PROSPECTUS
& APPLICATION
LOGO
TEMPLETON
GLOBAL BOND FUND
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JANUARY 1, 1997
INVESTMENT STRATEGY
GLOBAL GROWTH
AND INCOME
LOGO
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This prospectus describes the Advisor Class shares of Templeton Global
Bond Fund (the "Fund"). It contains information you should know before
investing in the Fund. Please keep it for future reference.
The Fund may borrow money for investment purposes, which will exaggerate
any increase or decrease in the market value of the Fund's portfolio and
subject the money borrowed to interest and other costs. The Fund is a
series of Templeton Income Trust (the "Trust").
The Fund's SAI for the Advisor Class, dated January 1, 1997, as may be
amended from time to time, includes more information about the Fund's
procedures and policies. It has been filed with the SEC and is
incorporated by reference into this prospectus. For a free copy or a
larger print version of this prospectus, call 1-800/DIAL BEN or write the
Fund at the address shown.
Advisor Class shares are only available for purchase by certain persons,
including, among others, certain financial institutions (such as banks,
trust companies, savings institutions and credit unions); government and
tax-exempt entities; certain pension, profit sharing and employee benefit
plans; certain qualified groups, including family trusts, endowments,
foundations and corporations; Franklin Templeton Fund Allocator Series;
and directors, trustees, officers and full time employees (and their
family members) of Franklin Templeton Group and the Franklin Templeton
Group of Funds. See "About Your Account."
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY OF THE U.S. GOVERNMENT. SHARES OF THE FUND INVOLVE INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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TEMPLETON GLOBAL
BOND FUND
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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 Distributors.
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When reading this prospectus, you will see
certain terms beginning with capital letters.
This means the term is explained
in our glossary section.
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<TABLE>
<S> <C> <C>
TABLE OF CONTENTS
ABOUT THE FUND
Expense Summary .................... 2
How Does the Fund Invest Its
Assets? ............................ 3
What Are the Fund's Potential
Risks? ............................. 9
Who Manages the Fund? .............. 13
How Does the Fund Measure
Performance? ....................... 14
How Is the Fund Organized? ......... 15
How Taxation Affects You and the
Fund ............................... 16
ABOUT YOUR ACCOUNT
How Do I Buy Shares? ............... 17
May I Exchange Shares for Shares of
Another Fund? ...................... 19
How Do I Sell Shares................ 22
TEMPLETON What Distributions Might I Receive
GLOBAL From the Fund? ..................... 23
BOND Transaction Procedures and Special
FUND Requirements ....................... 24
- ------------------------ Services to Help You Manage Your
January 1, 1997 Account ............................ 29
700 Central Avenue GLOSSARY
St. Petersburg, FL 33701
1-800/DIAL BEN Useful Terms and Definitions ....... 32
</TABLE>
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Advisor Class shares of the Fund. Because Advisor Class shares were not offered
to the public before January 1, 1997, the table is based on the historical
expenses of the Class I shares of the Fund for the fiscal year ended August 31,
1996.+ Your actual expenses may vary.
<TABLE>
<S> <C> <C>
A. Shareholder Transaction Expenses(++)
Maximum Sales Charge Imposed on Purchases NONE
Exchange Fee (per transaction) $5.00(+++)
B. Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.50%
Rule 12b-1 Fees NONE
Other Expenses 0.41%
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Total Fund Operating Expenses 0.91%
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C. Example
</TABLE>
Assume the annual return for Advisor Class shares is 5% and operating
expenses are as described above. For each $1,000 investment, you would pay
the following projected expenses if you sold your shares after the number of
years shown.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
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<S> <C> <C> <C>
$9 $29 $50 $112
</TABLE>
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends of the Advisor Class and are
not directly charged to your account.
(+)Unlike Advisor Class shares, the Class I shares of the Fund have a front-end
sales charge and Rule 12b-1 fees.
(++)If your transaction is processed through your Securities Dealer you may be
charged a fee by your Securities Dealer for this service.
(+++)$5.00 fee is only for Market Timers. We process all other exchanges
without a fee.
- Templeton Global Bond Fund
2
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HOW DOES THE FUND INVEST ITS ASSETS?
The Fund's Investment Objective
The Fund's investment objective is current income with capital appreciation and
growth of income. The Fund seeks to achieve its objective through a flexible
policy of investing primarily in debt securities of companies, governments and
government agencies of various nations throughout the world, as well as
preferred stock, common stocks which pay dividends, income-producing securities
which are convertible into common stock of such companies and sponsored and
unsponsored American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), and Global Depositary Receipts ("GDRs") (collectively, "depositary
receipts"). The objective is a fundamental policy of the Fund and may not be
changed without shareholder approval. Under normal circumstances, the Fund will
invest at least 65% of its total assets in issuers domiciled in at least three
different nations (one of which may be the U.S.). The Fund's investments in
common stocks will emphasize companies, in various countries and industries,
which pay dividends and may offer prospects for further growth in dividend
payments and capital appreciation. Of course, there is no assurance that the
Fund's objective will be achieved.
The Fund may invest in any debt security (which may include structured
investments, as described in the SAI under "How Does the Fund Invest Its
Assets? - Structured Investments"), including securities rated in any category
by S&P or Moody's and securities which are unrated by any rating agency. As an
operating policy, the Fund will not invest more than 5% of its total assets in
debt securities rated lower than BBB by S&P or Baa by Moody's. The average
maturity of the debt securities in the Fund's portfolio will fluctuate depending
upon TGBM's judgment as to future interest rate changes. In addition, when TGBM
determines that a temporary defensive strategy is warranted, the Fund may
invest without limit in U.S. government securities maturing in 13 months or
less, commercial paper, bank time deposits with less than seven days remaining
to maturity and bankers' acceptances. See "How Does the Fund Invest Its
Assets? - Debt Securities" in the SAI for descriptions of debt securities rated
BBB by S&P and Baa by Moody's.
The Fund may buy and sell financial futures contracts, stock and bond index
futures contracts and foreign currency forward and futures contracts. The Fund
also may write and buy put and call options on securities, indices, foreign
currencies and futures contracts. In addition, the Fund may invest in "when-
issued" securities and collateralized mortgage obligations, lend its portfolio
securities and borrow money for investment purposes (i.e., "leverage" its
portfolio). The Fund may also invest in repurchase agreements. These investment
Templeton Global Bond Fund -
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<PAGE>
techniques are described below and under the heading "How Does the Fund Invest
Its Assets?" in the SAI.
Although the Fund may invest up to 25% of its assets in a single industry, there
is no present intention of doing so. Under a non-fundamental policy approved by
the Board, TGBM will select securities for purchase by the Fund from many
industries that it believes to be productive and beneficial.
The Fund may invest up to 5% of its total assets in securities that may not be
resold without registration under applicable law ("restricted securities").
