PROSPECTUS
TEMPLETON
GLOBAL
BOND FUND
Class A & C
Investment Strategy
GLOBAL GROWTH
AND INCOME
January 1, 1999
[FRANKLIN TEMPLETON LOGO]
LIKE ALL MUTUAL FUND SHARES, THE SEC HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
THE FUND
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INFORMATION ABOUT THE 2 Goal and Strategies
FUND YOU SHOULD KNOW
BEFORE INVESTING 3 Main Risks
6 Performance
7 Fees and Expenses
9 Management
11 Distributions and Taxes
12 Financial Highlights
YOUR ACCOUNT
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INFORMATION ABOUT 13 Choosing a Share Class
SALES CHARGES, ACCOUNT
TRANSACTIONS AND 18 Buying Shares
SERVICES
20 Investor Services
23 Selling Shares
25 Account Policies
28 Questions
FOR MORE INFORMATION
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WHERE TO LEARN MORE Back Cover
ABOUT THE FUND
<PAGE>
2
The Fund
GOAL AND STRATEGIES
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[BULLSEYE GRAPHIC]
GOAL The fund's investment goal is current income with capital appreciation and
growth of income.
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The fund invests primarily in debt securities of companies and governments
located around the world.
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PRINCIPAL INVESTMENTS Under normal market conditions, the fund will invest
primarily in the debt securities of companies, governments and government
agencies located anywhere in the world. At least 65% of its total assets will be
invested in issuers located in at least three countries (including the U.S.).
Debt securities represent an obligation of the issuer to repay a loan of money
to it, and generally provide for the payment of interest. These include bonds,
notes and debentures. While the fund may buy securities rated in any category,
it focuses on "investment grade" debt securities. These are issues rated in the
top four rating categories by independent rating agencies such as Standard &
Poor's Corporation (S&P) or Moody's Investors Services, Inc. (Moody's) or, if
unrated, determined by the fund's manager to be comparable.
The fund may also invest in equity securities and American, European and Global
Depositary Receipts. Equity securities generally entitle the holder to
participate in a company's general operating results. These include common
stocks and preferred stocks. Depositary receipts are certificates typically
issued by a bank or trust company that give their holders the right to receive
securities issued by a foreign or domestic company.
The fund's manager allocates its assets based upon its assessment of changing
market, political and economic conditions. It will consider various factors,
including evaluation of interest and currency exchange rate changes and credit
risks.
TEMPORARY INVESTMENTS The manager may take a temporary defensive position when
it believes the markets or the economy are experiencing excessive volatility or
a prolonged general decline, or other adverse conditions exist. Under these
circumstances, the fund may be unable to pursue its investment goal, because it
may not invest or may invest less in global debt securities.
<PAGE>
Templeton Global Bond Fund 3
MAIN RISKS
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[MINIATURE GRAPH GRAPHIC]
INTEREST RATE When interest rates rise, fixed-income security prices fall. The
opposite is also true: fixed-income security prices rise when interest rates
fall. Generally, interest rates rise during times of inflation or a growing
economy, and will fall during an economic slowdown or recession. Securities with
longer maturities usually are more sensitive to interest rate changes than
securities with shorter maturities.
CREDIT This is the possibility that an issuer will be unable to make interest
payments or repay principal. Changes in an issuer's financial strength or in a
security's credit rating may affect its value and, thus, impact the value of
fund shares.
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Changes in global interest rates affect the prices of the fund's debt
securities. If rates rise, the value of the fund's debt securities will fall and
so too will the fund's share price. This means you could lose money.
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FOREIGN SECURITIES Securities of companies and governments located outside the
U.S. may involve risks that can increase the potential for losses in the fund.
Investments in Depositary Receipts also involve some or all of the following
risks.
COUNTRY. General securities market movements in any country where the fund has
investments are likely to affect the value of the securities the fund owns that
trade in that country. These movements will affect the fund's share price and
fund performance.
The political, economic and social structures of some countries the fund invests
in may be less stable and more volatile than those in the U.S. The risks of
investing in these countries include the possibility of the imposition of
exchange controls, currency devaluations, foreign ownership limitations,
expropriation, restrictions on removal of currency or other assets,
nationalization of assets, punitive taxes and certain custody and settlement
risks.
The fund's investments in developing or emerging markets are subject to all of
the risks of foreign investing generally, and have additional heightened risks
due to a lack of established legal, business and social frameworks to support
securities markets. Foreign securities markets, including emerging markets, may
have substantially lower trading volumes than U.S. markets, resulting in less
liquidity and more volatility than experienced in the U.S. While short-term
volatility in these markets can be disconcerting, declines in excess of 50% are
not unusual.
