions, this Fund may not (i) invest more than 25% of its total assets in
instruments denominated in any one Major Currency, other than the U.S. dollar,
(ii) invest more than 5% of its total assets in instruments denominated in any
one Non-Major Currency, or (iii) invest more than 25% of its total assets in
instruments denominated in Non-Major Currencies. In addition, this Fund may at
anytime temporarily invest its assets without percentage limitation in
instruments denominated in U.S. dollars for purposes of preservation of capital
or for defensive purposes. The yield of each of the Major Currencies is
determined quarterly from data published by DATASTREAM, THE WALL STREET
JOURNAL, THE FINANCIAL TIMES, SALOMON BROTHERS INTERNATIONAL BOND AND MONEY
MARKET PERFORMANCE and other independent bona fide publications which, in the
opinion of the Trust's Advisers, routinely publish reliable yield data on
instruments denominated in the Major Currencies. Subject to the restrictions
described above, the Fund's investments may be denominated in any of the Major
Currencies. The yield on a Major Currency is defined as the yield for the prior
calendar quarter on the highest quality three-month Euro-time deposits
denominated in that Major Currency. The Trust's Advisers will obtain yield
measures as soon as practicable following the end of each calendar quarter.

<PAGE>

The ten highest yielding Major Currencies and their respective average yields
during 1993, 1992, 1991, 1990, 1989 and 1988 are listed below:

<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Sweden................. 8.57% 15.94% 11.70% 15.39% 11.52% 9.86%
Italy.................. 10.12 14.16 11.67 11.50 11.78 10.93
Spain.................. 11.87 13.29 12.80 15.25 14.39 11.35
Denmark................ 10.28 11.22 10.00 11.43 8.89 8.39
France................. 8.44 10.95 9.67 10.55 9.15 8.00
United Kingdom......... 5.86 10.27 11.48 15.00 14.07 10.53
Germany................ 7.24 9.58 -- -- -- --
Belgium................ 8.09 9.52 9.45 9.52 -- --
Netherlands............ 6.82 9.41 9.24 -- -- --
Switzerland............ 4.84 7.72 -- -- -- --
Australia.............. 4.79 -- 9.90 14.39 16.67 12.00
New Zealand............ 5.84 -- 10.01 13.15 12.64 14.13
Canada................. 4.76 -- -- 12.96 12.25 8.91
United States.......... 3.21 -- -- -- 9.41 7.53
Source: Datastream.
</TABLE>

GENERAL

Each Fund will attempt to maintain a weighted average effective maturity of 120
days or less and will acquire only money market instruments that have an
effective maturity, at the time of purchase, of one year or less. These
securities include floating or variable rate obligations which may have actual
maturities of over one year but that have interest rates which adjust at
periodic intervals. The effective maturity of each floating or variable rate
obligation within each Fund's portfolio will be based upon such periodic
adjustments. Because each of the Funds invest primarily in short-term
securities which are excluded from the calculation of portfolio turnover rate,
the portfolio turnover rate for each Fund is usually minimal. (See "Financial
Highlights.")

MANAGEMENT POLICIES:
ISSUER, INVESTMENT QUALITY, MATURITY AND
HEDGING CONSIDERATIONS

The issuers of money market instruments in which the Funds may invest may
include governments of, and financial institutions, corporations or other
entities located in or organized under the laws of, any country. The Funds may
also invest in money market securities issued by supranational organizations
such as: The World Bank, which was chartered to finance development projects in
member countries; the European Economic Community, which is a twelve-nation
organization engaged in cooperative economic activities; the European Coal and
Steel Community, which is an economic union of various European nations' steel
and coal industries; and the Asian Development Bank, which is an international
development bank established to lend funds, promote investment and provide
tech-

<PAGE>

nical assistance to member nations in the Asian and Pacific regions. The Funds
invest only in instruments which are considered by the Trust's Advisers to be
of high quality, comparable to those (1) rated AAA or AA (A-1 for commercial
paper) by Standard & Poor's Corporation ("S&P") or Aaa or Aa (P-1 for
commercial paper) by Moody's Investors Service ("Moody's"); or (2) issued by
companies having an outstanding unsecured debt issue currently rated within the
above rating categories by S&P or Moody's. Each Fund's investments will be
reviewed by the Trust's Board of Trustees at least quarterly.

To hedge (protect) against currency exchange rate fluctuations that might
adversely affect the value of a portfolio position, each Fund may enter into
forward contracts for the future acquisition or delivery of foreign currencies.
To hedge against such fluctuations between the date of purchase or sale and the
settlement date of a transaction, the Funds may enter into such forward
contracts without limitation. Also, the Funds may, solely for hedging purposes,
enter into futures contracts for the purchase or sale of currencies or purchase
options on such futures contracts or on currencies. These hedging techniques
are described more fully under "Fund Securities and Practices."

RISK CONSIDERATIONS

An investment in shares of a Fund may not be appropriate for all investors and
should not be considered a complete investment program. Each prospective
investor should take into account his or her investment objectives as well as
his or her other investments when considering the purchase of shares of any of
the Funds. The value of the investments held by each Fund and, therefore, each
of their respective net asset values, generally will vary inversely with
changes in prevailing interest rates, although this variance will depend upon
the effective maturities of the instruments held. Each of the Funds intend to
invest exclusively in short-term money market instruments to minimize this
effect.

Because the Hard Currency Fund invests in instruments denominated in Major
Currencies issued by countries which have recently experienced, and which are
expected to continue to experience, relatively low inflation, it is likely that
the instruments in which this Fund invests may pay interest rates that are
lower than instruments denominated in other Major Currencies, including the
U.S. dollar. Due to the economic strength of the countries which issue the
currencies in which such instruments are denominated, or other factors,
however, the Major Currencies in which this Fund's instruments are denominated
may appreciate relative to other Major Currencies, including the U.S. dollar.
If such currency appreciation more than offsets any negative interest-rate
differential, this Fund could provide a higher total return to investors than
similar investments denominated in other Major Currencies, including the U.S.
dollar.

Because the High Income Fund invests primarily in instruments denominated in
the Major Currencies that have the highest yield, there is a significant
possibility that the countries represented by such high-yield Major Currencies
may have recently experienced or may be expected to experience relatively high
rates of inflation, which may cause such Major Currencies to depreciate
relative to other Major Currencies, including the U.S. dollar. It is possible,
however, that the higher yields of the instruments in which this Fund invests
will more than offset any such depreciation, in which case this Fund could
provide a higher total return to investors than similar investments denominated
in other Major Currencies, including the U.S. dollar.

<PAGE>

The price of the shares of each of the Funds, expressed in U.S. dollar terms,
will fluctuate and, unlike a money market fund, the Funds do not seek to
maintain a stable net asset value. In addition, the total return on each of the
Funds may be higher or lower than the total return on a U.S. dollar money
market fund. INVESTORS, THEREFORE, SHOULD NOT CONSIDER ANY OF THE FUNDS TO BE A
SUBSTITUTE FOR A U.S. DOLLAR MONEY MARKET FUND.

The value of the investments held by each Fund is calculated in U.S. dollars on
each day that the New York Stock Exchange (the "Exchange") is open for
business. As a result, to the extent that each such Fund's assets are invested
in instruments denominated in currencies other than the U.S. dollar and such
currencies appreciate relative to the U.S. dollar, that Fund's net asset value
per share as expressed in U.S. dollars (and, therefore, the value of a
shareholder's investment in that Fund as expressed in U.S. dollars) should
increase. If the U.S. dollar appreciates relative to such other currencies, the
converse should occur, except to the extent that losses are offset by net
investment income generated by the money market instruments in which that
particular Fund invests.

The currency-related gains and losses experienced by each Fund will be based on
changes in the value of portfolio securities attributable to currency
fluctuations only in relation to the original purchase price of such securities
as stated in U.S. dollars. An individual shareholder's gains or losses on
shares of a Fund will be based on changes attributable to fluctuations in the
net asset value of such shares, expressed in U.S. dollars, in relation to the
original U.S. dollar purchase price of such shares. The relative amount of
appreciation or depreciation in a Fund's assets also will be affected by
changes in the value of the securities that are unrelated to changes in
currency exchange rates. Interest rates paid on instruments denominated in
foreign currencies may be higher or lower than those paid on comparable U.S.
dollar instruments. Consequently, the Funds may have a higher or lower yield
than a portfolio which invests strictly in U.S. dollar-denominated instruments.

Although the Funds are non-diversified series of the Trust under the 1940 Act,
no such Fund will invest more than 5% of its total assets in the securities of
a single foreign bank. This limitation does not apply to other issuers. As
non-diversified Funds, there is no restriction under the 1940 Act on the
percentage of assets that may be invested at any time in the securities of any
one issuer. Each Fund, however, intends to comply with the diversification
requirements applicable to regulated investment companies under the Internal
Revenue Code of 1986, as amended (the "Code"). As of the last day of each
fiscal quarter (or other measuring period used for purposes of determining
compliance with Subchapter M of the Code), each Fund intends that its
investments in securities of any one issuer (other than the U.S. government)
will be limited to 25% of its total assets, provided that, with respect to at
least 50% of its total assets, no Fund may have invested more than 5% of its
total assets in the securities of any one issuer or hold more than 10% of the
outstanding voting securities of any one issuer. To the extent the Funds are
not fully diversified under the 1940 Act, they may be more susceptible to
adverse economic, political or regulatory developments affecting a single
issuer than would be the case if they were more broadly diversified.

FUND SECURITIES AND PRACTICES MONEY MARKET INSTRUMENTS.

Money market instruments include short-term U.S. government securities
(discussed below), bank certificates of deposit, time deposits, bankers'
acceptances, commercial

<PAGE>

paper, floating and variable rate notes, repurchase agreements secured by U.S.
government securities, and short-term liquid instruments issued by foreign
governments and supranational organizations.

Government Securities. Securities issued by the U.S. government include a
variety of U.S. Treasury securities, which differ in their interest rates,
maturities and dates of issuance. Some obligations issued or guaranteed by U.S.
government agencies and instrumentalities, such as Treasury bills with
maturities up to one year, are supported by the full faith and credit of the
U.S. government; others, such as those of the Federal Home Loan Banks, by the
right of the issuer to borrow from the U.S. Treasury; others, such as those
issued by the Farmers Home Administration, by discretionary authority of the
U.S. government to purchase certain obligations of the agency or
instrumentality; and others, such as those issued by the Federal Farm Credit
Banks, only by the credit of the instrumentality. While the U.S. government
provides financial support to such U.S. government-sponsored agencies or
instrumentalities, no assurance can be given that it will always do so, since
it is not so obligated by law. Each Fund will invest in such securities only
when the Trust's Advisers are satisfied that the credit risk with respect to
the issuer is minimal.

Securities issued by the governments of foreign countries may include direct
obligations and obligations guaranteed by the governments of the foreign
countries. These obligations may have fixed, floating or variable rates of
interest.

CONCENTRATION IN FINANCIAL SERVICES OBLIGATIONS

Under normal market conditions, each Fund will have at least 25% of its assets
invested in companies engaged in the financial services industry, including
banks (U.S. and non-U.S. banks and their branches), savings and loan
associations, insurance companies, and their holding companies, provided such
companies have total assets in excess of U.S. $1 billion (or the equivalent
thereof expressed in a foreign currency). These investments may include bank
obligations, such as certificates of deposit, time deposits and bankers'
acceptances. During periods when the Trust's Advisers determine that a Fund
should be in a temporary defensive position, such Fund may have less than 25%
of its assets concentrated in the financial services industry.

Concentration may result in increased exposure to the specific risks (e.g.,
credit risk and interest rate risk) pertaining to the financial services
industry and may subject each Fund to greater risk and price fluctuation due to
the more limited number of industries or issuers potentially represented in a
Fund. In addition, each Fund may have its assets concentrated in instruments of
foreign financial institutions and foreign branches of U.S. banks which are not
subject to the supervision and regulation of U.S. state and federal banking
agencies and other U.S. supervisory authorities.

OTHER INVESTMENT POLICIES OF THE FUNDS

Except as otherwise noted, each Fund may engage, without limit, in the
following investment transactions:

Repurchase Transactions. Each Fund may enter into repurchase agreements with
government securities dealers recognized by the Federal Reserve Board or with
member banks of the Federal Reserve System. This is an agreement in which the
seller of a security agrees to repurchase the security sold at a mutually
agreed upon time and price. It may also be viewed as the loan of money by a
Fund to the seller. The resale price is normally in excess of the purchase
price, reflecting an agreed upon interest rate. The interest rate is effective
for the period of time in which a Fund is invested in the agreement and is not
related to the coupon rate on the under

<PAGE>

lying security. The period of these repurchase agreements will usually be
short, from overnight to one week, and at no time will a Fund invest in
repurchase agreements for more than one year. The securities which are subject
to repurchase agreements may, however, have maturity dates in excess of one
year from the effective date of the repurchase agreements. The transaction
requires the initial collateralization of the seller's obligation by securities
with a market value, including accrued interest, equal to at least 102% of the
dollar amount invested by a Fund in each agreement, with the value of the
underlying security marked to market daily to maintain coverage of at least
100%. A default by the seller might cause a Fund to experience a loss or delay
in the liquidation of the collateral securing the repurchase agreement. A Fund
might also incur disposition costs in liquidating the collateral. A Fund will
make payment for such securities only upon physical delivery or evidence of
book entry transfer to the account of its Custodian Bank. A Fund may not enter
into a repurchase agreement with more than seven days duration if, as a result,
more than 10% of the market value of a Fund's total assets would be invested,
together with other investments deemed to be illiquid, in such repurchase
agreement.

As approved by the Board of Trustees and subject to the following conditions,
the Funds may lend their portfolio securities to qualified securities dealers
or other institutional investors, provided that such loans do not exceed 30% of
the value of a Fund's total assets at the time of the most recent loan, and
further provided that the borrower deposits and maintains 102% collateral for
the benefit of a Fund. The lending of securities is a common practice in the
securities industry. The Funds engage in security loan arrangements with the
primary objective of increasing a Fund's income either through investing the
cash collateral in short-term interest bearing obligations or by receiving a
loan premium from the borrower. Under the securities loan agreement, a Fund
continues to be entitled to all dividends or interest on any loaned securities.
As with any extension of credit, there are risks of delay in recovery and loss
of rights in the collateral should the borrower of the security fail
financially.

Non-U.S. Securities. Investing in non-U.S. money market instruments and other
securities of non-U.S. issuers involves considerations and possible risks and
opportunities not typically associated with investing in U.S. securities. Such
investments may be favorably or unfavorably affected by changes in interest
rates, currency exchange rates and exchange control regulations, and costs may
be incurred in connection with conversions between various currencies. In
addition, investments in countries other than the U.S. could be affected by
other factors generally not thought by the Trust's Advisers to be present in
the U.S., including less liquid and efficient securities markets, greater price
volatility, less publicly available information, the possibility of normal
foreign withholding taxes or heavier taxation, political or social instability,
limitations on the removal of funds or other assets of a Fund, expropriation of
assets, adverse diplomatic developments, higher transaction and custody costs,
delays attendant in settlement procedures, and difficulties in enforcing
contractual obligations.

Currency Exchange Transactions and Forward Contracts. The Funds may use forward
contracts in conjunction with money market instruments (including U.S. dollar
denominated instruments) for the purpose of obtaining an investment result
that is substantially equivalent to a direct investment in a foreign currency
denominated instrument. The Funds may also engage in currency transactions to

<PAGE>

hedge (protect) against uncertainty in the level of future currency exchange
rates. Hedging transactions will be limited to either specific transactions
(for example, in respect of settlement of securities purchased or sold by the
Funds) or portfolio positions (for example, in respect of security positions
already held by the Funds). The Hard Currency Fund, however, endeavors, to the
maximum extent practicable, to maintain foreign currency (non-U.S. dollar)
exposure with respect to 100% of its net assets at all times and, therefore,
any portfolio position hedging activities of such Fund are expected to be
consistent with this policy. The Global Currency and High Income Funds may
hedge up to 100% of their portfolio positions and each of the Funds may engage
in currency exchange transactions without limitation for hedging purposes in
respect of specific transactions, such as the settlement of securities
purchased or sold by the Funds.

The Funds conduct currency exchange transactions either on a spot (i.e., cash)
basis at the rate prevailing in the currency market, or through entering into
forward contracts to purchase or sell currencies. A forward currency contract
involves an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are entered into in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. When
used for hedging, such contracts tend to minimize the risk of loss due to a
change in the value of the subject currency; they also tend to limit any
potential currency gain which might result and do not protect against
fluctuations in the value of the underlying security or position.

Currency Futures Transactions. Each Fund may enter into futures contracts and
purchase options on such contracts in order to hedge against changes in
currency exchange rates. A futures contract on currency is an agreement to buy
or sell currency at a specified price during a designated month. A Fund does
not make payment or deliver currency on entering into a futures contract.
Instead, it makes a margin deposit, which is adjusted to reflect changes in the
value of the contract and which continues until the contract is terminated.

A Fund sells currency futures contracts in order to offset a possible decline
in the value of the currency in which its securities are denominated. When a
futures contract is sold by a Fund, the value of the contract will tend to rise
when the value of such currency (and the hedged securities) declines and to
fall when the value of such currency (and the hedged securities) increases. A
Fund purchases currency futures contracts in order to fix a favorable currency
exchange rate for securities denominated in that currency which a Fund intends
to purchase. If a futures contract is purchased by a Fund, the value of the
contract will tend to change with changes in the value of such currency and
securities.

Each Fund may also purchase put and call options on currency futures contracts
for hedging purposes. A put option purchased by a Fund would give it the right
to assume a position as the seller of a futures contract. A call option
purchased by a Fund would give it the right to assume a position as the buyer
of a futures contract. A Fund is required to pay a premium for a put or call
option on a futures contract, but is not required to take any actions under the
contract. If the option cannot be profitably exercised before it expires, a
Fund's loss will be limited to the amount of the premium and any transaction
costs.

<PAGE>

Each Fund may enter into closing purchase or sale transactions in order to
terminate a futures contract. A Fund may close out an option which it has
purchased by selling an offsetting option of the same series. There is no
guarantee that such closing transactions can be effected. The Funds' ability to
enter into closing transactions depends on the development and maintenance of a
liquid market, which may not be available at all times.

Although these futures and options transactions are intended to enable the
Funds to manage currency exchange risks, unanticipated changes in currency
exchange rates could result in poorer performance than if they had not entered
into these transactions. Even if the Trust's Advisers correctly predict
currency exchange rate movements, a hedge could be unsuccessful if changes in
the value of a Fund's futures position do not correspond to changes in the
value of the currency in which its investments are denominated. This lack of
correlation between a Fund's futures and currency positions may be caused by
differences between the futures and currency markets.

The Trust's Advisers will attempt to minimize these risks through careful
selection and monitoring of each Fund's futures and options positions. The
ability to predict the direction of currency exchange rates involves skills
different from those used in selecting securities.

The Funds will not use futures transactions for speculation. A Fund may not
purchase or sell futures contracts or options on futures, except for closing
purchase or sale transactions, if immediately thereafter the sum of margin
deposits on a Fund's outstanding futures positions and premiums paid for
outstanding options on futures would exceed 5% of the market value of a Fund's
total assets. These transactions involve brokerage costs, require margin
deposits and, in the case of contracts obligating a Fund to purchase
securities, require a Fund to segregate assets to cover such contracts.

These transactions also involve risks to the Funds of the possible loss of
margin deposits or collateral in the event of bankruptcy of a broker with whom
a Fund has an open position in a futures or options contract. A Fund's ability
to enter into certain futures, forward contracts and options is also limited by
the requirements of the Code for qualification of a Fund as a regulated
investment company. These securities may also require the application of
complex and special tax rules and elections which may affect the amount, timing
and character of distributions to shareholders. These investments and
transactions are discussed further in the Statement of Additional Information.

A Fund's investments in options, futures contracts and forward contracts may
give rise to taxable income, gain or loss, and may be subject to special tax
treatment under certain mark-to-market and straddle rules, the effect of which
may be to accelerate income to a Fund, defer Fund losses, cause adjustments in
the holding periods of Fund securities, convert capital gains and losses into
ordinary income and losses, convert long-term capital gains into short-term
capital gains, and convert short-term capital losses into long-term capital
losses. These rules could, therefore, affect the amount, timing and character
of distributions to shareholders. Certain elections may be available to a Fund
to mitigate some of the unfavorable consequences of the provisions described in
this paragraph. These investments and transactions are discussed in the
Statement of Additional Information. Currency Options Transactions. Each Fund
may, for hedging purposes, purchase put and call options on any currency in
which a Fund's investments are denominated. Each Fund is also authorized to

<PAGE>

enter into closing sale transactions in order to realize gains or minimize
losses on currency options purchased by a Fund.

A Fund would normally purchase currency call options to fix a favorable
currency exchange rate for securities denominated in that currency which a Fund
intends to acquire. The purchase of a call option would entitle a Fund, in
return for the premium paid, to purchase specified currency at a specified
price, upon exercise of the option, during the option period. A Fund would
ordinarily realize a gain if, during the option period, the value of such
currency exceeds the sum of the exercise price, the premium paid and
transaction cost; otherwise, a Fund would realize a loss on the purchase of the
call option.

A Fund would normally purchase currency put options to hedge against a decline
in the value of the currency in which its securities are denominated. The
purchase of a put option would entitle a Fund, in exchange for the premium
paid, to sell specified currency at a specified price, upon exercise of the
option, during the option period. Gains and losses on the purchase of such put
options would tend to be offset by countervailing changes in the value of the
underlying currency and the hedged securities. A Fund would ordinarily realize
a gain if, during the option period, the value of the underlying currency
decreases below the exercise price sufficiently to cover the premium and
transaction costs; otherwise a Fund would realize a loss on the purchase of the
put option.

If a Fund is unable to effect a closing sale transaction with respect to
options it has purchased, it would have to exercise the options in order to
realize any profit and may incur transaction costs upon the purchase or sale of
underlying currencies.

Options on currencies are traded on exchanges and in the over-the-counter
market and will be purchased only when the Trust's Advisers believe a liquid
secondary market exists for such options, although there can be no assurances
that a liquid secondary market will exist for a particular option at any
specific time. In general, over-the-counter options differ from exchange-traded
options in that they are two-party contracts with price and terms negotiated
between buyer and seller, and such options are endorsed and/or guaranteed by
third parties (such as a member of the Exchange). A Fund will purchase
over-the-counter options only from dealers and institutions which the Trust's
Advisers believe present a minimal credit risk.

The purchase of currency options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. A Fund pays brokerage commissions
or spreads in connection with its options and any related currency
transactions.

PORTFOLIO TURNOVER

The Funds anticipate that their annual portfolio turnover rate generally will
not exceed 100% but this rate should not be construed as a limiting factor in
the operation of a Fund's portfolio.

CERTAIN FUNDAMENTAL POLICIES

The following are fundamental policies of each Fund which cannot be changed, as
to any of the Funds described in this Prospectus, without approval by a
majority of the outstanding voting securities of such Fund.

Each Fund may not: (1) borrow money, except from banks for temporary or
emergency purposes in amounts not exceeding 331/3% of the value of its total
assets, or pledge, hypothecate, or mortgage more than 331/3% of the value
of its total assets in connection with any such borrowings (no additional
investments may be made while any such borrowings exceed 5% of the Fund's total
as-

<PAGE>

sets; a Fund may incur interest charges in connection with such borrowings);
(2) in the aggregate, invest more than 10% of its net assets in restricted
securities, repurchase agreements maturing in more than seven days, options
which are traded in the over-the-counter market and the investments hedged by
such options, or securities which are not readily marketable; (3) invest less
than 25% of its assets in the securities of companies engaged in the financial
services industry or more than 25% of its assets in the securities of issuers
in any other industry; (4) lend more than 30% of its total assets, except to
the extent that entering into repurchase agreements or purchasing debt
securities may be considered to be a loan; and (5) invest more than 5% of its
total assets in securities of issuers (including predecessors) with less than
three years' continuous operations. Restrictions (3) and (5) do not apply to
investments in U.S. government securities.

The Funds are subject to a number of additional investment restrictions, some
of which may be changed only with the approval of shareholders, which limit
their activities to some extent. For a list of these restrictions and more
information concerning the policies discussed herein, please see the Statement
of Additional Information.

MANAGEMENT OF THE FUNDS

The Board of Trustees has the primary responsibility for the overall management
of the Trust and for electing the officers of the Trust who are responsible for
administering its day-to-day operations.

Adviser is a wholly-owned subsidiary of Resources, a publicly owned holding
company, the principal shareholders of which are Charles B. Johnson, Rupert H.
Johnson, Jr. and R. Martin Wiskemann, who own approximately 20%, 16% and 10%,
respectively, of Resources' outstanding shares. Through its subsidiaries,
Resources is engaged in various aspects of the financial services industry. The
Manager acts as investment manager or administrator to 34 U.S. registered
investment companies (112 separate series) with aggregate assets of over $74
billion.

Under the management agreement between Adviser and the Trust on behalf of each
Fund dated November 12, 1993 (the "Management Agreement"), each Fund is
obligated to pay Adviser a fee computed at the close of business on the first
business day of each month equal to an annual rate of 0.65% of the value of the
average daily net assets of each Fund.

The management agreement specifies that the management fee will be reduced to
the extent necessary to comply with the most stringent limits on the expenses
which may be borne by a Fund as prescribed by any state in which a Fund's
shares are offered for sale. Currently, the most restrictive of such provisions
limits a fund's allowable expenses as a percentage of its average net assets
for each fiscal year to 2 1/2% of the first $30 million in assets, 2% of the
next $70 million, and 1 1/2% of assets in excess of $100 million. In addition,
the Manager has elected to reduce the fees payable under the Management
Agreement and to assume responsibility for making payments, if necessary, to
offset certain operating expenses otherwise payable by the Funds so that total
ordinary operating expenses do not exceed 1% of each Fund's average net assets.
This arrangement may be continued or terminated by the Manager at any time.

During the fiscal year ended April 30, 1994, fees totaling 0.65%, of the
average net assets of the Global Currency Fund, the Hard Currency Fund and the
High Income Fund would have accrued to Adviser. Total operating expenses,
including management fees, would have represented 1.61%,

<PAGE>

1.71% and 1.82% of the average net assets of the respective Funds. Pursuant to
an agreement by Adviser to limit its fees, the Funds paid management fees
totaling 0.45%, 0.41% and 0.42%, respectively, of the average net assets of the
Global Currency Fund, the Hard Currency Fund and the High Income Fund and
operating expenses totaling 1.41%, 1.47% and 1.59%, respectively, of the
average net assets of the respective Funds.

The Subadviser is an indirect subsidiary of Templeton Worldwide, Inc., which,
operating through its subsidiaries, is a major investment management
organization with approximately $37 billion of assets currently under
management and a long history of global investing.

TICI serves as the subadviser under a contract with the Manager, dated November
12, 1993, providing services similar to those previously provided by Bankers
Trust Company. Pursuant to the subadvisory agreement between the Manager and
TICI, and subject to the overall policies, control, direction and review of the
Board of Trustees and to the instructions and supervision of the Manager, TICI
will provide day-to-day portfolio management for the Funds.

Pursuant to the subadvisory agreement between TICI and the Manager, TICI will
receive a fee from the Manager for each Fund equal to an annual rate of 0.25%
of the value of the average daily net assets of each Fund, payable monthly.
TICI's fees will not be paid by the Funds.

Prior to November 12, 1993, Huntington Advisers, Inc., 251 South Lake Avenue,
Suite 600, Pasadena, California 91101, an indirect wholly-owned subsidiary of
Long Beach Bank, a federal savings bank, served as the Funds' manager with
overall responsibility for the administration of all operations of each Fund.
Bankers Trust Company, 280 Park Avenue, New York, New York 10015, a
wholly-owned subsidiary of Bankers Trust New York Corporation, served as each
Fund's investment adviser, responsible for carrying out the day-to-day
portfolio management of each Fund.

Each Fund is responsible for its own operating expenses, including, but not
limited to, the Manager's fee; taxes, if any; custodian, legal and auditing
fees; fees and expenses of trustees who are not members of, affiliated with, or
interested persons of the Trust's Advisers; salaries of any personnel not
affiliated with the Trust's Advisers; insurance premiums; trade association
dues; expenses of obtaining quotations for calculating the value of each Fund's
net assets; printing and other expenses which are not expressly assumed by the
Manager.

Pursuant to the Management Agreement and the sub-advisory agreement, the
Trust's Advisers supervise and implement each Fund's investment activities and
provide certain administrative services and facilities which are necessary to
conduct the Funds' business. The selection of brokers and dealers through whom
transactions in each Fund's portfolio securities will be effected will be done
by the Trust's Advisers. The Trust's Advisers will try to obtain the best
execution on all such transactions. If it is felt that more than one broker is
able to provide the best execution, the Trust's Advisers will consider the
furnishing of quotations and of other market services, research, statistical
and other data for the Trust's Advisers and affiliates, as well as the sale of
shares of each Fund, as factors in selecting a broker. Further information is
included under "The Funds' Policies Regarding Brokers Used on Portfolio
Transactions" in the Statement of Additional Information.

Shareholder accounting and many of the clerical functions for the Funds are
performed by Franklin/Templeton Investor Services, Inc. ("Investor Serv-

<PAGE>

ices" or "Shareholder Services Agent"), in its capacity as transfer agent
and dividend-paying agent. Investor Services is a wholly-owned subsidiary of
Resources.

PLAN OF DISTRIBUTION

Each Fund has adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the
"Plan"), whereby it may reimburse Distributors or others for all expenses
incurred by Distributors or others in the promotion and distribution of a
Fund's shares. Such expenses may include, but are not limited to, the printing
of prospectuses and reports used for sales purposes, expenses of preparing and
distributing sales literature and related expenses, advertisements, and
other distribution-related expenses, including a prorated portion of
Distributors' overhead expenses attributable to the distribution of Fund
shares, as well as any distribution or service fees paid to securities dealers
or their firms or others who have executed a servicing agreement with a Fund,
Distributors or its affiliates. The maximum amount which each Fund may pay to
Distributors or others for such distribution expenses is 0.45% per annum of the
average daily net assets of each Fund, payable on a quarterly basis. All
expenses of distribution and marketing in excess of 0.45% per annum will be
borne by Distributors, or others who have incurred them, without reimbursement
from the Funds. The Plan also covers any payments to or by the Funds,
Distributors, or other parties on behalf of the Funds or Distributors, to the
extent such payments are deemed to be for the financing of any activity
primarily intended to result in the sale of shares issued by a Fund within the
context of Rule 12b-1. The payments under the Plan are included in the maximum
operating expenses which may be borne by each Fund.

DISTRIBUTIONS TO SHAREHOLDERS

There are two types of distributions which the Funds may make to their
shareholders:

1. Income dividends. The Funds receive income generally in the form of interest
and other income derived from their investments. This income, less the expenses
incurred in the Funds' operations, is their net investment income from which
income dividends may be distributed. Thus, the amount of dividends paid per
share may vary with each distribution.

2. Capital gain distributions. The Funds may derive capital gains or losses in
connection with sales or other dispositions of their portfolio securities.
Distributions by the Funds derived from net short-term and net long-term
capital gains (after taking into account any net capital loss carryovers) may
generally be made once a year in December to reflect any net short-term and net
long-term capital gains realized by the Funds as of October 31 of the current
fiscal year and any undistributed net capital gains from the prior fiscal year.
The Funds may make more than one distribution derived from net short-term and
net long-term capital gains in any year or adjust the timing of these
distributions for operational or other reasons.

DISTRIBUTION DATE

Although subject to change by the Trust's Board of Trustees without prior
notice to, or approval by, shareholders, the Funds' current policy is to
declare income dividends monthly for shareholders of record generally on the
first business day preceding the 15th of the month, payable on or about the
last business day of that month. The amount of income dividend payments by the
Funds is dependent upon the amount of net income each receives from their
portfolio holdings, is not guaranteed and is subject to the discretion of the
Trust's Board

<PAGE>

of Trustees. Fund shares are quoted ex-dividend on the first business day
following the record date. THE FUNDS DO NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN THEIR SHARES.

In order to be entitled to a dividend, an investor must have acquired Fund
shares prior to the close of business on the record date. An investor
considering purchasing Fund shares shortly before the record date of a
distribution should be aware that because the value of a Fund's shares is based
directly on the amount of its net assets, rather than on the principle of
supply and demand, any distribution of income or capital gain will result in a
decrease in the value of a Fund's shares equal to the amount of the
distribution. While a dividend or capital gain distribution received shortly
after purchasing shares represents, in effect, a return of a portion of the
shareholder's investment, it may be taxable as dividend income or capital gain.

DIVIDEND REINVESTMENT

Unless requested otherwise in writing or on the Shareholder Application, income
dividends, and capital gain distributions, if any, will be automatically
reinvested in the shareholder's account in the form of additional shares,
valued at the closing net asset value (without sales charge) on the dividend
reinvestment date. Shareholders have the right to change their election with
respect to the receipt of distributions by notifying the Funds, but any such
change will be effective only as to distributions for which the record date is
seven or more business days after the Funds have been notified. See the
Statement of Additional Information for more information.

Many of the Funds' shareholders receive their distributions in the form of
additional shares. This is a convenient way to accumulate additional shares and
maintain or increase the shareholder's earnings base. Of course, any shares so
acquired remain at market risk.

DISTRIBUTIONS IN CASH

A shareholder may elect to receive income dividends, or both income dividends
and capital gain distributions, in cash. By completing the "Special Payment
Instructions for Distributions" section of the Shareholder Application included
with this Prospectus, a shareholder may direct the selected distributions to
another fund in the Franklin Group of Funds(R) or the Templeton Group, to
another person, or directly to a checking account. If the bank at which the
account is maintained is a member of the Automated Clearing House, the payments
may be made automatically by electronic funds transfer. If this last option is
requested, the shareholder should allow at least 15 days for initial
processing. Dividends which may be paid in the interim will be sent to the
address of record. Dividend and capital gain distributions are eligible for
investment in another fund in the Franklin Group of Funds or the Templeton
Group at net asset value. Additional information regarding automated funds
transfer may be obtained from Franklin's Shareholder Services Department.

HOW SHAREHOLDERS PARTICIPATE IN THE
RESULTS OF THE FUNDS' ACTIVITIES

The assets of the Funds are invested in portfolio securities. If the securities
owned by the Funds increase in value, the value of the shares of the Funds
which the shareholder owns will increase. If the securities owned by the Funds
decrease in value, the value of the shareholder's shares will also decline. In
this way, shareholders participate in any change in the value of the securities
owned by the Funds.

<PAGE>

TAXATION OF THE FUNDS
AND THEIR SHAREHOLDERS

The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. Additional information on tax matters
relating to the Funds and their shareholders is included in the section
entitled, "Additional Information Regarding Taxation" in the Statement of
Additional Information.

Each Fund of the Trust is treated as a separate entity for federal income tax
purposes. Each of the Funds has elected to be treated as a regulated investment
company under Subchapter M of the Code, qualified as such, and intends to
continue to so qualify. By distributing all of its income and meeting certain
other requirements relating to the sources of its income and diversification of
its assets, a Fund will not be liable for federal income or excise taxes.

Regular income dividends (which are generally distributed monthly) will be
determined from each Fund's net investment income, excluding any realized net
foreign currency gains and losses. Under U.S. Treasury regulations, net
realized foreign currency gains and losses are required to be reported as
ordinary income or loss to each Fund. Therefore, if in the course of a fiscal
year, a Fund realizes net foreign currency losses, that Fund may be required to
reclassify all or a portion of its income dividend distributions made during
such fiscal year as a return-of-capital for federal income tax purposes. Net
foreign currency gains, if any, will generally be distributed as a supplemental
income dividend once each year in December to reflect any net foreign currency
gain realized by a Fund as of October 31 for the current fiscal year, and may
also reflect any undistributed foreign currency gains for the prior fiscal
year. Shareholders will be informed of the tax status of all distributions
shortly after the close of each calendar year.

For federal income tax purposes, any income dividends which the shareholder
receives from a Fund, as well as any distributions derived from the excess of
net short-term capital gain over net long-term capital loss, are treated as
ordinary income whether the shareholder has elected to receive them in cash or
in additional shares.

Redemptions and exchanges of a Fund's shares are taxable events on which a
shareholder may realize a gain or a loss. Any loss incurred on sale or exchange
of each Fund's shares, held for six months or less, will be treated as a
long-term capital loss to the extent of capital gain dividends received with
respect to such shares.

All or a portion of the sales charge incurred in purchasing shares of each Fund
will not be included in the federal tax basis of such shares sold or exchanged
within ninety (90) days of their purchase (for purposes of determining gain or
loss with respect to such shares) if the sales proceeds are reinvested in the
Funds or in another fund in the Franklin Group of Funds and the Templeton Group
and a sales charge which would otherwise apply to the reinvestment is reduced
or elimi-

<PAGE>

nated. Any portion of such sales charge excluded from the tax basis of the
shares sold will be added to the tax basis of the shares acquired in the
reinvestment. Shareholders should consult with their tax advisors concerning
the tax rules applicable to the redemption or exchange of fund shares.

The Funds will inform shareholders of the source of their dividends and
distributions at the time they are paid, and will promptly after the close of
each calendar year advise them of the tax status for federal income tax
purposes of such dividends and distributions.

Shareholders who are not U.S. persons for purposes of federal income taxation
should consult with their financial or tax advisors regarding the applicability
of U.S. withholding or other taxes on distributions received by them from the
Funds and the application of foreign tax laws to these distributions.

Shareholders should consult their tax advisors with respect to the
applicability of state and local intangible property or income taxes to their
shares in the Funds and to distributions and redemption proceeds received from
the Funds.

HOW TO BUY SHARES OF A FUND

Shares of each Fund are continuously offered through securities dealers which
execute an agreement with Distributors, the principal underwriter of each
Fund's shares. The use of the term "securities dealer" shall include other
financial institutions which, pursuant to an agreement with Distributors
(directly or through affiliates), handle customer orders and accounts with the
Funds. Such reference, however, is for convenience only and does not indicate a
legal conclusion of capacity. The minimum initial investment is $100 and
subsequent investments must be $25 or more. These minimums may be waived when
the shares are purchased through plans established at Franklin. The Trust and
Distributors reserve the right to refuse any order for the purchase of shares.

PURCHASE PRICE OF SHARES OF A FUND

Shares of each Fund are offered at the public offering price, which is the net
asset value per share plus a sales charge, next computed (1) after the
shareholder's securities dealer receives the order which is promptly
transmitted to such Fund or (2) after receipt of an order by mail from the
shareholder directly in proper form (which generally means a completed
Shareholder Application accompanied by a negotiable check). The sales charge is
a variable percentage of the offering price depending upon the amount of the
sale. On orders for 100,000 shares or more, the offering price will be
calculated to four decimal places. On orders for less than 100,000 shares, the
offering price will be calculated to two decimal places using standard rounding
criteria. A description of the method of calculating net asset value per share
is included under the caption "Valuation of Each Fund's Shares." Set forth
below is a table of total sales charges or underwriting commissions and dealer
concessions.

<PAGE>

<TABLE>
<CAPTION>
TOTAL SALES CHARGE
--------------------------------------------------------
AS A PERCENTAGE DEALER CONCESSION
SIZE OF TRANSACTION AS A PERCENTAGE OF NET AMOUNT AS A PERCENTAGE
AT OFFERING PRICE OF OFFERING PRICE INVESTED OF OFFERING PRICE*
- ----------------- ----------------- --------------- ------------------
<S> <C> <C> <C>
Less than $50,000 3.00% 3.09% 2.60%
$50,000 but less than $100,000 2.50% 2.56% 2.25%
$100,000 but less than $250,000 2.00% 2.04% 1.85%
$250,000 but less than $500,000 1.50% 1.52% 1.40%
$500,000 but less than $750,000 1.00% 1.01% 1.00%
$750,000 but less than $1,000,000 0.75% 0.76% 0.75%
$1,000,000 or above** None None None
</TABLE>

*Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.