There may be a lapse of time between the Fund's decision to sell any restricted
security and the registration of the security. During this period, the price of
the security will be subject to market fluctuations. The Fund may invest up to
10% of its total assets in restricted securities and other securities which are
not restricted but which are not readily marketable (i.e., trading in the
security is suspended or, in the case of unlisted securities, market makers do
not exist or will not entertain bids or offers).
The Fund does not intend to emphasize short-term trading profits and usually
expects to have a portfolio turnover rate not exceeding 200%.
Types of Securities in which the Fund May Invest
The Fund is authorized to use the various securities and investment techniques
described below. Although these strategies are regularly used by some investment
companies and other institutional investors in various markets, some of these
strategies cannot at the present time be used to a significant extent by the
Fund in some of the markets in which the Fund will invest and may not be
available for extensive use in the future.
Repurchase Agreements. When the Fund acquires a security from a U.S. bank or a
registered broker-dealer, it may simultaneously enter into a repurchase
agreement, wherein the seller agrees to repurchase the security at a specified
time and price. The repurchase price is in excess of the purchase price by an
amount which reflects an agreed-upon rate of return, which is not tied to the
coupon rate of the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the underlying security
and therefore will be fully collateralized. However, if the seller should
default on its obligation to repurchase the underlying security, the Fund may
experience delay or difficulty in exercising its rights to realize upon the
security and might incur a loss if the value of the security declines, as well
as incur disposition costs in liquidating the security.
- Templeton Global Bond Fund
4
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Options on Securities, Indices and Futures Contracts. The Fund may write (i.e.,
sell) covered put and call options and purchase put and call options on
securities, securities indices or futures contracts that are traded on U.S. and
foreign exchanges or in the over-the-counter markets. An option on a security or
futures contract is a contract that permits the purchaser of the option, in
return for the premium paid, the right to buy a specified security or futures
contract (in the case of a call option) or to sell a specified security or
futures contract (in the case of a put option) from or to the writer of the
option at a designated price during the term of the option. An option on a
securities index permits the purchaser of the option, in return for the premium
paid, the right to receive from the seller cash equal to the difference between
the closing price of the index and the exercise price of the option. The Fund
may write a call or put option only if the option is "covered." This means that
so long as the Fund is obligated as the writer of a call option, it will own
the underlying securities or futures contracts subject to the call, or hold a
call at the same or lower exercise price, for the same exercise period, and on
the same securities or futures contracts as the written call. A put is covered
if the Fund maintains liquid assets with a value equal to the exercise price in
a segregated account, or holds a put on the same underlying securities or
futures contracts at an equal or greater exercise price.
Forward Foreign Currency Exchange Contracts and Options on Foreign Currencies.
The Fund will normally conduct its foreign currency exchange transactions either
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward contracts to purchase or sell
foreign currencies. The Fund will generally not enter into a forward contract
with a term of greater than one year. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date which
is individually negotiated and privately traded by currency traders and their
customers.
The Fund will generally enter into forward contracts only under two
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock in"
the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed
to settle the transaction. Second, when TGBM believes that the currency of a
particular foreign country may suffer or enjoy a substantial movement against
another currency, it may enter into a forward contract to sell or buy the
former foreign currency (or another currency which acts as a proxy for that
currency) approximating the value of some or all of the Fund's portfolio
securities
Templeton Global Bond Fund -
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<PAGE>
denominated in such foreign currency. This second investment practice is
generally referred to as "cross-hedging." The Fund's forward transactions may
call for the delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its portfolio
securities are then denominated. The Fund has no specific limitation on the
percentage of assets it may commit to forward contracts, subject to its stated
investment objective and policies, except that the Fund will not enter a
forward contract if the amount of assets set aside to cover forward contracts
would impede portfolio management or the Fund's ability to meet redemption
requests. Although forward contracts will be used primarily to protect the Fund
from adverse currency movements, they also involve the risk that anticipated
currency movements will not be accurately predicted.
The Fund may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the U.S. dollar value of foreign
currency denominated portfolio securities and against increases in the U.S.
dollar cost of such securities to be acquired. As in the case of other kinds of
options, however, the writing of an option on a foreign currency constitutes
only a partial hedge, up to the amount of the premium received, and the Fund
could be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on a
foreign currency may constitute an effective hedge against fluctuations in
exchange rates although, in the event of rate movements adverse to the Fund's
position, it may forfeit the entire amount of the premium plus related
transaction costs. Options on foreign currencies to be written or purchased by
the Fund are traded on U.S. and foreign exchanges or over-the-counter.
Futures Contracts. For hedging purposes only, the Fund may buy and sell
financial futures contracts, stock and bond index futures contracts and foreign
currency futures contracts. A financial futures contract is an agreement between
two parties to buy or sell a specified debt security at a set price on a future
date. An index futures contract is an agreement to take or make delivery of an
amount of cash based on the difference between the value of the index at the
beginning and at the end of the contract period. A futures contract on a foreign
currency is an agreement to buy or sell a specified amount of a currency for a
set price on a future date.
When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
- Templeton Global Bond Fund
6
<PAGE>
contract. In addition, when the Fund enters into a futures contract, it will
segregate assets or "cover" its position in accordance with the 1940 Act. See
"How Does the Fund Invest Its Assets - Futures Contracts" in the SAI. The Fund
may not commit more than 5% of its total assets to initial margin deposits on
futures contracts.
When-issued Securities. New issues of certain debt securities are often offered
on a when-issued basis, that is, the payment obligation and the interest rate
are fixed at the time the buyer enters into the commitment, but delivery and
payment for the securities normally take place after the date of the commitment
to purchase. The value of when-issued securities may vary prior to and after
delivery depending on market conditions and changes in interest rate levels.
However, the Fund will not accrue any income on these securities prior to
delivery. The Fund will maintain in a segregated account with its Custodian an
amount of cash or high quality debt securities equal (on a daily marked-to
market basis) to the amount of its commitment to purchase the when-issued
securities.
Borrowing. The Board has adopted a policy of limiting the Fund's borrowing to
5% of the value of its net assets to increase its holdings of portfolio
securities. Under the 1940 Act, the Fund is required to maintain continuous
asset coverage of 300% with respect to such borrowings and to sell (within
three days) sufficient portfolio holdings to restore such coverage if it should
decline to less than 300% due to market fluctuations or otherwise, even if
disadvantageous from an investment standpoint. Leveraging by means of borrowing
will exaggerate the effect of any increase or decrease in the value of portfolio
securities on the Fund's Net Asset Value, and money borrowed will be subject to
interest and other costs (which may include commitment fees and/or the cost of
maintaining minimum average balances), which may or may not exceed the income
or gains received from the securities purchased with borrowed funds.