<PAGE>
4
COMPANY. Foreign companies are not subject to the same disclosure, accounting,
auditing and financial reporting standards and practices as U.S. companies and
their securities may not be as liquid as securities of similar U.S. companies.
Foreign stock exchanges, trading systems, brokers and companies generally have
less government supervision and regulation than in the U.S. The fund may have
greater difficulty voting proxies, exercising shareholder rights, pursuing legal
remedies and obtaining judgments with respect to foreign investments in foreign
courts than with respect to U.S. companies in U.S. courts.
CURRENCY Many of the fund's investments are denominated in foreign currencies.
Changes in foreign currency exchange rates will affect the value of what the
fund owns and the fund's share price. Generally, when the U.S. dollar rises in
value against a foreign currency, an investment in that country loses value
because that currency is worth fewer U.S. dollars. Devaluation of currency by a
country's government or banking authority also has a significant impact on the
value of any securities denominated in that currency.
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Mutual fund shares 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. Mutual fund shares involve investment risks, including the possible
loss of principal.
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EURO. On January 1, 1999, the European Monetary Union (EMU) plans to introduce a
new single currency, the euro, which will replace the national currency for the
eleven participating member countries. If the fund holds investments in
countries with currencies replaced by the euro, the investment process,
including trading, foreign exchange, payments, settlements, cash accounts,
custody and accounting will be impacted.
Because this change to a single currency is new and untested, the establishment
of the euro may result in market volatility. For the same reason, it is not
possible to predict the impact of the euro on the business or financial
condition of European issuers which the fund may hold in its portfolio, and
their impact on the value of fund shares and fund performance. To the extent the
fund holds non-U.S. dollar (euro or other) denominated securities, it will still
be exposed to currency risk due to fluctuations in those currencies versus the
U.S. dollar.
<PAGE>
Templeton Global Bond Fund 5
ILLIQUID SECURITIES The fund may invest up to 10% of its total assets in
restricted and other securities that are not readily marketable.
DIVERSIFICATION The fund is non-diversified under federal securities laws. It
may invest a greater portion of its assets in the securities of one issuer, and
therefore in a smaller number of individual issuers, than diversified funds.
Therefore, it may be more sensitive to economic, business, political or other
changes affecting similar issuers or securities. The fund intends, however, to
meet certain tax diversification requirements.
YEAR 2000 When evaluating current and potential portfolio positions, Year 2000
is one of the factors the fund's manager considers.
The manager will rely upon public filings and other statements made by companies
about their Year 2000 readiness. Issuers in countries outside the U.S.,
particularly in emerging markets, may not be required to make the same level of
disclosure about Year 2000 readiness as is required in the U.S. The manager, of
course, cannot audit any company and its major suppliers to verify their Year
2000 readiness.
If a company in which the fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its security will also be adversely
affected. A decrease in the value of one or more of the fund's portfolio
holdings will have a similar impact on the price of the fund's shares. Please
see page 10 for more information.
PORTFOLIO TURNOVER The manager's attempt to keep the fund's portfolio of debt
securities at an optimum level of interest rate sensitivity, may cause the
fund's portfolio turnover rate to be high. High turnover will increase the
fund's transaction costs and may increase your tax liability.
More detailed information about the fund, its policies and risks can be found in
the fund's Statement of Additional Information (SAI).
<PAGE>
6
PERFORMANCE
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[BULL & BEAR GRAPHIC]
This bar chart and table show the volatility of the fund's returns, which is one
indicator of the risks of investing in the fund. The bar chart shows changes in
the fund's returns from year to year over the past 10 calendar years. The table
shows how the fund's average annual total returns compare to those of a
broad-based securities market index. Of course, past performance cannot predict
or guarantee future results.
CLASS A ANNUAL TOTAL RETURNS(1)
Best
Quarter:
Q2 '92
7.23%
Worst
Quarter:
Q1 '94
- -3.51%
[BAR GRAPH]
<TABLE>
<CAPTION>
YEAR 88 89 90 91 92 93 94 95 96 97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7.07% 8.54% 9.89% 14.91% 3.12% 10.35% -3.58% 18.21% 11.20% 1.83%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1997
1 Year 5 Years 10 Years
------ ------- --------
Templeton Global Bond Fund - Class A(2) -2.46% 6.40% 7.52%
SB WGBI Index(3) 0.23% 7.47% 7.88%
Since
Inception
1 Year (5/1/95)
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Templeton Global Bond Fund - Class C(2) -0.49% 8.67%
SB WGBI Index(3) 0.23% 3.44%
1. Figures do not reflect sales charges. If they did, returns would be lower. As
of September 30, 1998, the fund's year-to-date return was 4.33% for Class A.