**With respect to purchases of $1,000,000 or more made through selected
securities dealers or agents, the Manager may pay such securities dealers or
agents from its own resources a one-time fee of up to 0.25% of the amount
invested.

The size of a transaction which determines the applicable sales charge on the
purchase of Fund shares is determined by adding the amount of the shareholder's
current purchase plus the cost or current value (whichever is higher) of a
shareholder's existing investment in one or more of the many funds in the
Franklin Group of Funds(R) and the Templeton Group of Funds. Included for these
purposes are (a) the open-end investment companies in the Franklin Group
(except Franklin Valuemark Funds and Franklin Government Securities Trust) (the
"Franklin Group of Funds"), (b) other investment products in the Franklin Group
underwritten by Distributors or its affiliates (although certain investments
may not have the same schedule of sales charges and/or may not be subject to
reduction) (the products in subparagraphs (a) and (b) are referred to as the
"Franklin Group") and (c) the open-end U.S. registered investment companies in
the Templeton Group of Funds except Templeton American Trust, Inc., Templeton
Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund, and Templeton
Variable Products Series Fund (the "Templeton Group"). Purchases pursuant to
the Rights of Accumulation will be at the applicable sales charge of 0.75% or
more until the additional purchase, plus the value of the account or the amount
previously invested, less redemptions, exceeds $1,000,000, and not subject to
any sales charge on the excess over that amount. Sales charge reductions based
upon purchases in more than one of the funds in the Franklin Group or Templeton
Group (the "Franklin/Templeton Group") may be effective only after notification
to Distributors that the investment qualifies for a discount.

Distributors or its affiliates, at their expense, may also provide additional
compensation to dealers in connection with sales of shares of the Funds and
other funds in the Franklin Group of Funds or the Templeton Group. Compensation
may include financial assistance to dealers in connection with conferences,
sales or training programs for their employees, seminars for the public,
advertising, sales campaigns and/or shareholder services and

<PAGE>

programs regarding one or more of the Franklin Group of Funds or the Templeton
Group and other dealer-sponsored programs or events. In some instances, this
compensation may be made available only to certain dealers whose
representatives have sold or are expected to sell significant amounts of such
shares. Compensation may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Dealers may
not use sales of the Funds' shares to qualify for this compensation to the
extent such may be prohibited by the laws of any state or any self-regulatory
agency, such as the National Association of Securities Dealers, Inc. None of
the aforementioned additional compensation is paid for by the Funds or its
shareholders.

Certain officers and trustees of the Trust are also affiliated with
Distributors. A detailed description is included in the Statement of Additional
Information.

QUANTITY DISCOUNTS IN SALES CHARGES

Shares may be purchased under a variety of plans which provide for a reduced
sales charge. To be certain to obtain the reduction of the sales charge, the
investor or the dealer should notify Distributors at the time of each purchase
of shares which qualifies for the reduction. In determining whether a purchase
qualifies for any of the discounts, investments in any of the
Franklin/Templeton Group may be combined with those of the investor's spouse
and children under the age of 21. In addition, the aggregate investments of a
trustee or other fiduciary account (for an account under exclusive investment
authority) may be considered in determining whether a reduced sales charge is
available, even though there may be a number of beneficiaries of the account.

In addition, an investment in each Fund may qualify for a reduction in the
sales charge under the following programs:

1. Rights of Accumulation. The cost or current value (whichever is
higher) of existing investments in the Franklin/Templeton Group may be combined
with the amount of the current purchase in determining the sales charge to be
paid.

2. Letter of Intent. An investor may immediately qualify for a reduced sales
charge on a purchase of shares of a Fund by completing the Letter of Intent
section of the Shareholder Application (the "Letter of Intent" or "Letter"). By
completing the Letter, the investor expresses an intention to invest during the
next 13 months a specified amount which if made at one time would qualify for a
reduced sales charge. At any time within 90 days after the first investment
which the investor wants to qualify for the reduced sales charge, a signed
Shareholder Application, with the Letter of Intent section completed, may be
filed with such Fund. After the Letter of Intent is filed, each additional
investment made will be entitled to the sales charge applicable to the level of
investment indicated on the Letter of Intent as described above. Sales charge
reductions based upon purchases in more than one company in the
Franklin/Templeton Group will be effective only after notification to
Distributors that the investment qualifies for a discount. The shareholder's
holdings in the Franklin/Templeton Group acquired more than 90 days before the
Letter of Intent is filed will be counted towards completion of the Letter of
Intent but will not be entitled to a retroactive downward adjustment of sales
charge. Any redemptions made by the shareholder during the 13-month period will
be subtracted from the amount of the purchases for purposes of determining
whether the terms of the Letter of Intent have been completed. If the

<PAGE>

Letter of Intent is not completed within the 13-month period, there will be an
upward adjustment of the sales charge as specified below, depending upon the
amount actually purchased (less redemptions) during the period.

AN INVESTOR ACKNOWLEDGES AND AGREES TO THE FOLLOWING PROVISIONS BY COMPLETING
THE lETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION: Five percent (5%)
of the amount of the total intended purchase will be reserved in shares of a
Fund in which you invest, registered in the investor's name, to assure that the
full applicable sales charge will be paid if the intended purchase is not
completed. The reserved shares will be included in the total shares owned as
reflected on periodic statements; income and capital gain distributions on the
reserved shares will be paid as directed by the investor. The reserved shares
will not be available for disposal by the investor until the Letter of Intent
has been completed or the higher sales charge paid. If the total purchases,
less redemptions, equal the amount specified under the Letter, the reserved
shares will be deposited to an account in the name of the investor or delivered
to the investor or the investor's order. If the total purchases, less
redemptions, exceed the amount specified under the Letter and is an amount
which would qualify for a further quantity discount, a retroactive price
adjustment will be made by Distributors and the dealer through whom purchases
were made pursuant to the Letter of Intent (to reflect such further quantity
discount) on purchases made within 90 days before and on those made after
filing the Letter. The resulting difference in offering price will be applied
to the purchase of additional shares at the offering price applicable to a
single purchase or the dollar amount of the total purchases. If the total
purchases, less redemptions, are less than the amount specified under the
Letter, the investor will remit to Distributors an amount equal to the
difference in the dollar amount of sales charge actually paid and the amount of
sales charge which would have applied to the aggregate purchases if the total
of such purchases had been made at a single time. Upon such remittance the
reserved shares held for the investor's account will be deposited to an account
in the name of the investor or delivered to the investor or to the investor's
order. If within 20 days after written request such difference in sales charge
is not paid, the redemption of an appropriate number of reserved shares to
realize such difference will be made. In the event of a total redemption of the
account prior to fulfillment of the Letter of Intent, the additional sales
charge due will be deducted from the proceeds of the redemption, and the
balance will be forwarded to the investor. By completing the Letter of Intent
section of the Shareholder Application, an investor grants to Distributors a
security interest in the reserved shares and irrevocably appoints Distributors
as attorney-in-fact with full power of substitution to surrender for redemption
any or all shares for the purpose of paying any additional sales charge due.
Purchases under the Letter of Intent will conform with the requirements of Rule
22d-1 under the 1940 Act. The investor or the investor's securities dealer must
inform Investor Services or Distributors that this Letter is in effect each
time a purchase is made.

Additional terms concerning the offering of a Fund's shares are included in
the Statement of Additional Information.

GROUP PURCHASES

An individual who is a member of a qualified group may also purchase shares of
a Fund at the reduced sales charge applicable to the group as a whole. The
sales charge is based upon the aggregate dollar value of shares previously
purchased and still owned by the group, plus the amount of

<PAGE>

the current purchase. For example, if members of the group had previously
invested and still held $40,000 of a Fund's shares and now were investing
$20,000, the sales charge would be 2.50%. Information concerning the current
sales charge applicable to a group may be obtained by contacting Distributors.

A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund shares at a discount and
(iii) satisfies uniform criteria which enable Distributors to realize economies
of scale in its costs of distributing shares. A qualified group must have more
than 10 members, must be available to arrange for group meetings between
representatives of the Funds or Distributors and the members, must agree to
include sales and other materials related to the Funds in its publications and
mailings to members at reduced or no cost to Distributors, and must seek to
arrange for payroll deduction or other bulk transmission of investments to the
Funds.

If an investor selects a payroll deduction plan, subsequent investments will be
automatic and will continue until such time as the investor notifies such Fund
and the investor's employer to discontinue further investments. Due to the
varying procedures used to prepare, process and forward the payroll deduction
information to a Fund, there may be a delay between the time of the payroll
deduction and the time the money reaches such Fund. The investment in such Fund
will be made at the offering price per share determined on the day that both
the check and payroll deduction data are received in required form by a Fund.

PURCHASES AT NET ASSET VALUE

Dealers may place trades to purchase shares of the Fund at net asset value on
behalf of investors who have, within the past 60 days, redeemed an investment
in a registered management investment company which charges a contingent
deferred sales charge, and which has investment objectives similar to those of
the Fund.

Shares of each Fund may be purchased at net asset value (without sales charge)
by employee benefit plans qualified under Section 401 of the Code, including
salary reduction plans qualified under Section 401(k) of the Code, subject to
minimum requirements with respect to number of employees or amount of purchase,
which may be established by Distributors. Currently those criteria require that
the employer establishing the plan have 500 or more employees or that the
amount invested or to be invested during the subsequent 13-month period in a
Fund or another company or companies in the Franklin/Templeton Group totals at
least $1,000,000. Employee savings plans and employee benefit plans not
qualified under Section 401 of the Code may be afforded the same privilege if
they meet the above requirements as well as the uniform criteria for qualified
groups previously described under Group Purchases which enable Distributors to
realize economies of scale in its sales efforts and sales related expenses. If
investments by employee benefit plans at net asset value are made through a
dealer who has executed a dealer agreement with Distributors, Distributors or
one of its affiliates may make a payment, out of their own resources, to such
dealer in an amount not to exceed 1.00% of the amount invested. Contact
Franklin's Institutional Sales Department for additional information.

Shares of each Fund may be purchased at net asset value by trust companies and
bank trust departments for funds over which they exercise exclusive
discretionary investment authority and which are held in a fiduciary, agency,
advisory, custodial or similar capacity. Such purchases are subject to minimum
requirements with respect to amount of

<PAGE>

purchase, which may be established by Distributors. Currently, those criteria
require that the amount invested or to be invested during the subsequent
13-month period in a Fund or any other company in the Franklin/Templeton Group
must total at least $1,000,000. Orders for such accounts will be accepted by
mail accompanied by a check or by telephone or other means of electronic data
transfer directly from the bank or trust company, with payment by federal funds
received by the close of business on the next business day following such
order. If an investment by a trust company or bank trust department at net
asset value is made through a dealer who has executed a dealer agreement with
Distributors, Distributors or one of its affiliates may make payment, out of
their own resources, to such dealer in an amount not to exceed 0.25% of the
amount invested. Contact Franklin's Institutional Sales Department for
additional information.

Shares of each Fund may be purchased at net asset value by certain fiduciary
entities (such as registered investment advisers, bank trust departments and
bank custodians) or by financial services companies acting as intermediaries
for such fiduciary entities buying on behalf of a client, provided that the
fiduciary entity has a pre-existing investment advisory relationship with the
investor under which the investor compensates the fiduciary entity through
payment of an investment advisory fee and the qualifying investment in such
Fund is made within the context of that investment advisory relationship.
SHARES ACQUIRED PURSUANT TO THIS PROVISION ARE NOT ELIGIBLE FOR EXCHANGE AT NET
ASSET VALUE INTO ANOTHER FUND IN THE FRANKLIN GROUP OF FUNDS OR THE TEMPLETON
GROUP.

Shares of each Fund may be purchased at net asset value by persons who have
redeemed, within the previous 120 days, their shares of such Fund or another
fund in the Franklin Group of Funds or the Templeton Group which were purchased
with a sales charge. An investor may reinvest an amount not exceeding the
redemption proceeds. Shares of a Fund redeemed in connection with an exchange
into another fund (see "Exchange Privilege") are not considered "redeemed" for
this privilege. In order to exercise this privilege, a written order for the
purchase of shares of a Fund must be received by such Fund or the Fund's
Shareholder Services Agent within 120 days after the redemption. The 120 days,
however, do not begin to run on redemption proceeds placed immediately after
redemption in a Franklin Bank Certificate of Deposit ("CD") until the CD
(including any rollover) matures. Reinvestment at net asset value may also be
handled by a securities dealer or other financial institution, who may charge
the shareholder a fee for this service. The redemption is a taxable transaction
but reinvestment without a sales charge may affect the amount of gain or loss
recognized and the tax basis of the shares reinvested. If there has been a loss
on the redemption, the loss may be disallowed if a reinvestment in the same
fund is made within a 30-day period. Information regarding the possible tax
consequences of such a reinvestment is included in the tax section of this
Prospectus and the Statement of Additional Information.

Shares of each Fund may also be purchased at net asset value by (1) officers,
trustees or directors and full-time employees of a Fund or any fund in the
Franklin Group of Funds or the Templeton Group, the Manager and Distributors
and affiliates of such companies, if they have been such for at least 90 days,
and by their spouses and family members, (2) former participants in the
Franklin/Templeton Profit Sharing/401(k) plan, who elect to make a direct
rollover of all, or a portion of, their eligible distribution account balance
from such plan, (3) registered securities dealers and their affiliates, for
their investment account only, and (4) registered

<PAGE>

personnel and employees of securities dealers and by their spouses and family
members, in accordance with the internal policies and procedures of the
employing securities dealer. Such sales are made upon the written assurance of
the purchaser that the purchase is made for investment purposes and that the
securities will not be transferred or resold except through redemption or
repurchase by or on behalf of a Fund. Employees of securities dealers must
obtain a special application from their employers or from Franklin's Sales
Department in order to qualify.

Shares of each Fund may also be purchased at net asset value by any state,
county, or city, or any instrumentality, department, authority or agency
thereof which has determined that such Fund is a legally permissible investment
and which is prohibited by applicable investment laws from paying a sales
charge or commission in connection with the purchase of shares of any
registered management investment company ("an eligible governmental
authority"). SUCH INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO
DETERMINE WHETHER AND TO WHAT EXTENT THE SHARES OF THE FUNDS CONSTITUTE LEGAL
INVESTMENTS FOR THEM. Municipal investors considering investment of proceeds of
bond offerings into the Funds should consult with expert counsel to determine
the effect, if any, of various payments made by a Fund or its investment
manager on arbitrage rebate calculations. If an investment by an eligible
governmental authority at net asset value is made through a dealer who has
executed a dealer agreement with Distributors, Distributors or one of its
affiliates may make a payment, out of their own resources, to such dealer in an
amount not to exceed 0.25% of the amount invested. Contact Franklin's
Institutional Sales Department for additional information.

GENERAL

Securities laws of states in which each Fund's shares are offered for sale may
differ from the interpretations of federal law, and banks and financial
institutions selling shares of such Fund may be required to register as
dealers pursuant to state law.

PURCHASING SHARES OF THE FUNDS IN CONNECTION WITH RETIREMENT PLANS INVOLVING
TAX-DEFERRED INVESTMENTS

Shares of each Fund may be used for retirement programs providing for
tax-deferred investments for both individuals and businesses. Each Fund may be
used as an investment vehicle for an existing retirement plan, or
Franklin/Templeton Trust Company may provide the plan documents and trustee or
custodian services. A plan document must be adopted in order for a plan to be
in existence.

Franklin/Templeton Trust Company, an affiliate of Distributors, can serve as
custodian or trustee for various types of retirement plans. Brochures for
each of the plans sponsored by Franklin contain important information regarding
eligibility, contribution limits and IRS requirements. Please note that the
separate applications other than the one contained in this prospectus must be
used to establish a Franklin/Templeton Trust Company retirement account. To
obtain a retirement plan brochure or application, call toll-free 1-800/DIAL BEN
(1-800/342-5236).

The Franklin IRA is an individual retirement account in which the
contributions, annually limited to the lesser of $2,000 or 100% of an
individual's earned compensation, accumulate on a tax-deferred basis until
withdrawn. Under the current tax law, individuals who (or whose spouses)
are covered by a company retirement plan (termed "active participants") may be
restricted in the amount they may claim as an IRA deduction on

<PAGE>

their returns. The IRA deduction is gradually reduced to the extent that a
taxpayer's adjusted gross incomes exceed certain specified limits.

Two IRAs, with a combined limit of $2,250 or 100% of earned compensation, may
be established by a married couple in which only one spouse is a wage earner.
The $2,250 may be split between the two IRAs, so long as no more than $2,000 is
contributed to either one for a given tax year.

The Franklin 403(b) Retirement Plan is a salary deferral plan for employees of
certain non-profit and educational institutions [Section.501(c)(3)
organizations and public schools]. The 403(b) Plan allows participants to
determine the annual amount of salary they wish to defer. The maximum annual
salary deferral amount is generally the lesser of 25% of compensation (adjusted
for deferrals) or $9,500.

Redemptions from any Franklin retirement plan accounts require the completion
of specific distribution forms to comply with IRS regulations. Please see "How
to Sell Shares of the Fund."

Individuals and employers should consult with a competent tax or financial
advisor before choosing a retirement plan.

*The limit on compensation for determining SEP and qualified plan contributions
is reduced from $235,840 in 1993 to $150,000 in 1994. The new $150,000
limit will be adjusted for inflation, but only in $10,000 increments.

<PAGE>

OTHER PROGRAMS AND PRIVILEGES
AVAILABLE TO EACH FUND'S SHAREHOLDERS

CERTAIN OF THE PROGRAMS AND PRIVILEGES DESCRIBED IN THIS SECTION MAY NOT BE
AVAILABLE DIRECTLY FROM THE FUNDS TO SHAREHOLDERS WHOSE SHARES ARE HELD, OF
RECORD, BY A FINANCIAL INSTITUTION OR IN A "STREET NAME" ACCOUNT OR NETWORKED
ACCOUNT THROUGH THE NATIONAL SECURITIES CLEARING CORPORATION ("NSCC") (SEE THE
SECTION CAPTIONED "ACCOUNT REGISTRATIONS" IN THIS PROSPECTUS).

SHARE CERTIFICATES

Shares for an initial investment, as well as subsequent investments, including
the reinvestment of dividends and capital gain distributions, are generally
credited to an account in the name of an investor on the books of a Fund,
without the issuance of a share certificate. Maintaining shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss
or theft of a share certificate. A lost, stolen or destroyed certificate cannot
be replaced without obtaining a sufficient indemnity bond. The cost of such a
bond, which is generally borne by the shareholder, can be 2% or more of the
value of the lost, stolen or destroyed certificate. A certificate will be
issued if requested in writing by the shareholder or by the securities dealer.

CONFIRMATIONS

AUTOMATIC INVESTMENT PLAN

The market value of the Funds' shares is subject to fluctuation. Before
undertaking any plan for systematic investment, the investor should keep in
mind that such a program does not assure a profit or protect against a loss.

SYSTEMATIC WITHDRAWAL PLAN

A shareholder may establish a Systematic Withdrawal Plan and receive regular
periodic payments from the account provided that the net asset value of the
shares held by the shareholder is at least $5,000. There are no service charges
for establishing or maintaining a Systematic Withdrawal Plan. The minimum
amount which the shareholder may withdraw is $50 per withdrawal transaction
although this is merely the minimum amount allowed under the plan and should
not be mistaken for a recommended amount. The plan may be established on a
monthly, quarterly, semiannual or annual basis. If the shareholder establishes
a plan, any capital gain distributions and income dividends paid by a Fund will
be reinvested for the shareholder's account in additional shares at net asset
value. Payments will then be made from the liquidation of shares at net asset
value on the day of the transaction (which is generally the first business day
of the month in which the payment is scheduled) with payment generally received
by the

<PAGE>

shareholder three to five days after the date of liquidation. By completing the
"Special Payment Instructions for Distributions" section of the Shareholder
Application included with this Prospectus, a shareholder may direct the
selected withdrawals to another fund in the Franklin Group of Funds or the
Templeton Group, to another person, or directly to a checking account. If the
bank at which the account is maintained is a member of the Automated Clearing
House, the payments may be made automatically by electronic funds transfer. If
this last option is requested, the shareholder should allow at least 15 days
for initial processing. Withdrawals which may be paid in the interim will be
sent to the address of record. Liquidation of shares may reduce or possibly
exhaust the shares in the shareholder's account, to the extent withdrawals
exceed shares earned through dividends and distributions, particularly in the
event of a market decline. If the withdrawal amount exceeds the total plan
balance, the account will be closed and the remaining balance will be sent to
the shareholder. As with other redemptions, a liquidation to make a withdrawal
payment is a sale for federal income tax purposes. Because the amount withdrawn
under the plan may be more than the shareholder's actual yield or income, part
of the payment may be a return of the shareholder's investment.

The maintenance of a Systematic Withdrawal Plan concurrently with purchases of
additional shares of a Fund would be disadvantageous because of the sales
charge on the additional purchases. The shareholder should ordinarily not make
additional investments of less than $5,000 or three times the annual
withdrawals under the plan during the time such a plan is in effect. A
Systematic Withdrawal Plan may be terminated on written notice by the
shareholder or a Fund, and it will terminate automatically if all shares are
liquidated or withdrawn from the account, or upon a Fund's receipt of
notification of the death or incapacity of the shareholder. Shareholders may
change the amount (but not below the specified minimum) and schedule of
withdrawal payments, or suspend one such payment by giving written notice to
Investor Services at least seven business days prior to the end of the month
preceding a scheduled payment. Share certificates may not be issued while a
Systematic Withdrawal Plan is in effect.

INSTITUTIONAL ACCOUNTS

There may be additional methods of purchasing, redeeming or exchanging shares
of a Fund available to institutional accounts. For further information, contact
Franklin's Institutional Services Department at 1-800/321-8563.

EXCHANGE PRIVILEGE

The Franklin Group of Funds(R) and the Templeton Group consist of a number of
investment companies with various investment objectives or policies. The shares
of most of these investment companies are offered to the public with a sales
charge. If a shareholder's investment objective or outlook for the securities
markets changes, the Funds shares may be exchanged for shares of other mutual
funds in the Franklin Group of Funds or the Templeton Group (as defined under
"How to Buy Shares of a Fund") which are eligible for sale in the shareholder's
state of residence and in conformity with such fund's stated eligibility
requirements and investment minimums. Investors should review the prospectus of
the fund they wish to exchange from and the fund they wish to exchange into for
all specific requirements or limitations on exercising the exchange privilege,
for example, minimum holding periods or applicable sales charges. Exchanges may
be made in any of the following ways:

<PAGE>

EXCHANGES BY MAIL

EXCHANGES BY TELEPHONE

SHAREHOLDERS, OR THEIR INVESTMENT REPRESENTATIVE OF RECORD, IF ANY, MAY
EXCHANGE SHARES OF A FUND BY TELEPHONE BY CALLING INVESTOR SERVICES AT
1-800/632-2301. IF THE SHAREHOLDER DOES NOT WISH THIS PRIVILEGE EXTENDED TO A
PARTICULAR ACCOUNT, THE FUNDS OR INVESTOR SERVICES SHOULD BE NOTIFIED.

The Telephone Exchange Privilege allows a shareholder to effect exchanges from
a Fund into an identically registered account in one of the other available
funds in the Franklin Group of Funds or the Templeton Group. The Telephone
Exchange Privilege is available only for uncertificated shares or those which
have previously been deposited in the shareholder's account. The Funds and
Investor Services will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Please refer to "Telephone
Transactions - Verification Procedures."

EXCHANGES THROUGH SECURITIES DEALERS

As is the case with all purchases and redemptions of a Fund's shares, Investor
Services will accept exchange orders by telephone or by other means of
electronic transmission from securities dealers who execute a dealer or similar
agreement with Distributors. See also "Exchanges By Telephone" above. Such a
dealer-ordered exchange will be effective only for uncertificated shares on
deposit in the shareholder's account or for which certificates have previously
been deposited. A securities dealer may charge a fee for handling an exchange.

ADDITIONAL INFORMATION REGARDING EXCHANGES

Exchanges are made on the basis of the net asset values of the funds involved,
except as set forth below. Exchanges of shares of a Fund which were purchased
without a sales charge will be charged a sales charge in accordance with the
terms of the prospectus of the fund being purchased, unless the investment on
which no sales charge was paid was transferred in from a fund on which the
investor paid a sales charge. Exchanges of shares of a Fund which were
purchased with a lower sales charge to a fund which has a higher sales charge
will be charged the difference, unless the shares were held in a Fund for at
least six months prior to executing the exchange. When an investor requests the
exchange of the total value of a Fund account, declared but unpaid income and
capital gain dividends will be transferred to the fund being exchanged into and
will be invested at net asset value. Because the exchange is considered a
redemption and purchase of shares, the shareholder may realize a gain or loss
for federal income tax purposes. Backup withholding and information reporting
may also apply. Information regarding the possible tax consequences of such an
exchange is included in the tax section in this Prospectus and in the Statement
of Additional Information.

<PAGE>

If a substantial portion of a Fund's shareholders should, within a short
period, elect to redeem their shares of a Fund pursuant to the exchange
privilege, the Fund might have to liquidate portfolio securities it might
otherwise hold and incur the additional costs related to such transactions. On
the other hand, increased use of the exchange privilege may result in periodic
large inflows of money. If this should occur, it is the general policy of each
Fund to initially invest this money in short-term, interest-bearing money
market instruments, unless it is felt that attractive investment opportunities
consistent with the Fund's investment objectives exist immediately.
Subsequently, this money will be withdrawn from such short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.

The Exchange Privilege may be modified or discontinued by a Fund at any time
upon 60 days' written notice to shareholders.

RETIREMENT ACCOUNTS

The equivalent of an exchange involving retirement accounts (including IRAs)
between the Franklin Group of Funds and the Templeton Group can be accomplished
through a trustee-to-trustee transfer and requires the completion of additional
documentation before it can be effected. Franklin/Templeton IRA and 403(b)
retirement accounts may accomplish exchanges directly. Certain restrictions may
apply to other types of retirement plans. See "Restricted Accounts" under
"Telephone Transactions." Call 1-800/527-2020 for further information and
forms.

TIMING ACCOUNTS

RESTRICTIONS ON EXCHANGES

In accordance with the terms of their respective prospectuses, certain funds do
not accept or may place differing limitations than those below on exchanges by
Timing Accounts.

Each Fund reserves the right to temporarily or permanently terminate the
exchange privilege or reject any specific purchase order for any Timing Account
or any person whose transactions seem to follow a timing pattern who: (i) make
an exchange request out of the Fund within two weeks of an earlier exchange
request out of the Fund, or (ii) make more than two exchanges out of the Fund
per calendar quarter, or (iii) exchange shares equal in value to at least $5
million dollars, or more than 1% of the Fund's net assets. Accounts under
common ownership or control, including accounts administered so as to redeem or
purchase shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.

Each Fund reserves the right to refuse the purchase side of exchange requests
by any Timing Account, person, or group if, in the Manager's judgment, a Fund
would be unable to invest effectively in accordance with its investment
objectives and policies, or would otherwise potentially be adversely affected.
A shareholder's purchase exchanges may be restricted or refused if a Fund
receives or anticipates simultaneous orders affecting significant portions of a
Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.

Each Fund and Distributors also, as indicated in "How to Buy Shares of a Fund,"
reserve the right to refuse any order for the purchase of shares.

<PAGE>

HOW TO SELL SHARES OF A FUND

A shareholder may at any time liquidate shares owned and receive from a Fund
the value of the shares. Shares may be redeemed in any of the following ways:

REDEMPTIONS BY MAIL

Send a written request, signed by all registered owners, to Investor Services
at the address shown on the back cover of this Prospectus and any share
certificates which have been issued for the shares being redeemed, properly
endorsed and in order for transfer. The shareholder will then receive from such
Fund the value of the shares based upon the net asset value per share next
computed after the written request in proper form is received by Investor
Services. Redemption requests received after the time at which the net asset
value is calculated (at 1:15 p.m. Pacific time) each day that the Exchange is
open for business will receive the price calculated on the following business
day. Shareholders are requested to provide a telephone number(s) where they may
be reached during business hours, or in the evening if preferred. Investor
Services' ability to contact a shareholder promptly when necessary will speed
the processing of the redemption.

TO BE CONSIDERED IN PROPER FORM, SIGNATURE(S) MUST BE GUARANTEED IF THE
REDEMPTION REQUEST INVOLVES ANY OF THE FOLLOWING:

(1) the proceeds of the redemption are over $50,000;

(2) the proceeds (in any amount) are to be paid to someone other than the
registered owner(s) of the account;

(3) the proceeds (in any amount) are to be sent to any address other than the
shareholder's address of record, preauthorized bank account or brokerage
firm account;

(4) share certificates, if the redemption proceeds are in excess of $50,000; or

(5) a Fund or Investor Services believes that a signature guarantee would
protect against potential claims based on the transfer instructions,
including, for example, when (a) the current address of one or more joint
owners of an account cannot be confirmed, (b) multiple owners have a
dispute or give inconsistent instructions to a Fund, (c) a Fund has been
notified of an adverse claim, (d) the instructions received by a Fund are
given by an agent, not the actual registered owner, (e) a Fund determines
that joint owners who are married to each other are separated or may be
the subject of divorce proceedings, or (f) the authority of a
representative of a corporation, partnership, association, or other entity
has not been established to the satisfaction of a Fund.

Where shares to be redeemed are represented by share certificates, the request
for redemption must be accompanied by the share certificate and a

<PAGE>

share assignment form signed by the registered shareholders exactly as the
account is registered, with the signature(s) guaranteed as referenced above.
Shareholders are advised, for their own protection, to send the share
certificate and assignment form in separate envelopes if they are being mailed
in for redemption.

Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction require the following
documentation to be in proper form:

Corporation - (1) Signature guaranteed letter of instruction from the
authorized officer(s) of the corporation, and (2) a corporate resolution.

Custodial (other than a retirement account) - Signature guaranteed letter of
instruction from the custodian.

Accounts under court jurisdiction - Check court documents and the applicable
state law since these accounts have varying requirements, depending upon the
state of residence.

Payment for redeemed shares will be sent to the shareholder within seven days
after receipt of the request in proper form.

REDEMPTIONS BY TELEPHONE

Shareholders who file a Telephone Transaction Application (the "Application")
may redeem shares of a Fund by telephone, subject to the Restricted Account
exception noted under "Telephone Transactions - Restricted Accounts." THE
APPLICATION MAY BE OBTAINED BY WRITING TO THE FUNDS OR INVESTOR SERVICES AT THE
ADDRESS SHOWN ON THE COVER OR BY CALLING 1-800/632-2301. THE FUNDS AND INVESTOR
SERVICES WILL EMPLOY REASONABLE PROCEDURES TO CONFIRM THAT INSTRUCTIONS GIVEN
BY TELEPHONE ARE GENUINE. SHAREHOLDERS, HOWEVER, BEAR THE RISK OF LOSS IN
CERTAIN CASES AS DESCRIBED UNDER "TELEPHONE TRANSACTIONS - VERIFICATION
PROCEDURES."

For shareholder accounts with a completed Application on file, redemptions of
uncertificated shares or shares which have previously been deposited with a
Fund or Investor Services may be made for up to $50,000 per day per Fund
account. Telephone redemption requests received before 1:15 p.m. Pacific time
on any business day will be processed that same day. The redemption check will
be sent within seven days, made payable to all the registered owners on the
account, and will be sent only to the address of record. Redemption requests by
telephone will not be accepted within 30 days following an address change by
telephone. In that case, a shareholder should follow the other redemption
procedures set forth in this Prospectus. Institutional accounts (certain
corporations, bank trust departments, government entities, and qualified
retirement plans which qualify to purchase shares at net asset value pursuant
to the terms of this Prospectus) which wish to execute redemptions in excess of
$50,000 must complete an Institutional Telephone Privileges Agreement which is
available from Franklin's Institutional Services Department by telephoning
1-800/321-8563.

REDEEMING SHARES THROUGH SECURITIES DEALERS

Each Fund will accept redemption orders by telephone or other means of
electronic transmission from securities dealers who have entered into a dealer
or similar agreement with Distributors. This

<PAGE>

is known as a repurchase. The only difference between a normal redemption and a
repurchase is that if the shareholder redeems shares through a dealer, the
redemption price will be the net asset value next calculated after the
shareholder's dealer receives the order which is promptly transmitted to a
Fund, rather than on the day a Fund receives the shareholder's written request
in proper form. These documents, as described in the preceding section, are
required even if the shareholder's securities dealer has placed the repurchase
order. After receipt of a repurchase order from the dealer, a Fund will still
require a signed letter of instruction and all other documents set forth above.
A shareholder's letter should reference a Fund, the account number, the fact
that the repurchase was ordered by a dealer and the dealer's name. Details of
the dealer-ordered trade, such as trade date, confirmation number, and the
amount of shares or dollars, will help speed processing of the redemption. The
seven-day period within which the proceeds of the shareholder's redemption will
be sent will begin when a Fund receives all documents required to complete
("settle") the repurchase in proper form. The redemption proceeds will not earn
dividends or interest during the time between receipt of the dealer's
repurchase order and the date the redemption is processed upon receipt of all
documents necessary to settle the repurchase. Thus, it is in a shareholder's
best interest to have the required documentation completed and forwarded to a
Fund as soon as possible. The shareholder's dealer may charge a fee for
handling the order. The Statement of Additional Information contains more
information on the redemption of shares.

ADDITIONAL INFORMATION REGARDING REDEMPTIONS

Each Fund may delay the mailing of the redemption check, or a portion thereof,
until the clearance of the check used to purchase Fund shares, which may take
up to 15 days or more. Although the use of a certified or cashier's check will
generally reduce this delay, shares purchased with these checks will also be
held pending clearance. Shares purchased by federal funds wire are available
for immediate redemption. In addition, the right of redemption may be suspended
or the date of payment postponed if the Exchange is closed (other than
customary closing) or upon the determination of the SEC that trading on the
Exchange is restricted or an emergency exists, or if the SEC permits it, by
order, for the protection of shareholders. Of course, the amount received may
be more or less than the amount invested by the shareholder, depending on
fluctuations in the market value of securities owned by a Fund.

RETIREMENT ACCOUNTS

OTHER

For any information required about a proposed liquidation, a shareholder may
call Franklin's Shareholder Services Department or the securities dealer may
call Franklin's Dealer Services Department.

TELEPHONE TRANSACTIONS

Shareholders of each Fund and their investment representative of record, if
any, may be able to execute various transactions by calling Investor Services
at 1-800/632-2301. All shareholders will be able to: (i) effect a change in
address, (ii) change a dividend option (see "Restricted Accounts" below), (iii)
transfer Fund shares in one account to another identically registered account
in a Fund, (iv) ex-

<PAGE>

change Fund shares as described in this Prospectus by telephone. In addition,
shareholders who complete and file an Application as described under "How to
Sell Shares of a Fund - Redemptions by Telephone" will be able to redeem shares
of a Fund.

VERIFICATION PROCEDURES

Each Fund and Investor Services will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. These will include:
recording all telephone calls requesting account activity by telephone,
requiring that the caller provide certain personal and/or account information
requested by the telephone service agent at the time of the call for the
purpose of establishing the caller's identification, and by sending a
confirmation statement on redemptions to the address of record each time
account activity is initiated by telephone. So long as the Funds and Investor
Services follow instructions communicated by telephone which were reasonably
believed to be genuine at the time of their receipt, neither they nor their
affiliates will be liable for any loss to the shareholder caused by an
unauthorized transaction. Shareholders are, of course, under no obligation to
apply for or accept telephone transaction privileges. In any instance where the
Funds or Investor Services is not reasonably satisfied that instructions
received by telephone are genuine, the requested transaction will not be
executed, and neither a Fund nor Investor Services will be liable for any
losses which may occur because of a delay in implementing a transaction.

RESTRICTED ACCOUNTS

Telephone redemptions and dividend option changes may not be accepted on
Franklin/Templeton Trust Company ("FTTC") retirement accounts. To assure
compliance with all applicable regulations, special forms are required for any
distribution, redemption, or dividend payment. Currently, while the telephone
exchange privilege is extended to these retirement accounts, a
Franklin/Templeton Transfer Authorization Form must be on file in order to
transfer retirement plan assets between a Franklin fund and a Templeton fund
within the same plan type. This authorization form, however, will not be
required for Franklin/Templeton IRA and 403(b) retirement accounts. Certain
restrictions may apply to other types of retirement plans. Changes to dividend
options must also be made in writing.

GENERAL

Neither the Funds nor Investor Services will be liable for any losses resulting
from the inability of a shareholder to execute a telephone transaction.

The telephone transaction privilege may be modified or discontinued by a Fund
at any time upon 60 days' written notice to shareholders.

VALUATION OF EACH FUND'S SHARES

The net asset value per share of each Fund is determined as of 1:15 p.m.
Pacific time each day that the Exchange is open for trading. Many newspapers
carry daily quotations of the prior trading

<PAGE>

day's closing "bid" (net asset value) and "ask" (offering price, which includes
the maximum sales charge of each Fund's shares).

The net asset value per share of each Fund is determined in the following
manner: The aggregate of all liabilities, including, without limitation, the
current market value of any outstanding options written by a Fund, accrued
expenses and taxes and any necessary reserves, is deducted from the aggregate
gross value of all assets, and the difference is divided by the number of
shares of each Fund outstanding at the time. For the purpose of determining the
aggregate net assets of each Fund, cash and receivables are valued at their
realizable amounts. Interest is recorded as accrued and dividends are recorded
on the ex-dividend date. Portfolio securities listed on a securities exchange
or on the NASDAQ National Market System for which market quotations are readily
available are valued at the last quoted sale price of the day or, if there is
no such reported sale, within the range of the most recent quoted bid and ask
prices. Over-the-counter portfolio securities for which market quotations are
readily available are valued within the range of the most recent bid and ask
prices as obtained from one or more dealers that make markets in the
securities. Portfolio securities which are traded both in the over-the-counter
market and on a stock exchange are valued according to the broadest and most
representative market as determined by the Manager. Portfolio securities
underlying actively traded call options are valued at their market price as
determined above. The current market value of any option held by a Fund is its
last sales price on the relevant exchange prior to the time when assets are
valued. Lacking any sales that day or if the last sale price is outside the bid
and ask prices, the options are valued within the range of the current closing
bid and ask prices if such valuation is believed to fairly reflect the
contract's market value. Other securities for which market quotations are
readily available are valued at the current market price which may be obtained
from a pricing service based on a variety of factors, including recent trades,
institutional size trading in similar types of securities (considering yield,
risk and maturity) and/or developments related to specific issues. Securities
and other assets for which market prices are not readily available are valued
at fair value as determined following procedures approved by the Board of
Trustees. All money market instruments with a maturity of more than 60 days are
valued at current market, as discussed above. With the approval of trustees,
the Funds may utilize a pricing service, bank or securities dealer to perform
any of the above described functions.

Because foreign securities markets may close prior to the time the Funds
determine their net asset value, events affecting the value of portfolio
securities occurring between the time prices are determined and the time the
Funds calculate their net asset value will not be reflected in the affected
Fund's calculation of net asset value unless the Trust's Advisers, under
supervision of the Board of

<PAGE>

Trustees, determine that the particular event would materially affect the
applicable Fund's net asset value. The Funds' portfolio securities listed on
foreign exchanges may trade on days other than the Funds' normal business days,
such as Saturdays. As a result, the net asset value of the Funds may be
significantly affected by such trading on days when shareholders have no access
to the Funds.