Loans of Portfolio Securities. The Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of its total
assets. Such loans must be secured by collateral (consisting of any combination
of cash, U.S. government securities or irrevocable letters of credit) in an
amount at least equal (on a daily marked-to-market basis) to the current market
value of the securities loaned. The Fund may terminate the loans at any time
and obtain the return of the securities. The Fund will continue to receive any
interest or dividends paid on the loaned securities and will continue to have
voting rights with respect to the securities.
Depositary Receipts. ADRs are depositary receipts typically used by a U.S. bank
or trust company which evidence ownership of underlying securities issued by a
Templeton Global Bond Fund -
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<PAGE>
foreign corporation. EDRs and GDRs are typically issued by foreign banks or
trust companies, although they also may be issued by U.S. banks or trust
companies, and evidence ownership of underlying securities issued by either a
foreign or a U.S. corporation. Generally, depositary receipts in registered form
are designed for use in the U.S. securities market and depositary receipts in
bearer form are designed for use in securities markets outside the U.S.
Depositary receipts may not necessarily be denominated in the same currency as
the underlying securities into which they may be converted. Depositary receipts
may be issued pursuant to sponsored or unsponsored programs. In sponsored
programs, an issuer has made arrangements to have its securities traded in the
form of depositary receipts. In unsponsored programs, the issuer may not be
directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from an
issuer that has participated in the creation of a sponsored program.
Accordingly, there may be less information available regarding issuers of
securities underlying unsponsored programs and there may not be a correlation
between such information and the market value of the depositary receipts.
Depositary receipts also involve the risks of other investments in foreign
securities, as discussed below. For purposes of the Fund's investment policies,
the Fund's investments in depositary receipts will be deemed to be investments
in the underlying securities.
Collateralized Mortgage Obligations ("CMOs"). CMOs are fixed-income securities
which are collateralized by pools of mortgage loans created by commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other issuers in the U.S. In effect, CMOs "pass through" the
monthly payments made by individual borrowers on their mortgage loans. Timely
payment of interest and principal (but not the market value) of these pools is
supported by various forms of insurance or guarantees issued by U.S. government
agencies, private issuers and the mortgage poolers. The Fund may buy CMOs
without insurance or guarantees if, in the opinion of TGBM, the sponsor is
creditworthy. Prepayments of the mortgages included in the mortgage pool may
influence the yield of the CMO. In addition, prepayments usually increase when
interest rates are decreasing, thereby decreasing the life of the pool. As a
result, reinvestment of prepayments may be at a lower rate than that on the
original CMO.
U.S. Government Securities. U.S. government securities are obligations of, or
guaranteed by, the U.S. government, its agencies or instrumentalities. Some U.S.
government securities, such as Treasury bills and bonds, are supported by the
full faith and credit of the U.S. Treasury; others, such as those of Federal
Home
- Templeton Global Bond Fund
8
<PAGE>
Loan Banks, are supported by the right of the issuer to borrow from the
Treasury; others, such as those of the Federal National Mortgage Association,
are supported by the discretionary authority of the U.S. government to purchase
the agency's obligations; still others are supported only by the credit of the
instrumentality.
Commercial Paper. Investments in commercial paper are limited to obligations
rated Prime-1 by Moody's or A-1 by S&P or, if not rated by Moody's or S&P,
issued by companies having an outstanding debt issue currently rated Aaa or Aa
by Moody's or AAA or AA by S&P. See the Appendix in the SAI for a description
of these ratings.
WHAT ARE THE FUND'S POTENTIAL RISKS?
You should understand that all investments involve risk and there can be no
guarantee against loss resulting from an investment in the Fund nor can there be
any assurance that the Fund's investment objective will be attained. As with any
investment in securities, the value of, and income from, an investment in the
Fund can decrease as well as increase, depending on a variety of factors which
may affect the values and income generated by the Fund's portfolio securities,
including general economic conditions and market factors. In addition to the
factors which affect the value of individual securities, a shareholder may
anticipate that the value of the shares of the Fund will fluctuate with
movements in the broader equity and bond markets. A decline in the stock market
of any country in which the Fund is invested may also be reflected in declines
in the price of shares of the Fund. Changes in the prevailing rates of interest
in any of the countries in which the Fund is invested in fixed income
securities will likely affect the value of such holdings and thus the value of
Fund shares. Increased rates of interest, which frequently accompany inflation
and/or a growing economy, are likely to have a negative effect on the value of
Fund shares. The value of debt securities held by the Fund generally will vary
inversely with changes in prevailing interest rates. In addition, changes in
currency valuations will affect the price of shares of the Fund. History
reflects both decreases and increases in stock markets and currency valuations,
and these may occur unpredictably in the future. Additionally, investment
decisions made by TGBM will not always be profitable or prove to have been
correct. The Fund is not intended as a complete investment program.
The Fund is a "non-diversified" investment company, which means the Fund is not
limited in the proportion of its assets that may be invested in the securities
of a single issuer. However, the Fund intends to conduct its operations so as to
qualify as a "regulated investment company" for purposes of the Internal
Templeton Global Bond Fund -
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<PAGE>
Revenue Code of 1986, as amended (the "Code"), which generally will relieve the
Fund of any liability for federal income tax to the extent its earnings are
distributed to shareholders. See "How Taxation Affects You and the Fund." To so
qualify, among other requirements, the Fund will limit its investments so that,
at the close of each quarter of the taxable year, (i) not more than 25% of the
market value of the Fund's total assets will be invested in the securities of a
single issuer, and (ii) with respect to 50% of the market value of its total
assets, not more than 5% of the market value of its total assets will be
invested in the securities of a single issuer and the Fund will not own more
than 10% of the outstanding voting securities of a single issuer. The Fund's
investments in U.S. government securities are not subject to these limitations.
Because the Fund, as a non-diversified investment company, may invest in a
smaller number of individual issuers than a diversified investment company, and
may be more susceptible to any single economic, political or regulatory
occurrence, an investment in the Fund may present greater risk to an investor
than an investment in a diversified company.
The Fund has the right to purchase securities in any foreign country, developed
or developing. Investors should consider carefully the substantial risks
involved in investing in securities issued by companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments. There is the possibility of expropriation, nationalization or
confiscatory taxation, taxation of income earned in foreign nations or other
taxes with respect to investments in foreign nations, foreign exchange controls
(which may include suspension of the ability to transfer currency from a given
country), foreign investment controls on daily stock market movements, default
in foreign government securities, political or social instability, or
diplomatic developments which could affect investments in securities of issuers
in foreign nations. In addition, in many countries there is less publicly
available information about issuers than is available in reports about
companies in the U.S. Foreign companies are not generally subject to uniform
accounting or financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to U.S. companies. The
Fund may encounter difficulties or be unable to vote proxies, exercise
shareholder rights, pursue legal remedies, and obtain judgments in foreign
courts. Also, some countries may withhold portions of income and dividends at
the source. These considerations generally are more of a concern in developing
countries, where the possibility of political instability (including
revolution) and dependence on foreign economic assistance may be greater than
in developed countries. Investments in companies domiciled in developing
countries therefore may be subject to potentially higher risks than in
developed countries.