2. Figures reflect sales charges.
All fund performance assumes reinvestment of dividends and capital gains. On
January 1, 1993, Class A implemented a Rule 12b-1 plan, which affects subsequent
performance.
3. Source: Standard & Poor's(R) Micropal. The unmanaged Salomon Brothers World
Government Bond Index (SB WGBI) tracks the performance of government bond
markets in 18 countries. It includes fixed-rate U.S. and foreign government
bonds with remaining maturities of one year or more. One cannot invest directly
in an index, nor is an index representative of the fund's portfolio.
<PAGE>
Templeton Global Bond Fund 7
FEES AND EXPENSES
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[PERCENT GRAPHIC]
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund. It is based on the fund's expenses for the fiscal year ended
August 31, 1998.
SHAREHOLDER FEES (fees paid directly from your investment)
Class A(1) Class C(1)
---------- ----------
Maximum sales charge (Load) as a
percentage of offering price 4.25% 1.99%
Load imposed on purchases 4.25% 1.00%
Maximum Deferred Sales Charge (Load) None(2) 0.99%(3)
Exchange fee(4) None None
Please see "Choosing a Share Class" on page 13 for an explanation of how and
when these sales charges apply.
ANNUAL FUND OPERATING EXPENSES (expenses deducted from fund assets)
Class A(1) Class C(1)
---------- ----------
Management fees 0.49% 0.49%
Distribution and service (12b-1) fees(5) 0.25% 0.65%
Other expenses 0.42% 0.42%
---- ----
Total annual fund operating expenses 1.16%(6) 1.56%
==== ====
1. Before January 1, 1999, Class A shares were designated Class I and Class C
shares were designated Class II.
2. A contingent deferred sales charge (CDSC) of 1% may apply to purchases of $1
million or more sold within 12 months (see page 13) and to purchases by certain
retirement plans without an initial sales charge (see page 17).
3. This is equivalent to a charge of 1% based on net asset value.
4. There is a $5 fee for each exchange by a market timer (see page 26).
5. Because of the distribution and service (12b-1) fees, over the long term you
may indirectly pay more than the equivalent of the maximum permitted initial
sales charge.
6. Class A total annual fund operating expenses differ from the ratio of
expenses to average net assets shown on page 12 due to a timing difference
between the end of the 12b-1 plan year and the fund's fiscal year end.
<PAGE>
8
EXAMPLE
This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
The example assumes you invest $10,000 for the periods shown and then sell all
of your shares at the end of those periods. The example also assumes your
investment has a 5% return each year and the fund's operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
CLASS A $538(1) $778 $1,036 $1,774
CLASS C $355(2) $588 $ 941 $1,938
1. Assumes a contingent deferred sales charge (CDSC) will not apply.
2. For the same Class C investment, your costs would be $257 if you did not sell
your shares at the end of the first year. Your costs for the remaining periods
would be the same.
<PAGE>
Templeton Global Bond Fund 9
MANAGEMENT
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[BRIEFCASE GRAPHIC]
Templeton Investment Counsel, Inc. through its Global Bond Managers division
(Global Bond Managers), Broward Financial Centre, Fort Lauderdale, FL
33394-3091, is the fund's investment manager. Together, Templeton Investment
Counsel, Inc. and its affiliates manage over $216 billion in assets.
The fund's lead portfolio manager is:
NEIL S. DEVLIN, EXECUTIVE VICE PRESIDENT OF GLOBAL BOND MANAGERS Mr. Devlin has
been a manager of the fund since 1994. He joined the Franklin Templeton Group in
1987.
The following individuals have secondary portfolio management responsibilities:
THOMAS J. DICKSON, PORTFOLIO MANAGER OF GLOBAL BOND MANAGERS Mr. Dickson has
been a manager of the fund since 1996. He joined the Franklin Templeton Group in
1994.
DR. UMRAN DEMIRORS, VICE PRESIDENT OF GLOBAL BOND MANAGERS Dr. Demirors has been
a manager of the fund since 1998. He joined the Franklin Templeton Group in
1996.
The fund pays the manager a fee for managing the fund's assets and making its
investment decisions. For the fiscal year ended August 31, 1998, the fund paid
0.49% of its average daily net assets to the manager.
<PAGE>
10
YEAR 2000 PROBLEM The fund's business operations depend on a worldwide network
of computer systems that contain date fields, including securities trading
systems, securities transfer agent operations and stock market links. Many of
the systems currently use a two digit date field to represent the date, and
unless these systems are changed or modified, they may not be able to
distinguish the Year 1900 from the Year 2000 (commonly referred to as the Year
2000 problem). In addition, the fact that the Year 2000 is a non-standard leap
year may create difficulties for some systems.