HOW TO GET INFORMATION REGARDING AN INVESTMENT IN THE FUNDS

Any questions or communications regarding a shareholder's account should be
directed to Investor Services at the address shown on the back cover of this
Prospectus. From a touch-tone phone, shareholders may obtain current price,
yield or performance information specific to a fund in the Franklin Group of
Funds(R) by calling the automated Franklin TeleFACTS system (day or night) at
1-800/247-1753. Information about the Funds may be accessed by entering Fund
Code 211 for the Global Currency Fund, 213 for the High Income Fund, and 212
for the Hard Currency Fund followed by the # sign, when requested to do so by
the automated operator. To assist shareholders and securities dealers wishing
to speak directly with a representative, the following is a list of the various
Franklin departments, telephone numbers and hours of operation to call. The
same numbers may be used when calling from a rotary phone:

<TABLE>
<CAPTION>
Hours of Operation (Pacific time)
Department Name Telephone No. (Monday through Friday)
- --------------- ------------- --------------------------------
<S> <C> <C>
Shareholder Services 1-800/632-2301 6:00 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 6:00 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 6:00 a.m. to 8:00 p.m.
8:30 a.m. to 5:00 p.m. (Saturday)
Retirement Plans 1-800/527-2020 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 6:00 a.m. to 5:00 p.m.
</TABLE>

PERFORMANCE

Advertisements, sales literature and communications to shareholders may contain
various measures of each Fund's performance, including current yield, various
expressions of total return and current distribution rate. They may
occasionally cite statistics to reflect its volatility or risk.

Average annual total return figures as prescribed by the SEC represent the
average annual percentage change in value of $1,000 invested at the maximum
public offering price (offering price includes sales charge) for one-, five-
and ten-year periods, or portion thereof, to the extent applicable, through the
end of the most recent calendar quarter, assuming reinvestment of all
distributions. A Fund may also furnish total return quotations for other
periods, or based on investments at various sales charge levels or at net asset
value. For such purposes, total return equals the total of all income and
capital gain paid to shareholders, assuming reinvestment of all distributions,
plus (or minus) the change in the value of the original investment, expressed
as a percentage of the purchase price.

<PAGE>

Current yield reflects the income per share earned by each Fund's portfolio
investments; it is calculated by dividing a Fund's net investment income per
share during a recent 30-day period by the maximum public offering price on the
last day of that period and annualizing the result.

Yield which is calculated according to a formula prescribed by the SEC (see the
Statement of Additional Information) is not indicative of the dividends or
distributions which were or will be paid to a Fund's shareholders. Dividends or
distributions paid to shareholders are reflected in the current distribution
rate, which may be quoted to shareholders. The current distribution rate is
computed by dividing the total amount of dividends per share paid by a Fund
during the past 12 months by a current maximum offering price. Under certain
circumstances, such as when there has been a change in the amount of dividend
payout, or a fundamental change in investment policies, it might be appropriate
to annualize the dividends paid during the period such policies were in effect,
rather than using the dividends during the past 12 months. The current
distribution rate differs from the current yield computation because it may
include distributions to shareholders from sources other than dividends and
interest, such as premium income from option writing and short-term capital
gain, and is calculated over a different period of time.

In each case, performance figures are based upon past performance, reflect all
recurring charges against Fund income and will assume the payment of the
maximum sales charge on the purchase of shares. The investment results of a
Fund, like all other investment companies, will fluctuate over time; thus,
performance figures should not be considered to represent what an investment
may earn in the future or what a Fund's yield, distribution rate or total
return may be in any future period.

GENERAL INFORMATION

REPORTS TO SHAREHOLDERS

Each Fund's fiscal year ends April 30. Annual Reports containing audited
financial statements of the Trust, including the auditors' report, and
Semi-Annual Reports containing unaudited financial statements are automatically
sent to shareholders. Additional copies may be obtained, without charge, upon
request to the Trust at the telephone number or address set forth on the cover
page of this prospectus.

Additional information on Fund performance is included in the Trust's Annual
Report to Shareholders and Statement of Additional Information.

ORGANIZATION

The Trust was organized as a Massachusetts business trust on November 6, 1985.
The Trust is authorized to issue an unlimited number of shares of beneficial
interest, with a par value of $.01 per share in various series. All shares have
one vote, and, when issued, are fully paid, non-assessable, and redeemable.
Currently, the Trust issues shares in four series. Additional series may be
added in the future by the Board of Trustees. Shares have no preemptive or
subscription rights, and are fully transferable. There are no conversion
rights; however, holders of shares of any Fund may reinvest all or any portion
of the proceeds from the redemption or repurchase of such shares into shares of
any other fund in the Franklin Group of Funds or the Templeton Group as
described under "Exchange Privilege."

VOTING RIGHTS

<PAGE>

for the election of trustees can elect 100% of the trustees if they choose to
do so. The series of the Trust do not intend to hold annual meetings; they may,
however, hold special shareholder meetings for such purposes as changing
fundamental policies, approving new management agreements or any other matters
which are required to be acted on by shareholders under the 1940 Act. A meeting
may also be called by a majority of the Board of Trustees or by shareholders of
a series of the Trust holding at least ten percent of the shares entitled to
vote at the meeting. Shareholders may receive assistance in communicating with
other shareholders in connection with the election or removal of trustees, such
as that provided in Section 16(c) of the 1940 Act. The Board of Trustees may
from time to time establish other series of the Trust, the assets and
liabilities of which will be separate and distinct from any other fund of the
Trust.

REDEMPTIONS BY THE FUNDS

Each Fund reserves the right to redeem, at net asset value, shares of any
shareholder whose account has a value of less than $50, but only where the
value of such account has been reduced by the shareholder's prior voluntary
redemption of shares and has been inactive (except for the reinvestment of
distributions) for a period of at least six months, provided advance notice is
given to the shareholder. More information is included in the Statement of
Additional Information.

OTHER INFORMATION

Distribution or redemption checks sent to shareholders do not earn interest or
any other income during the time such checks remain uncashed, and neither the
Funds nor their affiliates will be liable for any loss to the shareholder
caused by the shareholder's failure to cash such check(s).

"Cash" payments to or from a Fund may be made by check, draft or wire. The
Trust has no facility to receive, or pay out, cash in the form of currency.

ACCOUNT REGISTRATIONS

Accounts should not be registered in the name of a minor, either as sole or
co-owner of the account. Transfer or redemption for such an account may require
court action to obtain release of the funds until the minor reaches the legal
age of majority. The account should be registered in the name of one "Adult" as
custodian for the benefit of the "Minor" under the Uniform Transfer or Gifts to
Minors Act.

Shares, whether in certificate form or not, registered as joint tenants or "Jt
Ten" shall mean "as joint tenants with rights of survivorship" and not "as
tenants in common."

Except as indicated, a shareholder may transfer an account in a Fund carried in
"street" or "nominee" name by the shareholder's securities dealer to a
comparably registered Fund account maintained

<PAGE>

by another securities dealer. Both the delivering and receiving securities
dealer must have executed dealer agreements on file with Distributors. Unless a
dealer agreement has been executed and is on file with Distributors, a Fund
will not process the transfer and will so inform the shareholder's delivering
securities dealer. To effect the transfer, a shareholder should instruct the
securities dealer to transfer the account to a receiving securities dealer and
sign any documents required by the securities dealer to evidence consent to the
transfer. Under current procedures, the account transfer may be processed by
the delivering securities dealer and a Fund after a Fund receives authorization
in proper form from the shareholder's delivering securities dealer. In the
future it may be possible to effect such transfers electronically through the
services of the NSCC.

The Funds may conclusively accept instructions from an owner or the owner's
nominee listed in publicly available nominee lists, regardless of whether the
account was initially registered in the name of or by the owner, the nominee,
or both. If a securities dealer or other representative is of record on an
investor's account, the investor will be deemed to have authorized the use of
electronic instructions on the account, including, without limitation, those
initiated through the services of the NSCC, to have adopted as instruction and
signature any such electronic instructions received by a Fund and the
Shareholder Services Agent, and to have authorized them to execute the
instructions without further inquiry. At the present time, such services which
are available, or which are anticipated to be made available in the near
future, include the NSCC's "Networking," "Fund/SERV," and "ACATS" systems.

Any questions regarding an intended registration should be answered by the
securities dealer handling the investment, or by calling Franklin's Fund
Information Department.

IMPORTANT NOTICE REGARDING
TAXPAYER IRS CERTIFICATIONS

Pursuant to the Code and U.S. Treasury regulations, the Funds may be required
to report to the Internal Revenue Service ("IRS") any taxable dividend, capital
gain distribution, or other reportable payment (including share redemption
proceeds) and withhold 31% of any such payments made to individuals and other
non-exempt shareholders who have not provided a correct taxpayer identification
number ("TIN") and made certain required certifications that appear in the
Shareholder Application. A shareholder may also be subject to backup
withholding if the IRS or a securities dealer notifies a Fund that the number
furnished by the shareholder is incorrect or that the shareholder is subject to
backup withholding for previous under-reporting of interest or dividend income.

The Funds reserve the right to (1) refuse to open an account for any person
failing to provide a TIN along with the required certifications and (2) close
an account by redeeming its shares in full at the then-current net asset value
upon receipt of notice from the IRS that the TIN certified as correct by the
shareholder is in fact incorrect or upon the failure of a shareholder who has
completed an "awaiting TIN" certification to provide a Fund with a certified
TIN within 60 days after opening the account.

PORTFOLIO OPERATIONS

The following persons are primarily responsible for the day-to-day management
of the Currency Funds' portfolios since November of 1993: Neil S. Devlin and
since 1994: Donald P. Gould.

<PAGE>

Neil S. Devlin, Senior Vice President of Templeton Global Bond Managers and
Portfolio Manager of TICI holds a Bachelor of Arts degree in Economics and
Philosophy from Brandeis University. Mr. Devlin has been in the fixed-income
department at Templeton since 1987 and is actively involved in all fixed-income
decisions, providing information and analysis on markets throughout the world.
Donald P. Gould, Portfolio Manager with Adviser, is President and founder of
the Trust. He joined the Franklin/Templeton organization upon its acquisition
of certain assets of Huntington Advisers, Inc., the former manager, in November
1993. For the 11/2 years prior to joining Franklin/Templeton, Mr. Gould had
acted as a consultant to the Huntington Funds. Prior to that, he had been
employed for seven years by Huntington Advisers, Inc. He has been in the
securities industry since 1981. Mr. Gould holds a Bachelor of Arts degree in
economics from Pomona College (Claremont, California) and a Masters in Business
Administration from Harvard. He has also studied international economics at
Oxford University.

44
<PAGE>

SUPPLEMENT DATED FEBRUARY 1, 1995

TO THE STATEMENT OF ADDITIONAL INFORMATION OF

FRANKLIN/TEMPLETON GERMAN GOVERNMENT BOND FUND

DATED SEPTEMBER 1, 1994

a) The following substitutes subsection "Purchases at Net Asset Value" under
"Additional Information Regarding Fund Shares":

ADDITIONAL INFORMATION REGARDING PURCHASES

Special Net Asset Value Purchases. As discussed in the Prospectus under "How
to Buy Shares of the Fund - Description of Special Net Asset Value
Purchases," certain categories of investors may purchase shares of the Fund
without a front-end sales charge ("net asset value") or a contingent deferred
sales charge. Distributors or one of its affiliates may make payments, out of
its own resources, to securities dealers who initiate and are responsible for
such purchases, as indicated below. As a condition for these payments,
Distributors or its affiliates may require reimbursement from the securities
dealers with respect to certain redemptions made within 12 months of the
calendar month following purchase, as well as other conditions, all of which
may be imposed by an agreement between Distributors, or its affiliates, and
the securities dealer.

The following amounts may be paid by Distributors or one of its affiliates,
out of its own resources, to securities dealers who initiate and are
responsible for (i) purchases of most equity and taxable-income Franklin
Templeton Funds made at net asset value by certain designated retirement
plans (excluding IRA and IRA rollovers): 1.00% on sales of $1 million but
less than $2 million, plus 0.80% on sales of $2 million but less than $3
million, plus 0.50% on sales of $3 million but less than $50 million, plus
0.25% on sales of $50 million but less than $100 million, plus 0.15% on
sales of $100 million or more; and (ii) purchases of most taxable income
Franklin Templeton Funds made at net asset value by non-designated retirement
plans: 0.75% on sales of $1 million but less than $2 million, plus 0.60% on
sales of $2 million but less than $3 million, plus 0.50% on sales of $3
million but less than $50 million, plus 0.25% on sales of $50 million but
less than $100 million, plus 0.15% on sales of $100 million or more. These
payment breakpoints are reset every 12 months for purposes of additional
purchases. With respect to purchases made at net asset value by certain trust
companies and trust departments of banks and certain retirement plans of
organizations with collective retirement plan assets of $10
million or more, Distributors, or one of its affiliates, out of its own
resources, may pay up to 1% of the amount invested.

Letter of Intent. An investor may qualify for a reduced sales charge on the
purchase of shares of the Fund, as described in the prospectus. At any time
within 90 days after the first investment which the investor wants to qualify
for the reduced sales charge, a signed Shareholder Application, with the
Letter of Intent section completed, may be filed with the Fund. After the
Letter of Intent is filed, each additional investment will be entitled to
the sales charge applicable to the level of investment indicated on the
Letter. Sales charge reductions based upon purchases in more than one of the
Franklin Templeton Funds will be effective only after notification to
Distributors that the investment qualifies for a discount. The shareholder's
holdings in the Franklin Templeton Funds acquired more than 90 days before
the Letter of Intent is filed will be counted towards completion of the
Letter of Intent but will not be entitled to a retroactive downward
adjustment in the sales charge. Any redemptions made by the shareholder,
other than by a designated benefit plan during the 13-month period will be
subtracted from the amount of the purchases for purposes of determining
whether the terms of the Letter of Intent have been completed. If the Letter
of Intent is not completed within the 13-month period, there will be an
upward adjustment of the sales charge, depending upon the amount actually
purchased (less redemptions) during the period. The upward adjustment does
not apply to designated benefit plans. An investor who executes a Letter of
Intent prior to a change in the sales charge structure for the Fund
will be entitled to complete the Letter of Intent at the lower of (i) the new
sales charge structure; or (ii) the sales charge structure in effect at the
time the Letter of Intent was filed with the Fund.

As mentioned in the Prospectus, five percent (5%) of the amount of the total
intended purchase will be reserved in shares of the Fund registered in the
investor's name, unless the investor is a designated benefit plan. If the
total purchases, less redemptions, equal the amount specified under the
Letter, the reserved shares will be deposited to an account in the name of
the investor or delivered to the investor or the investor's order. If the
total purchases, less redemptions, exceed the amount specified under the
Letter of Intent and is an amount which would qualify for a further quantity
discount, a retroactive price adjustment will be made by Distributors and
the securities dealer through whom purchases were made pursuant to the
Letter of Intent (to reflect such further quantity discount) on purchases
made within 90 days before and on those made after filing the Letter. The
resulting difference in offering price will be applied to the purchase of
additional shares at the offering price applicable to a single purchase or
the dollar amount of the total purchases. If the total purchases, less
redemptions, are less than the amount specified under the Letter, the
investor will remit to Distributors an amount equal to the difference in the
dollar amount of sales charge actually paid and the amount of
sales charge which would have applied to the aggregate purchases if the total
of such purchases had

<PAGE>

been made at a single time. Upon such remittance the reserved shares held for
the investor's account will be deposited to an account in the name of the
investor or delivered to the investor or to the investor's order. If within 20
days after written request such difference in sales charge is not paid, the
redemption of an appropriate number of reserved shares to realize such
difference will be made. In the event of a total redemption of the account
prior to fulfillment of the Letter of Intent, the additional sales charge due
will be deducted from the proceeds of the redemption, and the balance will be
forwarded to the investor.

If a Letter of Intent is executed on behalf of a benefit plan (such plans are
described under "Purchases at Net Asset Value" in the Prospectus), the level
and any reduction in sales charge for these designated benefit plans will be
based on actual plan participation and the projected investments in the
Franklin Templeton Funds under the Letter of Intent. Benefit plans are not
subject to the requirement to reserve 5% of the total intended purchase, or to
any penalty as a result of the early termination of a plan, nor are benefit
plans entitled to receive retroactive adjustments in price for investments
made before executing the Letter of Intent.

b) The caption "Purchases and Redemptions through Securities Dealers" is
changed to be a subcaption under "Additional Information Regarding Fund
Shares."

c) The paragraph "Reinvestment Date" under "Additional Information Regarding
Fund Shares" is substituted with the following language:

REINVESTMENT DATE

Shares acquired through the reinvestment of dividends will be purchased at the
net asset value determined on the business day following the dividend record
date (sometimes known as "ex-dividend date"). The processing date for the
reinvestment of dividends may vary from month to month, and does not affect
the amount or value of the shares acquired.

<PAGE>

FRANKLIN/TEMPLETON
GERMAN GOVERNMENT
BOND FUND [LOGO]

STATEMENT OF
ADDITIONAL INFORMATION 777 MARINERS ISLAND BLVD., P.O. BOX 7777
SEPTEMBER 1, 1994 SAN MATEO, CA 94403-7777 1-800/DIAL BEN

<PAGE>

FRANKLIN/TEMPLETON
GERMAN GOVERNMENT
BOND FUND [LOGO]

STATEMENT OF
ADDITIONAL INFORMATION 777 MARINERS ISLAND BLVD., P.O. BOX 7777
SEPTEMBER 1, 1994 SAN MATEO, CA 94403-7777 1-800/DIAL BEN

This Statement of Additional Information pertains to the Franklin/Templeton
German Government Bond Fund (the "Fund"), a separate non-diversified series of
the Franklin/Templeton Global Trust (the "Trust"), formerly known as the
Huntington Funds, an open-end management investment company.

The Fund seeks, over the long term, total return through investment in a
managed portfolio of German government bonds. Total return consists of a
combination of interest income, capital appreciation and currency gains.

A Prospectus for the Fund dated September 1, 1994, as may be amended from time
to time, which provides the basic information a prospective investor should
know before investing in the Fund, may be obtained without charge from the Fund
or the Fund's principal underwriter, Franklin/Templeton Distributors, Inc.
("Distributors"), by mail at the above address or by calling the number shown
above.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT CONTAINS
INFORMATION IN ADDITION TO AND IN MORE DETAIL THAN SET FORTH IN THE PROSPECTUS.
THIS STATEMENT IS INTENDED TO PROVIDE A PROSPECTIVE INVESTOR WITH ADDITIONAL
INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF THE FUND, AND SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS.

<TABLE>
<CAPTION>
CONTENTS PAGE
<S> <C>
About the Fund (See also
the Prospectus "About the Fund"
and "General Information")........................................... 2
The Fund's Investment Objective
and Restrictions (See also the
Prospectus "Investment Objective
and Policies of the Fund")........................................... 2
Potential Benefits of Investing
in German Government Obligations..................................... 5
Officers and Trustees................................................. 6
Investment Advisory and Other Services
(See also the Prospectus
"Management of the Fund")............................................ 10
The Fund's Policies Regarding
Brokers Used on Portfolio Transactions............................... 11
Additional Information Regarding
Fund Shares (See also the Prospectus
"How to Buy Shares of the Fund,"
"How to Sell Shares of the Fund,"
"Valuation of Fund Shares").......................................... 12
Purchases and Redemptions
Through Securities Dealers........................................... 13
Additional Information
Regarding Taxation................................................... 14
The Fund's Underwriter................................................ 16
General Information................................................... 18
Financial Statements.................................................. 22
</TABLE>

<PAGE>

ABOUT THE FUND

The Trust, organized as a Massachusetts business trust on November 6, 1985, is
an open-end, management investment company, known as a mutual fund, and has
registered with the Securities and Exchange Commission ("SEC") under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund, a
non-diversified series of the Trust, is managed by Franklin Advisers, Inc. (the
"Manager" or "Adviser"). Templeton Investment Counsel, Inc. ("TICI" or the
"Subadviser") serves as the subadviser under a contract with the Manager
(together, the "Fund's Advisers"). TICI is an indirect subsidiary of Templeton
Worldwide, Inc., which is a direct, wholly-owned subsidiary of Franklin
Resources, Inc. ("Resources"). (See "Investment Advisory and Other Services.")

THE FUND'S INVESTMENT
OBJECTIVE AND RESTRICTIONS

The following information supplements and should be read in conjunction with
the section in the Fund's Prospectus entitled "Investment Objective and
Policies of the Fund."

INVESTING IN FOREIGN SECURITIES

Foreign securities markets generally are not as developed or efficient as those
in the United States ("U.S."). Securities of some foreign issuers are less
liquid and more volatile than securities of comparable U.S. issuers. Similarly,
volume and liquidity in most foreign securities markets are less than in the
U.S. and, at times, volatility of prices can be greater than in the U.S. In
addition, there may be less publicly available information about a non-U.S.
issuer, and non-U.S. issuers are not generally subject to uniform accounting
and financial reporting standards, practices and requirements comparable to
those applicable to U.S. issuers.

Because foreign securities are purchased with and payable in currencies of
foreign countries, the value of these assets as measured in U.S. dollars will
be affected favorably or unfavorably by changes in currency exchange rates and
exchange control regulations. Currency exchange costs may be incurred when the
Fund sells instruments denominated in one currency and purchases instruments
denominated in another.

Furthermore, some of these securities may be subject to transaction taxes
levied by foreign governments, which would have the effect of increasing the
cost of such investments and which would reduce the realized gain or increase
the realized loss on such securities at the time of sale. Transaction costs and
custodial expenses for a portfolio of non-U.S. securities generally are higher
than for a portfolio of U.S. securities. Interest payments from certain foreign
securities may be subject to foreign withholding taxes on interest income
payable on the securities.

U.S. government policies have in the past, through taxation and other
restrictions, discouraged certain investments abroad by U.S. investors. While
no such restrictions are currently in effect, they could be reinstituted. In
such event, it may be necessary for the Fund to invest temporarily all or
substantially all of its assets in U.S. money market instruments, or it may
become necessary to liquidate the Fund.

The German government obligations in which the Fund invests are denominated in
the German mark and are rated at time of purchase triple A by a U.S. nationally
recognized rating service, such as Standard & Poor's Corporation ("S&P") or
Moody's Investors Service ("Moody's"), or, if unrated, are considered by the
Fund's Advisers to be of a quality comparable to a triple A rated instrument.

Consistent with its investment objective, the Fund may also invest up to 25% of
its total assets in (i) German mark-denominated bonds and other debt
instruments issued by sovereign governments other than the Federal Republic of
Germany and by supranational organizations (such as the World Bank) which are
rated at time of purchase triple A by a U.S. nationally recognized rating
service, such as S&P or Moody's, or which, if unrated, are considered by the
Fund's Advisers to be of a quality comparable to a triple A rated instrument;
and (ii) cash and money market instruments denominated in the German mark which
are rated at time of purchase A-1+ by S&P and/or P-1 by Moody's, or which, if
unrated, are considered by the Fund's Advisers to be of comparable high
quality.

CURRENCY TRANSACTIONS

Generally, the currency exchange transactions of the Fund are conducted on a
spot (i.e., cash) basis at the spot rate prevailing in the currency exchange
market for purchasing or selling currency. The Fund does not engage in hedging
strategies to protect against possible variations in the exchange rates between
the U.S. dollar and the German mark. However, the Fund may enter into forward
currency contracts in conjunction with money market instruments for the purpose
of obtaining an investment result that is substantially equivalent to a direct
investment in a foreign currency-denominated instrument. A forward currency
contract is an agreement

<PAGE>

to purchase or sell a specified currency at a specified future date and price
set at the time of the contract. The Fund may not enter into a forward contract
with a term of more than one year.

When using forward contracts for hedging purposes, the Fund may enter into
forward contracts with respect to specific transactions ("transaction
hedging"). Transaction hedging is the purchase or sale of forward contracts
with respect to specific receivables or payables of the Fund generally owing in
connection with the purchase and sale of portfolio securities. The Fund will
not speculate in forward contracts; the Fund will, however, utilize forward
contracts in conjunction with money market instruments in a manner which is
unrelated to the Fund's normal transaction hedging activities as described
above (i.e., to obtain an investment result that is substantially equivalent to
a direct investment in a foreign currency-denominated instrument).

When the Fund enters into a hedging transaction, its custodian bank will place
cash or high-quality readily marketable liquid debt securities in a segregated
account of the Fund in an amount equal to the value of its total assets
committed to the consummation of such forward contract. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account so that the value of the account will
equal the amount of the Fund's commitment with respect to such contracts.

It may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates. It is possible
that, under certain circumstances, the Fund may have to limit currency
transactions to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code").

At or before the maturity of a forward contract, the Fund may either sell a
portfolio security and make delivery of the currency, or it may retain the
security and terminate its contractual obligation to deliver the currency by
purchasing an "offsetting" contract obligating it to purchase, on the same
maturity date, the same amount of the currency.

If the Fund enters into a forward contract, retains the portfolio security and
engages in an offsetting transaction, the Fund will incur a gain or loss (as
described below) to the extent that there has been movement in forward contract
prices. If the Fund engages in an offsetting transaction, it may subsequently
enter into a new forward contract to sell the currency. Should forward prices
decline during the period between the Fund's entering into a forward contract
for the sale of a currency and the date it enters into an offsetting contract
for the purchase of the currency, the Fund will realize a gain to the extent
that the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the Fund
will suffer a loss to the extent the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.

Transactions in forward contracts by the Fund will be limited to the
transactions described above. Of course, the Fund is not required to enter into
such contracts, and will not do so unless deemed appropriate by the Fund's
Advisers. Investors should realize that the use of forward contracts does not
eliminate fluctuations in the underlying prices of the securities. Such
contracts simply establish a rate of exchange that the Fund can achieve at some
future point in time. Additionally, although such contracts tend to minimize
the risk of loss due to fluctuations in the value of the hedged currency, at
the same time they tend to limit any potential gain which might result from the
change in the value of such currency.

Because the Fund invests primarily in debt securities denominated in German
marks, it may hold German marks pending their investment in such instruments or
their conversion into U.S. dollars. Although the Fund values its assets daily
(as described in its Prospectus) in terms of U.S. dollars, the Fund does not
convert its holdings of German marks into U.S. dollars on a daily basis. It
will do so from time to time, however, and investors should be aware of the
costs of currency conversion. Foreign exchange dealers do not charge a fee for
conversion, but they do realize a profit based on the difference, which is
known as the spread, between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to resell the currency to the dealer.

CURRENCY MOVEMENTS

Exchange rates fluctuate for a number of reasons. Depending on the currency in
question and the point in time, some factors may outweigh others in determining
the course of exchange rate movements.

1. Inflation. The most fundamental reason exchange rates change is to reflect
changes in currencies' purchasing power. Different countries experience
different inflation rates due to different monetary and fiscal policies,
different product and labor market conditions and a host of other factors.

2. Trade Deficits. Countries with trade deficits tend to experience a
depreciating currency. Often, infla-

<PAGE>

tion is the cause of a trade deficit, making a country's goods more expensive
and less competitive and so reducing demand for its currency.

3. Interest Rates. High interest rates tend to boost currency values in the
short run by making such currencies more attractive to investors. Since high
interest rates are often the result of high inflation, however, long-term
results may be the opposite.

4. Budget Deficits and Low Savings Rates. Countries that run large budget
deficits and save little of their national income tend to suffer a depreciating
currency because they are forced to borrow abroad to finance their deficits.
Payments of interest on this debt can "flood" the currency markets with the
currency of the debtor nation. Also, budget deficits can indirectly contribute
to currency depreciation if a government chooses to cope with its deficits and
debt by means of inflation.

5. Political Factors. Political instability in a country can cause a currency
to depreciate. If the country appears a less desirable place in which to invest
and do business, demand for the currency is likely to fall.

6. Government Control. Through their own buying and selling of currencies, the
world's central banks sometimes manipulate exchange rate movements. In
addition, governments occasionally issue statements to influence people's
expectations about the direction of exchange rates, or they may instigate
policies with an exchange rate target as the goal.

INVESTMENT RESTRICTIONS

The Fund has adopted the following restrictions as fundamental policies, which
means that they may not be changed without approval of a majority of the Fund's
shareholders. In order to change any of these restrictions, the lesser of (i)
67% or more of the voting securities of the Fund present at a meeting of
shareholders if the holders of more than 50% of the voting securities of the
Fund are represented at that meeting or (ii) more than 50% of the outstanding
voting securities of the Fund must vote to make the change.

The Fund WILL NOT:
1. Purchase common stocks, preferred stocks, warrants or other equity
securities.

2. Borrow money, except from banks for temporary or emergency (not leveraging)
purposes in an amount up to 33 1/3% of the value of the Fund's total assets
(including the amount borrowed) based on the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of the Fund's total assets, the Fund will not
make any additional investments.

3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except in an
amount up to 33 1/3% of the value of its total assets, but only to secure
borrowing for temporary or emergency purposes provided that the deposit or
payment of initial or variation margin in connection with transactions in
options and futures shall not be treated as a pledge of assets hereunder.

4. Sell securities short or purchase securities on margin, provided that the
deposit or payment of initial or variation margin in connection with
transactions in options and futures shall not be treated as the purchase of
securities on margin hereunder, provided such transactions are effected in
compliance with investment restriction no. 6 below.

5. Underwrite the securities of other issuers, purchase interests in oil, gas
or other mineral exploration or development programs, including mineral leases,
or purchase or sell real estate or securities issued by real estate limited
partnerships, real estate investment trusts, or by companies that invest in
real estate or interests therein.

6. Invest more than 10% of its net assets in (i) securities subject to
restrictions on disposition under the Securities Act of 1933 ("restricted
securities") or other illiquid securities, (ii) repurchase agreements providing
for settlement in more than seven days, (iii) options which are traded in the
over-the-counter market and investments hedged by such options, and (iv) other
securities which are not readily marketable, provided that the Fund may invest
up to 15% of its net assets in time deposits of over seven days duration. The
Fund may not write put or call options on securities, but the Fund may buy and
sell put and call options on securities, financial futures contracts and
options thereon, provided that (A) the aggregate premiums paid on all such
options which are held at any time by the Fund do not exceed 20% of the Fund's
net assets, and (B) the aggregate margin deposits required on all such futures
contracts or options thereon do not exceed 5% of the Fund's total assets.

7. Purchase or sell commodities, except that the Fund may purchase or sell
currencies, may enter into futures contracts on securities, currencies,
securities and other indices or any other financial instruments, and may
purchase and sell options on such futures contracts.

8. Make loans to others except through the purchase of debt obligations
referred to in its Prospectus and the entry into repurchase agreements and
portfolio lending agreements, provided that the

<PAGE>

value of securities subject to such lending agreements may not exceed 30% of
the value of the Fund's total assets. Any loans of portfolio securities will be
made according to guidelines established by the SEC and the Trust's Board of
Trustees, including maintenance of collateral of the borrower equal at all
times to at least the current market value of the securities loaned.

9. Invest more than 25% of its assets in the securities of issuers in any
single industry (or in the securities of any single governmental issuer),
provided that (i) there shall be no limitation on the purchase of securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
and (ii) the Fund will invest more than 25% of its assets in debt obligations
issued or guaranteed by the Federal Republic of Germany, its agencies,
instrumentalities or political subdivisions.

10. Have invested as of the last day of any fiscal quarter (or other measuring
period used for purposes of determining compliance with Subchapter M of the
Code) (i) more than 25% of its total assets in the securities of any one
issuer, or (ii) with respect to 50% of the Fund's total assets, more than 5% of
its total assets in the obligations of any one issuer, except for cash and cash
items and securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, provided that for purposes of this restriction debt
securities issued by different agencies, instrumentalities or political
subdivisions of a national government other than the U.S. Government that are
not guaranteed by the full faith and credit of such national government may be
deemed to have been issued by different issuers.

11. Invest in companies for the purpose of exercising control.

12. Invest in securities of other investment companies.

13. Purchase the securities of any issuer having less than three years'
continuous operations (or any predecessors) if such purchase would cause the
value of the Fund's investments in all such issuers to exceed 5% of the value
of its total assets.

14. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (i) making any
otherwise permitted borrowing, mortgages or pledges, or (ii) entering into
option contracts, futures contracts, forward contracts or repurchase
transactions.

15. Purchase or retain securities of any issuer if the officers, directors or
trustees of the Fund, its investment manager or investment adviser who own
beneficially more than 1/2 of 1% of such securities outstanding together own
beneficially more than 5% of such securities.

If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in such percentage resulting from a change in values
or assets will not constitute a violation of that restriction. The Fund has no
current intention of investing in the securities of other investment companies.

POTENTIAL BENEFITS OF INVESTING IN
GERMAN GOVERNMENT OBLIGATIONS

The following information supplements and should be read in conjunction with
the Sections in the Fund's Prospectus entitled "Investment Objective and
Policies of the Fund" and "Investing in German Government Obligations."

As a general principle, the Fund's Advisers believe that investing outside of
the U.S. may be beneficial for any investor over a long term. Through
diversification into German government obligations, U.S. dollar-based investors
may seek to achieve a number of different potential benefits, as discussed
below.

Higher Current Yields. German government obligations may, from time to
time, pay higher current yields than U.S. government bonds of comparable
maturity. U.S. investors may wish to take advantage of these higher yields when
available by investing in the Fund. Primarily because of interest rate and
currency risk, the total return on German government obligations may be higher
or lower than the total return on U.S. government bonds, regardless of which
market offers higher yields at the time of investment. However, when available,
the higher current yields on German government obligations will provide a
margin of protection against adverse movements of currency exchange rates
and/or relative interest rates.

Capital Appreciation. When German market interest rates decline, German
government obligation prices (expressed in German marks) generally will
increase. Investors anticipating a general decline in German interest rates may
wish to invest in the Fund for the opportunity to participate in such capital
gains, should interest rates eventually decline. U.S. investors should
recognize, however, that adverse movements in currency exchange rates could
partially or completely offset any such price appreciation.

Currency Gains. When the German mark appreciates relative to the U.S. dollar
(i.e., the dollar declines), the U.S. dollar price of securities denominated in
German marks, such as German government obligations, will appreciate, other
things being equal. Investors anticipating appreciation of the German mark
against the U.S. dollar may wish

<PAGE>

to invest in the Fund for the opportunity to participate in such currency
gains, should such favorable exchange rate movement materialize. U.S.
investors should recognize, however, that an increase in German interest rates
would cause depreciation in German government obligation prices (expressed in
German marks) with a similar effect on the Fund's net asset value, which could
partially or completely offset any such currency gains.

Safety of Principal. U.S. investors may wish to invest in the Fund for safety
of principal due to the high credit quality of German government obligations.
Of course, the total return on German government obligations and on the Fund
will also be affected positively or negatively by German interest rate and
currency exchange rate movements.

U.S. investors may also wish to broaden the degree of credit diversification in
their portfolios by including obligations of foreign issuers, such as German
government obligations, through an investment in the Fund. In general, by
increasing credit diversification within a portfolio of fixed-income
securities, an investor may lessen portfolio exposure to adverse developments
affecting any one particular issuer.

Portfolio Diversification. Returns on non-U.S. investments such as German
government obligations tend not to reflect a high degree of correlation with
returns on U.S. financial assets such as U.S. stocks and bonds. This lack of
correlation arises from the fact that at any particular point in time,
countries are likely to differ with respect to: a) the status of their economy
within the overall business cycle; b) the level and direction of inflation and
interest rates; c) the mix of fiscal and monetary policy, d) the strength or
weakness of their domestic currency on foreign exchange markets; and e) the
degree to which one-time events (such as German unification) may have a
material impact on the economy. In general, combining assets the returns on
which are not highly correlated can be expected to reduce the variability of
portfolio returns over time, as weak performance in one asset class is, from
time to time, offset by the strong performance of another asset class. In
general, it can be shown that, up to a point, international diversification of
a U.S. portfolio has reduced overall portfolio volatility in the past. There
can be no assurance, however, that this will be the case in the future.

Protection of Global Purchasing Power. Depreciation of the U.S. dollar relative
to other major foreign currencies over time reduces the global purchasing power
of U.S. investors, i.e., it increases the amount of dollars required to buy any
given basket of goods and services from around the world. U.S. dollar
depreciation may cause the dollar price to rise both on imports as well as on
domestic output for which there is foreign competition, such as automobiles.
Given the increasing role of imports in U.S. consumption patterns in recent
years, finding ways to protect global purchasing power may be of increasing
importance to Americans now and in the future.

Investments in foreign currency-denominated securities, such as German
government obligations, through an investment in the Fund may help maintain the
global purchasing power of a U.S. investor's portfolio, in the event that the
U.S. dollar depreciates relative to the German mark in the future. Of course,
such currency diversification of an investor's portfolio can work to the
investor's benefit or detriment, depending on the future movement of currency
exchange rates, among other things.

OFFICERS AND TRUSTEES

The Board of Trustees has the responsibility for the overall management of the
Trust and the Fund, including general supervision and review of the Fund's
investment activities. The trustees, in turn, elect the officers of the Trust
who are responsible for administering the day-to-day operations of the Trust.
The affiliations of the officers and trustees and their principal occupations
for the past five years are listed below. Trustees who are deemed to be
"interested persons" of the Trust, as defined in the 1940 Act, are indicated by
an asterisk (*).

<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND ADDRESS WITH THE FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
---------------- --------------------- --------------------------------------------
<S> <C> <C>
Frank H. Abbott, III Trustee President and Director, Abbott Corporation (an investment company); Director,
1045 Sansome St. Vacu-Dry Co. (a food processing company) and Mother Lode Gold Mines
San Francisco, CA 94111 Consolidated; and director, trustee or managing general partner, as the case
may be, of most of the investment companies in the Franklin Group of Funds.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND ADDRESS WITH THE FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
---------------- --------------------- --------------------------------------------
<S> <C> <C>
Harris J. Ashton Trustee President, Chief Executive Officer and Chairman of the Board, General Host
General Host Corporation Corporation (nursery and craft centers); Director, RBC Holdings, Inc. (a bank
Metro Center, 1 Station Place holding company),Bar-S Foods and Sunbelt Nursery Group, Inc.; director of
Stamford, CT 06904-2045 certain of the investment companies in the Templeton Group of Funds; and
director, trustee or managing general partner, as the case may be, of most of
the Investment companies in the Franklin Group of Funds.

David K. Eiteman Trustee Since 1959, Professor of Finance in the John E. Anderson Graduate School of
HC2, Box 8076 Management, University of California, Los Angeles. From 1988 to June 1993, a
Frazier Park, CA 93225 Trustee of the Huntington Investment Trust.

S. Joseph Fortunato Trustee Member of the law firm of Pitney, Hardin, Kipp & Szuch; Director of General
Park Avenue at Morris County Host Corporation; director of certain of the investment companies in the
P. O. Box 1945 Templeton Group of Funds; and director, trustee or managing general partner, as
Morristown, NJ 07962-1945 the case may be, of most of the investment companies in the Franklin Group of
Funds.

David W. Garbellano Trustee Private Investor; Assistant Secretary/Treasurer and Director, Berkeley Science
111 New Montgomery St., #402 Corporation (a venture capital company); and director, trustee or managing
San Francisco, CA 94105 general partner, as the case may be, of most of the investment companies in the
Franklin Group of Funds.

* Donald P. Gould President and From February 1992 to present, independent consultant to the Trust and from
777 Mariners Island Blvd. Trustee February 1992 to June 1993, independent consultant to Huntington Investment
San Mateo, CA 94404 Trust. From December 1985 to February 1992, Chairman of the Board of the Trust.
From 1988 to June 1993, President and Trustee, from 1988 to February 1992,
Chairman of the Board, and from April 1990 to June 1993, Chief Financial
Officer and Secretary of Huntington Investment Trust. From October 1985 to
February 1992, President and Director of Huntington Advisers, Inc., a mutual
fund investment adviser, and President of Huntington Investments, Inc., a
mutual fund underwriter.