- Templeton Global Bond Fund
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<PAGE>
Brokerage commissions, custodial services, and other costs relating to
investments in foreign countries are generally more expensive than in the U.S.
Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is
earned thereon.
The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
In many foreign countries, there is less government supervision and regulation
of business and industry practices, stock exchanges, brokers and listed
companies than in the U.S. There is an increased risk, therefore, of uninsured
loss due to lost, stolen, or counterfeit stock certificates. In addition, the
foreign securities markets of many of the countries in which the Fund may
invest may also be smaller, less liquid, and subject to greater price
volatility than those in the U.S. The Fund may invest in Eastern European
countries, which involves special risks that are described under "What Are the
Fund's Potential Risks?" in the SAI.
Prior governmental approval of non-domestic investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been and
Templeton Global Bond Fund -
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<PAGE>
may continue to be adversely affected by economic conditions in the countries
with which they trade.
As a non-fundamental policy, the Fund will limit its investments in Russian
securities to 5% of its total assets. Russian securities involve additional
significant risks, including political and social uncertainty (for example,
regional conflicts and risk of war), currency exchange rate volatility,
pervasiveness of corruption and crime in the Russian economic system, delays in
settling portfolio transactions and risk of loss arising out of Russia's system
of share registration and custody. For more information on these risks and
other risks associated with Russian securities, please see "What Are the Fund's
Potential Risks?" in the SAI.
The Fund usually effects currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign exchange market. However, some
price spread on currency exchange (to cover service charges) will be incurred
when the Fund converts assets from one currency to another.
The Fund is authorized to invest in any debt security, including securities
rated in any category by S&P or Moody's and securities which are unrated by any
rating agency. As an operating policy, which may be changed by the Board
without shareholder approval, the Fund will not invest more than 5% of its total
assets in debt securities rated lower than BBB by S&P or Baa by Moody's. The
Board may consider a change in this operating policy if, in its judgment,
economic conditions change such that a higher level of investment in high-risk,
lower quality debt securities would be consistent with the interests of the Fund
and its shareholders. High-risk, lower quality debt securities, commonly known
as "junk bonds," are regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation and may be in default. Unrated debt
securities are not necessarily of lower quality than rated securities but they
may not be attractive to as many buyers. Regardless of rating levels, all debt
securities considered for purchase (whether rated or unrated) will be carefully
analyzed by TGBM to insure, to the extent possible, that the planned investment
is sound. The Fund may, from time to time, purchase defaulted debt securities
if, in the opinion of TGBM, the issuer may resume interest payments in the near
future. The Fund will not invest more than 10% of its total assets in defaulted
debt securities, which may be illiquid.
Successful use of futures contracts and related options is subject to special
risk considerations. A liquid secondary market for any futures or option
contract may not be available when the Fund seeks to close a futures or option
position. In addition, there may be an imperfect correlation between movements
in the securities or foreign currency on which the futures or option contract
is based
- Templeton Global Bond Fund
12
<PAGE>
and movements in the securities or currency in the Fund's portfolio. Successful
use of futures or option contracts is further dependent on TGBM's ability to
correctly predict movements in the securities or foreign currency markets and no
assurance can be given that its judgment will be correct. Successful use of
options on securities or securities indices is subject to similar risk
considerations.
There are further risk considerations, including possible losses through the
holding of securities in domestic and foreign custodian banks and depositories,
described in the SAI.
WHO MANAGES THE FUND?
The Board. The Board oversees the management of the Fund and elects its
officers. The officers are responsible for the Fund's day-to-day operations. The
Board also monitors the Fund to ensure no material conflicts exist among the
three classes of shares. While none is expected, the Board will act
appropriately to resolve any material conflict that may arise.
Investment Manager. TGBM manages the Fund's assets and makes its investment
decisions. TGBM also performs similar services for other funds. It is wholly
owned by Resources, a publicly owned company engaged in the financial services
industry through its subsidiaries. Charles B. Johnson and Rupert H. Johnson, Jr.
are the principal shareholders of Resources. Together, TGBM and its affiliates
manage over $172 billion in assets. The Templeton organization has been
investing globally since 1940. TGBM and its affiliates have offices in
Argentina, Australia, Bahamas, Canada, France, Germany, Hong Kong, India, Italy,
Luxembourg, Poland, Russia, Scotland, Singapore, South Africa, U.S., and
Vietnam. Please see "Investment Management and Other Services" and
"Miscellaneous Information" in the SAI for information on securities
transactions and a summary of the Fund's Code of Ethics.
Portfolio Management. The lead portfolio manager of the Fund since 1993 is
Thomas Latta. Mr. Latta is a vice president of TGBM. He attended the University
of Missouri and New York University. Before joining the Templeton organization
in 1991, Mr. Latta worked as a portfolio manager with Forester & Hairston, a
Houston based global fixed income investment management firm. Prior to that, Mr.
Latta spent seven years with Merrill Lynch, Pierce, Fenner & Smith
Incorporated, first as part of an investment advisory team to the Saudi Arabian
Monetary Authority and then working in the structured products group in New
York. In that position he developed asset-liability management strategies for
large Employee Retirement Income Security Act of 1974 (ERISA) plans. Mr.
Latta's current research responsibilities include the core European markets.
Templeton Global Bond Fund -
13
<PAGE>
Neil S. Devlin and Thomas J. Dickson exercise secondary portfolio management
responsibilities for the Fund. Mr. Devlin is the chief investment officer and
executive vice president of TGBM. He holds a BA in economics and philosophy
from Brandeis University and is a Chartered Financial Analyst. Before joining
the Templeton organization in 1987, he was a portfolio manager and bond analyst
with Constitutional Capital Management of Boston. While there, he managed a
portion of the Bank of New England's pension money, a number of trust and
corporate pension accounts, and began and managed a mortgage-backed securities
fund for the bank. Prior to that, Mr. Devlin was a bond trader and research
analyst for the Bank of New England. Mr. Dickson holds a BS in managerial
economics from the University of California at Davis. He joined the Templeton
organization in 1994 as a fixed income analyst. Prior to joining Templeton, Mr.
Dickson worked as a money market trader and securities analyst at Resources.
His current research responsibilities include non-dollar money market and
currency analysis, and country coverage of Japan, Denmark, Sweden, Greece and
Korea.
Management Fees. For the fiscal year ended August 31, 1996, the Fund paid 0.50%
of its average daily net assets in management fees.
Portfolio Transactions. TGBM tries to obtain the best execution on all
transactions. If TGBM believes more than one broker or dealer can provide the
best execution, consistent with internal policies it may consider research and
related services and the sale of Fund shares, as well as shares of other funds
in the Franklin Templeton Group of Funds, when selecting a broker or dealer.