When the Year 2000 arrives, the fund's operations could be adversely affected if
the computer systems used by the manager, its service providers and other third
parties it does business with are not Year 2000 ready. For example, the fund's
portfolio and operational areas could be impacted, including securities trade
processing, interest and dividend payments, securities pricing, shareholder
account services, reporting, custody functions and others. The fund could
experience difficulties in effecting transactions if any of its foreign
subcustodians, or if foreign broker-dealers or foreign markets are not ready for
Year 2000.
The fund's manager and its affiliated service providers are making a concerted
effort to take steps they believe are reasonably designed to address their Year
2000 problems. Of course, the fund's ability to reduce the effects of the Year
2000 problem is also very much dependent upon the efforts of third parties over
which the fund and its manager may have no control.
<PAGE>
Templeton Global Bond Fund 11
DISTRIBUTIONS AND TAXES
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[COIN GRAPHIC]
INCOME AND CAPITAL GAINS DISTRIBUTIONS The fund intends to pay a monthly
dividend representing its net investment income. Capital gains, if any, may be
distributed annually. The amount of these distributions will vary and there is
no guarantee the fund will pay dividends.
To receive a distribution, you must be a shareholder on the record date. The
record dates for the fund's distributions will vary. Please keep in mind that if
you invest in the fund shortly before the record date of a distribution, any
distribution will lower the value of the fund's shares by the amount of the
distribution and you will receive some of your investment back in the form of a
taxable distribution. If you would like information on upcoming record dates for
the fund's distributions, please call 1-800/DIAL BEN.
TAX CONSIDERATIONS In general, fund distributions are taxable to you as either
ordinary income or capital gains. This is true whether you reinvest your
distributions in additional shares of the fund or receive them in cash. Any
capital gains the fund distributes are taxable to you as long-term capital gains
no matter how long you have owned your shares.
BACKUP WITHHOLDING
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By law, the fund must withhold 31% of your taxable distributions and proceeds if
you do not provide your correct taxpayer identification number (TIN) or certify
that your TIN is correct, or if the IRS instructs the fund to do so.
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Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.
When you sell your shares, you may have a capital gain or loss. For tax
purposes, an exchange of your fund shares for shares of a different Franklin
Templeton Fund is the same as a sale. The individual tax rate on any gain from
the sale or exchange of your shares depends on how long you have held your
shares.
Fund distributions and gains from the sale or exchange of your shares generally
will be subject to state and local income tax. Any foreign taxes the fund pays
on its investments may be passed through to you as a foreign tax credit.
Non-U.S. investors may be subject to U.S. withholding and estate tax. You should
consult your tax advisor about federal, state, local or foreign tax consequences
of your investment in the fund.
<PAGE>
12
FINANCIAL HIGHLIGHTS
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[MONEY GRAPHIC]
This table presents the fund's financial performance for the past five years.
This information has been audited by McGladrey & Pullen, LLP.
<TABLE>
<CAPTION>
CLASS A Year ended August 31,
---------------------------------------------------------------------
1998 1997 1996 1995(1) 1994(2)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per share data ($)
Net asset value, beginning of year 9.82 9.76 9.32 9.05 9.96
------- ------- ------- ------- -------
Net investment income .60 .63 .69 .73 .72
Net realized and unrealized gains (losses) (.32) .03 .35 .17 (.91)
------- ------- ------- ------- -------
Total from investment operations .28 .66 1.04 .90 (.19)
------- ------- ------- ------- -------
Dividends from net investment income (.55) (.60) (.58) (.54) (.53)
Distributions from net realized gains (.06) -- -- -- (.07)
Tax basis return of capital -- -- (.02) (.09) (.12)
------- ------- ------- ------- -------
Total distributions (.61) (.60) (.60) (.63) (.72)
------- ------- ------- ------- -------
Net asset value, end of year 9.49 9.82 9.76 9.32 9.05
======= ======= ======= ======= =======
Total return (%)(3) 2.82 6.87 11.44 10.43 (2.01)
Ratios/supplemental data
Net assets, end of year ($ x 1,000) 189,898 198,131 185,596 191,301 205,482
Ratios to average net assets: (%)
Expenses 1.17 1.15 1.13 1.18 1.18
Net investment income 6.12 6.41 7.09 7.99 7.50
Portfolio turnover rate (%) 75.95 166.69 109.40 101.12 139.23
CLASS C
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Per share data ($)
Net asset value, beginning of year 9.83 9.77 9.31 9.05
------- ------- ------- -------
Net investment income .56 .57 .61 .21
Net realized and unrealized gains (losses) (.32) .05 .41 .24
------- ------- ------- -------
Total from investment operations .24 .62 1.02 .45
------- ------- ------- -------
Dividends from net investment income (.51) (.56) (.54) (.15)
Distributions from net realized gains (.06) -- -- --
Tax basis return of capital -- -- (.02) (.04)
------- ------- ------- -------
Total distributions (.57) (.56) (.56) (.19)
------- ------- ------- -------
Net asset value, end of year 9.50 9.83 9.77 9.31
======= ======= ======= =======
Total return (%)(3) 2.46 6.44 11.20 5.03
Ratios/supplemental data
Net assets, end of year ($ x 1,000) 20,404 16,629 6,563 2,043
Ratios to average net assets: (%)
Expenses 1.56 1.54 1.56 1.57(4)
Net investment income 5.73 5.96 6.69 7.47(4)
Portfolio turnover rate (%) 75.95 166.69 109.40 101.12
</TABLE>
1. Figures for Class C are for the period May 1, 1995 (effective date) through
August 31, 1995.