Gerald R. Healy Trustee Since April 1994, a private consultant. From July 1993 to March 1994, Director
5917 Cleveland Street of Corporate Management Resources of Alliance Imaging, Inc. From 1989,
Morton Grove, IL 60053 Executive Vice President of Capital Health Services Corp. Prior to that time, a
private investor. From 1988 to June 1993, a Trustee of the Huntington
Investment Trust.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND ADDRESS WITH THE FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
---------------- --------------------- --------------------------------------------
<S> <C> <C>
* Charles B. Johnson Chairman of the President and Director, Franklin Resources, Inc. and Franklin/Templeton
777 Mariners Island Blvd. Board and Trustee Distributors, Inc.; Chairman of the Board and Director, Franklin Advisers,
San Mateo, CA 94404 Inc.; Director, Franklin/Templeton Investor Services, Inc. and General Host
Corporation; director of certain of the investment companies in the Templeton
Group of Funds; and officer and/or director, trustee or managing general
partner, as the case may be, of most other subsidiaries of Franklin Resources,
Inc. and of most of the investment companies in the Franklin Group of Funds.

* Rupert H. Johnson, Jr. Vice President Executive Vice President and Director, Franklin Resources, Inc. and
777 Mariners Island Blvd. and Trustee Franklin/Templeton Distributors, Inc.; President and Director, Franklin
San Mateo, CA 94404 Advisers, Inc.; Director, Franklin/Templeton Investor Services, Inc.; director
of certain of the investment companies in the Templeton Group of Funds; and
officer and/or director, trustee or managing general partner, as the case may
be, of most other subsidiaries of Franklin Resources, Inc. and of most of the
investment companies in the Franklin Group of Funds.

David P. Kraus Trustee Since March 1992, of counsel to the Law Offices of Paul E. Fisher. From
2707 Stoner Avenue September 1989 to March 1992, an attorney in Los Angeles. From January 1986 to
Los Angeles, California 90064 September 1989, an attorney with Neiman Billet Albala & Levine. From 1988 to
June 1993, a Trustee of Huntington Investment Trust.

Frank W. T. LaHaye Trustee General Partner, Peregrine Associates and Miller & LaHaye, which are General
20833 Stevens Creek Blvd. Partners of Peregrine Ventures and Peregrine Ventures II (venture capital
Suite 102 firms); Chairman of the Board and Director, Quarterdeck Office Systems, Inc.;
Cupertino, CA 95014 Director, FischerImaging Corporation; and director or trustee, as the case may
be, of most of the investment companies in the Franklin Group of Funds.

Gordon S. Macklin Trustee Chairman, White River Corporation (information services); Director,
8212 Burning Tree Road Fundamerican Enterprises Holdings, Inc., Martin Marietta Corporation, MCI
Bethesda, MD 20817 Communications Corporation, Medimmune, Inc. (biotechnology) and Inforest
Corporation (information services); director of certain of the investment
companies in the Templeton Group of Funds; and director, trustee or managing
general partner, as the case may be, of most of the investment companies in the
Franklin Group of Funds; formerly, Chairman, Hambrecht and Quist Group;
Director, H & Q Healthcare Investors; and President, National Association of
Securities Dealers, Inc.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND ADDRESS WITH THE FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
---------------- --------------------- --------------------------------------------
<S> <C> <C>
Harmon E. Burns Vice President Executive Vice President, Secretary and Director, Franklin Resources, Inc.;
777 Mariners Island Blvd. Executive Vice President and Director, Franklin/Templeton Distributors, Inc.;
San Mateo, CA 94404 Executive Vice President, Franklin Advisers, Inc.; Director, Franklin/Templeton
Investor Services, Inc.; director of certain of the investment companies in the
Templeton Group of Funds; officer and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and officer and/or director or
trustee of all the investment companies in the Franklin Group of Funds.

Kenneth V. Domingues Vice President Senior Vice President, Franklin Resources, Inc. and Franklin Advisers, Inc.;
777 Mariners Island Blvd. and Treasurer Vice President, Franklin/Templeton Distributors, Inc.; officer and/or director,
San Mateo, CA 94404 as the case may be, of other subsidiaries of Franklin Resources, Inc.; and
officer and/or managing general partner, as the case may be, of all the
investment companies in the Franklin Group of Funds.

Deborah R. Gatzek Vice President Senior Vice President - Legal, Franklin Resources, Inc. and Franklin/Templeton
777 Mariners Island Blvd. and Secretary Distributors, Inc.; Vice President, Franklin Advisers, Inc.;
San Mateo, CA 94404 and officer of all the investment companies in the Franklin Group of Funds.

Charles E. Johnson Vice President President and Director of Templeton Worldwide, Inc.; Senior Vice President,
777 Mariners Island Blvd. Franklin Resources, Inc. and Franklin/Templeton Distributors, Inc.; President,
San Mateo CA 94404 Franklin Institutional Services Corporation; director of certain of the
investment companies in the Templeton Group of Funds; officer and/or director,
as the case may be, of some of the subsidiaries of Franklin Resources, Inc.;
and officer and/or director or trustee, as the case may be, of some of the
investment companies in the Franklin Group of Funds.

Edward V. McVey Vice President Senior Vice President/National Sales Manager, Franklin/Templeton Distributors,
777 MARINERS ISLAND BLVD. Inc.; and officer of many of the investment companies in the Franklin Group of
San Mateo, CA 94404 Funds.
</TABLE>

As indicated above, certain of the trustees and officers hold positions with
other companies in the Franklin Group of Funds. Trustees not affiliated with
the Fund's Advisers are currently paid fees of $800 annually plus $800 per
meeting attended and are reimbursed for expenses incurred in connection with
attending such meetings. Such costs are allocated equally among the various
series of the Trust. During the fiscal year ended April 30, 1994, the Fund's
share of these costs was $4,078. No officer or trustee received any other
compensation directly from the Fund. As of June 7, 1994, the trustees and
officers, as a group, owned no shares of the Fund. Certain officers or trustees
who are shareholders of Resources may be deemed to receive indirect
remuneration by virtue of their participation, if any, in the fees paid to its
subsidiaries. Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
Charles E. Johnson is the son of Charles B. Johnson and the nephew of Rupert H.
Johnson, Jr.

From time to time, the number of Fund shares held in the "street name" accounts
of various securities

<PAGE>

dealers for the benefit of their clients or in centralized securities
depositories may exceed 5% of the total shares outstanding. To the best
knowledge of the Trust, no other person holds beneficially or of record more
than 5% of the outstanding common stock of the Fund.

INVESTMENT ADVISORY AND OTHER SERVICES

Resources, the parent company of Adviser and TICI, is a publicly owned holding
company whose shares are listed on the New York Stock Exchange ("Exchange").
Resources owns several other subsidiaries which are involved in investment
management and shareholder services. Such subsidiary companies, together with
Adviser and TICI, currently manage over $113 billion in assets for over 3.5
million shareholders. The preceding table indicates those officers and trustees
who are also affiliated persons of Distributors, Adviser and TICI.

Adviser serves as the Fund's investment adviser pursuant to a management
agreement dated November 12, 1993 (the "Management Agreement"), which was
approved by the trustees of the Trust and by majority vote of the Fund's shares
at a special meeting of shareholders held on November 5, 1993. Pursuant to the
Management Agreement, the Fund is obligated to pay Adviser a fee computed at
the close of business on the first business day of each month equal to an
annual rate of 0.55% of the value of the average daily net assets of the Fund.

The Manager has not imposed its management fees and has assumed responsibility
for making payments, if necessary, to offset certain operating expenses
otherwise payable by the Fund. This action by the Manager to limit its
management fees and to assume responsibility for payment of the expenses
related to the operations of the Fund may be terminated by the Manager at any
time. The Management Agreement specifies that the management fee will be
reduced to the extent necessary to comply with the most stringent limits on the
expenses which may be borne by the Fund as prescribed by any state in which the
Fund's shares are offered for sale. The most stringent current limit requires
the Manager to reduce or eliminate its fee to the extent that aggregate
operating expenses of the Fund (excluding interest, taxes, brokerage
commissions and extraordinary expenses such as litigation costs) would
otherwise exceed in any fiscal year 2 1/2% of the first $30 million of average
net assets of the Fund, 2% of the next $70 million of average net assets of the
Fund and 1 1/2% of average net assets of the Fund in excess of $100 million.
Expense reductions have not been necessary based on state requirements. For the
period November 15, 1993 to April 30, 1994, the management fees the Fund was
contractually obligated to pay the Manager were $35,400. However, after
allowances by the Manager, the Fund paid no fees.

The Management Agreement is in effect until April 30, 1995. Thereafter, it may
continue in effect for successive annual periods providing such continuance is
specifically approved at least annually by a vote of the Trust's Board of
Trustees or, as to the Fund, by a vote of the holders of a majority of the
Fund's outstanding voting securities, and in either event by a majority vote of
the Trust's trustees who are not parties to the Management Agreement or
interested persons of any such party (other than as trustees of the Trust),
cast in person at a meeting called for that purpose. The Management Agreement
may be terminated without penalty at any time by the Fund or by the Manager on
behalf of the Fund on 60 days' written notice and will automatically terminate
in the event of its assignment, as defined in the 1940 Act.

TICI acts as sub-adviser to the Fund pursuant to a contract between TICI and
the Manager on behalf of the Fund. Pursuant to the subadvisory agreement
between the Manager and Sub-Adviser, and subject to the overall policies,
control, direction and review of the Board of Trustees and to the instructions
and supervision of the Manager, Sub-Adviser will provide the day-to-day
portfolio management of the Fund, including investment research and advice with
respect to securities and investments and cash equivalents in the Fund. The
Manager provides investment research and portfolio management services,
including the selection of securities for the Fund to purchase, hold or sell
and the selection of brokers through whom the Fund's portfolio transactions are
executed.

The Manager's activities are subject to the review and supervision of
the Trust's Board of Trustees to whom the Manager renders periodic reports of
the Fund's investment activities. The Manager, at its own expense, furnishes
the Fund with office space and office furnishings, facilities and equipment
required for managing the business affairs of the Fund; maintains all internal
bookkeeping, clerical, secretarial and administrative personnel and services;
and provides certain telephone and other mechanical services. The Manager is
covered by fidelity insurance on its officers, directors and employees for the
protection of the Trust. The Fund bears all of its expenses not assumed by the
Manager. See the Statement of Operations in the finan-

<PAGE>

cial statements at the end of this Statement of Additional Information
for additional details of these expenses.

As stated in the Prospectus, prior to November 12, 1993 Huntington Advisers,
Inc., 251 South Lake Avenue, Suite 600, Pasadena, California 91101, an indirect
wholly-owned subsidiary of Long Beach Bank, served as the Trust's manager and
Bankers Trust Company, 280 Park Avenue, New York, New York 10015, a
wholly-owned subsidiary of Bankers Trust New York Corporation, served as the
Fund's investment adviser. Under its separate agreements, the Fund was
obligated to pay its manager and investment adviser fees totaling $6,560 and
$5,467, respectively, for the Fund's initial period ended April 30, 1993 and
$21,167 and $17,639, respectively, for the period May 1, 1993 to November 15,
1993. However, after allowances by the manager and investment adviser, the Fund
paid no management fees or advisory fees.

Under the subadvisory agreement with the Manager, Sub-Adviser will receive a
fee from the Manager equal to an annual rate of 0.25% of the value of the
average daily net assets of the Fund. TICI's fee will not be paid by the Fund.

Franklin/Templeton Investor Services, Inc. ("Investor Services" or "Shareholder
Services Agent"), a wholly-owned subsidiary of Resources, is the shareholder
servicing agent for the Fund and acts as the Fund's transfer agent and
dividend-paying agent. Investor Services is compensated on the basis of a fixed
fee per account. Prior to November 12, 1993, Fund/Plan Services, Inc., Two Elm
Street, Conshohochken, Pennsylvania 19428, served as the Trust's transfer and
dividend disbursing agent.

Bank of America NT & SA, 555 California Street, 4th Floor, San Francisco,
California 94104, acts as custodian of certain of the securities and other
assets of the Fund. Chase Manhattan Bank, Global Securities Service, Chase
MetroTech Center, Brooklyn, New York 11245, also acts as custodian of certain
securities and other assets of the Fund. Citibank Delaware, One Penn's Way, New
Castle, Delaware 19720, acts as custodian in connection with transfer services
through bank automated clearing houses. The custodians do not participate in
decisions relating to the purchase and sale of portfolio securities. Prior to
November 12, 1993, Bankers Trust Company, 280 Park Avenue, New York, New York
10015, served as the Trust's custodian.

Coopers & Lybrand, 333 Market Street, San Francisco, California 94105, are the
Fund's independent auditors. During the fiscal year ended April 30, 1994, their
auditing services consisted of rendering an opinion on the financial statements
of the Fund included in the Fund's Annual Report and this Statement of
Additional Information. Previous fiscal years of the Fund were audited by other
independent auditors.

THE FUND'S POLICIES REGARDING
BROKERS USED ON PORTFOLIO TRANSACTIONS

Under the current Management Agreement with Adviser, the selection of brokers
and dealers to execute transactions in the Fund's portfolio is made by the
Manager in accordance with criteria set forth in the Management Agreement and
any directions which the Trust's Board of Trustees may give. Under the
subadvisory agreement, Adviser may delegate to TICI the authority to select
securities dealers to execute portfolio transactions for the Fund.

When placing a portfolio transaction, the Fund's Advisers attempt to obtain the
best net price and execution of the transaction. On portfolio transactions
which are done on a securities exchange, the amount of commission paid by the
Fund is negotiated between the Fund's Advisers and the broker executing the
transaction. The Fund's Advisers seek to obtain the lowest commission rate
available from brokers which are felt to be capable of efficient execution of
the transactions. The determination and evaluation of the reasonableness of the
brokerage commissions paid in connection with portfolio transactions are based
to a large degree on the professional opinions of the persons responsible for
the placement and review of such transactions. These opinions are formed on
the basis of, among other things, the experience of these individuals in the
securities industry and information available to them concerning the level of
commissions being paid by other institutional investors of comparable size.
The Fund's Advisers will ordinarily place orders for the purchase and sale of
over-the-counter securities on a principal rather than agency basis with a
principal market maker unless, in the opinion of the Fund's Advisers, a
better price and execution can otherwise be obtained. Purchases of portfolio
securities from underwriters will include a commission or concession paid by
the issuer to the underwriter, and purchases from dealers will include a
spread between the bid and ask price. As a general rule, the Fund does not
purchase bonds in underwritings where it is not given any choice, or only
limited choice, in the designation of dealers to receive the commission.
The Fund will seek to obtain prompt execution of orders at the most favorable
net price.

<PAGE>

The amount of commission is not the only relevant factor to be considered in
the selection of a broker to execute a trade. If it is felt to be in the Fund's
best interests, the Fund's Advisers may place portfolio transactions with
brokers who provide the types of services described below, even if it means the
Fund will have to pay a higher commission than would be the case if no weight
were given to the broker's furnishing of these services. This will be done only
if, in the opinion of the Fund's Advisers, the amount of any additional
commission is reasonable in relation to the value of the services. Higher
commissions will be paid only when the brokerage and research services received
are bona fide and produce a direct benefit to the Fund or assist the Fund's
Advisers in carrying out their responsibilities to the Fund, or when it is
otherwise in the best interest of the Fund to do so, whether or not such data
may also be useful to the Fund's Advisers in advising other clients.

When it is felt that several brokers are equally able to provide the best net
price and execution, the Fund's Advisers may decide to execute transactions
through brokers who provide quotations and other services to the Fund,
specifically including the quotations necessary to determine the value of the
Fund's net assets, in such amount of total brokerage as may reasonably be
required in light of such services, and through brokers who supply research,
statistical and other data to the Fund and the Fund's Advisers in such amount
of total brokerage as may reasonably be required.

It is not possible to place a dollar value on the special executions or on the
research services received by the Fund's Advisers from dealers effecting
transactions in portfolio securities. The allocation of transactions in order
to obtain additional research services permits the Fund's Advisers to
supplement its own research and analysis activities and to receive the views
and information of individuals and research staff of other securities firms. As
long as it is lawful and appropriate to do so, the Fund's Advisers and their
affiliates may use this research and data in their investment advisory
capacities with other clients. Provided that the Trust's officers are satisfied
that the best execution is obtained, the sale of Fund shares may also be
considered as a factor in the selection of securities dealers to execute the
Fund's portfolio transactions.

Because Distributors is a member of the National Association of Securities
Dealers, it is sometimes entitled to obtain certain fees when the Fund tenders
portfolio securities pursuant to a tender-offer solicitation. As a means of
recapturing brokerage for the benefit of the Fund, any portfolio securities
tendered by the Fund will be tendered through Distributors if it is legally
permissible to do so. In turn, the next management fee payable to Adviser under
the Management Agreement will be reduced by the amount of any fees received by
Distributors in cash, less any costs and expenses incurred in connection
therewith.

If purchases or sales of securities of the Fund and one or more other
investment companies or clients supervised by the Fund's Advisers are
considered at or about the same time, transactions in such securities will be
allocated among the several investment companies and clients in a manner deemed
equitable to all by the Fund's Advisers, taking into account the respective
sizes of the funds and the amount of securities to be purchased or sold. It is
recognized that in some cases this procedure could possibly have a detrimental
effect on the price or volume of the security so far as the Fund is concerned.
In other cases it is possible that the ability to participate in volume
transactions and to negotiate lower brokerage commissions will be beneficial to
the Fund.

During the period ended April 30, 1993 and the fiscal year ended April 30,
1994, the Fund paid no brokerage commissions. As of April 30, 1994, the Fund
did not own securities of its regular broker-dealers.

ADDITIONAL INFORMATION
REGARDING FUND SHARES

All checks, drafts, wires and other payment mediums used for purchasing or
redeeming shares of the Fund must be denominated in U.S. dollars. The Fund
reserves the right, in its sole discretion, to either (a) reject any order for
the purchase or sale of shares denominated in any other currency, or (b) honor
the transaction or make adjustments to a shareholder's account for the
transaction as of a date and with a foreign currency exchange factor determined
by the drawee bank.

In connection with exchanges (see Prospectus "Exchange Privilege"), it should
be noted that since the proceeds from the sale of shares of an investment
company generally are not available until the fifth business day following the
redemption, the funds into which the Fund shareholders are seeking to exchange
reserve the right to delay issuing shares pursuant to an exchange until said
fifth business day. The redemption of shares of the Fund to complete an
exchange for shares of any of the investment companies will be effected at the
close of

<PAGE>

business on the day the request for exchange is received in proper form
at the net asset value then effective.

Dividend checks which are returned to the Fund marked "unable to forward" by
the postal service will be deemed to be a request by the shareholder to change
the dividend option and the proceeds will be reinvested in additional shares at
the public offering price (or net asset value if a capital gain distribution)
until new instructions are received.

The Fund may deduct from a shareholder's account the costs of its efforts to
locate a shareholder if mail is returned as undeliverable or the Fund is
otherwise unable to locate the shareholder or verify the current mailing
address. These costs may include a percentage of the account when a search
company charges a percentage fee in exchange for their location services.

Under agreements with certain banks in Taiwan, Republic of China, the Fund's
shares are available to such banks' discretionary trust funds at net asset
value. The banks may charge service fees to their customers who participate in
the discretionary trusts. Pursuant to agreements, a portion of such service
fees may be paid to Distributors, or an affiliate of Distributors, to help
defray expenses of maintaining a service office in Taiwan, including expenses
related to local literature fulfillment and communication facilities.

Shares of the Fund may be offered to investors in Taiwan through securities
firms known locally as Securities Investment Consulting Enterprises. In
conformity with local business practices in Taiwan, shares of the Fund will be
offered with the following schedule of sales charges:

<TABLE>
<CAPTION>
SALES
SIZE OF PURCHASE CHARGE
- ---------------- ------
<S> <C>
Up to U.S. $100,000.............................................. 3%
U.S. $100,000 to U.S. $1,000,000.................................. 2%
Over U.S. $1,000,000............................................. 1%
</TABLE>

PURCHASES AND REDEMPTIONS
THROUGH SECURITIES DEALERS

Orders for the purchase of shares of the Fund received in proper form prior to
1:15 p.m. Pacific time any business day that the Exchange is open for trading
and promptly transmitted to the Fund will be based upon the public offering
price determined that day. Purchase orders received by securities dealers or
other financial institutions after 1:15 p.m. Pacific time will be effected at
the Fund's public offering price on the day it is next calculated. The use of
the term "securities dealer" herein shall include other financial institutions
which, pursuant to an agreement with Distributors (directly or through
affiliates), handle customer orders and accounts with the Fund. Such reference
however is for convenience only and does not indicate a legal conclusion of
capacity.

Orders for the redemption of shares are effected at net asset value subject to
the same conditions concerning time of receipt in proper form. It is the
securities dealer's responsibility to transmit the order in a timely fashion
and any loss to the customer resulting from failure to do so must be settled
between the customer and the securities dealer.

PURCHASES AT NET ASSET VALUE

As discussed in the Prospectus, certain categories of investors may purchase
shares of the Fund at net asset value (without a sales charge) or at a reduced
sales charge. The reason for this is that there is minimal or no sales effort
required with respect to these investors. If certain investments at net asset
value are made through a dealer who has executed a dealer or similar agreement
with Distributors, Distributors or its affiliates may make a payment, out of
their own resources, to such dealer in an amount not to exceed 0.25% of the
amount invested, paid pro rata on a quarterly basis on average quarterly
balances for a period of one year.

REDEMPTIONS IN KIND

The Fund has committed itself to pay in cash (by check) all requests for
redemption by any shareholder of record, limited in amount, however, during any
90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Securities and Exchange Commission. In the case of
requests for redemption in excess of such amounts, the trustees reserve the
right to make payments in whole or in part in securities or other assets of the
Fund from which the shareholder is redeeming, in case of an emergency, or if
the payment of such a redemption in cash would be detrimental to the existing
shareholders of the Fund. In such circumstances, the securities distributed
would be valued at the price used to compute the Fund's net assets. Should the
Fund do so, a shareholder may incur brokerage fees in converting the securities
to cash. None of the Fund's of the Trust intend to redeem illiquid securities
in kind; however, should it happen, shareholders may not be able to timely
recover their investment and may also incur brokerage costs in selling such
securities.

<PAGE>

REDEMPTIONS BY THE FUND

Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, involuntarily, at net asset value, the shares of
any shareholder whose account has a value of less than one-half of the initial
minimum investment required for that shareholder, but only where the value of
such account has been reduced by the shareholder's prior voluntary redemption
of shares. Until further notice, it is the present policy of the Trust not to
exercise this right with respect to any shareholder whose account has a value
of $50 or more. In any event, before the Trust redeems such shares and sends
the proceeds to the shareholder, it will notify the shareholder that the value
of the shares in the account is less than the minimum amount and allow the
shareholder 30 days to make an additional investment in an amount which will
increase the value of the account to at least $100.

CALCULATION OF NET ASSET VALUE

As noted in the Prospectus, the Fund generally calculates net asset value as of
1:15 p.m. Pacific time each day that the Exchange is open for trading. As of
the date of this Statement of Additional Information, the Fund is informed that
the Exchange observes the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.

The Fund's portfolio securities are valued as stated in the Prospectus.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times prior
to the close of the Exchange. The values of such securities used in computing
the net asset value of the Fund's shares are determined as of such times.
Occasionally, events affecting the values of such securities may occur between
the times at which they are determined and 1:00 p.m. Pacific time which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in good
faith by the Board of Trustees.

REINVESTMENT DATE

The dividend reinvestment date is the date on which additional shares are
purchased for the investor who has elected to have dividends reinvested. This
date will vary from month to month, based on operational considerations, and is
not necessarily the same date as the record date or the payable date for cash
dividends.

SPECIAL SERVICES

The Trust and Institutional Services Division of Distributors provides
specialized services, including recordkeeping, for institutional investors of
the Fund. The cost of these services is not borne by the Fund.

Investor Services may pay certain financial institutions which maintain omnibus
accounts with the Fund on behalf of numerous beneficial owners for
recordkeeping operations performed with respect to such beneficial owners. For
each beneficial owner in the omnibus account, the Fund may reimburse Investor
Services an amount not to exceed the per account fee which the Fund normally
pays Investor Services. Such financial institutions may also charge a fee for
their services directly to their clients.

ADDITIONAL INFORMATION REGARDING TAXATION

The following information is a supplement to and should be read in conjunction
with the section in the Fund's Prospectus entitled "Taxation of the Fund and
Its Shareholders."

Under Subchapter M of the Code, the Fund is to be treated as a separate entity
for U.S. federal income tax purposes. As stated in the Prospectus, the Fund has
elected to be treated as a regulated investment company under Subchapter M of
the Code, qualified as such, and intends to continue to so qualify. The
Trustees reserve the right not to maintain the qualification of the Fund as a
regulated investment company if they determine such course of action to be
beneficial to the shareholders. In such case, the Fund will be subject to
federal and possibly state corporate taxes on its taxable income and gains, and
distributions to shareholders will be ordinary dividend income to the extent of
the Fund's available earnings and profits.

The Code requires all funds to distribute at least 98% of their taxable
ordinary income earned during the calendar year and at least 98% of their
capital gain net income earned during the twelve month period ending October 31
of each year (in addition to amounts from the prior year that were neither
distributed nor taxed to the Fund) to shareholders by December 31 of each year
in order to avoid the imposition of a federal excise tax. Under these rules,
certain distributions which are declared in October, November or December but
which, for operational reasons, may not be paid to the shareholder until the
following January, will be treated for tax

<PAGE>

purposes as if paid by the Fund and received by the shareholder on December 31
of the calendar year in which they are declared. The Fund intends as a matter
of policy to declare and pay such dividends, if any, in December to avoid the
imposition of this tax, but does not guarantee that its distributions will be
sufficient to avoid any or all federal excise taxes.

All or a portion of a loss realized upon a redemption of shares will be
disallowed to the extent other shares of the Fund are purchased (through
reinvestment of dividends or otherwise) within 30 days before or after such
redemption. Any loss disallowed under these rules will be added to the tax
basis of the shares purchased.

The Fund's investment in options, futures contracts and forward contracts,
including transactions involving actual or deemed short sales or foreign
exchange gains or losses are subject to many complex and special tax rules. For
example, over-the-counter options on debt securities and equity options,
including options on stock and on narrow-based stock indexes, will be subject
to tax under Section 1234 of the Code, generally producing a long-term or
short-term capital gain or loss upon exercise, lapse, or closing out of the
option or sale of the underlying stock or security. By contrast, the Fund
treatment of certain other options, futures and forward contracts entered into
by the Fund is generally governed by Section 1256 of the Code. These "Section
1256" positions generally include listed options on debt securities, options on
broad-based stock indexes, options on securities indexes, options on futures
contracts, regulated futures contracts and certain foreign currency contracts
and options thereon.

Absent a tax election to the contrary, each such Section 1256 position held by
the Fund will be marked-to-market (i.e., treated as if it were sold for fair
market value) on the last business day of the Fund's fiscal year, and all gain
or loss associated with fiscal year transactions and mark-to-market positions
at fiscal year end (except certain foreign currency gain or loss covered by
Section 988 of the Code, which is treated as ordinary income or loss) will
generally be treated as 60% long-term capital gain or loss and 40% short-term
capital gain or loss. The effect of Section 1256 mark-to-market rules may be to
accelerate income or to convert what otherwise would have been long-term
capital gains into short-term capital gains or short-term capital losses into
long-term capital losses within the Fund. The acceleration of income on Section
1256 positions may require the Fund to accrue taxable income without the
corresponding receipt of cash. In order to generate cash to satisfy the
distribution requirements of the Code, the Fund may be required to dispose of
portfolio securities that it otherwise would have continued to hold or to use
cash flows from other sources such as the sale of Fund shares. In these ways,
any or all of these rules may affect both the amount, character and time of
income distributed to shareholders by the Fund.

When the Fund holds an option or contract which substantially diminishes the
Fund's risk of loss with respect to another position of the Fund (as might
occur in some hedging transactions), this combination of positions could be
treated as a "straddle" for tax purposes, resulting in possible deferral of
losses, adjustments in the holding periods of Fund securities and conversion of
short-term capital losses into long-term capital losses. Certain tax elections
exist for mixed straddles (i.e., straddles comprised of at least one Section
1256 position and at least one non-Section 1256 position) which may reduce or
eliminate the operation of these straddle rules.

As a regulated investment company, the Fund is subject to the requirement that
less than 30% of its annual gross income be derived from the sale or other
disposition of securities and certain other investments held for less than
three months ("short-short income"). This requirement may limit the Fund's
ability to engage in options, straddles, hedging transactions and forward or
futures contracts because these transactions are often consummated in less than
three months, may require the sale of portfolio securities held less than three
months and may, as in the case of short sales of portfolio securities reduce
the holding periods of certain securities within the Fund, resulting in
additional short-short income for the Fund.

The Fund will monitor its transactions in such options and contracts and may
make certain other tax elections in order to mitigate the effect of the above
rules and to prevent disqualification of the Fund as a regulated investment
company under Subchapter M of the Code.

<PAGE>

distributions to shareholders. Additionally, investments in foreign securities
pose special issues to the Fund in meeting its asset diversification and income
tests as a regulated investment company. The Fund will limit its investments in
foreign securities to the extent necessary to comply with these requirements.

In order for the Fund to qualify as a regulated investment company, at least
90% of the Fund's annual gross income must consist of dividends, interest and
certain other types of qualifying income, and no more than 30% of its annual
gross income may be derived from the sale or other disposition of securities on
certain other instruments held for less than three months. Foreign exchange
gains derived by a Fund with respect to the Fund's business of investing in
stock or securities, or options or futures with respect to such stock or
securities is qualifying income for purposes of this 90% limitation.

Currency speculation or the use of currency forward contracts or other currency
instruments for non-hedging purposes may generate gains deemed to be not
derived with respect to the Fund's principal business of investing in stock or
securities and related options or futures. Under current law, non-directly
related gains arising from foreign currency positions or instruments held for
less than three months are treated as derived from the disposition of
securities held less than three months in determining the Fund's compliance
with the 30% limitation. The Fund will limit its activities involving foreign
exchange gains to the extent necessary to comply with these requirements.

The foregoing discussion and related discussion in the Prospectus have been
prepared by the management of the Trust and do not purport to be a complete
description of all tax implications of an investment in the Fund. Shareholders
are advised to consult their own tax advisers with respect to the particular
tax consequences to them of an investment in shares of the Fund.

THE FUND'S UNDERWRITER

Pursuant to an underwriting agreement dated November 12, 1993 in effect until
April 30, 1995, Distributors acts as principal underwriter in a continuous
public offering for shares of the Fund. Prior to that date Huntington
Investments, Inc., an indirect wholly-owned subsidiary of Long Beach Bank and
an affiliate of Huntington Advisers, Inc., the Fund's former manager, served as
the Fund's principal underwriter. Distributors pays the expenses of
distribution of Fund shares, including advertising expenses and the costs of
printing sales material and prospectuses used to offer shares to the public.
The Fund pays the expenses of preparing and printing amendments to its
registration statements and prospectuses (other than those necessitated by the
activities of Distributors) and of sending prospectuses to existing
shareholders.

The underwriting agreement will continue in effect for successive annual
periods thereafter provided that its continuance is specifically approved at
least annually by a vote of the Trust's Board of Trustees or by a vote of the
holders of a majority of the Fund's outstanding voting securities, and in
either event by a majority vote of the Trust's trustees who are not parties to
the underwriting agreement or interested persons of any such party (other than
as trustees of the Trust), cast in person at a meeting called for that purpose.
The underwriting agreement terminates automatically in the event of its
assignment and may be terminated by either party on 90 days' written notice.

Distributors allows to dealers a portion of the underwriting commission on the
sale of Fund shares.

In connection with the offering of shares of all four of the Trust's
series, including the Fund, aggregate underwriting commissions for the period
ended April 30, 1993 and the fiscal year ended April 30, 1994 were $365,441 and
$442,640, respectively. After allowances to dealers, Huntington Investments,
Inc. retained $224,955 and $37,002, for the period ended April 30, 1993 and the
fiscal year ended April 30, 1994, respectively, and Distributors retained
$14,854 for the fiscal year ended April 30, 1994. Huntington Investments, Inc.
and Distributors received no other compensation from the Funds for acting as
underwriter.

DISTRIBUTION PLAN

The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940
Act (the "Plan") whereby the Fund may pay up to a maximum of 0.25% per annum of
its average daily net assets for expenses incurred in the promotion and
distribution of its shares.

<PAGE>

ments, and other distribution-related expenses, including a prorated portion of
Distributors' overhead expenses attributable to the distribution of Fund
shares, as well as any distribution or service fees paid to securities dealers
or their firms or others who have executed a servicing agreement with the Fund,
Distributors or its affiliates.

In addition to the payments to which Distributors or others are entitled under
the Plan, the Plan also provides that to the extent the Fund, the Manager or
Distributors or other parties on behalf of the Fund, the Manager or
Distributors, make payments that are deemed to be payments for the financing of
any activity primarily intended to result in the sale of shares of the Fund
within the context of Rule 12b-1 under the 1940 Act, then such payments shall
be deemed to have been made pursuant to the Plan.

In no event shall the aggregate asset-based sales charges which include
payments made under the Plan, plus any other payments deemed to be made
pursuant to the Plan, exceed the amount permitted to be paid pursuant to the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.,
Article III, Section 26(d)4.

The terms and provisions of the Plan relating to required reports, term, and
approval are consistent with Rule 12b-1. The Plan does not permit unreimbursed
expenses incurred in a particular year to be carried over to or reimbursed in
subsequent years.

To the extent fees are for distribution or marketing functions, as
distinguished from administrative servicing or agency transactions, certain
banks will not be entitled to participate in the Plan as a result of applicable
federal law prohibiting certain banks from engaging in the distribution of
mutual fund shares. Such banking institutions, however, are permitted to
receive fees under the Plan for administrative servicing or for agency
transactions. If a bank were prohibited from providing such services, its
customers who are shareholders would be permitted to remain shareholders of the
Fund, and alternate means for continuing the servicing of such shareholders
would be sought. In such an event, changes in the services provided might occur
and such shareholders might no longer be able to avail themselves of any
automatic investment or other services then being provided by the bank. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these changes. Securities laws of states in which the
Fund's shares are offered for sale may differ from the interpretations of
federal law expressed herein, and banks and financial institutions selling
shares of the Fund may be required to register as dealers pursuant to state
law.

The Board of Trustees has determined that a consistent cash flow resulting from
the sale of new shares is necessary and appropriate to meet redemptions and to
take advantage of buying opportunities of portfolio securities without having
to make unwarranted liquidations of other portfolio securities. The Board of
Trustees, therefore, felt that it would benefit the Fund to have monies
available for the direct distribution activities of Distributors or others in
promoting the sale of its shares. The Board of Trustees, including the
non-interested trustees, concluded that, in the exercise of their reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.

The Plan has been approved by the trustees of the Trust, including those
trustees who are not interested persons, as defined in the 1940 Act and by a
majority vote of the Fund's shares at a special meeting of shareholders held on
November 5, 1993. The Plan is effective through April 30, 1995 and renewable
annually by a vote of the Trust's Board of Trustees, including a majority vote
of the trustees who are non-interested persons of the Trust and who have no
direct or indirect financial interest in the operation of the Plan, cast in
person at a meeting called for that purpose. It is also required that the
selection and nomination of such trustees be done by the non-interested
trustees. The Plan and any related agreement may be terminated at any time,
without any penalty, by vote of a majority of the non-interested trustees on
not more than 60 days' written notice, by Distributors, on not more than 60
days' written notice, by any act that constitutes an assignment of the
Management Agreement with the Manager or the Underwriting Agreement with
Distributors, or by vote of a majority of the Fund's outstanding shares.
Distributors or any dealer or other firm may also terminate their respective
distribution or service agreement at any time upon written notice.

The Plan and any related agreements may not be amended to increase materially
the amount to be spent for distribution expenses without approval by a majority
of the Fund's outstanding shares, and all material amendments to the Plan or
any related agreements shall be approved by a vote of the non-interested
trustees, cast in person at a meeting called for the purpose of voting on any
such amendment.

Distributors is required to report in writing to the Board of Trustees at least
quarterly on the amounts

<PAGE>

and purpose of any payment made under the Plan and any related agreements, as
well as to furnish the Board of Trustees with such other information as may
reasonably be requested in order to enable the Board of Trustees to make an
informed determination of whether the Plan should be continued.

GENERAL INFORMATION

PERFORMANCE

As noted in the Prospectus, the Fund may from time to time quote various
performance figures to illustrate the Fund's past performance. The Fund may
occasionally cite statistics to reflect its volatility or risk.

Performance quotations by investment companies are subject to rules adopted by
the SEC. These rules require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation furnished by
the Fund be accompanied by certain standardized performance information
computed as required by the SEC. Current yield and average annual compounded
total return quotations used by the Fund are based on the standardized methods
of computing performance mandated by the SEC. An explanation of those and other
methods used by the Fund to compute or express performance follows.

TOTAL RETURN

The average annual total return is determined by finding the average annual
compounded rates of return over one-, five- and ten-year periods, or fractional
portion thereof, that would equate an initial hypothetical $1,000 investment to
its ending redeemable value. The calculation assumes the maximum sales charge
is deducted from the initial $1,000 purchase order and income dividends and
capital gains are reinvested at net asset value. The quotation assumes the
account was completely redeemed at the end of each one-, five- and ten-year
period (or fractional portion thereof) and the deduction of all applicable
charges and fees. The average annual compounded rate of return for the Fund for
the one-year period ended April 30, 1994 was -2.35% and for the period from
inception of the Fund (12/31/92) to April 30, 1994 was 2.68%.

These figures were calculated according to the SEC formula:

P(1+T)(n) = ERV

where:

P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the one-, five- or ten-year periods at the end
of the one-, five- or ten-year periods (or fractional portion thereof)

As discussed in the Prospectus, in the future the Fund may quote total rates of
return in addition to its average annual total return. Such quotations are
computed in the same manner as the Fund's average annual compounded rate,
except that such quotations will be based on the Fund's actual return for a
specified period rather than on its average return over one-, five- and
ten-year periods (or fractional portion thereof). The total rate of return for
the Fund for the one-year period ended April 30, 1994 was -2.35% and for the
period from inception of the Fund to April 30, 1994 was 3.59%

In considering the quotations of total return by the Fund, investors should
remember that the 3.00% maximum sales charge reflected in each quotation is a
one time fee (charged on all direct purchases which will have its greatest
impact during the early stages of an investor's investment in the Fund. The
actual performance of an investment will be affected less by this charge the
longer an investor retains the investment in the Fund.

YIELD

Current yield reflects the income per share earned by the Fund's portfolio
investments.

Current yield is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base period. The
yield for the Fund for the 30-day period ended on the date of the financial
statements included herein was 5.40%.

These figures were obtained using the following SEC formula:

Yield = 2 [(a-b + 1)(6) - 1]
---
cd
where:

a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the period

<PAGE>

CURRENT DISTRIBUTION RATE

Yield which is calculated according to a formula prescribed by the SEC is not
indicative of the amounts which were or will be paid to the Fund's
shareholders. Amounts paid to shareholders are reflected in the quoted "current
distribution rate." The current distribution rate is computed by dividing the
total amount of dividends per share paid by the Fund during the past 12 months
by a current maximum offering price. Under certain circumstances, such as when
there has been a change in the amount of dividend payout, or a fundamental
change in investment policies, it might be appropriate to annualize the
dividends paid over the period such policies were in effect, rather than using
the dividends during the past 12 months. The current distribution rate differs
from the current yield computation because it may include distributions to
shareholders from sources other than dividends and interest, such as premium
income from option writing and short-term capital gains and is calculated over
a different period of time.