Please see "How Does the Fund Buy Securities For Its Portfolio?" in the SAI for
more information.
Administrative Services. FT Services (and, prior to October 1, 1996, Templeton
Global Investors, Inc.) provides certain administrative services and facilities
for the Fund. During the fiscal year ended August 31, 1996, administration fees
totaling 0.14% of the average daily net assets of the Fund were paid to
Templeton Global Investors, Inc. Please see "Investment Management and Other
Services" in the SAI for more information.
HOW DOES THE FUND MEASURE PERFORMANCE?
From time to time, each class of the Fund advertises its performance. The more
commonly used measures of performance are total return, current yield and
current distribution rate. Performance figures are usually calculated using the
maximum sales charge, if applicable. Certain performance figures may not
include any applicable sales charge or Rule 12b-1 fees.
- Templeton Global Bond Fund
14
<PAGE>
Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested. Current yield for each
class shows the income per share earned by that class. The current distribution
rate shows the dividends or distributions paid to shareholders of a class. This
rate is usually computed by annualizing the dividends paid per share during a
certain period and dividing that amount by the current Offering Price of the
class or, in the case of Advisor Class shares, the Net Asset Value of the class.
Unlike current yield, the current distribution rate may include income
distributions from sources other than dividends and interest received by the
Fund.
The investment results of each class will vary. Performance figures are always
based on past performance and do not guarantee future results. For a more
detailed description of how the Fund calculates its performance figures, please
see "How Does the Fund Measure Performance?" in the SAI.
HOW IS THE FUND ORGANIZED?
The Fund is a non-diversified series of the Trust, an open-end management
investment company, commonly called a mutual fund. It was organized as a
Massachusetts business trust on June 16, 1986, and is registered with the SEC
under the 1940 Act. Prior to May 15, 1996, the Fund's name was Templeton Income
Fund. The Fund began offering two classes of shares on May 1, 1995: Templeton
Global Bond Fund - Class I and Templeton Global Bond Fund - Class II. All
shares purchased before that time are considered Class I shares. The Fund began
offering a third class of shares on January 1, 1997: Templeton Global Bond
Fund - Advisor Class. Class I, Class II and Advisor Class shares differ as to
sales charges, expenses and services. Different fees and expenses will affect
performance. In the future, additional series or classes of shares may be
offered. A further description of Class I and Class II is set forth below.
Shares of each class represent proportionate interests in the assets of the Fund
and have the same voting and other rights and preferences as any other class of
the Fund for matters that affect the Fund as a whole. For matters that only
affect one class, however, only shareholders of that class may vote. Each class
will vote separately on matters (1) affecting only that class, (2) expressly
required to be voted on separately by state law, or (3) required to be voted
on separately by the 1940 Act. Shares of each class of a series have the same
voting and other rights and preferences as the other classes and series of the
Trust for matters that affect the Trust as a whole.
The Trust has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the members of the Board. If
this
Templeton Global Bond Fund -
15
<PAGE>
happens, holders of the remaining shares voting will not be able to elect anyone
to the Board.
The Trust does not intend to hold annual shareholder meetings. It may hold a
special meeting of a series, however, for matters requiring shareholder approval
under the 1940 Act. The Trust will call a special meeting of shareholders for
the purpose of considering the removal of a Board member if requested in writing
to do so by shareholders holding at least 10% of the outstanding shares. The
1940 Act requires that we help you communicate with other shareholders in
connection with removing members of the Board.
Class I and Class II. Class I and Class II shares of the Fund are described in a
separate prospectus relating only to those classes. You may buy Class I and
Class II shares through your investment representative or directly by contacting
the Trust. If you would like a prospectus relating to the Fund's Class I and
Class II shares, contact your investment representative or Distributors.
Class I and Class II shares of the Fund have sales charges and Rule 12b-1
charges that may affect performance. Class I shares have a front-end sales
charge of 4.25% (4.44% of the net amount invested) which is reduced on certain
transactions of $100,000 or more. Class I shares are subject to Rule 12b-1 fees
up to a maximum of 0.35% per year of Class I's average daily net assets. Class
II shares have a front-end sales charge of 1.00% (1.01% of the net amount
invested) and are subject to Rule 12b-1 fees up to a maximum of 0.75% per year
of Class II's average daily net assets. Shares of Class I may be subject to, and
shares of Class II are generally subject to, a Contingent Deferred Sales Charge
upon redemption.
HOW TAXATION AFFECTS YOU AND THE FUND
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Fund and its shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
The Fund intends to elect to be treated and to qualify each year as a regulated
investment company under Subchapter M of the Code. A regulated investment
company generally is not subject to federal income tax on income and gains
distributed in a timely manner to its shareholders. The Fund intends to
distribute to shareholders substantially all of its net investment income and
net realized capital gains, which generally will be taxable income or capital
gains in their hands. Distributions declared in October, November or December to
shareholders of record on a date in such month and paid during the following
- Templeton Global Bond Fund
16
<PAGE>
January will be treated as having been received by shareholders on December 31
in the year such distributions were declared. The Fund will inform you each year
of the amount and nature of such income or gains. Sales or other dispositions of
Fund shares generally will give rise to taxable gain or loss.
Templeton Global Bond Fund -
17
<PAGE>
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
Opening Your Account
You may buy Advisor Class shares if you are making a minimum initial investment
of $5 million (in the aggregate) in one or more Advisor Class shares of the
Franklin Templeton Funds ($25 for subsequent investments) or if you are an
investor in one of the following categories:
(a) Broker-dealers, qualified registered investment advisors or certified
financial planners, who have entered into a supplemental agreement with
Distributors for clients participating in comprehensive fee programs;
(b) Qualified registered investment advisors or registered certified financial
planners who have clients invested in Mutual Series on October 31, 1996;
(c) Qualified registered investment advisors or registered certified financial
planners who did not have clients invested in Mutual Series on October 31,
1996 may buy through a broker-dealer or service agent who has entered into
an agreement with Distributors;
(d) Employer stock, bonus, pension or profit-sharing plans that meet the
requirements for qualification under Section 401 of the Code, including
salary reduction plans qualified under Section 401(k) of the Code, if the
number of employees is 5,000 or more or the plan has assets of $50 million
or more;
(e) Effective on or about February 1, 1997, participants in Franklin
Templeton's 401(k) and any Franklin Templeton Group Company Profit Sharing
Plans;
(f) Trust companies and bank trust departments initially investing in any of
the Franklin Templeton Funds at least $1 million of assets held in a
fiduciary, agency, advisory, custodial or similar capacity and over which
the trust companies, bank trust departments or other plan fiduciaries or
participants, in the case of certain retirement plans, have full or shared
investment discretion;
(g) Governments, municipalities and tax-exempt entities that meet the
requirements for qualification under Section 501 of the Code (subject to
an initial investment in Advisor Class shares of $1 million);
- Templeton Global Bond Fund
18
<PAGE>
(h) Any other investor, including a private investment vehicle such as a family
trust or foundation, who is a member of a qualified group may also
purchase Advisor Class shares of the Fund if the group as a whole meets
the required minimum initial investment of $5 million;
(i) Directors, trustees, officers and full-time employees (and members of
their immediate family) of Franklin Templeton Group and Franklin Templeton
Group of Funds who invest $100 or more;
(j) Accounts managed by the Franklin Templeton Group; and
(k) Class I shareholders of the Fund who qualify under one of the above
categories, may have their existing Class I shares invested into the Fund's
Advisor Class by sending written instructions indicating that they wish to
do so, by June 30, 1997. Instructions should be addressed to Investor
Services. Generally, for federal income tax purposes, there will be no
recognition of gain or loss associated with such a transaction. You may
wish to consult with your tax advisor to determine whether there are any
state income tax consequences to such a transaction.