2. Based on weighted average shares outstanding.
3. Total return does not include sales charges, and is not annualized.
4. Annualized.
<PAGE>
Templeton Global Bond Fund 13
Your Account
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[PENCIL MARKING BOX GRAPHIC]
CHOOSING A SHARE CLASS
Each class has its own sales charge and expense structure, allowing you to
choose the class that best meets your situation. Your investment representative
can help you decide.
CLASS A
- Initial sales charge of 4.25% or less
- Deferred sales charge of 1% on purchases of $1 million or more
sold within 12 months
- Lower annual expenses than Class C due to lower distribution
fees
CLASS C
- Initial sales charge of 1%
- Deferred sales charge of 1% on shares you sell within 18
months
- Higher annual expenses than Class A due to higher distribution
fees.
Before January 1, 1999, Class A shares were designated Class I and Class C
shares were designated Class II.
SALES CHARGES - CLASS A
<TABLE>
<CAPTION>
the sales charge makes up which equals this %
when you invest this amount this % of the offering price of your net investment
<S> <C> <C>
Under $100,000 4.25 4.44
$100,000 but under $250,000 3.50 3.63
$250,000 but under $500,000 2.50 2.56
$500,000 but under $1 million 2.00 2.04
</TABLE>
INVESTMENTS OF $1 MILLION OR MORE If you invest $1 million or more, either as a
lump sum or through our cumulative quantity discount or letter of intent
programs (see page 15), you can buy Class A shares without an initial sales
charge. However, there is a 1% contingent deferred sales charge (CDSC) on any
shares you sell within 12 months of purchase. The way we calculate the CDSC is
the same for each class (please see page 14).
DISTRIBUTION AND SERVICE (12b-1) FEES Class A has a distribution plan, sometimes
known as a Rule 12b-1 plan, that allows the fund to pay distribution fees of up
to 0.25% per year to those who sell and distribute Class A shares and provide
other services to shareholders. Because these fees are paid out of Class A's
assets on an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
<PAGE>
14
SALES CHARGES - CLASS C
<TABLE>
<CAPTION>
the sales charge makes up which equals this %
when you invest this amount this % of the offering price of your net investment
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Under $1 million 1.00 1.01
</TABLE>
We invest any investment of $1 million or more in Class A shares, since there is
no initial sales charge and Class A's annual expenses are lower.
CDSC There is a 1% contingent deferred sales charge (CDSC) on any Class C shares
you sell within 18 months of purchase. The way we calculate the CDSC is the same
for each class (please see below).
DISTRIBUTION AND SERVICE (12b-1) FEES Class C has a distribution plan, sometimes
known as a Rule 12b-1 plan, that allows the fund to pay distribution and other
fees of up to 0.65% per year for the sale of Class C shares and for services
provided to shareholders. Because these fees are paid out of Class C's assets on
an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
- -------------------------------------------------------------------------------
The HOLDING PERIOD FOR THE CDSC begins on the day you buy your shares. Your
shares will age one month on that same date the next month and each following
month.
For example, if you buy shares on the 18th of the month, they will age one month
on the 18th day of the next month and each following month.
- -------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE (CDSC) - CLASS A & C The CDSC for each class is
based on the current value of the shares being sold or their net asset value
when purchased, whichever is less. There is no CDSC on shares you acquire by
reinvesting your dividends.
To keep your CDSC as low as possible, each time you place a request to sell
shares we will first sell any shares in your account that are not subject to a
CDSC. If there are not enough of these to meet your request, we will sell the
shares in the order they were purchased. We will use this same method if you
exchange your shares into another Franklin Templeton Fund (please see page 21
for exchange information).
SALES CHARGE REDUCTIONS AND WAIVERS If you qualify for any of the sales charge
reductions or waivers below, please let us know at the time you make your
investment to help ensure you receive the lower sales charge.