VOLATILITY

Occasionally statistics may be used to specify Fund volatility or risk.
Measures of volatility or risk are generally used to compare Fund net asset
value or performance relative to a market index. One measure of volatility is
beta. Beta is the volatility of a fund relative to the total market as
represented by the Standard & Poor's 500 Stock Index. A beta of more than 1.00
indicates volatility greater than the market, and a beta of less than 1.00
indicates volatility less than the market. Another measure of volatility or
risk is standard deviation. Standard deviation is used to measure variability
of net asset value or total return around an average over a specified period of
time. The premise is that greater volatility connotes greater risk undertaken
in achieving performance.

OTHER PERFORMANCE QUOTATIONS

With respect to those categories of investors who are permitted to purchase
shares of the Fund at net asset value, sales literature pertaining to the Fund
may quote a current distribution rate, yield, total return, average annual
total return and other measures of performance as described elsewhere in this
Statement of Additional Information with the substitution of net asset value
for the public offering price.

Sales literature referring to the use of the Fund(s) as a potential
investment for Individual Retirement Accounts (IRAs), Business Retirement
Plans, and other tax-advantaged retirement plans may quote a total return based
upon compounding of dividends on which it is presumed no federal income tax
applies.

Regardless of the method used, past performance is not necessarily indicative of
future results, but is an indication of the return to shareholders only for the
limited historical period used. The Fund may include in its advertising or
sales material information relating to investment objectives and performance
results of funds belonging to the Templeton Group of Funds. Resources is the
parent company of the advisers and underwriter of both the Franklin Group of
Funds and Templeton Group of Funds.

COMPARISONS

To help investors better evaluate how an investment in the Fund(s) might
satisfy their investment objective, advertisements and other materials
regarding the Fund(s) may discuss various measures of Fund performance as
reported by various financial publications. Materials may also compare
performance (as calculated above) to performance as reported by other
investments, indices, and averages. Such comparisons may include, but are not
limited to, the following examples:

a) Dow Jones Composite Average or its component averages - an unmanaged index
composed of 30 blue-chip industrial corporation stocks (Dow Jones Industrial
Average), 15 utilities company stocks (Dow Jones Utilities Average), and 20
transportation company stocks. Comparisons of performance assume reinvestment
of dividends.

b) Standard & Poor's 500 Stock Index or its component indices - an unmanaged
index composed of 400 industrial stocks, 40 financial stocks, 40 utilities
stocks, and 20 transportation stocks. Comparisons of performance assume
reinvestment of dividends.

c) The New York Stock Exchange composite or component indices - unmanaged
indices of all industrial, utilities, transportation, and finance stocks listed
on the New York Stock Exchange.

d) Wilshire 5000 Equity Index - represents the return on the market value of
all common equity - securities for which daily pricing is available.
Comparisons of performance assume reinvestment of dividends.

e) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income Fund
Performance Analysis - measure total return and average current yield for the
mutual fund industry. Rank individual mutual fund performance over specified
time periods, assuming reinvestment of all distributions, exclusive of any
applicable sales charges.

f) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc. -
analyzes price, current yield, risk, total return, and average rate of
return

<PAGE>

(average annual compounded growth rate) over specified time periods for the
mutual fund industry.

g) Mutual Fund Source Book, published by Morningstar, Inc. - analyzes price,
yield, risk, and total return for equity funds.

h) Financial publications: The Wall Street Journal and Business Week, Changing
Times, Financial World, Forbes, Fortune, and Money magazines - provide
performance statistics over specified time periods.

i) Consumer Price Index (or Cost of Living Index), published by the U.S. Bureau
of Labor Statistics - a statistical measure of change, over time, in the price
of goods and services in major expenditure groups.

j) Stocks, Bonds, Bills, and Inflation, published by Ibbotson Associates -
historical measure of yield, price, and total return for common and small
company stock, long-term government bonds, Treasury bills, and inflation.

k) Savings and Loan Historical Interest Rates - as published in the U.S.
Savings & Loan League Fact Book.

l) Historical data supplied by the research departments of First Boston
Corporation, the J. P. Morgan companies, Salomon Brothers, Merrill Lynch,
Pierce, Fenner & Smith, Lehman Brothers and Bloomberg L.P.

From time to time, advertisements or information for the Fund may include a
discussion of certain attributes or benefits to be derived by an investment in
the Fund. Such advertisements or information may include symbols, headlines, or
other material which highlight or summarize the information discussed in more
detail in the communication.

Advertisements or information may also compare the Fund's performance to the
return on certificates of deposit or other investments. Investors should be
aware, however, that an investment in the Fund involves the risk of fluctuation
of principal value, a risk generally not present in an investment in a
certificate of deposit issued by a bank. For example, as the general level of
interest rates rise, the value of the Fund's fixed-income investments, as well
as the value of its shares which are based upon the value of such portfolio
investments, can be expected to decrease. Conversely, when interest rates
decrease, the value of the Fund's shares can be expected to increase.
Certificates of deposit are frequently insured by an agency of the U.S.
government. An investment in the Fund is not insured by any federal, state or
private entity.

In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Fund's portfolio, that the indices and
averages are generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the formula used by the
Fund to calculate its figures. In addition, there can be no assurance that the
Fund will continue this performance as compared to such other averages.

OTHER FEATURES AND BENEFITS

The Fund may help investors achieve various investment goals such as
accumulating money for retirement, saving for a down payment on a home, college
cost and/or other long-term goals. The Franklin College Costs Planner may
assist an investor in determining how much money must be invested on a monthly
basis in order to have a projected amount available in the future to fund a
child's college education. (Projected college cost estimates are based upon
current costs published by the College Board.) The Franklin Retirement Planning
Guide leads an investor through the steps to start a retirement savings
program. Of course, an investment in the Fund cannot guarantee that such goals
will be met.

MISCELLANEOUS INFORMATION

The Funds of the Trust are members of the Franklin/Templeton Group, one of the
largest mutual fund organizations in the United States and may be considered in
a program for diversification of assets. Founded in 1947, Franklin, one of the
oldest mutual fund organizations, has managed mutual funds for over 45 years
and now services more than 2.4 million shareholder accounts. In 1992, Franklin,
a leader in managing fixed-income mutual funds and an innovator in creating
domestic equity funds, joined forces with Templeton Worldwide, Inc., a pioneer
in international investing. Together, the Franklin/Templeton Group has over
$113 billion in assets under management for more than 3.5 million shareholder
accounts and offers 103 U.S.-based mutual funds. The Fund may identify itself
by its NASDAQ or CUSIP number.

The Dalbar Surveys, Inc. broker/dealer survey has ranked Franklin number one of
36 mutual fund groups in service quality for 1993. One other fund group was
also ranked number one. Franklin has been ranked number one in service quality
by Dalbar for five of the past six years.

<PAGE>

OWNERSHIP AND AUTHORITY DISPUTES

In the event of disputes involving multiple claims of ownership or authority to
control a shareholder's account, the Fund has the right (but has no obligation)
to: (a) freeze the account and require the written agreement of all persons
deemed by the Fund to have a potential property interest in the account, prior
to executing instructions regarding the account; (b) interplead disputed funds
or accounts with a court of competent jurisdiction; or (c) surrender ownership
of all or a portion of the account to the Internal Revenue Service in response
to a Notice of Levy.

<PAGE>
FRANKLIN/TEMPLETON GLOBAL TRUST

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Trustees
of Franklin/Templeton Global Trust:

We have audited the accompanying statements of assets and liabilities of the
various funds comprising the Franklin/Templeton Global Trust, including each
Fund's statement of investments in securities and net assets, as of April 30,
1994, and the related statements of operations and changes in net assets, and
the financial highlights included under the caption "Financial Highlights" for
the year ended April 30, 1994. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The statements of changes in net assets and financial
highlights of the Trust for the periods ending prior to May 1, 1993 were
audited by other auditors, whose report, dated June 11, 1993, expressed an
unqualified opinion on such statements and financial highlights.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. Our procedures included confirmation of securities owned as of April
30, 1994 by correspondence with custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 1994 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
the various funds comprising the Franklin/Templeton Global Trust as of April
30, 1994, and the results of their operations, the changes in their net assets
and their financial highlights for the year ended April 30, 1994, in conformity
with generally accepted accounting principles.

COOPERS & LYBRAND

San Francisco, California
June 3, 1994
22

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1994

<TABLE>
<CAPTION>
FACE VALUE
COUNTRY* AMOUNT FRANKLIN/TEMPLETON GERMAN GOVERNMENT BOND FUND (NOTE 1)
-------- ------ ---------------------------------------------- --------
<S> <C> <C> <C>
LONG TERM INVESTMENTS 92.5%
EUROBONDS 27.2%
DD 1,000,000 European Economic Community, 6.50%, 03/10/00 ........................... $ 607,218
DD 1,000,000 Inter-American Development Bank, 6.75%, 04/29/03 ....................... 597,414
DD 1,500,000 Government of Denmark, 6.125%, 04/15/98 ................................ 903,429
DD 1,500,000 Republic of Argentina, 8.00%, 10/05/98 ................................. 900,567
DD 1,000,000 United Kingdom, 7.125%, 10/28/97 ....................................... 621,720
-----------
EUROBONDS (COST $3,631,078) ...................................... 3,630,348
-----------
GERMAN BONDS 65.3%
DD 1,000,000 Baden Wurttemberg State, 6.75%, 12/01/95 ............................... 613,534
DD 425,000 Bundesschatzanweisungen, 5.75%, 08/20/97 ............................... 255,128
DD 500,000 Deutsche Bundespost, 6.25%, 10/01/03 ................................... 289,474
DD 1,000,000 Deutschland Bundespost, 7.50%, 12/02/02 ................................ 623,459
DD 1,000,000 Freistaat Bayern Bavaria, 6.00%, 03/20/97 .............................. 605,714
DD 1,460,000 German Unity Fund, 8.75%, 07/20/00 ..................................... 976,905
DD 1,000,000 Kredit Fuer Wiederaufbau, 6.00%, 09/02/96 .............................. 604,511
DD 1,000,000 Kredit Fuer Wiederaufbau, 5.75%, 03/15/99 .............................. 589,089
DD 1,000,000 Land Berlin, 6.75%, 08/25/99 ........................................... 613,534
DD 1,000,000 Land Niedersachsen, 6.25%, 09/15/03 .................................... 578,346
DD 1,100,000 Nordrhein-Westfalen, 7.00%, 07/17/95 ................................... 673,564
DD 2,250,000 Treuhand-Obligationen, 6.125%, 03/26/98 ................................ 1,357,714
DD 1,550,000 Treuhand-Obligationen, 6.125%, 06/25/98 ................................ 934,661
-----------
GERMAN BONDS (COST $8,664,221) ................................... 8,715,633
-----------
TOTAL LONG TERM INVESTMENTS (COST $12,295,299) ................... 12,345,981
-----------
SHORT TERM INVESTMENTS 2.3%
DD 500,000 Bundesbank Schatz (Boulis), 06/01/94 (COST $289,763) ................... 299,300
-----------
TOTAL INVESTMENTS (COST $12,585,062) 94.8% .................. 12,645,281
OTHER ASSETS AND LIABILITIES, NET 5.2% ...................... 695,769
-----------
NET ASSETS 100.0% ........................................... $13,341,050
===========

At April 30, 1994, the net unrealized appreciation based on the cost of
investments for income tax purposes of $12,585,062 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost ........................... $ 149,241
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value ........................... (89,022)
---------
Net unrealized appreciation ........................................... $ 60,219
=========
</TABLE>

*Securities traded in currency of country indicated. See page 28 for country
legend.

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1994

<TABLE>
<CAPTION>
FACE VALUE
COUNTRY* AMOUNT FRANKLIN/TEMPLETON GLOBAL CURRENCY FUND (NOTE 1)
-------- ------ --------------------------------------- --------
<S> <C> <C> <C>
LONG TERM INVESTMENTS 14.2%
FOREIGN GOVERNMENT SECURITIES - FLOATING RATE NOTES
JP 250,000,000 Inter-American Development Bank, floating rate notes, 2.063%, 06/19/98..... $ 2,448,504
DD 4,150,000 Government of Spain, floating rate notes, 5.75%, 06/29/02.................. 2,472,327
DD 4,000,000 cNew Zealand Government, floating rate notes, quarterly calls, 5.875%,
06/08/97................................................................... 2,400,914
-----------
TOTAL LONG TERM INVESTMENTS (COST $7,021,856)..................... 7,321,745
-----------
SHORT TERM INVESTMENTS 76.1%
BONDS 30.2%
DD 4,000,000 cCredit Foncier Finance, guaranteed floating rate notes, semi-annual calls,
5.688%, 07/15/96........................................................... 2,403,609
DD 4,000,000 Deutsche Finance Netherlands, 7.00%, 06/20/94.............................. 2,407,459
JP 350,000,000 cEuropean Investment Bank, floating rate notes, semi-annual calls, 1.991%,
05/30/08................................................................... 3,397,352
JP 240,000,000 Kredit Fuer Wiederaufbau International Finance, Inc., guaranteed deb.,
6.25%, 12/28/94........................................................... 2,423,258
DD 4,100,000 Merrill Lynch International Bank, London Branch, 5.375%, 05/06/94.......... 2,466,165
JP 250,602,217 Morgan Guaranty London, 2.125%, 05/11/94................................... 2,458,089
-----------
TOTAL BONDS (COST $13,960,491).................................... 15,555,932
-----------
GOVERNMENT SECURITIES 45.9%
AU 4,550,000 Australian Government Treasury Bills, 06/21/94............................. 3,217,110
AU 5,100,000 Australian Government Treasury Bills, 07/13/94............................. 3,614,937
DD 4,050,000 German Government Treasury Bonds, 6.75%, 07/20/94.......................... 2,441,937
NZ 12,600,000 New Zealand Government Treasury Bills, 07/06/94............................ 7,207,479
US 7,205,000 U.S. Treasury Bills, 06/30/94.............................................. 7,161,338
-----------
TOTAL GOVERNMENT SECURITIES (COST $23,447,607).................... 23,642,801
-----------
TOTAL SHORT TERM INVESTMENTS (COST $37,408,098)................... 39,198,733
-----------
TOTAL INVESTMENTS (COST $44,429,954) 90.3%................... 46,520,478
OTHER ASSETS AND LIABILITIES, NET 9.7%....................... 5,018,876
-----------
NET ASSETS 100.0%............................................ $51,539,354
===========

At April 30, 1994, the net unrealized appreciation based on the cost of
investments for income tax purposes of $44,429,954 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost ............................. $ 2,363,531
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value ............................. (273,007)
-----------
Net unrealized appreciation.............................................. $ 2,090,524
===========
</TABLE>

*Securities traded in currency of country indicated. See page 29 for country
legend.

(c) Floating rate notes (FRN's) with an embedded put and/or call feature. The
interest rate changes periodically (often every six months) and is tied to
a designated money market index (such as LIBOR or U.S. Treasury bills
rate).

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1994

<TABLE>
<CAPTION>
FACE VALUE
COUNTRY* AMOUNT FRANKLIN/TEMPLETON HARD CURRENCY FUND (NOTE 1)
-------- ------ -------------------------------------- --------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS 91.7%
BONDS 33.7%
JP 500,000,000 European Investment Bank, 5.00%, 02/13/95 ................................. $ 5,021,088
JP 150,000,000 cEuropean Investment Bank, floating rate notes, semi-annual calls, 1.991%,
05/30/08................................................................... 1,456,008
NZ 1,800,000 Housing Corporation of New Zealand, 10.00%, 09/15/94 ...................... 1,053,274
JP 150,000,000 Kredit Fuer Wiederaufbau International Finance, guaranteed deb. 6.25%,
12/28/94.................................................................. 1,514,537
DK 11,000,000 Merrill Lynch International Bank, London Branch, 5.375%, 05/06/94 ......... 1,688,696
JP 135,325,199 Morgan Guaranty, London Branch, 2.125%, 05/11/94 .......................... 1,327,368
-----------
TOTAL BONDS (COST $11,351,867) ................................... 12,060,971
-----------
COMMERCIAL PAPER 11.2%
US 1,300,000 General Electric Credit Corp., 3.80%, 05/20/94 ............................ 1,297,393
US 1,300,000 Merrill Lynch and Co., 3.75%, 05/20/94 .................................... 1,297,427
US 1,400,000 Metropolitan Life Funding, Inc., 3.78%, 05/20/94 .......................... 1,397,207
-----------
TOTAL COMMERCIAL PAPER (COST $3,992,027) ......................... 3,992,027
-----------
GOVERNMENT SECURITIES 46.8%
DK 13,000,000 Denmark Government Treasury Bills, 07/01/94 ............................... 1,976,973
DK 10,000,000 Denmark Government Treasury Bills, 11/15/94 ............................... 1,556,364
US 13,213,000 U.S. Treasury Bills, 05/12/94 - 08/25/94 .................................. 13,197,551
-----------
TOTAL GOVERNMENT SECURITIES (COST $16,659,060) ................... 16,730,888
-----------
TOTAL SHORT TERM INVESTMENTS (COST $32,002,954) 91.7% ....... 32,783,886
OTHER ASSETS AND LIABILITIES, NET 8.3% ...................... 2,954,912
-----------
NET ASSETS 100.0% ........................................... $35,738,798
===========

At April 30, 1994, the net unrealized appreciation based on the cost of
investments for income tax purposes of $32,002,954 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost .......................... $ 788,779
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value .......................... (7,847)
----------
Net unrealized appreciation ....................................... $ 780,932
==========
</TABLE>

*Securities traded in currency of country indicated. See page 26 for country
legend.
(a) Certain short-term securities are traded on a discount basis; the rates
shown are the discount rates at the time of purchase by the Fund. Other
securities bear interest at the rates shown, payable at fixed dates or
upon maturity.
(c) Floating rate notes (FRN's) with an embedded put and/or call feature. The
interest rate changes periodically (often every six months) and is tied
to a designated money market index (such as LIBOR or U.S. Treasury bills
rate).

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1994

<TABLE>
<CAPTION>
FACE VALUE
COUNTRY* AMOUNT FRANKLIN/TEMPLETON HIGH INCOME FUND (NOTE 1)
-------- ------ ---------------------------------------------- --------
<S> <C> <C> <C>
aSHORT TERM INVESTMENTS 93.8%
BONDS 26.1%
IT 1,013,232,000 Bankers Trust Co., London Branch, 7.688%, 05/06/94 ....................... $ 636,864
US 100,000 cBanque Francaise de Comercio, floating rate notes, semi-annual calls,
3.417%, 11/17/96......................................................... 99,840
US 724,000 bCaisse Centrale dis Jardin, (original accretion rate 3.95%), 06/29/94..... 719,233
NZ 1,300,000 Housing Corporation of New Zealand, 10.00%, 09/15/94 ..................... 760,698
IT 1,300,000,000 Merrill Lynch International Bank, London Branch, 7.563%, 05/06/94......... 817,112
NZ 1,000,000 bMobil Oil, New Zealand, (original accretion rate 4.65%), 05/24/94......... 575,623
IT 1,200,000,000 Morgan Guaranty, London Branch, 7.50%, 05/06/94 .......................... 754,257
-----------
TOTAL BONDS (COST $4,330,394) ................................. 4,363,627
-----------
COMMERCIAL PAPER 4.3%
US 724,000 Merrill Lynch Financial Co., 3.95%, 06/27/94 (COST $719,472) ............. 719,472
-----------
DEBIT NOTES 8.6%
US 725,000 Federal Home Loan Mortgage Corp., 06/28/94 ............................... 720,549
US 725,000 Federal National Mortgage Association, 06/28/94 .......................... 720,549
-----------
TOTAL DEBIT NOTES (COST $1,441,098) ........................... 1,441,098
-----------
GOVERNMENT SECURITIES 54.8%
AU 1,100,000 Australian Government Treasury Bills, 06/21/94 ........................... 781,662
DK 11,000,000 Denmark Government Treasury Bills, 07/01/94 .............................. 1,672,849
DD 1,000,000 German Government Treasury Bonds, 7.25%, 12/20/94 ........................ 608,361
GR 250,000,000 Greek Government Treasury Bills, 02/14/95 ................................ 884,572
DD 1,000,000 Ireland Government Treasury Bonds, 8.00%, 10/15/94 ....................... 606,015
IT 1,200,000,000 Italian Government Treasury Bills, 08/31/94 .............................. 736,532
NZ 1,200,000 New Zealand Government Treasury Bills, 07/06/94 .......................... 684,891
SE 6,000,000 Swedish Government Treasury Bills, 05/18/94 .............................. 780,765
SE 17,000,000 Swedish Government Treasury Bills, 06/15/94 .............................. 2,201,037
US 15,000 U.S. Treasury Bills, 06/30/94 ........................................... 14,913
US 175,000 U.S. Treasury Bills, 08/25/94 ............................................ 172,730
-----------
TOTAL GOVERNMENT SECURITIES (COST $8,901,260) .................. 9,144,327
-----------
TOTAL SHORT TERM INVESTMENTS (COST $15,392,224)
93.8%...................................................... 15,668,524
OTHER ASSETS AND LIABILITIES, NET 6.2% ................... 1,037,370
-----------
NET ASSETS 100.0% ........................................ $16,705,894
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1994 (CONT.)

<TABLE>
<CAPTION>
VALUE
FRANKLIN/TEMPLETON HIGH INCOME CURRENCY FUND (NOTE 1)
-------------------------------------------- --------
<S> <C>
At April 30, 1994, the net unrealized appreciation based on the cost of
investments for income tax purposes of $15,396,690 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost .............................. $ 285,072
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value .............................. (13,238)
---------
Net unrealized appreciation .............................................. $ 271,834
=========
</TABLE>

* Securities traded in currency of country indicated. See page 28 for country
legend.
a Certain short-term securities are traded on a discount basis; the rates
shown are the discount rates at the time of purchase by the Fund. Other
securities bear interest at the rates shown, payable at fixed dates or
upon maturity.
b Zero coupon bonds. The current effective yield may vary. The original
accretion rate by security, as reported, will remain constant.
c Floating rate notes (FRN's) with an embedded put and/or call feature. The
interest rate changes periodically (often every six months) and is tied to
a designated money market index (such as LIBOR or U.S. Treasury bills rate).

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1994 (CONT.)

CUNTRY LEGEND:
AU - Australia
DD - Germany
DK - Denmark
GR - Greece
IT - Italy
JP - Japan
NZ - New Zealand
SE - Sweden
US - United States of America

The accompanying notes are an integral part of these financial statements. #

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST
FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1994
<TABLE>
<CAPTION>
FRANKLIN/
TEMPLETON FRANKLIN/ FRANKLIN/ FRANKLIN/
GERMAN TEMPLETON TEMPLETON TEMPLETON
GOVERNMENT GLOBAL HARD HIGH INCOME
BOND FUND CURRENCY FUND CURRENCY FUND CURRENCY FUND
---------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Assets:
Investment in Securities:
At identified cost........................................ $12,585,062 $44,429,954 $32,002,954 $15,392,224
=========== =========== =========== ===========

At value.................................................. 12,645,281 46,520,478 32,783,886 15,668,524
Foreign currencies (cost $282,828, and $411,034,
respectively)............................................. -- 288,068 -- 414,941
Cash....................................................... 157,227 3,646,115 293,068 722,909
Receivables:
Interest.................................................. 405,605 675,493 191,634 85,398
Investment securities sold................................ 298,547 -- 14,599,553 --
Capital shares sold....................................... 74,418 952,904 759,034 89
Unrealized gain on forward foreign currency contracts
(Note 2).................................................. -- -- 206,861 --
Unamortized organization cost (Note 3)..................... 28,136 -- -- --
Receivable from affiliates................................. 10,627 -- -- --
----------- ----------- ----------- -----------
Total assets.......................................... 13,619,841 52,083,058 48,834,036 16,891,861
----------- ----------- ----------- -----------

Liabilities:
Payables:
Investment securities purchased........................... -- -- 11,834,381 --
Capital shares repurchased................................ 102,732 109,686 117,314 44,160
Management fees........................................... -- 29,390 2,278 8,434
Distribution fees......................................... 11,263 108,241 70,344 37,124
Shareholder servicing costs............................... 440 1,700 1,075 800
Accrued expenses and other liabilities..................... 14,585 31,967 20,222 11,219
Unrealized loss on forward foreign currency contracts
(Note 2).................................................. -- 262,720 -- 84,230
Foreign currencies overdraft (cost $148,831, and
$1,086,040, respectively)................................ 149,771 -- 1,049,624 --
----------- ----------- ----------- -----------
Total liabilities..................................... 278,791 543,704 13,095,238 185,967
----------- ----------- ----------- -----------
Net assets, at value........................................ $13,341,050 $51,539,354 $35,738,798 $16,705,894
=========== =========== =========== ===========

Net assets consist of:
Unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign
currencies................................................ $ 72,104 $ 1,915,687 $ 1,003,464 $ 227,094
Net realized gain (loss) from investments and foreign
currency transactions..................................... (128,660) 1,170,436 (561,323) 7,285
Capital shares............................................. 10,852 37,207 27,605 14,804
Additional paid-in capital................................. 13,386,754 48,416,024 35,269,052 16,456,711
----------- ----------- ----------- -----------
Net assets, at value........................................ $13,341,050 $51,539,354 $35,738,798 $16,705,894
=========== =========== =========== ===========

Shares outstanding.......................................... 1,085,180 3,720,705 2,760,453 1,480,407
=========== =========== =========== ===========

Net asset value per share................................... $12.29 $13.85 $12.95 $11.28
=========== =========== =========== ===========

Representative computation (Franklin/Templeton German
Government Bond Fund) of net asset value and offering
price per share:
Net asset value and redemption price per share
($13,341,050 (/) 1,085,180)............................... $12.29
===========

Maximum offering price (100/97 of $12.29)*............... $12.67
===========
</TABLE>

*On sales of $50,000 or more the offering price is reduced as stated in the
section of the Prospectus entitled "How to Buy Shares of a Fund."

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST
FINANCIAL STATEMENTS (CONT.)

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1994

Investment income:
Interest (Note 1)......................................... $ 779,583 $2,508,199 $ 2,078,774 $ 1,521,678
--------- ---------- ---------- ----------
Expenses:
Management fees (Note 7).................................. -- 188,301 106,115 68,831
Distribution fees (Note 7)................................ 20,056 262,479 173,094 103,950
Investment advisory fees (Note 7)......................... 17,639 85,126 57,239 37,844
Shareholder servicing costs .............................. 29,041 71,511 44,744 33,849
Custody fees.............................................. 15,894 45,624 28,848 16,745
Accounting service fees................................... 17,424 28,963 26,250 23,809
Customer service fees (Note 7)............................ 7,056 34,158 22,972 15,155
Shareholder administration fees (Note 7).................. 13,621 -- -- --
Registration fees and insurance........................... 26,287 35,526 49,087 38,933
Reports to shareholders................................... 18,814 12,249 9,261 4,788
Amortization of organization cost
(Note 3)................................................. 7,661 -- -- --
Professional fees......................................... 14,532 62,484 47,021 26,324
Trustees' fees and expenses............................... 4,078 13,018 8,750 5,483
Other..................................................... 272 5,784 3,715 2,193
Payments from Manager (Note 7)............................ (55,894) -- -- --
--------- ---------- ---------- ----------
Total expenses....................................... 136,481 845,223 577,096 377,904
--------- ---------- ---------- ----------
Net investment income................................ 643,102 1,662,976 1,501,678 1,143,774
--------- ---------- ---------- ----------
Realized and unrealized gain (loss) from
investments:
Net realized gain (loss) on:
Investments............................................. (300,648) 1,016,423 (379,660) (1,128,308)
Foreign currency transactions........................... (135,480) 231,599 1,678,578 (592,623)
Net unrealized depreciation on
investments and translation of
assets and liabilities denominated
in foreign currencies................................... (116,040) (1,004,082) (1,849,850) (486,244)
--------- ---------- ---------- -----------
Net realized and unrealized gain (loss)
on investments............................................ (552,168) 243,940 (550,932) (2,207,175)
--------- ---------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations................................. $ 90,934 $1,906,916 $ 950,746 $(1,063,401)
========= ========== ========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

FINANCIAL STATEMENTS (CONT.)

STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED APRIL 30, 1994 AND 1993
(EXCEPT AS NOTED FOR THE GERMAN GOVERNMENT BOND FUND)
<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON
GERMAN GOVERNMENT FRANKLIN/TEMPLETON
BOND FUND GLOBAL CURRENCY FUND
-------------------- --------------------
1994 1993* 1994 1993
------ ----- ------- -----
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................................. $ 643,102 $ 130,773 $ 1,662,976 $ 2,954,010
Net realized gain (loss) from investments and foreign
currency transactions................................ (436,128) 126,070 1,248,022 3,671,415
Net unrealized appreciation (depreciation) on
investments and translation of assets and liabilities
denominated in foreign currencies.................... (116,040) 188,144 (1,004,082) 1,381,412
--------- ---------- ------------ -----------
Net increase in net assets resulting from operations 90,934 444,987 1,906,916 8,006,837
Distributions to shareholders:
From undistributed net investment income............... (411,253) (120,644) (2,466,914) (3,047,495)
From net realized capital gains........................ (78,504) -- -- (4,594,658)
From tax return of capital............................. (426,966) -- -- --
Increase (decrease) in net assets from capital share
transactions (Note 4).................................. 3,428,405 10,414,091 (10,255,263) (1,598,821)
---------- ----------- ------------ -----------
Net increase (decrease) in net assets............. 2,602,616 10,738,434 (10,815,261) (1,234,137)
Net assets:
Beginning of year...................................... 10,738,434 -- 62,354,615 63,588,752
----------- ----------- ------------ -----------
End of year............................................ $13,341,050 $10,738,434 $ 51,539,354 $62,354,615
=========== =========== ============ ===========
Undistributed net investment income included in net assets:
Beginning of year...................................... $ 10,129 $ -- $ (18,718) $ 74,767
=========== =========== ============ ===========
End of year............................................ $ -- $ 10,129 $ -- $ (18,718)
=========== =========== ============ ===========
</TABLE>

*For the period December 31, 1992 (effective date of registration)
to April 30, 1993.

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

FINANCIAL STATEMENTS (CONT.)

STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEARS ENDED APRIL 30, 1994 AND 1993

<TABLE>
<CAPTION> FRANKLIN/TEMPLETON
FRANKLIN/TEMPLETON HIGH INCOME
HARD CURRENCY FUND CURRENCY FUND
-------------------- --------------------
1994 1993* 1994 1993
------ ----- ------- -----
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................... $ 1,501,678 $ 2,127,089 $ 1,143,774 $ 3,095,841
Net realized gain (loss) from investments and foreign
currency transactions............................... 1,298,918 1,171,634 (1,720,931) (1,712,988)
Net unrealized appreciation (depreciation) on
investments and translation of assets and liabilities
denominated in foreign currencies................... (1,849,850) 2,508,285 (486,244) 728,684
----------- ---------- ------------ ------------
Net increase (decrease) in net assets resulting
from operations................................. 950,746 5,807,008 (1,063,401) 2,111,537
Distributions to shareholders:
From undistributed net investment income.............. (400,376) (2,065,496) -- (3,219,701)
From net realized capital gains....................... -- (4,022,523) -- (1,146,074)
From tax return of capital............................ (1,166,097) -- (1,238,929) --
Increase (decrease) in net assets from capital share
transactions (Note 4)................................. (13,214,059) 18,092,495 (13,332,834) (11,979,999)
----------- ---------- ------------ ------------
Net increase (decrease) in net assets............ (13,829,786) 17,811,484 (15,635,164) (14,234,237)
Net assets:
Beginning of year..................................... 49,568,584 31,757,100 32,341,058 46,575,295
----------- ---------- ------------ ------------

End of year........................................... $ 35,738,798 $49,568,584 $ 16,705,894 $ 32,341,058
============ =========== ============ ============
Undistributed net investment income included in net assets:
Beginning of year..................................... $ 97,795 $ 36,202 $ (24,660) $ 99,200
============ =========== ============ ============
End of year........................................... $ -- $ 97,795 $ -- $ (24,660)
============ =========== ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

Franklin/Templeton Global Trust (the Trust), (prior to November 15, 1993, the
Huntington Funds) is an open-end management investment company (mutual fund)
registered under the Investment Company Act of 1940 as amended. The Trust
currently has four separate non-diversified funds (the Funds) in operation
consisting of: Franklin/Templeton German Government Bond Fund (the German Bond
Fund), Franklin/Templeton Global Currency Fund (the Global Currency Fund),
Franklin/Templeton Hard Currency Fund (the Hard Currency Fund), and
Franklin/Templeton High Income Currency Fund (the High Income Fund). Each of
the Funds issues a separate series of the Trust's shares and maintains a
totally separate investment portfolio.

On December 28, 1993, the U.S. Cash Portfolio (previously the fifth separate
Fund of the Trust) merged into the Franklin Money Fund, under a tax-free
reorganization.

The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.

A. SECURITY VALUATIONS:

Portfolio securities listed on a securities exchange or on the NASDAQ National
Market System for which market quotations are readily available are valued at
the last quoted sale price of the day or, if there is no such reported sale,
within the range of the most recent quoted bid and asked prices. Other
securities for which market quotations are readily available are valued at
current market values, obtained from pricing services, which are based on a
variety of factors, including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific securities. Portfolio securities which are
traded both in the over-the-counter market and on a securities exchange are
valued according to the broadest and most representative market as determined
by the Manager. Other securities for which market quotations are not available,
if any, are valued in accordance with procedures established by the Board of
Trustees. Short-term securities and similar investments with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
current value.

Securities denominated in foreign currencies and traded on foreign exchanges or
in foreign markets are valued in a similar manner and these values are
translated into U.S. dollars at current market quotations of their respective
currency against U.S. dollars last quoted by a major bank or, if no such
quotation is available, at the rate of exchange determined in accordance with
policies established by the Board of Trustees.

B. INCOME TAXES:

The Trust intends to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes. Therefore, no income tax provision is
required. Each Fund is treated as a separate entity in the determination of
compliance with the Internal Revenue Code.

C. SECURITY TRANSACTIONS:

Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Realized gains and losses on security
transactions are determined on the basis of specific identification for both
financial statement and income tax purposes.

D. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:

Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily.
Bond discount is amortized as required by the Internal Revenue Code.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

1. SIGNIFICANT ACCOUNTING POLICIES (CONT.)

D. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS: (CONT.)

Distributions from undistributed net investment income, and net realized
capital gains from security transactions, to the extent they exceed available
capital loss carryovers, are generally made during each year to avoid the 4%
excise tax imposed on regulated investment companies by the Internal Revenue
Code.

Net investment income differs for financial statement and tax purposes
primarily due to different treatments of realized gain (loss) on foreign
currency transactions.

Net realized capital gains differ for financial statement and tax purposes
primarily due to losses on wash sale transactions.

E. EXPENSE ALLOCATION:

Common expenses incurred by the Trust are allocated among the Funds based on
the ratio of the net assets of each Fund to the combined net assets. In all
other respects, expenses are charged to each Fund as incurred on a specific
identification basis.

F. FOREIGN CURRENCY TRANSLATION:

The accounting records of the Trust are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars at the rate of exchange of such currencies against U.S. dollars on the
date of the valuation. Purchases and sales of securities, income and expenses
are translated at the rate of exchange quoted on the respective date that such
transactions are recorded.

The Trust does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency
gains or losses realized between the trade date and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Trust's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in exchange rates.

G. CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS:

Effective April 30, 1994, the Trust adopted AICPA Statement of Position 93-2:
Determination, Disclosure and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. As a
result, components of net assets have been reclassified to better present
financial statement amounts and distributions in accordance with Statement of
Position 93-2, as follows:

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

1. SIGNIFICANT ACCOUNTING POLICIES (CONT.)

H. RECLASSIFICATIONS:
Certain reclassifications were made in the prior years' financial statements to
conform to current year presentation.

2. FORWARD FOREIGN CURRENCY CONTRACTS

A forward currency contract, which is individually negotiated and privately
traded by currency traders and their customers, is a commitment to purchase or
sell a specific currency for an agreed-upon price at a future date.

The Funds may enter into forward contracts with the goal of minimizing the risk
to the Funds from adverse changes in the relationship between currencies or to
enhance income. The Funds may also enter into a forward contract in relation to
a security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of that security.

The Funds segregate in their custodian bank, sufficient cash, cash equivalents
or readily marketable debt securities as deposits for commitments created by
open forward contracts. The Funds could be exposed to risk if counterparties to
the contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.

As of April 30, 1994, the Global Currency Fund had the following forward
foreign currency contracts outstanding:

<TABLE>
<CAPTION>
IN UNREALIZED
CONTRACTS TO SELL EXCHANGE FOR SETTLEMENT DATE GAIN (LOSS)
----------------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
2,810,000 Australian Dollars U.S. $ 1,972,761 05/02/94 U.S. $ (36,955)
1,000,000 Australian Dollars 720,000 05/12/94 4,956
300,000 Australian Dollars 214,590 05/13/94 81
25,000,000 German Deutschemarks 14,895,548 05/11/94 (134,377)
1,200,000,000 Japanese Yen 11,673,152 05/13/94 (100,502)
----------- ---------
$29,476,051 (266,797)
=========== =========
</TABLE>

<TABLE>
<CAPTION>
CONTRACT TO BUY
---------------
<S> <C> <C> <C> <C> <C>
2,810,000 Australian Dollars U.S. $ 2,005,638 05/12/94 4,077
=========== ---------
Net unrealized depreciation....................................................... U.S. $(262,720)
=========
</TABLE>

As of April 30, 1994, the Hard Currency Fund had the following forward foreign
currency contracts outstanding:

<TABLE>
<CAPTION>
IN UNREALIZED
CONTRACTS TO SELL EXCHANGE FOR SETTLEMENT DATE GAIN (LOSS)
----------------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
10,500,000 Australian Dollars U.S. $ 7,423,238 05/02/94 U.S. $ (76,386)
5,230,000 Swiss Francs 3,722,340 05/02/94 13,120
12,500,000 Swiss Francs 8,877,841 05/03/94 12,593
----------- --------
$20,023,419 (50,673)
=========== ========
</TABLE>

<TABLE>
<CAPTION>
CONTRACT TO BUY
---------------
<S> <C><C> <C> <C> <C>
10,500,000 Australian Dollars 7,542,151 05/02/94 (42,526)
2,500,000 Australian Dollars 1,784,025 05/09/94 3,672
5,230,000 Swiss Francs 3,682,761 05/02/94 26,459
12,500,000 Swiss Francs 8,695,350 05/03/94 169,898
5,000,000 Swiss Francs 3,457,456 05/09/94 88,679
18,730,000 Swiss Francs 13,272,245 05/13/94 11,352
----------- --------
U.S. $38,433,988 257,534
=========== --------
Net unrealized appreciation....................................................... U.S. $206,861
========
</TABLE>

<PAGE>
FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

2. FORWARD FOREIGN CURRENCY CONTRACTS (CONT.)

As of April 30, 1994, the High Income Fund had the following forward foreign
currency contracts outstanding:

<TABLE>
<CAPTION>
IN UNREALIZED
CONTRACTS TO SELL EXCHANGE FOR SETTLEMENT DATE GAIN (LOSS)
----------------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
320,000 Australian Dollars U.S. $ 224,656 05/02/94 U.S. $ (4,208)
120,000 Australian Dollars 86,400 05/12/94 595
36,000 Australian Dollars 25,751 05/13/94 10
10,800,000 Danish Kroner 1,634,976 05/11/94 (21,740)
2,000,000 German Deutschemarks 1,188,255 05/11/94 (14,140)
2,400,000,000 Italian Lire 1,487,708 05/11/94 (18,724)
1,760,000,000 Italian Lire 1,026,958 05/12/94 (77,626)
7,934,500 Swedish Krona 1,003,605 05/03/94 (32,222)
---------- ---------
$6,678,309 (168,055)
========== =========
</TABLE>

<TABLE>
<CAPTION>
CONTRACT TO BUY
---------------
<S> <C> <C> <C> <C>
320,000 Australian Dollars U.S. $ 228,400 05/02/94 464
1,760,000,000 Italian Lire 1,014,409 05/12/94 90,175
7,934,500 Swedish Krona 1,042,641 05/03/94 (6,814)
---------- ---------
U.S. $2,285,450 83,825
========== ---------
Net unrealized depreciation....................................................... U.S. $ (84,230)
=========
</TABLE>

3. UNAMORTIZED ORGANIZATION COSTS

The organization costs of the Funds are amortized on a straight line basis over
a period of five years from the effective date of registration under the
Securities Act of 1933 for each Fund. In the event the initial shareholder or
its transferee redeems its shares within the five-year period, the pro-rata
share of the then-unamortized deferred organization costs will be deducted from
the redemption price paid to such shareholder. New investors purchasing shares
of the Funds subsequent to that date bear such costs during the amortization
period only as such charges are accrued daily against investment income.