(l) Each series of Franklin Templeton Fund Allocator Series that invests
$1,000 or more.
The qualified group referred to in Item (h) above, is one that:
- - Was formed at least six months ago,
- - Has a purpose other than buying Fund shares at a discount,
- - Has more than 10 members,
- - Can arrange for meetings between our representatives and group members,
- - Agrees to include sales and other Franklin Templeton Fund materials in
publications and mailings to its members at reduced or no cost to
Distributors,
- - Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and
- - Meets other uniform criteria that allow Distributors to achieve cost savings
in distributing shares.
If you are subject to the $5 million minimum investment requirement, the cost
or current value (whichever is higher) of your investment in other funds in the
Franklin Templeton Funds will be included for purposes of determining
compliance with the required minimum investment amount, provided that at
Templeton Global Bond Fund -
19
<PAGE>
least $1 million is invested in Advisor Class shares of the Franklin Templeton
Funds.
The minimum for subsequent investments in Advisor Class shares is $25 for most
purchases of Advisor Class shares of the Fund and for purchases by directors,
trustees, officers and full-time employees (and members of their immediate
family) of Franklin Templeton Group and Franklin Templeton Funds; and $1,000
for each series of Franklin Templeton Fund Allocator Series.
Purchase Price of Fund Shares
Advisor Class shares are purchased at Net Asset Value without a sales charge.
Securities Dealers may receive compensation up to 0.25% of the amount invested
from Distributors or an affiliated company.
How Do I Buy Shares in Connection with Retirement Plans?
Your individual or employer-sponsored retirement plan may invest in the Fund.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need an
application other than the one included in this prospectus. For a retirement
plan brochure or application, please call our Retirement Plans Department.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund and its rules and
requirements for exchanges. For example, some Franklin Templeton Funds do not
accept exchanges and others may have different investment minimums. Some
Franklin Templeton Funds do not offer Advisor Class shares.
- Templeton Global Bond Fund
20
<PAGE>
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- --------------------------------------------------------------------------
<S> <C>
BY MAIL 1. Send us written instructions signed by all
account owners
2. Include any outstanding share certificates for
the shares you're exchanging
- --------------------------------------------------------------------------
BY PHONE Call Shareholder Services
If you do not want the ability to exchange by
phone to apply to your account, please let us
know.
- --------------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- --------------------------------------------------------------------------
</TABLE>
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
How We Process Your Exchange
If you are exchanging your Advisor Class shares of the Fund you may:
- - exchange into any of our money funds except Franklin Templeton Money Fund II.
- - exchange into the other Advisor Class shares of the Franklin Templeton Funds
(excluding Templeton Developing Markets Trust, Templeton Foreign Fund and
Templeton Growth Fund, Inc., except as described below), Mutual Series Class
Z shares and Templeton Institutional Funds, Inc., if you meet the investment
requirements of the fund to be acquired.
- - exchange into the Advisor Class shares of Templeton Developing Markets Trust,
Templeton Foreign Fund and Templeton Growth Fund, Inc. only if you fall into
one of the following categories: (i) you are a broker-dealer or a qualified
registered investment advisor who has entered into a special agreement with
Distributors for your clients who are participating in comprehensive fee
programs; (ii) you are a qualified registered investment advisor or registered
certified financial planner who has clients invested in Mutual Series on
October 31, 1996; (iii) you are a qualified registered investment advisor or
registered certified financial planner who did not have clients invested in
Mutual Series on October 31, 1996 and are buying through a broker-dealer or
service agent who has entered into an agreement with Distributors; (iv) you
are a director, trustee, officer or full-time employee (or a family member)
of the Franklin Templeton Group or the Franklin Templeton Funds; (v) you are a
participant in Franklin Templeton's 401(k) Plan or Franklin Templeton's Profit
Sharing Plan; (vi) the exchanging shareholder is an account managed by the
Templeton Global Bond Fund -
21
<PAGE>
Franklin Templeton Group; or (vii) the exchanging shareholder is a series of
the Franklin Templeton Fund Allocator Series.
- - If the fund you are exchanging into does not offer Advisor Class shares, you
may exchange into the Class I shares of the fund at Net Asset Value.
Please be aware that the following restrictions may apply to exchanges:
- - The accounts must be identically registered. You may exchange shares from a
Fund account requiring two or more signatures into an identically registered
money fund account requiring only one signature for all transactions. Please
notify us in writing if you do not want this option to be available on your
account(s). Additional procedures may apply. Please see "Transaction
Procedures and Special Requirements."
- - Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact our Retirement Plans Department for information on exchanges
within these plans.
- - The fund you are exchanging into must be eligible for sale in your state.
- - We may modify or discontinue our exchange policy upon 60 days' written notice.
- - Your exchange may be restricted or refused if you: (i) request an exchange out
of the Fund within two weeks of an earlier exchange request, (ii) exchange
shares out of the Fund more than twice in a calendar quarter, or (iii)
exchange shares equal to at least $5 million, or more than 1/4 of 1% of the
Fund's net assets. Shares under common ownership or control are combined for
these limits. If you exchange shares as described in this paragraph, you will
be considered a Market Timer. Each exchange by a Market Timer, if accepted,
will be charged $5.00. Some of our funds do not allow investments by Market
Timers.
Because excessive trading can hurt Fund performance and shareholders, we may
refuse any exchange purchase if (i) we believe the Fund would be harmed or
unable to invest effectively, or (ii) the Fund receives or anticipates
simultaneous orders that may significantly affect the Fund.
- Templeton Global Bond Fund
22
<PAGE>
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ----------------------------------------------------------------------
<S> <C>
BY MAIL 1. Send us written instructions signed by all
account owners
2. Include any outstanding share certificates
for the shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts
may need to send additional documents.