<PAGE>
Templeton Global Bond Fund 15
QUANTITY DISCOUNTS We offer several ways for you to combine your purchases in
the Franklin Templeton Funds to take advantage of the lower sales charges for
large purchases of Class A shares.
- Cumulative Quantity Discount - lets you combine all of your shares
in the Franklin Templeton Funds for purposes of calculating the
sales charge. You may also combine the shares of your spouse, and
your children or grandchildren, if they are under the age of 21.
Certain company and retirement plan accounts may also be included.
- Letter of Intent (LOI) - expresses your intent to buy a stated
dollar amount of shares over a 13-month period and lets you receive
the same sales charge as if all shares had been purchased at one
time. We will reserve a portion of your shares to cover any
additional sales charge that may apply if you do not buy the amount
stated in your LOI.
To sign up for these programs, complete the appropriate section
of your account application.
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The FRANKLIN TEMPLETON FUNDS include all of the Franklin Templeton U.S.
registered mutual funds, except Franklin Valuemark Funds, Templeton Capital
Accumulator Fund, Inc., and Templeton Variable Products Series Fund.
- -------------------------------------------------------------------------------
REINSTATEMENT PRIVILEGE If you sell shares of a Franklin Templeton Fund, you may
reinvest some or all of the proceeds within 365 days without an initial sales
charge. The proceeds must be reinvested within the same share class, except
proceeds from the sale of Class B shares will be reinvested in Class A shares.
If you paid a CDSC when you sold your Class A or C shares, we will credit your
account with the amount of the CDSC paid but a new CDSC will apply. For Class B
shares reinvested in Class A, a new CDSC will not apply, although your account
will not be credited with the amount of any CDSC paid when you sold your Class B
shares.
Proceeds immediately placed in a Franklin Bank Certificate of Deposit (CD) also
may be reinvested without an initial sales charge if you reinvest them within
365 days from the date the CD matures, including any rollover.
<PAGE>
16
This privilege does not apply to shares you buy and sell under our exchange
program. Shares purchased with the proceeds from a money fund may be subject to
a sales charge.
WAIVERS FOR INVESTMENTS FROM CERTAIN PAYMENTS Class A shares may be purchased
without an initial sales charge or CDSC by investors who reinvest within 365
days:
- certain payments received under an annuity contract that offers a
Franklin Templeton insurance fund option
- distributions from an existing retirement plan invested in the
Franklin Templeton Funds
- dividend or capital gain distributions from a real estate investment
trust sponsored or advised by Franklin Properties, Inc.
- redemption proceeds from a repurchase of Franklin Floating Rate
Trust shares held continuously for at least 12 months
- redemption proceeds from Class A of any Templeton Global Strategy
Fund, if you are a qualified investor. If you paid a CDSC when you
sold your shares, we will credit your account with the amount of the
CDSC paid but a new CDSC will apply.
WAIVERS FOR CERTAIN INVESTORS Class A shares also may be purchased without an
initial sales charge or CDSC by various individuals and institutions, including:
- certain trust companies and bank trust departments investing $1
million or more in assets over which they have full or shared
investment discretion
- government entities that are prohibited from paying mutual fund
sales charges
- certain unit investment trusts and their holders reinvesting trust
distributions
- group annuity separate accounts offered to retirement plans
- employees and other associated persons or entities of Franklin
Templeton or of certain dealers
- Chilean retirement plans that meet the requirements for retirement
plans described below.
If you think you may be eligible for a sales charge waiver,
call your investment representative or call Shareholder Services
at 1-800/632-2301 for more information.
<PAGE>
Templeton Global Bond Fund 17
CDSC WAIVERS The CDSC for each class generally will be waived:
- to pay account fees
- to make payments through systematic withdrawal plans, up to 1%
monthly, 3% quarterly, 6% semiannually or 12% annually depending on
the frequency of your plan
- for redemptions by Franklin Templeton Trust Company employee benefit
plans or employee benefit plans serviced by ValuSelect(R)
- for IRA distributions due to death or disability or upon periodic
distributions based on life expectancy
- to return excess contributions (and earnings, if applicable) from
retirement plan accounts
- for redemptions following the death of the shareholder or beneficial
owner
- for participant initiated distributions from employee benefit plans
or participant initiated exchanges among investment choices in
employee benefit plans
RETIREMENT PLANS Certain retirement plans may buy Class A shares without an
initial sales charge. To qualify, the plan must be sponsored by an employer:
- with at least 100 employees, or
- with retirement plan assets of $1 million or more, or
- that agrees to invest at least $500,000 in the Franklin Templeton
Funds over a 13-month period
A CDSC may apply. Retirement plans other than SIMPLEs, SEPs, or plans that
qualify under section 401 of the Internal Revenue Code also must qualify under
our group investment program to buy Class A shares without an initial sales
charge. Any retirement plan that does not qualify to buy Class A shares without
an initial sales charge and that was a shareholder of the fund on or before
February 1, 1995, may buy Class A shares with a maximum initial sales charge of
4% (as a percentage of the offering price).