4. TRUST SHARES

At April 30, 1994 there were an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in each of the Fund's shares for
the years ended April 30, 1994 and 1993 were as follows:

<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON
GERMAN GOVERNMENT FRANKLIN/TEMPLETON
BOND FUND GLOBAL CURRENCY FUND
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Year Ended April 30, 1994
Shares sold................................................ 1,078,610 $ 13,611,746 838,375 $ 11,527,350
Shares issued in reinvestment of distributions............. 56,974 706,692 142,294 1,956,434
Shares redeemed............................................ (871,567) (10,890,033) (1,725,806) (23,739,047)
--------- ------------ ---------- ------------
Net increase (decrease)............................... 264,017 $ 3,428,405 (745,137) $(10,255,263)
========= ============ ========== ============
</TABLE>

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

4. TRUST SHARES (CONT.)

<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON
GERMAN GOVERNMENT FRANKLIN/TEMPLETON
BOND FUND GLOBAL CURRENCY FUND
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Year Ended April 30, 1993
Shares sold................................................ 893,123 $ 11,307,843 967,922 $ 13,853,183
Shares issued in reinvestment of distributions............. 7,788 99,895 455,572 6,215,009
Shares redeemed............................................ (79,748) (993,647) (1,497,512) (21,667,013)
--------- ------------ ---------- ------------
Net increase (decrease)............................... 821,163 $ 10,414,091 (74,018) $ (1,598,821)
========= ============ ========== ============
</TABLE>

*For the period December 31, 1992 (effective date of registration) to April 30,
1993.

<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON FRANKLIN/TEMPLETON
HARD CURRENCY HIGH INCOME CURRENCY FUND
-------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Year Ended April 30, 1994
Shares sold............................................... 2,895,210 $ 36,728,040 178,728 $ 2,033,535
Shares issued in reinvestment of distributions............ 93,222 1,172,155 67,543 767,989
Shares redeemed............................................ (4,042,017) (51,114,254) (1,432,140) (16,134,358)
----------- ------------ ---------- ------------
Net decrease......................................... (1,053,585) $(13,214,059) (1,185,869) $(13,332,834)
========== ============ ========== ============
Year Ended April 30, 1993
Shares sold............................................... 4,545,439 $ 63,153,299 2,161,547 $ 29,539,466
Shares issued in reinvestment of distributions............ 373,771 4,714,359 234,659 2,947,947
Shares redeemed............................................ (3,525,134) (49,775,163) (3,340,045) (44,467,412)
---------- ------------ ---------- ------------
Net increase (decrease).............................. 1,394,076 $ 18,092,495 (943,839) $(11,979,999)
========== ============ ========== ============
</TABLE>

5. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS

At April 30, 1994, for tax purposes, the Funds had capital loss carryovers as
follows:

<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON FRANKLIN/TEMPLETON
GERMAN GOVERNMENT FRANKLIN/TEMPLETON FRANKLIN/TEMPLETON HIGH INCOME
BOND FUND* GLOBAL CURRENCY FUND HARD CURRENCY FUND CURRENCY FUND
------------------ -------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Capital loss carryovers expiring:
2002................................. $ -- $187,705 $301,642 $ --
====== ======== ======== ======
</TABLE>

For income tax purposes, the aggregate cost of securities is higher (and
unrealized appreciation is lower) than for financial reporting purposes at
April 30, 1994 by $4,466 in the High Income Fund.

*The German Government Bond Fund has a deferred capital loss of $128,660,
deemed to be incurred on the first day of the following fiscal year.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

6. PURCHASES AND SALES OF SECURITIES

Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the year ended April 30, 1994, were as follows:

7. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

Franklin Advisers, Inc. ("Manager"), under the terms of a management agreement
effective November 15, 1993, provides investment advice, office space and
facilities to each Fund and receives fees computed monthly based on the average
daily net assets at an annualized rate of .65 of 1% for the Global Currency
Fund, the Hard Currency Fund, and the High Income Fund, and .55 of 1% for the
German Government Bond Fund. Under a subadvisory agreement effective November
15, 1993, Templeton Investment Counsel, Inc. ("TICI" or the "Subadviser"), an
indirect subsidiary of Templeton Worldwide, Inc., which is a direct,
wholly-owned subsidiary of Franklin Resources, Inc. ("Resources") receives from
the Manager a fee equal to an annual rate of .25 of 1% of the value of the
average daily net assets of the Funds, payable monthly.

The terms of the agreements provide that aggregate annual expenses of the Trust
be limited to the extent necessary to comply with the limitations set forth in
the laws, regulations and administrative interpretations of the states in which
the Trust's shares are registered. The Trust's expenses did not exceed these
limitations; however, for the period November 15, 1993 to April 30, 1994,
Franklin Advisers, Inc. reduced management fees by $292,757 as indicated below:

Prior to November 15, 1993, the Trust had a management agreement with
Huntington Advisers, Inc. Fees were payable monthly based on .30 of 1% per
annum of the average daily net assets of the German Bond Fund and .40 of 1% per
annum of the average daily net assets of the other Funds. Fees paid by the
Funds to Huntington Advisers, Inc. for the period prior to November 15, 1993
were as follows:

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

7. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)

In its capacity as underwriter for the shares of the Trust, Franklin/Templeton
Distributors, Inc. receives commissions on sales of the Trust's shares.
Commissions received by Franklin/Templeton Distributors, Inc. and the amounts
which were subsequently paid to other dealers for the period November 15, 1993
to April 30, 1994 were as follows:

Prior to November 15, 1993, Huntington Investments, Inc. served as the
Trust's underwriter and received commissions totalling $37,002, net, as
follows:

Commissions are deducted from the gross proceeds received from the sale of the
shares of the Trust, and as such are not expenses of the Funds.

Under the terms of a distribution agreement pursuant to Rule 12b-1 of the
Investment Company Act of 1940, the Global Currency Fund, the Hard Currency
Fund, and the High Income Fund will reimburse Franklin/Templeton Distributors,
Inc., in an amount up to 0.45% per annum of the average daily net assets of
each Fund and the German Bond Fund will reimburse Franklin/Templeton
Distributors, Inc., in amount up to 0.25% per annum of the average daily net
assets of the Fund for the cost incurred in the promotion, offering and
marketing of the Funds' shares. Fees incurred by the German Bond Fund, Global
Currency Fund, Hard Currency Fund, and High Income Fund under the agreement
aggregated $20,056, $142,102, $90,759, and $48,903, respectively, for the
period November 15, 1993 to April 30, 1994.

Prior to November 15, 1993, the Trust had entered into a distribution plan
adopted in accordance with the requirements of Rule 12b-1 under the Investment
Company Act of 1940 with Huntington Investments, Inc. and Huntington Advisers,
Inc. each an indirect wholly-owned subsidiary of Long Beach Bank. The
distribution plan specified that payments for such services would be made
quarterly at the annual rate of up to .60 of 1% of the average daily net assets
of the Global Currency Fund and .45 of 1% of the average daily net assets of
the Hard Currency Fund and the High Income Currency Fund. For the period prior
to November 15, 1993, the Global Currency Fund, Hard Currency Fund and High
Income Currency Fund paid Huntington Investments, Inc. $120,377, $82,335 and
$55,047, respectively, related to the 12b-1 distribution plan. The German Bond
Fund did not participate in the Huntington 12b-1 distribution plan.

Under the terms of a shareholder servicing agreement with Franklin/Templeton
Investor Services, Inc., the Trust pays costs on a per shareholder account
basis. Shareholder servicing costs incurred for the period November 15, 1993
through April 30, 1994 aggregated $22,223 of which $21,950 was paid to
Franklin/Templeton Investor Services, Inc.

Prior to November 15, 1993, the Trust had entered into an agreement with
Huntington Advisers, Inc. for certain customer services. Fees payable by the
Trust under that agreement were equal to .10 of 1% per annum of the Trust's
aggregate average daily net assets (allocated among the several Funds in
accordance with policies established by the Board of Trustees). Fees incurred
under this agreement totalled $79,341 for the period prior to November 15,
1993.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

7. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)

The Trust had entered into a shareholder administrative agreement with
Huntington Advisers, Inc. which provided for payments to be made by the German
Bond Fund to Huntington Investments, Inc. and to financial intermediaries for
providing certain personalized and account maintenance services to shareholders
of the German Bond Fund. The fee payable under that agreement was equal to .25
of 1% per annum of the average daily net assets of the German Bond Fund and was
payable quarterly. Fees incurred under that agreement by the German Bond Fund
for the period prior to November 15, 1993 totalled $13,621.

Until November 15, 1993, the Trust had a separate investment advisory agreement
with Bankers Trust Company, which provided research, investment programs and
supervision of the investment portfolios. Total advisory fees incurred under
this agreement totalled $197,848 for the period ended November 15, 1993.

Certain officers and trustees of the Trust are also officers and/or directors
of Franklin/Templeton Distributors, Inc., Franklin Advisers, Inc., Templeton
Worldwide, Inc. and Franklin/Templeton Investor Services, Inc., all
wholly-owned subsidiaries of Franklin Resources, Inc.

8. CREDIT RISK

Although each of the Funds has a diversified investment portfolio, there are
certain credit risks, foreign currency exchange risks, or event risks due to
the manner in which the Funds are invested, which may subject the Funds more
significantly to economic changes occurring in certain industries or sectors,
as follows:

The Global Currency Fund has investments in excess of 10% in debt
securities denominated in Australian Dollars, German Deutschemarks,
Japanese Yen & New Zealand Dollars.

The Hard Currency Fund has investments in excess of 10% in debt
securities denominated in Danish Kroner & Japanese Yen.

The High Income Fund has investments in excess of 10% in debt securities
denominated in Danish Kroner, Italian Lire, New Zealand Dollars &
Swedish Krona.

Although the German Bond Fund has a diversified investment portfolio, most of
its investments are in the securities of issuers in the country of Germany.
Such concentration may subject the Fund to economic changes occurring within
that country.

9. FINANCIAL HIGHLIGHTS

Selected data for each share of beneficial interest outstanding throughout each
year are set forth in the Prospectus under the caption "Financial Highlights."

<PAGE>
SUPPLEMENT DATED FEBRUARY 1, 1995
TO THE STATEMENT OF ADDITIONAL INFORMATION OF
FRANKLIN/TEMPLETON INTERNATIONAL CURRENCY FUNDS
FRANKLIN/TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN/TEMPLETON HIGH INCOME CURRENCY FUND
FRANKLIN/TEMPLETON HARD CURRENCY FUND
DATED SEPTEMBER 1, 1994

a) The following substitutes subsection "Purchases at Net Asset Value" under
"Additional Information Regarding Fund Shares":

ADDITIONAL INFORMATION REGARDING PURCHASES

Special Net Asset Value Purchases. As discussed in the Prospectus under "How to
Buy Shares of the Fund - Description of Special Net Asset Value Purchases,"
certain categories of investors may purchase shares of the Funds without a
front-end sales charge ("net asset value") or a contingent deferred sales
charge. Distributors or one of its affiliates may make payments, out of its own
resources, to securities dealers who initiate and are responsible for such
purchases, as indicated below. As a condition for these payments, Distributors
or its affiliates may require reimbursement from the securities dealers with
respect to certain redemptions made within 12 months of the calendar month
following purchase, as well as other conditions, all of which may be imposed by
an agreement between Distributors, or its affiliates, and the securities
dealer.

The following amounts may be paid by Distributors or one of its affiliates, out
of its own resources, to securities dealers who initiate and are responsible
for (i) purchases of most equity and taxable-income Franklin Templeton Funds
made at net asset value by certain designated retirement plans (excluding IRA
and IRA rollovers): 1.00% on sales of $1 million but less than $2 million, plus
0.80% on sales of $2 million but less than $3 million, plus 0.50% on sales of
$3 million but less than $50 million, plus 0.25% on sales of $50 million but
less than $100 million, plus 0.15% on sales of $100 million or more; and (ii)
purchases of most taxable income Franklin Templeton Funds made at net asset
value by non-designated retirement plans: 0.75% on sales of $1 million but less
than $2 million, plus 0.60% on sales of $2 million but less than $3 million,
plus 0.50% on sales of $3 million but less than $50 million, plus 0.25% on
sales of $50 million but less than $100 million, plus 0.15% on sales of $100
million or more. These payment breakpoints are reset every 12 months for
purposes of additional purchases. With respect to purchases made at net asset
value by certain trust companies and trust departments of banks and certain
retirement plans of organizations with collective retirement plan assets of $10
million or more, Distributors, or one of its affiliates, out of its own
resources, may pay up to 1% of the amount invested.

Letter of Intent. An investor may qualify for a reduced sales charge on the
purchase of shares of the Fund, as described in the prospectuses. At any time
within 90 days after the first investment which the investor wants to qualify
for the reduced sales charge, a signed Shareholder Application, with the Letter
of Intent section completed, may be filed with the Fund. After the Letter of
Intent is filed, each additional investment will be entitled to the sales
charge applicable to the level of investment indicated on the Letter. Sales
charge reductions based upon purchases in more than one of the Franklin
Templeton Funds will be effective only after notification to Distributors that
the investment qualifies for a discount. The shareholder's holdings in the
Franklin Templeton Funds acquired more than 90 days before the Letter of Intent
is filed will be counted towards completion of the Letter of Intent but will
not be entitled to a retroactive downward adjustment in the sales charge. Any
redemptions made by the shareholder, other than by a designated benefit plan
during the 13-month period will be subtracted from the amount of the purchases
for purposes of determining whether the terms of the Letter of Intent have been
completed. If the Letter of Intent is not completed within the 13-month period,
there will be an upward adjustment of the sales charge, depending upon the
amount actually purchased (less redemptions) during the period. The upward
adjustment does not apply to designated benefit plans. An investor who executes
a Letter of Intent prior to a change in the sales charge structure for the Fund
will be entitled to complete the Letter of Intent at the lower of (i) the new
sales charge structure; or (ii) the sales charge structure in effect at the
time the Letter of Intent was filed with the Fund.

As mentioned in the prospectuses, five percent (5%) of the amount of the total
intended purchase will be reserved in shares of the Fund registered in the
investor's name, unless the investor is a designated benefit plan. If the total
purchases, less redemptions, equal the amount specified under the Letter, the
reserved shares will be deposited to an account in the name of the investor or
delivered to the investor or the investor's order. If the total purchases, less
redemptions, exceed the amount specified under the Letter of Intent and is an
amount which would qualify for a further quantity discount, a retroactive price
adjustment will be made by Distributors and the securities dealer through whom
purchases were made pursuant to the Letter of Intent (to reflect such further
quantity discount) on purchases made within 90 days before and on those made
after filing the Letter. The resulting difference in offering price will be
applied to the purchase of additional shares at the offering price applicable
to a single purchase or the dollar amount of the

<PAGE>
total purchases. If the total purchases, less redemptions, are less than the
amount specified under the Letter, the investor will remit to Distributors an
amount equal to the difference in the dollar amount of sales charge actually
paid and the amount of sales charge which would have applied to the aggregate
purchases if the total of such purchases had been made at a single time. Upon
such remittance the reserved shares held for the investor's account will be
deposited to an account in the name of the investor or delivered to the
investor or to the investor's order. If within 20 days after written request
such difference in sales charge is not paid, the redemption of an appropriate
number of reserved shares to realize such difference will be made. In the event
of a total redemption of the account prior to fulfillment of the Letter of
Intent, the additional sales charge due will be deducted from the proceeds of
the redemption, and the balance will be forwarded to the investor.

b) The caption "Purchases and Redemptions through Securities Dealers" is
changed to be a subcaption under "Additional Information Regarding Fund
Shares."

c) The paragraph "Reinvestment Date" under "Additional Information Regarding
Fund Shares" is substituted with the following language:

REINVESTMENT DATE

<PAGE>
THE FRANKLIN/
TEMPLETON
INTERNATIONAL
CURRENCY FUNDS

FRANKLIN/TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN/TEMPLETON HIGH INCOME CURRENCY FUND
FRANKLIN/TEMPLETON HARD CURRENCY FUND

STATEMENT OF
ADDITIONAL INFORMATION

[LOGO]

SEPTEMBER 1, 1994
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN

<PAGE>

THE FRANKLIN/
TEMPLETON
INTERNATIONAL
CURRENCY FUNDS

FRANKLIN/TEMPLETON GLOBAL CURRENCY FUND
FRANKLIN/TEMPLETON HIGH INCOME CURRENCY FUND
FRANKLIN/TEMPLETON HARD CURRENCY FUND

STATEMENT OF
ADDITIONAL INFORMATION

[LOGO]

SEPTEMBER 1, 1994
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN

This Statement of Additional Information pertains only to the
Franklin/Templeton Global Currency Fund ("Global Currency Fund"), the
Franklin/Templeton Hard Currency Fund (the "Hard Currency Fund") and the
Franklin/Templeton High Income Currency Fund (the "High Income Fund")
(individually or collectively, the "Funds"), each a separate non-diversified
series of the Franklin/Templeton Global Trust (the "Trust"), formerly known as
the Huntington Funds, an open-end management investment company consisting of
four separate series. The Trust and its series are also referred to in this
document and from time to time in other communications as The
Franklin/Templeton International Currency Funds. Each series of the Trust in
effect represents a separate fund with its own investment objective and
policies, with various possibilities for income or capital appreciation, and
subject to various market risks. Through the different series, the Trust
attempts to satisfy different investment objectives.

The Global Currency Fund invests in high-quality money market instruments
denominated in three or more of the world's Major Currencies (as defined in the
Prospectus under "About the Funds"), with the objective of maximizing total
return.

A Prospectus for the Funds, dated September 1, 1994, as may be amended from
time to time, which provides the basic information you should know before
investing in one of the Funds, may be obtained without charge from the Trust at
the address listed above or from the Funds' principal underwriter,
Franklin/Templeton Distributors, Inc. ("Distributors"), 777 Mariners Island
Blvd., P.O. Box 777, San Mateo, California 94403-7777. This Statement of
Additional Information is not a Prospectus. It contains information in addition
to and in more detail than set forth in the Funds' Prospectuses.

<PAGE>

<TABLE>
<CAPTION>
CONTENTS PAGE
<S> <C>
About the Funds (See also the
Prospectus "About the Funds"
and "General Information")...................... 2
Each Fund's Investment Objective
and Restrictions (See also the
Prospectus "Investment Objectives
and Policies of the Funds")..................... 2
Officers and Trustees............................ 6
Investment Advisory and Other Services
(See also the Prospectus
"Management of the Funds")...................... 10
Each Fund's Policies Regarding
Brokers Used on Portfolio Transactions.......... 11
Additional Information Regarding Fund Shares
(See also the Prospectus "How to Buy Shares
of a Fund," "How to Sell Shares of a Fund,"
"Valuation of Each Fund's Shares")............... 12
Purchases and Redemptions
Through Securities Dealers...................... 13
Additional Information
Regarding Taxation.............................. 14
Each Fund's Underwriter.......................... 16
General Information.............................. 18
Financial Statements............................. 23
</TABLE>

ABOUT THE FUNDS

The Trust is an open-end, management investment company, commonly called a
"mutual fund." The Trust was organized as a Massachusetts business trust on
November 6, 1985, and has registered with the Securities and Exchange
Commission ("SEC") as a management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"). Each Fund represents a
separate and distinct series of the Trust's shares of beneficial interest. This
Statement of Additional Information relates only to the Global Currency Fund,
the Hard Currency Fund and the High Income Currency Fund. The Funds are managed
by Franklin Advisers, Inc. (the "Manager" or "Adviser"). Templeton Investment
Counsel, Inc. ("TICI" or the "Subadviser") serves as the subadviser under a
contract with the Manager (together, the "Trust's Advisers"). TICI is an
indirect subsidiary of Templeton Worldwide, Inc. which is a direct,
wholly-owned subsidiary of Franklin Resources, Inc. (See "Management of the
Funds.")

EACH FUND'S INVESTMENT
OBJECTIVE AND RESTRICTIONS

The following information supplements and should be read in conjunction with
the sections in the Funds' Prospectus entitled "About the Funds" and
"Investment Objectives and Policies of the Funds."

Floating and Variable Rate Notes. Floating and variable rate notes generally
are unsecured obligations issued by financial institutions and other entities.
These obligations typically have a stated maturity in excess of one year. The
interest rate on such notes is based on an identified interest rate index and
is adjusted automatically at specified intervals, generally not less frequently
than semi-annually.

Commercial Paper. Commercial paper consists of short-term, unsecured promissory
notes issued to finance short-term credit needs.

Concentration in Financial Services Obligations. Under normal market
conditions, each Fund invests at least 25% of its net assets in obligations of
companies engaged in the financial services industry. Such investments include
obligations of the character described below.

Certificates of Deposit. Certificates of deposit are certificates representing
the obligation of a bank or a foreign branch of such bank to repay funds
deposited with it for a specified period of time at a stated interest rate.

Time Deposits. Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time at a stated interest rate.

Bankers' Acceptances. Bankers' acceptances are credit instruments bearing
interest at a stated interest rate and evidencing the obligation of a bank to
pay a draft drawn on it by a customer. These instruments reflect the obligation
both of the bank and of the drawer to pay the face amount of the instrument
upon maturity.

U.S. Banks. Commercial banks organized under U.S. federal law are supervised
and examined by the U.S. Comptroller of the Currency and are required to be
members of the U.S. Federal Reserve System and to be insured by the U.S.
Federal Deposit Insurance Corporation (the "FDIC"). U.S. banks organized under
state law are supervised and examined by state banking authorities but are
members of the U.S. Federal Reserve System only if they elect to join. Most
state banks are insured by the FDIC (although such insurance may not be of
material benefit to the Funds depending upon the principal amount of the
certificates of deposit of
2

<PAGE>

each bank held by the Funds) and are subject to U.S. federal examination and to
a substantial body of U.S. federal law and regulation. As a result of U.S.
federal and state laws and regulations, domestic branches of U.S. banks are,
among other things, generally required to maintain specified levels of
reserves, and are subject to other supervision and regulation designed to
promote financial soundness.

Non-U.S. Banks and Non-U.S. Branches of U.S. Banks. Obligations of non-U.S.
branches of U.S. banks and of non-U.S. banks, such as certificates of deposit
and time deposits, may be general obligations of the parent banks in addition
to the issuing branch, or may be limited by the terms of a specific obligation
and governmental regulation. Such obligations are subject to different risks
than are those of domestic U.S. banks or U.S. branches of non-U.S. banks. These
risks include foreign economic and political developments, foreign governmental
restrictions that may adversely affect payment of principal and interest on the
obligations, foreign exchange controls and foreign withholding and other taxes
on interest income. Non-U.S. branches of U.S. banks are not necessarily subject
to the same or similar regulatory requirements that apply to U.S. banks, such
as mandatory reserve requirements, loan limitations, and accounting, auditing
and financial recordkeeping requirements. In addition, less information may be
publicly available about a non-U.S. branch of a U.S. bank or about a non-U.S.
bank than about a U.S. bank.

Obligations of U.S. branches of non-U.S. banks may be general obligations of
the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by U.S. federal and state regulation as well
as governmental action in the country in which the non-U.S. bank has its head
office. A U.S. branch of a non-U.S. bank with assets in excess of $1 billion
may or may not be subject to reserve requirements imposed by the U.S. Federal
Reserve System or by the state in which the branch is located if the branch is
licensed in that state. In addition, a branch licensed by the U.S. Comptroller
of the Currency or a branch licensed by certain states may or may not be
required to: (1) pledge to the regulator, by depositing assets with a
designated bank within the state, an amount of its assets equal to 5% of its
total liabilities; and (2) maintain assets with the state in an amount equal to
a specified percentage of the aggregate amount of liabilities of the foreign
bank payable at or through all of its agencies or branches within the state.
The deposits of branches licensed by states may not necessarily be insured by
the FDIC.

Investing in Non-U.S. Securities. Non-U.S. securities markets generally are not
as developed or efficient as those in the United States. Securities of some
foreign issuers are less liquid and more volatile than securities of comparable
U.S. issuers. Similarly, volume and liquidity in most foreign securities
markets are less than in the United States and, at times, volatility of prices
can be greater than in the United States. In addition, there may be less
publicly available information about a non-U.S. issuer, and non-U.S. issuers
are not generally subject to uniform accounting and financial reporting
standards, practices and requirements comparable to those applicable to U.S.
issuers.

Because foreign securities (e.g., non-U.S. money market instruments) are
purchased with and payable in currencies of foreign countries, the value of
these assets as measured in U.S. dollars will be affected favorably or
unfavorably by changes in currency exchange rates and exchange control
regulations. Currency exchange costs may be incurred when a Fund sells
instruments denominated in one currency and purchases instruments denominated
in another.

U.S. government policies have in the past, through taxation and other
restrictions, discouraged certain investments abroad by U.S. investors. While
no such restrictions are currently in effect, they could be reinstituted. In
such event, it may be necessary for a Fund to invest temporarily all or
substantially all of its assets in U.S. money market instruments, or it may
become necessary to liquidate a Fund.

Currency Transactions. Generally, the currency exchange transactions of the
Funds are conducted on a spot (i.e., cash) basis at the spot rate prevailing in
the currency exchange market for purchasing or selling currency. However, the
Funds have authority and intend to enter into forward currency contracts as a
hedge against possible variations in the exchange rates between the currencies
in which their investments are denominated and other

<PAGE>
currencies, including the U.S. dollar, or in conjunction with money market
instruments for the purpose of obtaining an investment result that is
substantially equivalent to a direct investment in a foreign currency
denominated instrument. A forward currency contract is an agreement to purchase
or sell a specified currency at a specified future date and price set at the
time of the contract.

When using forward contracts for hedging purposes, the Funds may enter into
forward contracts with respect to either specific transactions ("transaction
hedging") or portfolio positions ("position hedging"). Transaction hedging is
the purchase or sale of forward contracts with respect to specific receivables
or payables of a Fund generally owing in connection with the purchase and sale
of portfolio securities. Position hedging is the sale of a forward contract on
a particular currency with respect to portfolio security positions denominated
or quoted in such currency. The Funds will not speculate in forward contracts;
however, the Funds will utilize forward contracts in conjunction with money
market instruments in a manner which is unrelated to the Funds' normal hedging
activities as described above (i.e., to obtain an investment result that is
substantially equivalent to a direct investment in a foreign currency
denominated instrument).

If a Fund enters into a position hedging transaction, its custodian bank will
place cash or readily marketable liquid securities in a segregated account of a
Fund in an amount equal to the value of its total assets committed to the
consummation of such forward contract. If the value of the securities placed in
the segregated account declines, additional cash or securities will be placed
in the account so that the value of the account will equal the amount of a
Fund's commitment with respect to such contracts.

A Fund may attempt to hedge up to 100% of its portfolio positions, but will
enter into such transactions only to the extent, if any, deemed appropriate by
the Trust's Advisers. A Fund may not enter into a position hedging forward
contract if, as a result thereof, it would have more than 10% of the value of
its total assets committed to such contracts. A Fund may not enter into a
forward contract with a term of more than one year. A Fund may not engage in
position hedging with respect to the currency of a particular country to an
extent greater than the aggregate market value (at the time the hedging
transaction is entered into) of its portfolio securities denominated in (or
quoted in or currently convertible into or directly related through the use of
forward contracts in conjunction with money market instruments to) that
particular currency.

It may not be possible for a given Fund to hedge against a devaluation that is
so generally anticipated that a Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates. It is possible
that, under certain circumstances, one or more Funds may have to limit currency
transactions to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code").

At or before the maturity of a forward contract, a Fund that entered into the
contract may either sell a portfolio security and make delivery of the
currency, or it may retain the security and terminate its contractual
obligation to deliver the currency by purchasing an "offsetting" contract
obligating it to purchase, on the same maturity date, the same amount of the
currency.

If a Fund entering into a forward contract retains the portfolio security and
engages in an offsetting transaction, a Fund will incur a gain or loss (as
described below) to the extent that there has been movement in forward contract
prices. If a Fund engages in an offsetting transaction, it may subsequently
enter into a new forward contract to sell the currency. Should forward prices
decline during the period between a Fund's entering into a forward contract for
the sale of a currency and the date it enters into an offsetting contract for
the purchase of the currency, a Fund will realize a gain to the extent that the
price of the currency it has agreed to sell exceeds the price of the currency
it has agreed to purchase. Should forward prices increase, a Fund will suffer a
loss to the extent the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell.

Transactions in forward contracts by any of the Funds will be limited to the
transactions described above. Of course, no Fund is required to enter into such
contracts, and none will do so unless deemed appropriate by the Trust's
Advisers. Investors should realize that the use of forward contracts does not
eliminate fluctuations in the underlying prices of the securities. Such
contracts simply establish a rate of exchange that a Fund can achieve at some
future point in time. Additionally, although such contracts tend to minimize
the risk of loss due to fluctuations in the value of the hedged currency, at
the same time they tend to limit any potential gain which might result from the
change in the value of such currency.
4

<PAGE>
Because the Funds invest primarily in money market instruments denominated in
non-U.S. currencies, each may hold foreign currencies pending their investment
in such instruments or their conversion into U.S. dollars. Although the Funds
value their assets daily (as described in the Prospectuses) in terms of U.S.
dollars, they do not convert their holdings of foreign currencies into U.S.
dollars on a daily basis. They will do so from time to time, however, and
investors should be aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do realize a profit based
on the difference, which is known as the spread, between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a foreign currency to a Fund at one rate, while offering a lesser rate of
exchange should a Fund desire to resell the currency to the dealer.

CURRENCY MOVEMENTS

Exchange rates fluctuate for a number of reasons. Depending on the currency in
question and the point in time, some factors may outweigh others in determining
the course of exchange rate movements.

2. Trade Deficits. Countries with trade deficits tend to experience a
depreciating currency. Often, inflation is the cause of a trade deficit, making
a country's goods more expensive and less competitive and so reducing demand
for its currency.

3. Interest Rates. High interest rates tend to boost currency values in the
short run by making such currencies more attractive to investors. However,
since high interest rates are often the result of high inflation, the opposite
is often true in the longer run.

Also, budget deficits can indirectly contribute to currency depreciation if a
government chooses to cope with its deficits and debt by means of inflation.

INVESTMENT RESTRICTIONS

Each of the Funds has adopted the following restrictions as fundamental
policies, which means that they may not be changed without approval of a
majority of such Fund's shareholders. In order to change any of these
restrictions, the lesser of (i) 67% or more of the voting securities of such
Fund present at a meeting of shareholders if the holders of more than 50% of
the voting securities of the Fund are represented at that meeting or (ii) more
than 50% of the outstanding voting securities of such Fund must vote to make
the change. Each Fund will not:

1. Purchase common stocks, preferred stocks, warrants or other equity
securities, or purchase municipal bonds or industrial revenue bonds.

2. Borrow money, except from banks for temporary or emergency (not leveraging)
purposes in an amount up to 33 1/3% of the value of that Fund's total assets
(including the amount borrowed) based on the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of a Fund's total assets, the Fund will not
make any additional investments.

3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except in an
amount up to 33 1/3% of the value of its total assets, but only to secure
borrowings for temporary or emergency purposes provided that the deposit or
payment of initial or variation margin in connection with transactions in
options and futures shall not be treated as a pledge of assets hereunder.

5. Underwrite the securities of other issuers or invest more than 10% of its
net assets in (a) securi-
5

<PAGE>

ties subject to restrictions on disposition under the Securities Act of 1933
("restricted securities"), (b) repurchase agreements providing for settlement
in more than seven days, (c) options which are traded in the over-the-counter
market and investments hedged by such options, or (d) securities which are not
readily marketable. No Fund may enter into time deposits maturing in more than
seven days and any Fund's investment in time deposits with maturities of three
days or more may not exceed 10% of the net assets of such Fund.

6. Purchase or sell real estate, securities of real estate investment trusts,
commodities, or oil and gas interests, except that a Fund may purchase or sell
currencies, may enter into futures contracts on securities, currencies,
securities and other indices or any other financial instruments, and may
purchase and sell options on such futures contracts.

7. Make loans to others except through the purchase of debt obligations
referred to in the Prospectus and the entry into repurchase agreements and
portfolio lending agreements, provided that the value of securities subject to
such lending agreements may not exceed 30% of the value of the Fund's total
assets. Any loans of portfolio securities will be made according to guidelines
established by the Securities and Exchange Commission and the Trust's Board of
Trustees, including maintenance of collateral of the borrower equal at all
times to at least the current market value of the securities loaned.

8. Invest less than 25% of its assets in securities issued by companies
primarily engaged in the financial services industry or invest more than 25% of
its assets in the securities of issuers in any other industry, provided that
there shall be no limitation on the purchase of securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities. Notwithstanding the
foregoing, for temporary defensive purposes, a Fund may invest less than 25% of
its assets in the obligations of companies primarily engaged in the financial
services industry.

9. Have invested as of the last day of any fiscal quarter (or other measuring
period used for purposes of determining compliance with Subchapter M of the
Code) (a) more than 25% of its total assets in the securities of any one
issuer, or (b) with respect to 50% of the Fund's total assets, more than 5% of
its total assets in the obligations of any one issuer, except for cash and cash
items and securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities.

10. Invest in companies for the purpose of exercising control.

11. Invest in securities of other investment companies, except as they may be
acquired as part of a merger, consolidation or acquisition of assets.

12. Purchase the securities of any issuer having less than three years'
continuous operations (or any predecessors) if such purchase would cause the
value of the Fund's investments in all such issuers to exceed 5% of the value
of its total assets.

Securities issued by a foreign government, its agencies and instrumentalities,
as well as supra-national organizations are considered as one industry for
concentration purposes.

If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values or assets
will not constitute a violation of that restriction.

OFFICERS AND TRUSTEES

The Board of Trustees has the responsibility for the overall management of the
Trust and each Fund, including general supervision and review of each Fund's
investment activities. The trustees, in turn, elect the officers of the Trust
who are responsible for administering the day-to-day operations of the Trust.
The affiliations of the officers and trustees and their principal occupations
for the past five years are listed below. Trustees who are deemed to be
"interested persons" of the Trust, as defined in the 1940 Act, are indicated by
an asterisk (*).

<TABLE>
<CAPTION>
Positions and Offices Principal Occupations
Name and Address with the Funds During Past Five Years
- ---------------- --------------------- ----------------------
<S> <C> <C>
Frank H. Abbott, III Trustee President and
1045 Sansome St. Director, Abbott
San Francisco, CA 94111 Corporation (an
investment company);
Director, Vacu-Dry Co.
(a food processing
company) and Mother
Lode Gold Mines
Consolidated; and
director, trustee or
managing general
partner, as the case
may be, of most of the
investment companies
in the Franklin Group
of Funds.
</TABLE>
6

<PAGE>

<TABLE>
<CAPTION>
Positions and Offices Principal Occupations
Name and Address with the Funds During Past Five Years
- ---------------- --------------------- ----------------------
<S> <C> <C>
Harris J. Ashton Trustee President, Chief Executive Officer and Chairman of the Board,
General Host Corporation General Host Corporation (nursery and craft centers); Director, RBC
Metro Center, 1 Station Place Holdings, Inc. (a bank holding company), Bar-S Foods and Sunbelt Nursery
Stamford, CT 06904-2045 Group, Inc.; director of certain of the investment companies in the Templeton
Group of Funds; and director, trustee or managing general partner, as the
case may be, of most of the investment companies in the Franklin
Group of Funds.

David K. Eiteman Trustee Since 1959, Professor of Finance in the John E. Anderson Graduate School
HC2, Box 8076 of Management, University of California, Los Angeles. From 1988 to
Frazier Park, CA 93225 June 1993, a Trustee of the Huntington Investment Trust.

S. Joseph Fortunato Trustee Member of the law firm of Pitney, Hardin, Kipp & Szuch; Director of General
Park Avenue at Morris County Host Corporation; director of certain of the investment companies in the
P. O. Box 1945 Templeton Group of Funds; and director, trustee or managing general partner,
Morristown, NJ 07962-1945 as the case may be, of most of the investment companies in the Franklin
Group of Funds.

David W. Garbellano Trustee Private Investor; Assistant Secretary/Treasurer and Director, Berkeley Science
111 New Montgomery St., #402 Corporation (a venture capital company); and director, trustee or
San Francisco, CA 94105 managing general partner, as the case may be, of most of the investment
companies in the Franklin Group of Funds.

* Donald P. Gould President and From February 1992 to present, independent consultant to the Trust
777 Mariners Island Blvd. Trustee and from February 1992 to June 1993, independent consultant to Huntington
San Mateo, CA 94404 Investment Trust. From December 1985 to February 1992, Chairman of the Board
of the Trust. From 1988 to June 1993, President and Trustee, from 1988 to
February 1992, Chairman of the Board, and from April 1990 to June 1993, Chief
Financial Officer and Secretary of Huntington Investment Trust. From
October 1985 to February 1992, President and Director of Huntington Advisers,
Inc., a mutual fund investment adviser, and President of Huntington
Investments, Inc., a mutual fund underwriter.

Gerald R. Healy Trustee Since April 1994, a private consultant. From July 1993 to March 1994,
5917 Cleveland Street Director of Corporate Management Resources of Alliance Imaging, Inc. From 1989,
Morton Grove, IL 60053 Executive Vice President of Capital Health Services Corp. Prior to that time,
a private investor. From 1988 to June 1993, a Trustee of the Huntington
Investment Trust.

</TABLE>
7

<PAGE>
<TABLE>
<CAPTION>
Positions and Offices Principal Occupations
Name and Address with the Funds During Past Five Years
---------------- --------------------- ----------------------
<S> <C> <C>
* Charles B. Johnson Chairman of the President and Director, Franklin Resources, Inc. and
777 Mariners Island Blvd. Board and Trustee Franklin/Templeton Distributors, Inc.; Chairman of the Board and
San Mateo, CA 94404 Director, Franklin Advisers, Inc.; Director, Franklin/Templeton
Investor Services, Inc. and General Host Corporation; director of
certain of the investment companies in the Templeton Group of
Funds; and officer and/or director, trustee or managing general
partner, as the case may be, of most other subsidiaries of
Franklin Resources, Inc. and of most of the investment
companies in the Franklin Group of Funds.

* Rupert H. Johnson, Jr. Vice President Executive Vice President and Director, Franklin Resources, Inc. and
777 Mariners Island Blvd. and Trustee Franklin/Templeton Distributors, Inc.; President and Director,
San Mateo, CA 94404 Franklin Advisers, Inc.; Director, Franklin/Templeton Investor
Services, Inc.; director of certain of the investment companies in
the Templeton Group of Funds; and officer and/or director, trustee
or managing general partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc. and of most of the
investment companies in the Franklin Group of Funds.