Accounts under court jurisdiction may have
additional requirements
- ----------------------------------------------------------------------
BY PHONE
(Only available if you have completed and sent to us the telephone
redemption agreement included with this prospectus)
Telephone requests will be accepted:
- If the request is $50,000 or less.
Institutional accounts may exceed $50,000 by
completing a separate agreement. Call
Institutional Services to receive a copy.
- If there are no share certificates issued
for the shares you want to sell or have
already returned to the Fund.
- Unless you are selling shares in a Trust
Company retirement plan account.
- Unless the address on your account was
changed by phone within the last 30 days.
Beginning on or about May 1, 1997, you will
automatically be able to redeem shares by
telephone without completing a telephone
redemption agreement. Please notify us if you
do not want this option to be available on
your account. If you later decide you would
like this option, send us written instructions
signed by all account owners.
- ----------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ----------------------------------------------------------------------
</TABLE>
Templeton Global Bond Fund -
23
<PAGE>
We will send your redemption check within seven days after we receive your
request in proper form. If you sell your shares by phone, the check may only be
made payable to all registered owners on the account and sent to the address of
record. We are not able to receive or pay out cash in the form of currency.
If you sell shares you just purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
Trust Company Retirement Plan Accounts
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call our Retirement Plans Department.
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
Dividends and capital gains are calculated and distributed the same way for each
class of the Fund. The amount of any income dividends per share will differ,
however, generally due to the difference in the applicable Rule 12b-1 fees of
any class. Advisor Class shares are not subject to Rule 12b-1 fees.
The Fund intends to pay a monthly dividend representing substantially all of its
net investment income and to distribute annually any net realized capital gains.
Dividend payments are not guaranteed, are subject to the Board's discretion and
may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of the Fund's shares by the amount of the
distribution.
Distribution Options
You may receive your distributions from the Fund in any of these ways:
1. Buy additional shares of the Fund - You may buy additional shares of the same
class of the Fund by reinvesting capital gain distributions, dividend
distributions,
- Templeton Global Bond Fund
24
<PAGE>
or both. This is a convenient way to accumulate additional shares and maintain
or increase your earnings base.
2. Buy shares of other Franklin Templeton Funds - You may direct your
distributions to buy Advisor Class shares or Class I shares of another Franklin
Templeton Fund. Many shareholders find this a convenient way to diversify their
investments.
3. Receive distributions in cash - You may receive capital gains distributions,
dividend distributions, or both in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee.
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE THE SHAREHOLDER APPLICATION
INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT REPRESENTATIVE WHICH
OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL AUTOMATICALLY
REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE ADVISOR CLASS SHARES OF
THE FUND. For Trust Company retirement plans, special forms are required to
receive distributions in cash. You may change your distribution option at any
time by notifying us by mail or phone. Please allow at least seven days prior to
the record date for us to process the new option.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
How and When Shares Are Priced
The Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share as of the scheduled close of the NYSE, generally 4:00
p.m. Eastern time. You can find the prior day's closing Net Asset Value and
Offering Price of the Fund in many newspapers.
The Net Asset Value of all outstanding shares of each class is calculated on a
pro rata basis. It is based on each class' proportionate participation in the
Fund, determined by the value of the shares of each class. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. The Fund's assets are
valued as described under "How Are Fund Shares Valued?" in the SAI.
The Price We Use When You Buy or Sell Shares
You buy shares of Advisor Class at the Net Asset Value per share. We calculate
it to two decimal places using standard rounding criteria. You also sell shares
at Net Asset Value.
Templeton Global Bond Fund -
25
<PAGE>
We will use the Net Asset Value next calculated after we receive your
transaction request in proper form. If you buy or sell shares through your
Securities Dealer, however, we will use the Net Asset Value next calculated
after your Securities Dealer receives your request, which is promptly
transmitted to the Fund. Your redemption proceeds will not earn interest
between the time we receive the order from your dealer and the time we receive
any required documents.
Proper Form
An order to buy shares is in proper form when we receive your signed
shareholder application and check. Written requests to sell or exchange shares
are in proper form when we receive written instructions signed by all registered
owners, with a signature guarantee if necessary. We must also receive any
outstanding share certificates for those shares.
Written Instructions
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
- - Your name,
- - The Fund's name,
- - The class of shares,
- - A description of the request,
- - For exchanges, the name of the fund you're exchanging into,
- - Your account number,
- - The dollar amount or number of shares, and
- - A telephone number where we may reach you during the day, or in the evening
if preferred.
Signature Guarantees
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
- Templeton Global Bond Fund
26
<PAGE>
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
A signature guarantee verifies the authenticity of your signature and may be
obtained from certain banks, brokers or other eligible guarantors. YOU SHOULD
VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR PRIOR TO SIGNING. A
NOTARIZED SIGNATURE IS NOT SUFFICIENT.
Share Certificates
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate
is lost, stolen or destroyed, you may have to pay an insurance premium of up to
2% of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the Fund if you want to
sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do this
either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form. In this case, you should send the certificate and assignment
form in separate envelopes.
Telephone Transactions
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We will also record calls. We will not be
liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or not
implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.
Trust Company Retirement Plan Accounts. You may not sell shares or change
distribution options on Trust Company retirement plans by phone. While you
Templeton Global Bond Fund -
27
<PAGE>
may exchange shares of Trust Company IRA and 403(b) retirement accounts by
phone, certain restrictions may be imposed on other retirement plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call our Retirement Plans Department.
Account Registrations and Required Documents
When you open an account, you need to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
Joint Ownership. If you open an account with two or more owners, we register
the account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or
more owners, all owners must sign instructions to process transactions and
changes to the account. Even if the law in your state says otherwise, you will
not be able to change owners on the account unless all owners agree in writing.
If you would like another person or owner to sign for you, please send us a
current power of attorney.
Gifts and Transfers to Minors. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
Trusts. If you register your account as a trust, you should have a valid written
trust document to avoid future disputes or possible court action over who owns
the account.
Required Documents. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
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<PAGE>
<TABLE>
<CAPTION>
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- -----------------------------------------------------------------------
<S> <C>
CORPORATION Corporate Resolution
- -----------------------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement that
identify the general partners, or
2. A certification for a partnership agreement
- -----------------------------------------------------------------------
TRUST 1. The pages from the trust document that
identify the trustees, or
2. A certification for trust
- -----------------------------------------------------------------------
</TABLE>
Street or Nominee Accounts. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both
dealers must have an agreement with Distributors or we will not process the
transfer. Contact your Securities Dealer to initiate the transfer. We will
process the transfer after we receive authorization in proper form from your
delivering Securities Dealer. Accounts may be transferred electronically
through the NSCC. For accounts registered in street or nominee name, we may
take instructions directly from the Securities Dealer or your nominee.