For more information, call your investment representative or
Retirement Plan Services at 1-800/527-2020.
<PAGE>
18
GROUP INVESTMENT PROGRAM Allows established groups of 11 or more investors to
invest as a group. For sales charge purposes, the group's investments are added
together. There are certain other requirements and the group must have a purpose
other than buying fund shares at a discount.
BUYING SHARES
- -------------------------------------------------------------------------------
The FRANKLIN TEMPLETON FUNDS include all of the Franklin Templeton U.S.
registered mutual funds, except Franklin Valuemark Funds, Templeton Capital
Accumulator Fund, Inc., and Templeton Variable Products Series Fund.
- -------------------------------------------------------------------------------
[PEN WRITING ON PAGE GRAPHIC]
MINIMUM INVESTMENTS
- -------------------------------------------------------------------------------
Initial Additional
- -------------------------------------------------------------------------------
Regular accounts $1,000 $50
- -------------------------------------------------------------------------------
UGMA/UTMA accounts $ 100 $50
- -------------------------------------------------------------------------------
Retirement accounts
(other than IRAs, IRA rollovers,
Education IRAs or Roth IRAs) no minimum no minimum
- -------------------------------------------------------------------------------
IRAs, IRA rollovers, Education IRAs
or Roth IRAs $ 250 $50
- -------------------------------------------------------------------------------
Broker-dealer sponsored wrap account
programs $ 250 $50
- -------------------------------------------------------------------------------
Full-time employees, officers, trustees
and directors of Franklin Templeton
entities, and their immediate family
members $ 100 $50
- -------------------------------------------------------------------------------
<PAGE>
Templeton Global Bond Fund 19
ACCOUNT APPLICATION If you are opening a new account, please complete and sign
the enclosed account application. Make sure you indicate the share class you
have chosen. If you do not indicate a class, we will invest your purchase in
Class A shares. To save time, you can sign up now for services you may want on
your account by completing the appropriate sections of the application (see the
next page).
BUYING SHARES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Opening an account Adding to an account
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[HANDSHAKE Through your Contact your investment Contact your investment
GRAPHIC] investment representative representative
representative
- -----------------------------------------------------------------------------------------------------------------------
[LETTER By Mail Make your check payable to Make your check payable to
GRAPHIC] Templeton Global Bond Fund. Templeton Global Bond Fund. Include
your account number on the check.
Mail the check and your signed
application to Investor Services. Fill out the deposit slip from your
account statement. If you do not
have a slip, include a note with your
name, the fund name, and your
account number.
Mail the check and deposit slip or
note to Investor Services.
- -----------------------------------------------------------------------------------------------------------------------
[WIRE By Wire Call to receive a wire control Call to receive a wire control number
GRAPHIC] 1-800/632-2301 number and wire instructions. and wire instructions.
(or 1-650/312-2000
collect) Mail your signed application to To make a same day wire investment,
Investor Services. Please include the please call us by 1:00 p.m.
wire control number or your new pacific time and make sure your
account number on the application. wire arrives by 3:00 p.m.
To make a same day wire investment,
please call us by 1:00 p.m. pacific
time and make sure your wire arrives
by 3:00 p.m.
- -----------------------------------------------------------------------------------------------------------------------
[ARROW By Exchange Call Shareholder Services at the Call Shareholder Services at the
GRAPHIC] TeleFACTS(R) number below, or send signed number below or our automated
1-800/247-1753 written instructions. The TeleFACTS TeleFACTS system, or send signed
(around-the-clock system cannot be used to open a written instructions.
access) new account.
(Please see page 21 for information
(Please see page 21 for information on exchanges.)
on exchanges.)
</TABLE>
FRANKLIN TEMPLETON INVESTOR SERVICES 100 FOUNTAIN PARKWAY, P.O. BOX 33030,
ST. PETERSBURG, FL 33733-8030
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME)
<PAGE>
20
INVESTOR SERVICES
- -------------------------------------------------------------------------------
[MAN WITH HEADSET GRAPHIC]
AUTOMATIC INVESTMENT PLAN This plan offers a convenient way for you to invest in
the fund by automatically transferring money from your checking or savings
account each month to buy shares. The minimum investment to open an account with
an automatic investment plan is $50 ($25 for an Education IRA). To sign up,
complete the appropriate section of your account application.