David P. Kraus Trustee Since March 1992, of counsel to the Law Offices of Paul E. Fisher.
2707 Stoner Avenue From September 1989 to March 1992, an attorney in Los Angeles. From
Los Angeles, California 90064 January 1986 to September 1989, an attorney with Neiman Billet
Albala & Levine. From 1988 to June 1993, a Trustee of Huntington
Investment Trust.

Frank W. T. LaHaye Trustee General Partner, Peregrine Associates and Miller & LaHaye, which
20833 Stevens Creek Blvd. are General Partners of Peregrine Ventures and Peregrine Ventures
Suite 102 II (venture capital firms); Chairman of the Board and Director,
Cupertino, CA 95014 Quarterdeck Office Systems, Inc.; Director, FischerImaging
Corporation; and director or trustee, as the case may be, of
most of the investment companies in the Franklin Group of Funds.

Gordon S. Macklin Trustee Chairman, White River Corporation (information services);
8212 Burning Tree Road Director, Fundamerican Enterprises Holdings, Inc., Martin Marietta
Bethesda, MD 20817 Corporation, MCI Communications Corporation, Medimmune, Inc.
(biotechnology) and Inforest Corporation (information services);
director of certain of the investment companies in the Templeton
Group of Funds; and director, trustee or managing general partner,
as the case may be, of most of the investment companies in the
Franklin Group of Funds; formerly, Chairman, Hambrecht and Quist
Group; Director, H & Q Healthcare Investors; and President, National
Association of Securities Dealers, Inc.
</TABLE>

<PAGE>

<TABLE>
<S> <C> <C>
Positions and Offices Principal Occupations
Name and Address with the Funds During Past Five Years
---------------- --------------------- ----------------------
Harmon E. Burns Vice President Executive Vice President, Secretary and Director, Franklin Resources, Inc.;
777 Mariners Island Blvd. Executive Vice President and Director, Franklin/Templeton Distributors, Inc.;
San Mateo, CA 94404 Executive Vice President, Franklin Advisers, Inc.; Director, Franklin/
Templeton Investor Services, Inc.; director of certain of the investment
companies in the Templeton Group of Funds; officer and/or director, as
the case may be, of other subsidiaries of Franklin Resources, Inc.; and
officer and/or director or trustee of all the investment companies in the
Franklin Group of Funds.

Kenneth V. Domingues Vice President Senior Vice President, Franklin Resources, Inc. and Franklin Advisers, Inc.;
777 Mariners Island Blvd. and Treasurer Vice President, Franklin/Templeton Distributors, Inc.; officer and/or
San Mateo, CA 94404 director, as the case may be, of other subsidiaries of Franklin Resources,
Inc.; and officer and/or managing general partner, as the case may be, of all
the investment companies in the Franklin Group of Funds.

Deborah R. Gatzek Vice President Senior Vice President - Legal, Franklin Reources, Inc. and Franklin/Templeton
777 Mariners Island Blvd. and Secretary Distributors, Inc.; Vice President, Franklin Advisers, Inc.; and officer of
San Mateo, CA 94404 all the investment companies in the Franklin Group of Funds.

Charles E. Johnson Vice President President and Director of Templeton Worldwide, Inc.; Senior Vice President,
777 Mariners Island Blvd. Franklin Resources, Inc. and Franklin/Templeton Distributors, Inc.;
San Mateo CA 94404 President, Franklin Institutional Services Corporation; director of certain
of the investment companies in the Templeton Group of Funds; officer and/or
director, as the case may be, of some of the subsidiaries of Franklin
Resources, Inc.; and officer and/or director or trustee, as the case may be, of
some of the investment companies in the Franklin Group of Funds.

Edward V. McVey Vice President Senior Vice President/National Sales Manager, Franklin/Templeton Distributors,
777 Mariners Island Blvd. Inc.; and officer of many of the investment companies in the Franklin Group of
San Mateo, CA 94404 Funds.

</TABLE>

As indicated above, certain of the trustees and officers hold positions with
other companies in the Franklin Group of Funds(R). Trustees not affiliated with
the Trust's Advisers are currently paid fees of $800 annually plus $800 per
meeting attended and are reimbursed for expenses incurred in connection with
attending such meetings. During the fiscal year ended April 30, 1994, each
Fund's share of these costs was $13,018, $8,750 and $5,483, respectively, for
the Global Currency Fund, the Hard Currency Fund and the High Income Fund. No
officer or trustee received any other compensation directly from the Trust. As
of June 7, 1994, the trustees and officers, as a group, owned no shares of the
Hard Currency or High Income Funds and owned of record and beneficially
approximately 2,624 shares of the Global Currency Fund or less than 1% of the
total outstanding shares of that Fund. Certain officers or trustees who are
shareholders of Franklin Resources, Inc. may be deemed to receive indirect
remuneration by virtue of their participation, if any, in the fees paid to its
subsidiaries. Charles B.
9

<PAGE>
Johnson and Rupert H. Johnson, Jr. are brothers. Charles E. Johnson is the son
of Charles B. Johnson and the nephew of Rupert H. Johnson, Jr.

INVESTMENT ADVISORY AND OTHER SERVICES

Each Fund's investment manager is Adviser, which is a wholly-owned subsidiary
of Franklin Resources, Inc. ("Resources"), a publicly owned holding company
whose shares are listed on the New York Stock Exchange ("Exchange"). Resources
owns several other subsidiaries which are involved in investment management and
shareholder services. The Manager and other subsidiary companies of Resources
currently manage over $113 billion in assets for over 3.5 million shareholders.
The preceding table indicates those officers and trustees who are also
affiliated persons of Distributors, Adviser, and TICI.

Pursuant to the management agreement, the Manager provides investment research
and portfolio management services, including the selection of securities for
each Fund to purchase, hold or sell and the selection of brokers through whom
each Fund's portfolio transactions are executed. The Manager's activities are
subject to the review and supervision of the Trust's Board of Trustees to whom
the Manager renders periodic reports of each Fund's investment activities. The
Manager, at its own expense, furnishes the Funds with office space and office
furnishings, facilities and equipment required for managing the business
affairs of each Fund; maintains all internal bookkeeping, clerical, secretarial
and administrative personnel and services; and provides certain telephone and
other mechanical services. The Manager is covered by fidelity insurance on its
officers, directors and employees for the protection of the Trust. Each Fund
bears all of its expenses not assumed by the Manager. See the Statement of
Operations in the financial statements at the end of this Statement of
Additional Information for additional details of these expenses.

Pursuant to the management agreement, each Fund is obligated to pay the Manager
a fee computed at the close of business on the first business day of each month
equal to an annual rate of 0.65% of the value of the average daily net assets
of each Fund.

The Manager has limited its management fees and has assumed responsibility for
making payments, if necessary, to offset certain operating expenses otherwise
payable by the Funds. This action by the Manager to limit its management fees
and to assume responsibility for payment of the expenses related to the
operations of a Fund may be terminated by the Manager at any time. The
management agreement specifies that the management fee will be reduced to the
extent necessary to comply with the most stringent limits on the expenses which
may be borne by a Fund as prescribed by any state in which a Fund's shares are
offered for sale. The most stringent current limit requires the Manager to
reduce or eliminate its fee to the extent that aggregate operating expenses of
a Fund (excluding interest, taxes, brokerage commissions and extraordinary
expenses such as litigation costs) would otherwise exceed in any fiscal year
2 1/2% of the first $30 million of average net assets of a Fund, 2% of the next
$70 million of average net assets of a Fund and 1 1/2% of average net assets of
a Fund in excess of $100 million. Expense reductions have not been necessary
based on state requirements. For the period November 15, 1993 to April 30,
1994, the management fees the Funds were contractually obligated to pay the
Manager were $165,435, $104,552 and $55,225, for the Global Currency Fund, the
Hard Currency Fund and the High Income Fund, respectively, and the management
fees actually paid to the Manager by the Funds for the same period were
$48,533, $12,229 and $7,093, respectively.

The management agreement is in effect until April 30, 1995. Thereafter, it may
continue in effect for successive annual periods providing such continuance is
specifically approved at least annually by a vote of the Trust's Board of
Trustees or as to each Fund, by a vote of the holders of a majority of such
Fund's outstanding voting securities, and in either event by a majority vote of
the Trust's trustees who are not parties to the management agreement or
interested persons of any such party (other than as trustees of the Trust),
cast in person at a meeting called for that purpose. The management agreement
may be terminated without penalty at any time by each Fund or by the Manager on
behalf of a Fund on 60 days' written notice and will automatically terminate in
the event of its assignment, as defined in the Investment Company Act of 1940.

As stated in the Prospectus, prior to November 12, 1993, Huntington Advisers,
Inc., 251 South Lake Avenue, Suite 600, Pasadena, California 91101, an indirect
wholly-owned subsidiary of Long Beach Bank, served as the Trust's manager; and
Bankers Trust Company, 280 Park Avenue, New York, New York 10015, a
wholly-owned subsidiary of Bankers Trust New York Corporation, served as each
Fund's investment adviser. For the fiscal years ended April 30, 1992 and 1993
and for the period May 1, 1993 to November 15, 1993 investment advisory fees
and management and administration fees paid by the Funds were as follows:

GLOBAL HIGH HARD
CURRENCY INCOME CURRENCY
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
MANAGEMENT AND ADMINISTRATION FEES PAID TO HUNTINGTON ADVISERS
May 1, 1993 to November 15, 1993 .................................. $139,768 $ 61,738 $ 93,886
1993 .............................................................. 254,010 180,302 162,142
1992 .............................................................. 272,850 211,912 150,626
ADVISORY FEES PAID TO BANKERS TRUST COMPANY
May 1, 1993 to November 15, 1993 .................................. $ 85,126 $ 37,844 $ 57,239
1993 .............................................................. 158,756 112,688 101,339
1992 .............................................................. 170,531 132,445 94,141
</TABLE>

As stated in the Prospectus, Templeton Investment Counsel, Inc., an affiliate
of Templeton Worldwide, Inc. and an indirect wholly-owned subsidiary of
Resources will serve as the subadviser under a contract with the Manager.
Pursuant to the subadvisory agreement between the Manager and TICI, and subject
to the overall policies, control, direction and review of the Board of Trustees
and to the instructions and supervision of the Manager, TICI will provide a
continuous investment program for each Fund, including allocation of each
Fund's assets among the various securities markets of the world and, investment
research and advice with respect to securities and investments and cash
equivalents in the Funds.

Under the subadvisory agreement with the Manager, TICI receives a fee from the
Manager equal to an annual rate of 0.25% of the value of the average daily net
assets of each of the Funds.

Franklin/Templeton Investor Services, Inc. ("Investor Services" or "Shareholder
Services Agent"), a wholly-owned subsidiary of Resources, is the shareholder
servicing agent for each Fund and acts as each Fund's transfer agent and
dividend-paying agent. Investor Services is compensated on the basis of a fixed
fee per account. Prior to November 12, 1993, Fund/Plan Services, Inc., Two Elm
Street, Conshohochken, Pennsylvania 19428, served as the Trust's transfer and
dividend-disbursing agent.

Bank of America NT & SA, 555 California Street, 4th Floor, San Francisco,
California 94104, acts as custodian of certain of the securities and other
assets of each Fund. Chase Manhattan Bank, Global Securities Service, Chase
MetroTech Center, Brooklyn, New York 11245, also acts as custodian of certain
securities and other assets of each Fund. Citibank Delaware, One Penn's Way,
New Castle, Delaware 19720, acts as custodian in connection with transfer
services through bank automated clearing houses. The custodians do not
participate in decisions relating to the purchase and sale of portfolio
securities. Prior to November 12, 1993, Bankers Trust Company 280 Park Avenue,
New York, New York 10015, served as the Trust's custodian.

Coopers & Lybrand, 333 Market Street, San Francisco, California 94105, are the
Trust's independent auditors. During the fiscal year ended April 30, 1994,
their auditing services consisted of rendering an opinion on the financial
statements of the Funds included in the Trust's Annual Report and this
Statement of Additional Information. Previous fiscal years of the Funds were
audited by other independent auditors.

EACH FUND'S POLICIES REGARDING
BROKERS USED ON PORTFOLIO TRANSACTIONS

Under the current management agreement with Adviser, the selection of brokers
and dealers to execute transactions in each Fund's portfolio is made by the
Manager in accordance with criteria set forth in the management agreement and
any directions which the Trust's Board of Trustees may give. Under the
subadvisory agreement Adviser may delegate to TICI the authority to select
securities dealers to execute portfolio transactions for the Funds.

When placing a portfolio transaction, the Trust's Advisers attempt to obtain
the best net price and execution of the transaction. On portfolio transactions,
which are done on a securities exchange, the amount of commission paid by the
Funds is negotiated between the Trust's Advisers and the broker executing the
transaction. The Trust's Advisers seek to obtain the lowest commission rate
available from brokers which are felt to be capable of efficient execution of
the transactions. The determination and evaluation of the reasonableness of the
brokerage commissions paid in connection with portfolio transactions are based
to a large degree on the professional opinions of the persons responsible for
the placement and review of such transactions. These opinions are formed on the
basis of, among other things, the experience of these individuals in the
securities industry and information available to them concerning the level of
commis-

<PAGE>
sions being paid by other institutional investors of comparable size. The
Trust's Advisers will ordinarily place orders for the purchase and sale of
over-the-counter securities on a principal rather than agency basis with a
principal market maker unless, in the opinion of the Trust's Advisers, a better
price and execution can otherwise be obtained. Purchases of portfolio
securities from underwriters will include a commission or concession paid by
the issuer to the underwriter, and purchases from dealers will include a spread
between the bid and ask price. As a general rule, the Funds do not purchase
bonds in underwritings where they are not given any choice, or only limited
choice, in the designation of dealers to receive the commission. Each Fund will
seek to obtain prompt execution of orders at the most favorable net price.

The amount of commission is not the only relevant factor to be considered in
the selection of a broker to execute a trade. If it is felt to be in a Fund's
best interests, the Trust's Advisers may place portfolio transactions with
brokers who provide the types of services described below, even if it means the
Funds will have to pay a higher commission than would be the case if no weight
were given to the broker's furnishing of these services. This will be done only
if, in the opinion of the Trust's Advisers, the amount of any additional
commission is reasonable in relation to the value of the services. Higher
commissions will be paid only when the brokerage and research services received
are bona fide and produce a direct benefit to the Funds or assist the Trust's
Advisers in carrying out their responsibilities to the Funds, or when it is
otherwise in the best interest of the Funds to do so, whether or not such data
may also be useful to the Trust's Advisers in advising other clients.

When it is felt that several brokers are equally able to provide the best net
price and execution, the Trust's Advisers may decide to execute transactions
through brokers who provide quotations and other services to the Funds,
specifically including the quotations necessary to determine the value of each
Fund's net assets, in such amount of total brokerage as may reasonably be
required in light of such services, and through brokers who supply research,
statistical and other data to the Funds and the Trust's Advisers in such amount
of total brokerage as may reasonably be required.

It is not possible to place a dollar value on the special executions or on the
research services received by the Trust's Advisers from dealers effecting
transactions in portfolio securities. The allocation of transactions in order
to obtain additional research services permits the Trust's Advisers to
supplement their own research and analysis activities and to receive the views
and information of individuals and research staff of other securities firms. As
long as it is lawful and appropriate to do so, the Trust's Advisers and their
affiliates may use this research and data in their investment advisory
capacities with other clients. Provided that the Trust's officers are satisfied
that the best execution is obtained, the sale of Fund shares may also be
considered as a factor in the selection of securities dealers to execute each
Fund's portfolio transactions.

Because Distributors is a member of the National Association of Securities
Dealers, it is sometimes entitled to obtain certain fees when a Fund tenders
portfolio securities pursuant to a tender-offer solicitation. As a means of
recapturing brokerage for the benefit of a Fund, any portfolio securities
tendered by a Fund will be tendered through Distributors if it is legally
permissible to do so. In turn, the next management fee payable to Adviser under
the management agreement will be reduced by the amount of any fees received by
Distributors in cash, less any costs and expenses incurred in connection
therewith.

If purchases or sales of securities of a Fund and one or more other investment
companies or clients supervised by the Trust's Advisers are considered at or
about the same time, transactions in such securities will be allocated among
the several investment companies and clients in a manner deemed equitable to
all by the Trust's Advisers, taking into account the respective sizes of the
funds and the amount of securities to be purchased or sold. It is recognized
that in some cases this procedure could possibly have a detrimental effect on
the price or volume of the security so far as a Fund is concerned. In other
cases it is possible that the ability to participate in volume transactions and
to negotiate lower brokerage commissions will be beneficial to a Fund.

During the fiscal years ended April 30, 1992, 1993, and 1994, the Funds paid no
brokerage commissions. As of April 30, 1994, the Funds did not own securities
of any broker-dealers.

ADDITIONAL INFORMATION
REGARDING FUND SHARES

All checks, drafts, wires and other payment mediums used for purchasing or
redeeming shares of the Funds must be denominated in U.S. dollars. Each Fund
reserves the right, in its sole discretion, to either (a) reject any order for
the purchase or sale of shares denominated in any other currency,

<PAGE>
or (b) honor the transaction or make adjustments to a shareholder's account for
the transaction as of a date and with a foreign currency exchange factor
determined by the drawee bank.

In connection with exchanges (see Prospectus "Exchange Privilege"), it should
be noted that since the proceeds from the sale of shares of an investment
company generally are not available until the fifth business day following the
redemption, the funds into which a Fund's shareholders are seeking to exchange
reserve the right to delay issuing shares pursuant to an exchange until said
fifth business day. The redemption of shares of a Fund to complete an exchange
for shares of any of the investment companies will be effected at the close of
business on the day the request for exchange is received in proper form at the
net asset value then effective.

Dividend checks which are returned to a Fund marked "unable to forward" by the
postal service will be deemed to be a request by the shareholder to change the
dividend option and the proceeds will be reinvested in additional shares at the
public offering price (or net asset value if a capital gain distribution) until
new instructions are received.

Each Fund may deduct from a shareholder's account the costs of its efforts to
locate a shareholder if mail is returned as undeliverable or a Fund is
otherwise unable to locate the shareholder or verify the current mailing
address. These costs may include a percentage of the account when a search
company charges a percentage fee in exchange for their location services.

Under agreements with certain banks in Taiwan, Republic of China, each Fund's
shares are available to such banks' discretionary trust funds at net asset
value. The banks may charge service fees to their customers who participate in
the discretionary trusts. Pursuant to agreements, a portion of such service
fees may be paid to Distributors, or an affiliate of Distributors, to help
defray expenses of maintaining a service office in Taiwan, including expenses
related to local literature fulfillment and communication facilities.

Shares of the Funds may be offered to investors in Taiwan through securities
firms known locally as Securities Investment Consulting Enterprises. In
conformity with local business practices in Taiwan, shares of the Funds will be
offered with the following schedule of sales charges:

SALES
SIZE OF PURCHASE CHARGE
- ---------------- ------
Up to U.S. $100,000.......................... 3%
U.S. $100,000 to U.S. $1,000,000............. 2%
Over U.S. $1,000,000......................... 1%

PURCHASES AND REDEMPTIONS
THROUGH SECURITIES DEALERS

Orders for the purchase of shares of the Funds received in proper form prior to
1:15 p.m. Pacific time any business day that the Exchange is open for trading
and promptly transmitted to a Fund will be based upon the public offering price
determined that day. Purchase orders received by securities dealers or other
financial institutions after 1:15 p.m. Pacific time will be effected at the
applicable Fund's public offering price on the day it is next calculated. The
use of the term "securities dealer" herein shall include other financial
institutions which, pursuant to an agreement with Distributors (directly or
through affiliates), handle customer orders and accounts with a Fund. Such
reference, however, is for convenience only and does not indicate a legal
conclusion of capacity.

PURCHASES AT NET ASSET VALUE

As discussed in the Prospectus, certain categories of investors may purchase
shares of any of the Funds at net asset value (without a sales charge) or at a
reduced sales charge. The reason for this is that there is minimal or no sales
effort required with respect to these investors. If certain investments at net
asset value are made through a dealer who has executed a dealer or similar
agreement with Distributors, Distributors or its affiliates may make a payment,
out of their own resources, to such dealer in an amount not to exceed 0.25% of
the amount invested, paid pro rata on a quarterly basis on average quarterly
balances for a period of one year.

REDEMPTIONS IN KIND

Each Fund has committed itself to pay in cash (by check) all requests for
redemption by any shareholder of record, limited in amount, however, during any
90-day period to the lesser of $250,000 or 1% of the value of a Fund's net
assets at the beginning of such period. Such commitment is irrevocable

<PAGE>
without the prior approval of the Securities and Exchange Commission. In the
case of requests for redemption in excess of such amounts, the trustees reserve
the right to make payments in whole or in part in securities or other assets of
a Fund from which the shareholder is redeeming, in case of an emergency, or if
the payment of such a redemption in cash would be detrimental to the existing
shareholders of a Fund. In such circumstances, the securities distributed would
be valued at the price used to compute a Fund's net assets. Should a Fund do
so, a shareholder may incur brokerage fees in converting the securities to
cash. The Funds do not intend to redeem illiquid securities in kind; however,
should it happen, shareholders may not be able to timely recover their
investment and may also incur brokerage costs in selling such securities.

REDEMPTIONS BY A FUND

Due to the relatively high cost of handling small investments, the Trust
reserves the right to redeem, involuntarily, at net asset value, the shares of
any shareholder whose account has a value of less than one-half of the initial
minimum investment required for that shareholder, but only where the value of
such account has been reduced by the shareholder's prior voluntary redemption
of shares. Until further notice, it is the present policy of the Trust not to
exercise this right with respect to any shareholder whose account has a value
of $50 or more in the Funds. In any event, before a Fund redeems such shares
and sends the proceeds to the shareholder, it will notify the shareholder that
the value of the shares in the account is less than the minimum amount and
allow the shareholder 30 days to make an additional investment in an amount
which will increase the value of the account to at least $100 in a Fund.

CALCULATION OF NET ASSET VALUE

As noted in the Prospectus, the Funds generally calculate net asset value as of
1:15 p.m. Pacific time each day that the Exchange is open for trading. As of
the date of this Statement of Additional Information, the Funds are informed
that the Exchange observes the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.

The Funds' portfolio securities are valued as stated in the Prospectus.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times prior
to the close of the Exchange. The values of such securities used in computing
the net asset value of each Fund's shares are determined as of such times.
Occasionally, events affecting the values of such securities may occur between
the times at which they are determined and 1:00 p.m. Pacific time which will
not be reflected in the computation of each Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in good
faith by the Board of Trustees.

REINVESTMENT DATE

The dividend reinvestment date is the date on which additional shares are
purchased for the investor who has elected to have dividends reinvested.
This date will vary from month to month, based on operational considerations,
and is not necessarily the same date as the record date or the payable date for
cash dividends.

SPECIAL SERVICES

The Trust and Institutional Services Division of Distributors provides
specialized services, including recordkeeping, for institutional investors of
the Funds. The cost of these services is not borne by the Funds.

Investor Services may pay certain financial institutions which maintain omnibus
accounts with the Funds on behalf of numerous beneficial owners for
recordkeeping operations performed with respect to such beneficial owners. For
each beneficial owner in the omnibus account, each Fund may reimburse Investor
Services an amount not to exceed the per account fee which a Fund normally pays
Investor Services. Such financial institutions may also charge a fee for their
services directly to their clients.

ADDITIONAL INFORMATION REGARDING TAXATION

As stated in the Prospectus, each Fund has elected to be treated as a regulated
investment company under Subchapter M of the Code. The trustees reserve the
right not to maintain the qualification of a Fund as a regulated investment
company if they determine such course of action to be beneficial to
shareholders. In such case, a Fund will be subject to federal and possibly
state corporate taxes on its taxable income and gains, and distributions to
shareholders will be taxable to the extent of a Fund's available earnings and
profits.

The Code requires all funds to distribute at least 98% of their taxable
ordinary income earned during the calendar year and at least 98% of their
capital
14

<PAGE>
gain net income earned during the twelve month period ending October 31 of each
year (in addition to amounts from the prior year that were neither distributed
nor taxed to a Fund) to shareholders by December 31 of each year in order to
avoid the imposition of a federal excise tax. Under these rules, certain
distributions which are declared in October, November or December but which,
for operational reasons, may not be paid to the shareholder until the following
January, will be treated for tax purposes as if paid by a Fund and received by
the shareholder on December 31 of the calendar year in which they are declared.
The Funds intend as a matter of policy to declare such dividends, if any, in
December or January to avoid the imposition of this tax, but do not guarantee
that their distributions will be sufficient to avoid any or all federal excise
taxes.

For corporate shareholders, none of the distributions paid by a Fund for the
fiscal year ended April 30, 1994 qualified for the corporate dividends-received
deduction and it is not anticipated that any of the current year's dividends
will qualify.

Redemptions and exchanges of Fund shares are taxable transactions for federal
and state income tax purposes. For most shareholders, gain or loss will be
recognized in an amount equal to the difference between the shareholder's basis
in the shares and the amount received, subject to the rules described below. If
such shares are a capital asset in the hands of the shareholder, gain or loss
will be cpital gain or loss and will be long-term for federal income tax
purposes if the shares have been held for more than one year.

All or a portion of a loss realized upon a redemption of shares will be
disallowed to the extent other shares of a Fund are purchased (through
reinvestment of dividends or otherwise) within 30 days before or after such
redemption. Any loss disallowed under these rules will be added to the tax
basis of the shares purchased.

A Fund's investment in options, futures contracts and forward contracts,
including transactions involving actual or deemed short sales or foreign
exchange gains or losses are subject to many complex and special tax rules. For
example, a Fund's treatment of options on futures contracts, regulated futures
contracts, and certain foreign currency forward contracts and options thereon
is generally governed by Section 1256 of the Code. Absent a tax election to the
contrary, each such Section 1256 position held by a Fund will be
marked-to-market (i.e., treated as if it were sold for fair market value) on
the last business day of a Fund's fiscal year, and all gain or loss associated
with mark-to-market positions at fiscal year end (except certain foreign
currency gain or loss covered by Section 988 of the Code), which is treated as
ordinary income or loss) will generally be treated as 60% long-term capital
gain or loss and 40% short-term capital gain or loss. The effect of Section
1256 mark-to-market rules may be to accelerate income or to convert what
otherwise would have been long-term capital gains into short-term capital gains
or short-term capital losses into long-term capital losses within a Fund. The
acceleration of income on Section 1256 positions may require a Fund to
recognize taxable income without the corresponding receipt of cash. In order to
generate cash to satisfy the distribution requirements of the Code, a Fund may
be required to dispose of portfolio securities that it otherwise would have
continued to hold or to use cash flows from other sources such as the sale of
Fund shares. In these ways, any or all of these rules may affect both the
amount, character and time of income distirbuted to shareholders by a Fund.

When a Fund holds an option or contract which substantially diminishes a Fund's
risk of loss with respect to another position of a Fund (as might occur in some
hedging transactions), this combination of positions could be treated as a
"straddle" for tax purposes, resulting in possible deferral of losses,
adjustments in the holding periods of Fund securities and conversion of
short-term capital losses into long-term capital losses. Certain tax elections
exist for mixed straddles (i.e., straddles comprised of at least one Section
1256 position and at least one non-Section 1256 position) which may reduce or
eliminate the operation of these straddle rules.

As a regulated investment company, each Fund is also subject to the requirement
that less than 30% of its annual gross income be derived from the sale or other
disposition of securities and certain other investments held for less than
three months ("short-short income"). This requirement may limit a Fund's
ability to engage in options, straddles, hedging transactions and forward or
futures contracts because these transactions are often consummated in less than
three months, may require the sale of portfolio securities held less than three
months and may, as in the case of short sales of portfolio securities reduce
the holding periods of certain securities within a Fund, resulting in
additional short-short income for a Fund.

<PAGE>
The Funds will monitor their transactions in such options and contracts and may
make certain other tax elections in order to mitigate the effect of the above
rules and to prevent disqualification of a Fund as a regulated investment
company under Subchapter M of the Code.

Foreign exchange gains and losses realized by a Fund in connection with certain
transactions involving foreign currencies, foreign currency payables or
receivables, foreign currency-denominated debt securities, foreign currency
forward contracts, and options or futures contracts on foreign currencies are
subject to special tax rules which may cause such gains and losses to be
treated as ordinary income and losses rather than capital gains and losses and
may affect the amount and timing of a Fund's income or loss from such
transactions and in turn its distributions to shareholders.

In order for a Fund to qualify as a regulated investment company, at least 90%
of a Fund's annual gross income must consist of dividends, interest and certain
other types of qualifying income, and no more than 30% of its annual gross
income may be derived from the sale or other disposition of securities or
certain other instruments held for less than 3 months. Foreign exchange gains,
derived by the Funds with respect to a Fund's business of investing in stock or
securities, or options or futures with respect to such stock or securities,
constitute qualifying income for purposes of the 90% limitation.

Currency speculation or the use of currency forward contracts or other currency
instruments for non-hedging purposes may generate gains deemed to be not
directly related to a Fund's principal business of investing in stock or
securities and related options or futures. Under current law,
non-directly-related gains arising from foreign currency positions or
instruments held for less than 3 months are treated as derived from the
disposition of securities held less than 3 months in determining a Fund's
compliance with the 30% limitation. Each Fund will limit its activities
involving foreign exchange gains to the extent necessary to comply with these
requirements.

The Funds may be subject to foreign withholding taxes on income from certain of
its foreign securities. If more than 50% of the total assets of the Funds at
the end of its fiscal year are invested in securities of foreign corporations,
the Funds may elect to pass-through to its shareholders the pro rata share of
foreign taxes paid by the Funds. If this election is made, shareholders will be
(i) required to include in their gross income their pro rata share of foreign
source income (including any foreign taxes paid by the Funds), and (ii)
entitled to either deduct their share of such foreign taxes in computing their
taxable income or to claim a credit for such taxes against their U.S. income
tax, subject to certain limitations under the Code. Shareholders will be
informed by the Funds at the end of each calendar year regarding the
availability of any credits and the amount of foreign source income (including
any foreign taxes paid by a Fund) to be included on their income tax returns.

EACH FUND'S UNDERWRITER

Pursuant to an underwriting agreement dated November 12, 1993, in effect until
April 30, 1995, Distributors acts as principal underwriter in a continuous
public offering for shares of each Fund. Prior to that date, Huntington
Investments, Inc., an indirect wholly-owned subsidiary of Long Beach Bank and
an affiliate of Huntington Advisers, Inc., each Fund's former manager, served
as each Fund's principal underwriter.

Distributors pays the expenses of distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. Each Fund pays the expenses of preparing
and printing amendments to its registration statements and prospectuses (other
than those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders.

The underwriting agreement will continue in effect for successive annual
periods provided that its continuance is specifically approved at least
annually by a vote of the Trust's Board of Trustees or as to each Fund, by a
vote of the holders of a majority of such Fund's outstanding voting securities,
and in either event by a majority vote of the Trust's trustees who are not
parties to the underwriting agreement or interested persons of any such party
(other than as trustees of the Trust), cast in person at a meeting called for
that purpose. The underwriting agreement terminates automatically in the event
of its assignment and may be terminated by either party on 90 days' written
notice.

Distributors allows to dealers a portion of the underwriting commission on the
sale of the Funds' shares. In connection with the offering of the Funds'
shares, aggregate underwriting commissions for the fiscal years ended April 30,
1994, 1993, and 1992, were $280,011, $495,391 and $211,462, respectively. After
allowances to dealers, Huntington Investments, Inc., retained $22,148, $58,393
and $96,086, respectively, for the period May 1, 1993 to Novem-

<PAGE>
ber 15, 1993 and the fiscal years ended April 30, 1993 and 1992, respectively,
and Distributors retained $10,779 for the period from November 15, 1993 to
April 30, 1994. Huntington Investment, Inc. and Distributors received no other
compensation from the Funds for acting as underwriter.

DISTRIBUTION PLAN

Each of the Funds has adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act (the "Plan") whereby each Fund may pay up to a maximum of 0.45%
per annum of its average daily net assets for expenses incurred in the
promotion and distribution of its shares.

Pursuant to the Plan, Distributors or others will be entitled to be reimbursed
each quarter (up to the maximum as stated above) for actual expenses incurred
in the distribution and promotion of each Fund's shares, including, but not
limited to, the printing of prospectuses and reports used for sales purposes,
expenses of preparation and distribution of sales literature and related
expenses, advertisements, and other distribution-related expenses, including a
prorated portion of Distributors' overhead expenses attributable to the
distribution of Fund shares, as well as any distribution or service fees paid
to securities dealers or their firms or others who have executed a servicing
agreement with a Fund, Distributors or their affiliates.

In addition to the payments to which Distributors or others are entitled under
the Plan, the Plan also provides that to the extent a Fund, the Manager or
Distributors or other parties on behalf of a Fund, the Manager or Distributors,
make payments that are deemed to be payments for the financing of any activity
primarily intended to result in the sale of shares of a Fund within the context
of Rule 12b-1 under the 1940 Act, then such payments shall be deemed to have
been made pursuant to the Plan.

To the extent fees are for distribution or marketing functions, as
distinguished from administrative servicing or agency transactions, certain
banks will not be entitled to participate in the Plan as a result of applicable
federal law prohibiting certain banks from engaging in the distribution of
mutual fund shares. Such banking institutions, however, are permitted to
receive fees under the Plan for administrative servicing or for agency
transactions. If a bank were prohibited from providing such services, its
customers who are shareholders would be permitted to remain shareholders of a
Fund, and alternate means for continuing the servicing of such shareholders
would be sought. In such an event, changes in the services provided might occur
and such shareholders might no longer be able to avail themselves of any
automatic investment or other services then being provided by the bank. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these changes. Securities laws of states in which each
Fund's shares are offered for sale may differ from the interpretations of
federal law expressed herein, and banks and financial institutions selling
shares of the Funds may be required to register as dealers pursuant to state
law.

The Board of Trustees has determined that a consistent cash flow resulting from
the sale of new shares is necessary and appropriate to meet redemptions and to
take advantage of buying opportunities of portfolio securities without having
to make unwarranted liquidations of other portfolio securities. The Board of
Trustees, therefore, felt that it would benefit each Fund to have monies
available for the direct distribution activities of Distributors or others in
promoting the sale of its shares. The Board of Trustees, including the
non-interested trustees, concluded that, in the exercise of their reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit each Fund and its shareholders.

The Plan has been approved by the trustees of the Trust, including those
trustees who are not interested persons, as defined in the 1940 Act and as to
each Fund, by majority vote of such Fund's shares at a special meeting of
shareholders held on November 5, 1993. The Plan is effective through April 30,
1995, and renewable annually by a vote of the Trust's Board of Trustees,
including a majority vote of the trustees who are non-interested persons of the
Trust and who have no direct or indirect financial interest in the operation of
the Plan, cast in person at a meeting called for that purpose. It is also
required that the selection and nomination of such trustees be done by the
non-interested trustees. The Plan and any related agreement may

<PAGE>
be terminated at any time, without any penalty, by vote of a majority of the
non-interested trustees on not more than 60 days' written notice, by
Distributors on not more than 60 days' written notice, by any act that
constitutes an assignment of the Management Agreement with the Manager or the
Underwriting Agreement with Distributors, or by vote of a majority of the
Funds' outstanding shares. Distributors or any dealer or other firm may also
terminate their respective distribution or service agreement at any time upon
written notice.

The Plan and any related agreements may not be amended to increase materially
the amount to be spent for distribution expenses without approval by a majority
of the Funds' outstanding shares, and all material amendments to the Plan or
any related agreements shall be approved by a vote of the non-interested
trustees, cast in person at a meeting called for the purpose of voting on any
such amendment.

Distributors is required to report in writing to the Board of Trustees at least
quarterly on the amounts and purpose of any payment made under the Plan and any
related agreements, as well as to furnish the Board of Trustees with such other
information as may reasonably be requested in order to enable the Board of
Trustees to make an informed determination of whether the Plan should be
continued.

GENERAL INFORMATION

PERFORMANCE

As noted in the Prospectus, each Fund may from time to time quote various
performance figures to illustrate a Fund's past performance. The Funds may
occasionally cite statistics to reflect their volatility or risk.

Performance quotations by investment companies are subject to rules adopted by
the SEC. These rules require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation furnished by a
Fund be accompanied by certain standardized performance information computed as
required by the SEC. Current yield and average annual compounded total return
quotations used by the Funds are based on the standardized methods of computing
performance mandated by the SEC. An explanation of those and other methods used
by each Fund to compute or express performance follows.

TOTAL RETURN

The average annual total return is determined by finding the average annual
compounded rates of return over one-, five and ten-year periods, or fractional
portion thereof, that would equate an initial hypothetical $1,000 investment to
its ending redeemable value. The calculation assumes the maximum sales charge
is deducted from the initial $1,000 purchase order, income dividends and
capital gains are reinvested at net asset value during the period. The
quotation assumes the account was completely redeemed at the end of each one-,
five- and ten-year period and the deduction of all applicable charges and fees.

The average annual compounded rates of return for each Fund for the indicated
periods ended on the date of the financial statements included herein was as
follows:

<TABLE>
<CAPTION>
ONE-YEAR FIVE-YEAR
PERIOD PERIOD
FUND NAME ENDING ENDING FROM INCEPTION
- --------- ------ ------ --------------
<S> <C> <C> <C>
Global
Currency
Fund......... 0.32% 7.55% 8.33% (6-27-86)
Hard
Currency
Fund......... 0.53% N/A 10.21% (11-17-89)
High
Income
Fund......... -5.01% N/A 6.52% (11-17-89)

These figures were calculated according to the
SEC formula:
P(1+T)n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
</TABLE>

ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one-, five- or ten-year periods at the end of the one-,
five-or ten-year periods (or fractional portion thereof)

As discussed in the Prospectus, each Fund may quote total rates of return in
addition to its average annual total return. Such quotations are computed in
the same manner as a Fund's average annual compounded rate, except that such
quotations will be based on a Fund's actual return for a specified period
rather than on its average return over one-, five- and ten-year periods, or
fractional portion thereof. The total rates of return for each Currency Fund
for the indicated periods ended on the date of the financial statements
included herein was as follows:
18

<PAGE>
<TABLE>
<CAPTION>
ONE-YEAR FIVE-YEAR
PERIOD PERIOD FROM
FUND NAME ENDING ENDING INCEPTION
- --------- -------- --------- ---------
<S> <C> <C> <C>
Global Currency
Fund.................. 0.32% 43.91% 87.46%
Hard Currency
Fund.................. 0.53% N/A 54.21%
High Income
Fund.................. -5.01% N/A 32.51%
</TABLE>

In considering the quotations of total return by each Fund, investors should
remember that the 3.00% maximum sales charge reflected in each quotation is a
one time fee (charged on all direct purchases) which will have its greatest
impact during the early stages of an investor's investment in a Fund. The
actual performance of an investment will be affected less by this charge the
longer an investor retains the investment in a Fund.

YIELD

Current yield reflects the income per share earned by a Fund's portfolio
investments. Current yield is determined by dividing the net investment income
per share earned during a 30-day base period by the maximum offering price per
share on the last day of the period and annualizing the result. Expenses
accrued for the period include any fees charged to all shareholders during the
base period. The yield for each Fund for the 30-day period ended on the date of
the financial statements included herein was as follows:

<TABLE>
<CAPTION>
7-DAY
FUND NAME YIELD
- --------- -----
<S> <C>
Global Currency Fund......................... 3.34%
Hard Currency Fund........................... 3.01
High Income Fund............................. 5.10
</TABLE>

These figures were obtained using the following SEC formula:

Yield = 2 [(a-b + 1)6 - 1]
---
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per share on the
last day of the period

CURRENT DISTRIBUTION RATE

Yield which is calculated according to a formula prescribed by the SEC is not
indicative of the amounts which were or will be paid to a Funds' shareholders.
Amounts paid to shareholders are reflected in the quoted "current distribution
rate." The current distribution rate is computed by dividing the total amount
of dividends per share paid by a Fund during the past 12 months by a current
maximum offering price. Under certain circumstances, such as when there has
been a change in the amount of dividend payout, or a fundamental change in
investment policies, it might be appropriate to annualize the dividends paid
over the period such policies were in effect, rather than using the dividends
during the past 12 months. The current distribution rate differs from the
current yield computation because it may include distributions to shareholders
from sources other than dividends and interest, such as premium income from
option writing and short-term capital gains, and is calculated over a different
period of time.