Electronic Instructions. If there is a Securities Dealer or other
representative of record on your account, we are authorized to use and execute
electronic instructions. We can accept electronic instructions directly from
your dealer or representative without further inquiry. Electronic instructions
may be processed through the services of the NSCC, which currently include the
NSCC's "Networking," "Fund/SERV," and "ACATS" systems, or through Franklin/
Templeton's PCTrades II(TM) System.
Tax Identification Number
For tax reasons, we must have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies the Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete
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<PAGE>
an "awaiting TIN" certification, we must receive a correct tax identification
number within 60 days of your initial purchase to keep your account open.
Keeping Your Account Open
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is $50 or less, except for investors in
categories (d), (e), (j) and (l) under "Opening Your Account." We will only do
this if the value of your account falls below this minimum because you
voluntarily sold your shares and your account has been inactive (except for the
reinvestment of distributions) for at least six months. Before we close your
account, we will notify you and give you 30 days to increase the value of your
account to the required minimum amount of at least $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
Automatic Investment Plan
Our automatic investment plan offers a convenient way to invest in the Fund.
Under the plan, you can have money transferred automatically from your checking
account to the Fund each month to buy additional shares. If you are interested
in this program, please refer to the account application included with this
prospectus or contact your investment representative. The market value of the
Fund's shares may fluctuate and a systematic investment plan such as this will
not assure a profit or protect against a loss. You may discontinue the program
at any time by notifying Investor Services by mail or phone.
Systematic Withdrawal Plan
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum
payment amount for each withdrawal must be at least $50. For retirement plans
subject to mandatory distribution requirements, the $50 minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account. You will generally receive your payment by the
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end of the month in which a payment is scheduled. When you sell your shares
under a systematic withdrawal plan, it is a taxable transaction.
You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us in
writing at least seven business days before the end of the month preceding a
scheduled payment. Please see "How Do I Buy, Sell and Exchange Shares? -
Systematic Withdrawal Plan" in the SAI for more information.
Statements and Reports to Shareholders
We will send you the following statements and reports on a regular basis:
- - Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
- - Financial reports of the Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of the Fund's financial reports or an interim quarterly
report.
Brokers and Dealers and Plan Administrators
You may buy and sell Fund shares through registered broker-dealers. The Fund
does not impose a sales or service charge but your broker-dealer may charge you
a transaction fee. Transaction fees and services may vary among broker-dealers,
and your broker-dealer may impose higher initial or subsequent investment
requirements than those established by the Fund. Services provided by broker-
dealers may include allowing you to establish a margin account and borrow on
the value of the Fund's shares in that account. If your broker-dealer receives
your order before pricing on a given day, the broker-dealer is required to
forward the order to the Fund before pricing closes on that day. A broker-
dealer's failure to timely forward an order may give rise to a claim by the
investor against the broker.
Third party plan administrators of tax-qualified retirement plans and other
entities may provide sub-transfer agent services to the Fund. In such cases, the
Fund may pay the third party an annual sub-transfer agency fee that is not
greater than the Fund otherwise would have paid for such services.
Templeton Global Bond Fund -
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Institutional Accounts
Institutional investors will likely be required to complete an institutional
account application. There may be additional methods of opening accounts and
purchasing, redeeming or exchanging shares of the Fund available for
institutional accounts. To obtain an institutional application or additional
information regarding institutional accounts, contact Franklin Templeton
Institutional Services at 1-800/321-8563 Monday through Friday, from 9:00 a.m.
to 5:00 p.m. Eastern time.
Availability of These Services
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Fund may not be able to offer these services directly to
you. Please contact your investment representative.
What If I Have Questions About My Account?
If you have any questions about your account, you may write to Investor
Services, P.O. Box 33030, St. Petersburg, FL 33733-8030. The Fund and
Distributors are also located at this address. You may also contact us by phone
at one of the numbers listed below.
<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN
TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
- ------------------------------------------------------------------------
<S> <C> <C>
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
(1-800/342-5236) 9:30 a.m. to 5:30 p.m. (Saturday)
Retirement Plans 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
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<PAGE>
GLOSSARY
USEFUL TERMS AND DEFINITIONS
1940 Act - Investment Company Act of 1940, as amended.
Board - The Board of Trustees of the Trust.
Class I, Class II and Advisor Class - The Fund offers three classes of shares,
designated "Class I," "Class II," and "Advisor Class." The three classes have
proportionate interests in the Fund's portfolio. Class I and Class II shares are
subject to a sales charge structure and a Rule 12b-1 plan. Advisor Class shares
are purchased without a sales charge and do not have a Rule 12b-1 plan.
Code - Internal Revenue Code of 1986, as amended.
Contingency Period - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the
contingency period is 18 months. Regardless of when during the month you
purchased shares, they will age one month on the last day of that month and
each following month.
Contingent Deferred Sales Charge (CDSC) - A sales charge of 1% that may apply
if you sell your shares within the Contingency Period.
Distributors - Franklin/Templeton Distributors, Inc., the Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
Franklin Funds - the mutual funds in the Franklin Group of Funds(R) except
Franklin Valuemark Funds and the Franklin Government Securities Trust.
Franklin Templeton Funds - The Franklin Funds and the Templeton Funds.
Franklin Templeton Group - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries.
Franklin Templeton Group of Funds - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds.
FT Services - Franklin Templeton Services, Inc., the Fund's administrator.
Investor Services - Franklin/Templeton Investor Services, Inc., the Fund's
transfer agent and shareholder servicing agent.
IRS - Internal Revenue Service.
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Market Timer(s) - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.
Moody's - Moody's Investors Service, Inc.
Mutual Series - Franklin Mutual Series Fund Inc., a member of the Franklin
Group of Funds, formerly the Mutual Series Fund Inc. Each series of Mutual
Series began offering three classes of shares on November 1, 1996, Class I,
Class II and Class Z. All shares sold before that time are designated Class Z
shares.
NASD - National Association of Securities Dealers, Inc.
Net Asset Value (NAV) - the value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by
the number of shares outstanding.
NSCC - National Securities Clearing Corporation.
NYSE - New York Stock Exchange, Inc.
Offering Price - The public offering price is based on the Net Asset Value per
share and includes the front-end sales charge, if applicable. The maximum front-
end sales charge is 5.75% for Class I. Advisor Class has no front-end sales
charge.
Resources - Franklin Resources, Inc.
SAI - Statement of Additional Information.
S&P - Standard and Poor's Corporation.
SEC - U.S. Securities and Exchange Commission.
Securities Dealer - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
Templeton Funds - The U.S. registered mutual funds in the Templeton Group of
Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund.
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TGBM - Templeton Global Bond Managers, a division of Templeton Investment
Counsel, Inc., the Fund's investment manager, is located at Broward Financial
Centre, Fort Lauderdale, FL 33394-3091.
Trust Company - Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. - United States.
We/Our/Us - Unless the context indicates a different meaning, these terms refer
to the Fund and/or Investor Services, Distributors, or other wholly-owned
subsidiaries of Resources.
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