VOLATILITY

OTHER PERFORMANCE QUOTATIONS

With respect to those categories of investors who are permitted to purchase
shares of the Funds at net asset value, sales literature pertaining to the
Funds may quote a current distribution rate, yield, total return, average
annual total return and other measures of performance as described elsewhere in
this Statement of Additional Information with the substitution of net asset
value for the public offering price.

<PAGE>
a total return based upon compounding of dividends on which it is presumed no
federal income tax applies.

Regardless of the method used, past performance is not necessarily indicative
of future results, but is an indication of the return to shareholders only for
the limited historical period used.

Each Fund may include in its advertising or sales material information relating
to investment objectives and performance results of funds belonging to the
Templeton Group of Funds. Resources is the parent company of the advisers and
underwriter of both the Franklin Group of Funds and Templeton Group of Funds.

COMPARISONS

c) The New York Stock Exchange composite or component indices - unmanaged
indices of all industrial, utilities, transportation, and finance stocks listed
on the New York Stock Exchange.

d) Wilshire 5000 Equity Index - represents the return on the market value of
all common equity securities for which daily pricing is available. Comparisons
of performance assume reinvestment of dividends.

f) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc. -
analyzes price, current yield, risk, total return, and average rate of return
(average annual compounded growth rate) over specified time periods for the
mutual fund industry.

g) Mutual Fund Source Book, published by Morningstar, Inc. - analyzes price,
yield, risk, and total return for equity funds.

i) Consumer Price Index (or Cost of Living Index), published by the U.S. Bureau
of Labor Statistics a statistical measure of change, over time, in the price of
goods and services in major expenditure groups.

k) Savings and Loan Historical Interest Rates - as published in the U.S.
Savings & Loan League Fact Book.

From time to time, the total return of the Funds may also be compared to Global
Currency, Hard Currency, High Income or International Money Market Indices.
These indices measure the total return performance in U.S. dollar terms of the
world's money markets. The Global Money Market Index includes ten countries
that are considered by the Trust's Advisers to be a reasonable indicator for
the world's money markets; their currency weights in the Index have been
derived from measurement of the Gross National Product ("GNP") of each country
and reflect the approximate share of each country's GNP in total world GNP.

The ten countries/currencies currently in the Global Index and their current
weights are as follows. The weights will be adjusted approximately every five
years.
20

<PAGE>
Australian dollar 2.04%
British pound sterling 6.76
Canadian dollar 3.99
Dutch guilder 0.90
French franc 8.26
Italian lira 7.62
Japanese yen 20.37
Swiss franc 1.56
United States dollar 38.21
German mark 10.30
------
100.00%
======

The International Money Market Index includes nine countries considered by the
Trust's Advisers to be a reasonable indicator for international money markets
(excluding the United States dollar); their currency weights in the Index have
been derived from measurement of the GNP of each country and reflect the
approximate share of each country's GNP in international GNP.

The nine countries/currencies currently in the International Index and their
current weights are as follows. The weights will be adjusted approximately
every five years.

Australian dollar 3.30%
British pound sterling 10.94
Canadian dollar 6.45
Dutch guilder 1.45
French franc 13.37
Italian lira 12.32
Japanese yen 32.97
Swiss franc 2.52
German mark 16.68
------
100.00%
======

The actual performance of the indices are calculated monthly from a base value
of 100 in January 1976. The calculation employs exchange rates on the last day
of each month and one-month deposit rates obtained from an independent source.
It reflects compounding of interest.

From time to time, advertisements or information for a Fund may include a
discussion of certain attributes or benefits to be derived by an investment in
a Fund. Such advertisements or information may include symbols, headlines, or
other material which highlight or summarize the information discussed in more
detail in the communication.

Advertisements or information may also compare a Fund's performance to the
return on certificates of deposit or other investments. Investors should be
aware, however, that an investment in a Fund involves the risk of fluctuation
of principal value, a risk generally not present in an investment in a
certificate of deposit issued by a bank. For example, as the general level of
interest rates rise, the value of a Fund's fixed-income investments, as well as
the value of its shares which are based upon the value of such portfolio
investments, can be expected to decrease. Conversely, when interest rates
decrease, the value of a Fund's shares can be expected to increase.
Certificates of deposit are frequently insured by an agency of the U.S.
government. An investment in a Fund is not insured by any federal, state or
private entity.

In assessing such comparisons of performance an investor should keep in mind
that the composition of the investments in the reported indices and averages is
not identical to a Funds' portfolio, that the averages are generally unmanaged,
and that the items included in the calculations of such averages may not be
identical to the formula used by a Fund to calculate its figures. In addition,
there can be no assurance that a Fund will continue this performance as
compared to such other averages.

OTHER FEATURES AND BENEFITS

Each Fund may help investors achieve various investment goals such as
accumulating money for retirement, saving for a down payment on a home, college
cost and/or other long-term goals. The Franklin College Costs Planner may
assist an investor in determining how much money must be invested on a monthly
basis in order to have a projected amount available in the future to fund a
child's college education. (Projected college cost estimates are based upon
current costs published by the College Board.) The Franklin Retirement Planning
Guide leads an investor through the steps to start a retirement savings
program. Of course, an investment in a Fund cannot guarantee that such goals
will be met.

MISCELLANEOUS INFORMATION

<PAGE>

holder accounts and offers 103 U.S.-based mutual funds. A Fund may identify
itself by its NASDAQ or CUSIP number.

From time to time, the number of Fund shares held in the "street name" accounts
of various securities dealers for the benefit of their clients or in
centralized securities depositories may exceed 5% of the total shares
outstanding.

OWNERSHIP AND AUTHORITY DISPUTES

In the event of disputes involving multiple claims of ownership or authority to
control a shareholder's account, each Fund has the right (but has no
obligation) to: (a) freeze the account and require the written agreement of all
persons deemed by the Fund to have a potential property interest in the
account, prior to executing instructions regarding the account; (b) interplead
disputed funds or accounts with a court of competent jurisdiction; or (c)
surrender ownership of all or a portion of the account to the Internal Revenue
Service in response to a Notice of Levy.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Trustees
of Franklin/Templeton Global Trust:

COOPERS & LYBRAND

San Francisco, California
June 3, 1994

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1994

<TABLE>
<CAPTION>
FACE VALUE
COUNTRY* AMOUNT FRANKLIN/TEMPLETON GERMAN GOVERNMENT BOND FUND (NOTE 1)
-------- --------- ---------------------------------------------- -----------
<S> <C> <C> <C>
LONG TERM INVESTMENTS 92.5%
EUROBONDS 27.2%
DD 1,000,000 European Economic Community, 6.50%, 03/10/00 ........................... $ 607,218
DD 1,000,000 Inter-American Development Bank, 6.75%, 04/29/03 ....................... 597,414
DD 1,500,000 Government of Denmark, 6.125%, 04/15/98 ................................ 903,429
DD 1,500,000 Republic of Argentina, 8.00%, 10/05/98 ................................. 900,567
DD 1,000,000 United Kingdom, 7.125%, 10/28/97 ....................................... 621,720
-----------
EUROBONDS (COST $3,631,078) ...................................... 3,630,348
-----------
GERMAN BONDS 65.3%
DD 1,000,000 Baden Wurttemberg State, 6.75%, 12/01/95 ............................... 613,534
DD 425,000 Bundesschatzanweisungen, 5.75%, 08/20/97 ............................... 255,128
DD 500,000 Deutsche Bundespost, 6.25%, 10/01/03 ................................... 289,474
DD 1,000,000 Deutschland Bundespost, 7.50%, 12/02/02 ................................ 623,459
DD 1,000,000 Freistaat Bayern Bavaria, 6.00%, 03/20/97 .............................. 605,714
DD 1,460,000 German Unity Fund, 8.75%, 07/20/00 ..................................... 976,905
DD 1,000,000 Kredit Fuer Wiederaufbau, 6.00%, 09/02/96 .............................. 604,511
DD 1,000,000 Kredit Fuer Wiederaufbau, 5.75%, 03/15/99 .............................. 589,089
DD 1,000,000 Land Berlin, 6.75%, 08/25/99 ........................................... 613,534
DD 1,000,000 Land Niedersachsen, 6.25%, 09/15/03 .................................... 578,346
DD 1,100,000 Nordrhein-Westfalen, 7.00%, 07/17/95 ................................... 673,564
DD 2,250,000 Treuhand-Obligationen, 6.125%, 03/26/98 ................................ 1,357,714
DD 1,550,000 Treuhand-Obligationen, 6.125%, 06/25/98 ................................ 934,661
-----------
GERMAN BONDS (COST $8,664,221) ................................... 8,715,633
-----------
TOTAL LONG TERM INVESTMENTS (COST $12,295,299) ................... 12,345,981
-----------
SHORT TERM INVESTMENTS 2.3%
DD 500,000 Bundesbank Schatz (Boulis), 06/01/94 (COST $289,763) ................... 299,300
-----------
TOTAL INVESTMENTS (COST $12,585,062) 94.8% .................. 12,645,281
OTHER ASSETS AND LIABILITIES, NET 5.2% ...................... 695,769
-----------
NET ASSETS 100.0% ........................................... $13,341,050
===========
At April 30, 1994, the net unrealized appreciation based on the
cost of investments for income tax purposes of $12,585,062 was
as follows:
Aggregate gross unrealized appreciation for all investments in
which there was an excess of value over tax cost ................. $ 149,241
Aggregate gross unrealized depreciation for all investments in
which there was an excess of tax cost over value.................. (89,022)
-----------
Net unrealized appreciation ........................................ $ 60,219
===========
</TABLE>

*Securities traded in currency of country indicated. See page 29 for country
legend.

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1994

<TABLE>
<CAPTION>
FACE VALUE
COUNTRY* AMOUNT FRANKLIN/TEMPLETON GLOBAL CURRENCY FUND (NOTE 1)
-------- ----------- --------------------------------------- -----------
<S> <C> <C> <C>
LONG TERM INVESTMENTS 14.2%
FOREIGN GOVERNMENT SECURITIES - FLOATING RATE NOTES
JP 250,000,000 Inter-American Development Bank, floating rate notes, 2.063%,
06/19/98........................................................... $ 2,448,504
DD 4,150,000 Government of Spain, floating rate notes, 5.75%, 06/29/02............ 2,472,327
DD 4,000,000 cNew Zealand Government, floating rate notes, quarterly calls, 5.875%,
06/08/97........................................................... 2,400,914
-----------
TOTAL LONG TERM INVESTMENTS (COST $7,021,856).................. 7,321,745
-----------
SHORT TERM INVESTMENTS 76.1%
BONDS 30.2%
DD 4,000,000 cCredit Foncier Finance, guaranteed floating rate notes, semi-annual
calls, 5.688%, 07/15/96............................................ 2,403,609
DD 4,000,000 Deutsche Finance Netherlands, 7.00%, 06/20/94........................ 2,407,459
JP 350,000,000 cEuropean Investment Bank, floating rate notes, semi-annual calls,
1.991%, 05/30/08................................................... 3,397,352
JP 240,000,000 Kredit Fuer Wiederaufbau International Finance, Inc., guaranteed
deb., 6.25%, 12/28/94.............................................. 2,423,258
DD 4,100,000 Merrill Lynch International Bank, London Branch, 5.375%, 05/06/94.... 2,466,165
JP 250,602,217 Morgan Guaranty London, 2.125%, 05/11/94............................. 2,458,089
-----------
TOTAL BONDS (COST $13,960,491)................................. 15,555,932
-----------
GOVERNMENT SECURITIES 45.9%
AU 4,550,000 Australian Government Treasury Bills, 06/21/94....................... 3,217,110
AU 5,100,000 Australian Government Treasury Bills, 07/13/94....................... 3,614,937
DD 4,050,000 German Government Treasury Bonds, 6.75%, 07/20/94.................... 2,441,937
NZ 12,600,000 New Zealand Government Treasury Bills, 07/06/94...................... 7,207,479
US 7,205,000 U.S. Treasury Bills, 06/30/94........................................ 7,161,338
-----------
TOTAL GOVERNMENT SECURITIES (COST $23,447,607)................. 23,642,801
-----------
TOTAL SHORT TERM INVESTMENTS (COST $37,408,098)................ 39,198,733
-----------
TOTAL INVESTMENTS (COST $44,429,954) 90.3%................ 46,520,478
OTHER ASSETS AND LIABILITIES, NET 9.7%.................... 5,018,876
-----------
NET ASSETS 100.0%......................................... $51,539,354
===========
At April 30, 1994, the net unrealized appreciation based on the
cost of investments for income tax purposes of $44,429,954
was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost............ $ 2,363,531
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value............ (273,007)
-----------
Net unrealized appreciation...................................... $ 2,090,524
===========
</TABLE>

*Securities traded in currency of country indicated. See page 29 for country
legend.

cFloating rate notes (FRN's) with an embedded put and/or call feature. The
interest rate changes periodically (often every six months) and is tied to a
designated money market index (such as LIBOR or U.S. Treasury bills rate).

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1994

<TABLE>
<CAPTION>
FACE VALUE
COUNTRY* AMOUNT FRANKLIN/TEMPLETON HARD CURRENCY FUND (NOTE 1)
-------- ----------- ------------------------------------- ------------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS 91.7%
BONDS 33.7%
JP 500,000,000 European Investment Bank, 5.00%, 02/13/95 ........................... $ 5,021,088
JP 150,000,000 cEuropean Investment Bank, floating rate notes, semi-annual calls,
1.991%, 05/30/08................................................... 1,456,008
NZ 1,800,000 Housing Corporation of New Zealand, 10.00%, 09/15/94 ................ 1,053,274
JP 150,000,000 Kredit Fuer Wiederaufbau International Finance, guaranteed deb.
6.25%, 12/28/94.................................................... 1,514,537
DK 11,000,000 Merrill Lynch International Bank, London Branch, 5.375%, 05/06/94 ... 1,688,696
JP 135,325,199 Morgan Guaranty, London Branch, 2.125%, 05/11/94 .................... 1,327,368
-----------
TOTAL BONDS (COST $11,351,867) ................................ 12,060,971
-----------
COMMERCIAL PAPER 11.2%
US 1,300,000 General Electric Credit Corp., 3.80%, 05/20/94 ...................... 1,297,393
US 1,300,000 Merrill Lynch and Co., 3.75%, 05/20/94 .............................. 1,297,427
US 1,400,000 Metropolitan Life Funding, Inc., 3.78%, 05/20/94 .................... 1,397,207
-----------
TOTAL COMMERCIAL PAPER (COST $3,992,027) ...................... 3,992,027
-----------
GOVERNMENT SECURITIES 46.8%
DK 13,000,000 Denmark Government Treasury Bills, 07/01/94 ......................... 1,976,973
DK 10,000,000 Denmark Government Treasury Bills, 11/15/94 ......................... 1,556,364
US 13,213,000 U.S. Treasury Bills, 05/12/94 - 08/25/94 ............................ 13,197,551
-----------
TOTAL GOVERNMENT SECURITIES (COST $16,659,060) ................ 16,730,888
-----------
TOTAL SHORT TERM INVESTMENTS (COST $32,002,954) 91.7% .... 32,783,886
OTHER ASSETS AND LIABILITIES, NET 8.3% ................... 2,954,912
-----------
NET ASSETS 100.0% ........................................ $35,738,798
===========

At April 30, 1994, the net unrealized appreciation based on the
cost of investments for income tax purposes of $32,002,954 was
as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value over
tax cost ......................................................... $ 788,779
Aggregate gross unrealized depreciation for all investments in
which there was an excess of tax cost over value .................. (7,847)
-----------
Net unrealized appreciation ....................................... $ 780,932
===========
</TABLE>
*Securities traded in currency of country indicated. See page 26 for country
legend.

aCertain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.

cFoating rate notes (FRN's) with an embedded put and/or call feature. The
interest rate changes periodically (often every six months) and is tied to a
designated money market index (such as LIBOR or U.S. Treasury bills rate).

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1994

<TABLE>
<CAPTION>
FACE VALUE
COUNTRY* AMOUNT FRANKLIN/TEMPLETON HIGH INCOME CURRENCY FUND (NOTE 1)
- --------- ------------- --------------------------------------------- ----------
<S> <C> <C> <C>
aSHORT TERM INVESTMENTS 93.8%
BONDS 26.1%
IT 1,013,232,000 Bankers Trust Co., London Branch, 7.688%, 05/06/94 ................ $ 636,864
US 100,000 cBanque Francaise de Comercio, floating rate notes, semi-annual
calls, 3.417%, 11/17/96.......................................... 99,840
US 724,000 bCaisse Centrale dis Jardin, (original accretion rate 3.95%),
06/29/94......................................................... 719,233
NZ 1,300,000 Housing Corporation of New Zealand, 10.00%, 09/15/94 .............. 760,698
IT 1,300,000,000 Merrill Lynch International Bank, London Branch, 7.563%, 05/06/94 . 817,112
NZ 1,000,000 bMobil Oil, New Zealand, (original accretion rate 4.65%), 05/24/94 . 575,623
IT 1,200,000,000 Morgan Guaranty, London Branch, 7.50%, 05/06/94 ................... 754,257
-----------
TOTAL BONDS (COST $4,330,394) ............................... 4,363,627
-----------
COMMERCIAL PAPER 4.3%
US 724,000 Merrill Lynch Financial Co., 3.95%, 06/27/94 (COST $719,472) ...... 719,472
-----------
DEBIT NOTES 8.6%
US 725,000 Federal Home Loan Mortgage Corp., 06/28/94 ........................ 720,549
US 725,000 Federal National Mortgage Association, 06/28/94 ................... 720,549
-----------
TOTAL DEBIT NOTES (COST $1,441,098) ......................... 1,441,098
-----------
GOVERNMENT SECURITIES 54.8%
AU 1,100,000 Australian Government Treasury Bills, 06/21/94 .................... 781,662
DK 11,000,000 Denmark Government Treasury Bills, 07/01/94 ....................... 1,672,849
DD 1,000,000 German Government Treasury Bonds, 7.25%, 12/20/94 ................. 608,361
GR 250,000,000 Greek Government Treasury Bills, 02/14/95 ......................... 884,572
DD 1,000,000 Ireland Government Treasury Bonds, 8.00%, 10/15/94 ................ 606,015
IT 1,200,000,000 Italian Government Treasury Bills, 08/31/94 ....................... 736,532
NZ 1,200,000 New Zealand Government Treasury Bills, 07/06/94 ................... 684,891
SE 6,000,000 Swedish Government Treasury Bills, 05/18/94 ....................... 780,765
SE 17,000,000 Swedish Government Treasury Bills, 06/15/94 ....................... 2,201,037
US 15,000 U.S. Treasury Bills, 06/30/94 .................................... 14,913
US 175,000 U.S. Treasury Bills, 08/25/94 ..................................... 172,730
-----------
TOTAL GOVERNMENT SECURITIES (COST $8,901,260) ............... 9,144,327
-----------
TOTAL SHORT TERM INVESTMENTS (COST $15,392,224) 93.8%..... 15,668,524
OTHER ASSETS AND LIABILITIES, NET 6.2% .................. 1,037,370
-----------
NET ASSETS 100.0% ....................................... $16,705,894
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1994 (CONT.)

<TABLE>
<CAPTION>
VALUE
FRANKLIN/TEMPLETON HIGH INCOME CURRENCY FUND (NOTE 1)
-------------------------------------------- --------
<S> <C>
At April 30, 1994, the net unrealized appreciation based
on the cost of investments for income tax purposes of
$15,396,690 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost .............. $285,072
Aggregate gross unrealized depreciation for all investments in
which there was an excess of tax cost over value ................. (13,238)
--------
Net unrealized appreciation ........................................ $271,834
========
</TABLE>

*Securities traded in currency of country indicated. See page 29 for country
legend.

bZero coupon bonds. The current effective yield may vary. The original
accretion rate by security, as reported, will remain constant.

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1994 (CONT.)

COUNTRY LEGEND:
AU - Australia
DD - Germany
DK - Denmark
GR - Greece
IT - Italy
JP - Japan
NZ - New Zealand
SE - Sweden
US - United States of America

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1994

<TABLE>
<CAPTION>
FRANKLIN/
TEMPLETON FRANKLIN/ FRANKLIN/ FRANKLIN/
GERMAN TEMPLETON TEMPLETON TEMPLETON
GOVERNMENT GLOBAL HARD HIGH INCOME
BOND FUND CURRENCY FUND CURRENCY FUND CURRENCY FUND
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Assets:
Investment in Securities:
At identified cost............................ $12,585,062 $44,429,954 $32,002,954 $15,392,224
=========== =========== =========== ===========
At value...................................... 12,645,281 46,520,478 32,783,886 15,668,524
Foreign currencies (cost $282,828,
and $411,034, respectively)................... -- 288,068 -- 414,941
Cash........................................... 157,227 3,646,115 293,068 722,909
Receivables:
Interest...................................... 405,605 675,493 191,634 85,398
Investment securities sold.................... 298,547 -- 14,599,553 --
Capital shares sold........................... 74,418 952,904 759,034 89
Unrealized gain on forward
foreign currency contracts (Note 2)........... -- -- 206,861 --
Unamortized organization cost (Note 3)......... 28,136 -- -- --
Receivable from affiliates..................... 10,627 -- -- --
----------- ----------- ----------- -----------
Total assets.............................. 13,619,841 52,083,058 48,834,036 16,891,861
----------- ----------- ----------- -----------
Liabilities:
Payables:
Investment securities purchased............... -- -- 11,834,381 --
Capital shares repurchased.................... 102,732 109,686 117,314 44,160
Management fees............................... -- 29,390 2,278 8,434
Distribution fees............................. 11,263 108,241 70,344 37,124
Shareholder servicing costs................... 440 1,700 1,075 800
Accrued expenses and other liabilities......... 14,585 31,967 20,222 11,219
Unrealized loss on forward foreign
currency contracts (Note 2)................... -- 262,720 -- 84,230
Foreign currencies overdraft
(cost $148,831, and $1,086,040,
respectively)................................. 149,771 -- 1,049,624 --
----------- ----------- ----------- -----------
Total liabilities......................... 278,791 543,704 13,095,238 185,967
----------- ----------- ----------- -----------
Net assets, at value............................ $13,341,050 $51,539,354 $35,738,798 $16,705,894
=========== =========== =========== ===========
Net assets consist of:
Unrealized appreciation on investments and
translation of assets and liabilities
denominated in foreign currencies............. $ 72,104 $ 1,915,687 $ 1,003,464 $ 227,094
Net realized gain (loss) from investments
and foreign currency transactions............. (128,660) 1,170,436 (561,323) 7,285
Capital shares................................. 10,852 37,207 27,605 14,804
Additional paid-in capital..................... 13,386,754 48,416,024 35,269,052 16,456,711
----------- ----------- ----------- -----------
Net assets, at value............................ $13,341,050 $51,539,354 $35,738,798 $16,705,894
=========== =========== =========== ===========
Shares outstanding.............................. 1,085,180 3,720,705 2,760,453 1,480,407
=========== =========== =========== ===========
Net asset value per share....................... $12.29 $13.85 $12.95 $11.28
=========== =========== =========== ===========
Representative computation
(Franklin/Templeton German Government
Bond Fund) of net asset value and
offering price per share:
Net asset value and redemption price
per share ($13,341,050 / 1,085,180)....... $12.29
===========
Maximum offering price (100/97 of $12.29)*... $12.67
===========
</TABLE>

*On sales of $50,000 or more the offering price is reduced as stated in the
section of the Prospectus entitled "How to Buy Shares of a Fund."

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

FINANCIAL STATEMENTS (CONT.)

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1994

<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON FRANKLIN/TEMPLETON
GERMAN GOVERNMENT FRANKLIN/TEMPLETON FRANKLIN/TEMPLETON HIGH INCOME
BOND FUND GLOBAL CURRENCY FUND HARD CURRENCY FUND CURRENCY FUND
------------------ -------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Investment income:
Interest (Note 1).................... $ 779,583 $2,508,199 $ 2,078,774 $ 1,521,678
--------- ---------- ----------- -----------
Expenses:
Management fees (Note 7)............. -- 188,301 106,115 68,831
Distribution fees (Note 7)........... 20,056 262,479 173,094 103,950
Investment advisory fees (Note 7).... 17,639 85,126 57,239 37,844
Shareholder servicing costs ......... 29,041 71,511 44,744 33,849
Custody fees......................... 15,894 45,624 28,848 16,745
Accounting service fees.............. 17,424 28,963 26,250 23,809
Customer service fees (Note 7)....... 7,056 34,158 22,972 15,155
Shareholder administration
fees (Note 7)....................... 13,621 -- -- --
Registration fees and insurance...... 26,287 35,526 49,087 38,933
Reports to shareholders.............. 18,814 12,249 9,261 4,788
Amortization of organization cost
(Note 3)............................ 7,661 -- -- --
Professional fees.................... 14,532 62,484 47,021 26,324
Trustees' fees and expenses.......... 4,078 13,018 8,750 5,483
Other................................ 272 5,784 3,715 2,193
Payments from Manager (Note 7)....... (55,894) -- -- --
--------- ---------- ----------- -----------
Total expenses.................. 136,481 845,223 577,096 377,904
--------- ---------- ----------- -----------
Net investment income........... 643,102 1,662,976 1,501,678 1,143,774
--------- ---------- ----------- -----------
Realized and unrealized gain
(loss) from investments:
Net realized gain (loss) on:
Investments........................ (300,648) 1,016,423 (379,660) (1,128,308)
Foreign currency transactions...... (135,480) 231,599 1,678,578 (592,623)
Net unrealized depreciation on
investments and translation of
assets and liabilities denominated
in foreign currencies.............. (116,040) (1,004,082) (1,849,850) (486,244)
--------- ---------- ----------- -----------
Net realized and unrealized
gain (loss) on investments........... (552,168) 243,940 (550,932) (2,207,175)
--------- ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations............ $ 90,934 $1,906,916 $ 950,746 $(1,063,401)
========= ========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

FINANCIAL STATEMENTS (CONT.)

STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED APRIL 30, 1994 AND 1993
(EXCEPT AS NOTED FOR THE GERMAN GOVERNMENT BOND FUND)

<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON
GERMAN GOVERNMENT FRANKLIN/TEMPLETON
BOND FUND GLOBAL CURRENCY FUND
--------------------------- ------------------------------
1994 1993* 1994 1993
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................................. $ 643,102 $ 130,773 $ 1,662,976 $ 2,954,010
Net realized gain (loss) from investments and foreign
currency transactions................................ (436,128) 126,070 1,248,022 3,671,415
Net unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities denominated in foreign currencies........ (116,040) 188,144 (1,004,082) 1,381,412
----------- ----------- ------------ -----------
Net increase in net assets
resulting from operations........................ 90,934 444,987 1,906,916 8,006,837
Distributions to shareholders:
From undistributed net investment income............... (411,253) (120,644) (2,466,914) (3,047,495)
From net realized capital gains........................ (78,504) -- -- (4,594,658)
From tax return of capital............................. (426,966) -- -- --
Increase (decrease) in net assets from capital share
transactions (Note 4).................................. 3,428,405 10,414,091 (10,255,263) (1,598,821)
----------- ----------- ------------ -----------
Net increase (decrease) in net assets............. 2,602,616 10,738,434 (10,815,261) (1,234,137)
Net assets:
Beginning of year...................................... 10,738,434 -- 62,354,615 63,588,752
----------- ----------- ------------ -----------
End of year............................................ $13,341,050 $10,738,434 $ 51,539,354 $62,354,615
=========== =========== ============ ===========
Undistributed net investment income
included in net assets:
Beginning of year...................................... $ 10,129 $ -- $ (18,718) $ 74,767
=========== =========== ============ ===========
End of year............................................ $ -- $ 10,129 $ -- $ (18,718)
=========== =========== ============ ===========
</TABLE>

*For the period December 31, 1992 (effective date of registration) to April 30,
1993.

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

FINANCIAL STATEMENTS (CONT.)

STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEARS ENDED APRIL 30, 1994 AND 1993

<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON FRANKLIN/TEMPLETON
HARD CURRENCY FUND HIGH INCOME CURRENCY FUND
------------------------------ ------------------------------
1994 1993 1994 1993
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................... $ 1,501,678 $ 2,127,089 $ 1,143,774 $ 3,095,841
Net realized gain (loss) from investments and foreign
currency transactions............................... 1,298,918 1,171,634 (1,720,931) (1,712,988)
Net unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities denominated in foreign currencies....... (1,849,850) 2,508,285 (486,244) 728,684
------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations...................... 950,746 5,807,008 (1,063,401) 2,111,537
Distributions to shareholders:
From undistributed net investment income.............. (400,376) (2,065,496) -- (3,219,701)
From net realized capital gains....................... -- (4,022,523) -- (1,146,074)
From tax return of capital............................ (1,166,097) -- (1,238,929) --
Increase (decrease) in net assets from capital share
transactions (Note 4)................................. (13,214,059) 18,092,495 (13,332,834) (11,979,999)
------------ ----------- ------------ ------------
Net increase (decrease) in net assets............ (13,829,786) 17,811,484 (15,635,164) (14,234,237)
Net assets:
Beginning of year..................................... 49,568,584 31,757,100 32,341,058 46,575,295
------------ ----------- ------------ ------------
End of year........................................... $ 35,738,798 $49,568,584 $ 16,705,894 $ 32,341,058
============ =========== ============ ============
Undistributed net investment income
included in net assets:
Beginning of year..................................... $ 97,795 $ 36,202 $ (24,660) $ 99,200
============ =========== ============ ============
End of year........................................... $ -- $ 97,795 $ -- $ (24,660)
============ =========== ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

On December 28, 1993, the U.S. Cash Portfolio (previously the fifth separate
Fund of the Trust) merged into the Franklin Money Fund, under a tax-free
reorganization.

A. SECURITY VALUATIONS:

B. INCOME TAXES:

C. SECURITY TRANSACTIONS:

D. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

1. SIGNIFICANT ACCOUNTING POLICIES (CONT.)

D. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS: (CONT.)

Net investment income differs for financial statement and tax purposes
primarily due to different treatments of realized gain (loss) on foreign
currency transactions.

Net realized capital gains differ for financial statement and tax purposes
primarily due to losses on wash sale transactions.

E. EXPENSE ALLOCATION:

F. FOREIGN CURRENCY TRANSLATION:

G. CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS:

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

1. SIGNIFICANT ACCOUNTING POLICIES (CONT.)

H. RECLASSIFICATIONS:

Certain reclassifications were made in the prior years' financial statements to
conform to current year presentation.

2. FORWARD FOREIGN CURRENCY CONTRACTS

As of April 30, 1994, the Global Currency Fund had the following forward
foreign currency contracts outstanding:

<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO SELL IN EXCHANGE FOR SETTLEMENT DATE GAIN (LOSS)
----------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
2,810,000 Australian Dollars U.S. $ 1,972,761 05/02/94 U.S. $ (36,955)
1,000,000 Australian Dollars 720,000 05/12/94 4,956
300,000 Australian Dollars 214,590 05/13/94 81
25,000,000 German Deutschemarks 14,895,548 05/11/94 (134,377)
1,200,000,000 Japanese Yen 11,673,152 05/13/94 (100,502)
----------- --------
$29,476,051 (266,797)
=========== =========
CONTRACT TO BUY
---------------
2,810,000 Australian Dollars U.S. $ 2,005,638 05/12/94 4,077
=========== ---------
Net unrealized depreciation........................................................... U.S. $(262,720)
=========
</TABLE>

As of April 30, 1994, the Hard Currency Fund had the following forward foreign
currency contracts outstanding:

<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO SELL IN EXCHANGE FOR SETTLEMENT DATE GAIN (LOSS)
----------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
10,500,000 Australian Dollars U.S. $ 7,423,238 05/02/94 U.S. $ (76,386)
5,230,000 Swiss Francs 3,722,340 05/02/94 13,120
12,500,000 Swiss Francs 8,877,841 05/03/94 12,593
----------- ---------
$20,023,419 (50,673)
=========== =========
CONTRACTS TO BUY
----------------
10,500,000 Australian Dollars 7,542,151 05/02/94 (42,526)
2,500,000 Australian Dollars 1,784,025 05/09/94 3,672
5,230,000 Swiss Francs 3,682,761 05/02/94 26,459
12,500,000 Swiss Francs 8,695,350 05/03/94 169,898
5,000,000 Swiss Francs 3,457,456 05/09/94 88,679
18,730,000 Swiss Francs 13,272,245 05/13/94 11,352
----------- --------
U.S. $38,433,988 U.S. $ 257,534
=========== ---------
Net unrealized appreciation....................................................... U.S. $ 206,861
=========
</TABLE>

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

2. FORWARD FOREIGN CURRENCY CONTRACTS (CONT.)

As of April 30, 1994, the High Income Fund had the following forward foreign
currency contracts outstanding:

<TABLE>
<CAPTION>
IN UNREALIZED
CONTRACTS TO SELL EXCHANGE FOR SETTLEMENT DATE GAIN (LOSS)
----------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
320,000 Australian Dollars U.S. $ 224,656 05/02/94 U.S. $ (4,208)
120,000 Australian Dollars 86,400 05/12/94 595
36,000 Australian Dollars 25,751 05/13/94 10
10,800,000 Danish Kroner 1,634,976 05/11/94 (21,740)
2,000,000 German Deutschemarks 1,188,255 05/11/94 (14,140)
2,400,000,000 Italian Lire 1,487,708 05/11/94 (18,724)
1,760,000,000 Italian Lire 1,026,958 05/12/94 (77,626)
7,934,500 Swedish Krona 1,003,605 05/03/94 (32,222)
---------- ---------
$6,678,309 (168,055)
========== ---------
CONTRACTS TO BUY
----------------
320,000 Australian Dollars U.S. $ 228,400 05/02/94 464
1,760,000,000 Italian Lire 1,014,409 05/12/94 90,175
7,934,500 Swedish Krona 1,042,641 05/03/94 (6,814)
---------- ---------
U.S. $2,285,450 83,825
========== ---------

Net unrealized depreciation........................................................ U.S. $ (84,230)
=========

</TABLE>

3. UNAMORTIZED ORGANIZATION COSTS

4. TRUST SHARES

<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON
GERMAN GOVERNMENT FRANKLIN/TEMPLETON
BOND FUND GLOBAL CURRENCY FUND
--------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Year Ended April 30, 1994
Shares sold................................................ 1,078,610 $ 13,611,746 838,375 $ 11,527,350
Shares issued in reinvestment of distributions............. 56,974 706,692 142,294 1,956,434
Shares redeemed............................................ (871,567) (10,890,033) (1,725,806) (23,739,047)
--------- ------------ ---------- ------------
Net increase (decrease)............................... 264,017 $ 3,428,405 (745,137) $(10,255,263)
========= ============ ========== ============
</TABLE>

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

4. TRUST SHARES (CONT.)

<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON
GERMAN GOVERNMENT FRANKLIN/TEMPLETON
BOND FUND* GLOBAL CURRENCY FUND
------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Year Ended April 30, 1993
Shares sold................................................ 893,123 $11,307,843 967,922 $ 13,853,183
Shares issued in reinvestment of distributions............. 7,788 99,895 455,572 6,215,009
Shares redeemed............................................ (79,748) (993,647) (1,497,512) (21,667,013)
------- ----------- ---------- ------------
Net increase (decrease)............................... 821,163 $10,414,091 (74,018) $ (1,598,821)
======= =========== ========== ============
</TABLE>

*For the period December 31, 1992 (effective date of registration) to April 30,
1993.

<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON FRANKLIN/TEMPLETON
HARD CURRENCY HIGH INCOME CURRENCY FUND
-------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Year Ended April 30, 1994
Shares sold............................................... 2,895,210 $ 36,728,040 178,728 $ 2,033,535
Shares issued in reinvestment of distributions............ 93,222 1,172,155 67,543 767,989
Shares redeemed........................................... (4,042,017) (51,114,254) (1,432,140) (16,134,358)
---------- ------------ ---------- ------------
Net decrease......................................... (1,053,585) $(13,214,059) (1,185,869) $(13,332,834)
========== ============ ========== ============
Year Ended April 30, 1993
Shares sold............................................... 4,545,439 $ 63,153,299 2,161,547 $ 29,539,466
Shares issued in reinvestment of distributions............ 373,771 4,714,359 234,659 2,947,947
Shares redeemed............................................ (3,525,134) (49,775,163) (3,340,045) (44,467,412)
---------- ------------ ---------- ------------
Net increase (decrease).............................. 1,394,076 $ 18,092,495 (943,839) $(11,979,999)
========== ============ ========== ============
</TABLE>

5. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS

At April 30, 1994, for tax purposes, the Funds had capital loss carryovers as
follows:

<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON FRANKLIN/TEMPLETON
GERMAN GOVERNMENT FRANKLIN/TEMPLETON FRANKLIN/TEMPLETON HIGH INCOME
BOND FUND* GLOBAL CURRENCY FUND HARD CURRENCY FUND CURRENCY FUND
------------------ -------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Capital loss carryovers expiring:
2002............................... $-- $187,705 $301,642 $--
=== ======== ======== ===
</TABLE>

For income tax purposes, the aggregate cost of securities is higher (and
unrealized appreciation is lower) than for financial reporting purposes at
April 30, 1994 by $4,466 in the High Income Fund.

*The German Government Bond Fund has a deferred capital loss of $128,660,
deemed to be incurred on the first day of the following fiscal year.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

6. PURCHASES AND SALES OF SECURITIES

Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the year ended April 30, 1994, were as follows:

</TABLE>

7. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

7. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)

Prior to November 15, 1993, Huntington Investments, Inc. served as the Trust's
underwriter and received commissions totalling $37,002, net, as follows:

<TABLE>
<CAPTION>
FRANKLIN/TEMPLETON FRANKLIN/TEMPLETON
GERMAN GOVERNMENT FRANKLIN/TEMPLETON FRANKLIN/TEMPLETON HIGH INCOMEE
BOND FUND GLOBAL CURRENCY FUND HARD CURRENCY FUND CURRENCY FUND
------------------ -------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Total commissions received............ $128,314 $95,445 $82,684 $9,312
================== ==================== ================== ==================
Paid to other dealers................. $113,460 $84,307 $72,798 $8,188
================== ==================== ================== ==================
</TABLE>

Commissions are deducted from the gross proceeds received from the sale of the
shares of the Trust, and as such are not expenses of the Funds.

<PAGE>

FRANKLIN/TEMPLETON GLOBAL TRUST

NOTES TO FINANCIAL STATEMENTS (CONT.)

7. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)

8. CREDIT RISK

The Global Currency Fund has investments in excess of 10% in debt
securities denominated in Australian Dollars, German Deutschemarks,
Japanese Yen & New Zealand Dollars.

The Hard Currency Fund has investments in excess of 10% in debt
securities denominated in Danish Kroner & Japanese Yen.

The High Income Fund has investments in excess of 10% in debt
securities denominated in Danish Kroner, Italian Lire, New Zealand
Dollars & Swedish Krona.

9. FINANCIAL HIGHLIGHTS

Selected data for each share of beneficial interest outstanding throughout each
year are set forth in the Prospectus under the caption "Financial Highlights."