DISTRIBUTION OPTIONS You may reinvest distributions you receive from the fund in
an existing account in the same share class* of the fund or another Franklin
Templeton Fund. Initial sales charges and CDSCs will not apply if you reinvest
your distributions within 365 days. You can also have your distributions
deposited in a bank account, or mailed by check. Deposits to a bank account may
be made by electronic funds transfer.
Please indicate on your application the distribution option you have chosen,
otherwise we will reinvest your distributions in the same share class of the
fund.
*Class C shareholders may reinvest their distributions in Class A shares of any
Franklin Templeton money fund.
- -------------------------------------------------------------------------------
For Franklin Templeton Trust Company retirement plans, special forms may be
needed to receive distributions in cash. Please call 1-800/527-2020 for
information.
- -------------------------------------------------------------------------------
RETIREMENT PLANS Franklin Templeton offers a variety of retirement plans for
individuals and businesses. These plans require separate applications and their
policies and procedures may be different than those described in this
prospectus. For more information, including a free retirement plan brochure or
application, please call Retirement Plan Services at 1-800/527-2020.
TeleFACTS(R) Our TeleFACTS system offers around-the-clock access to information
about your account or any Franklin Templeton Fund. This service is available
from touch-tone phones at 1-800/247-1753. For a free TeleFACTS brochure, call
1-800/DIAL BEN.
<PAGE>
Templeton Global Bond Fund 21
TELEPHONE PRIVILEGES You will automatically receive telephone privileges when
you open your account, allowing you and your investment representative to sell
or exchange your shares and make certain other changes to your account by phone.
For accounts with more than one registered owner, telephone privileges also
allow the fund to accept written instructions signed by only one owner for
transactions and account changes that could otherwise be made by phone. For all
other transactions and changes, all registered owners must sign the
instructions.
As long as we take certain measures to verify telephone requests, we will not be
responsible for any losses that may occur from unauthorized requests. Of course,
you can decline telephone exchange or redemption privileges on your account
application.
EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton Funds
within the same class*, generally without paying any additional sales charges.
If you exchange shares held for less than six months, however, you may be
charged the difference between the initial sales charge of the two funds if the
difference is more than 0.25%. If you exchange shares from a money fund, a sales
charge may apply no matter how long you have held the shares.
- -------------------------------------------------------------------------------
For Franklin Templeton Trust Company retirement plans, special forms may be
needed to receive distributions in cash. Please call 1-800/527-2020 for
information.
Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee. Any CDSC will
continue to be calculated from the date of your initial investment and will not
be charged at the time of the exchange. The purchase price for determining a
CDSC on exchanged shares will be the price you paid for the original shares. If
you exchange shares subject to a CDSC into a Class A money fund, the time your
shares are held in the money fund will not count towards the CDSC holding
period.
- -------------------------------------------------------------------------------
An EXCHANGE is really two transactions: a sale of one fund and the purchase of
another. In general, the same policies that apply to purchases and sales apply
to exchanges. Exchanges also have the same tax consequences as ordinary sales
and purchases.
- -------------------------------------------------------------------------------
<PAGE>
22
Frequent exchanges can interfere with fund management or operations and drive up
costs for all shareholders. To protect shareholders, there are limits on the
number and amount of exchanges you may make (please see "Market Timers" on page
26).
*Certain Class Z shareholders of Franklin Mutual Series Fund Inc. may exchange
into Class A without any sales charge.
SYSTEMATIC WITHDRAWAL PLAN This plan allows you to automatically sell your
shares and receive regular payments from your account. A CDSC may apply to
withdrawals that exceed certain amounts. Certain terms and minimums apply. To
sign up, complete the appropriate section of your application.
<PAGE>
Templeton Global Bond Fund 23
SELLING SHARES
- -------------------------------------------------------------------------------
[CERTIFICATE GRAPHIC]
You can sell your shares at any time.
SELLING SHARES IN WRITING Requests to sell $100,000 or less can generally be
made over the phone or with a simple letter. Sometimes, however, to protect you
and the fund we will need written instructions signed by all registered owners,
with a signature guarantee for each owner, if:
- you are selling more than $100,000 worth of shares
- you want your proceeds paid to someone who is not a registered
owner
- you want to send your proceeds somewhere other than the
address of record, or preauthorized bank or brokerage firm
account
- you have changed the address on your account by phone within
the last 15 days
We may also require a signature guarantee on instructions we receive from an
agent, not the registered owners, or when we believe it would protect the fund
against potential claims based on the instructions received.
- -------------------------------------------------------------------------------
A SIGNATURE GUARANTEE helps protect your account against fraud. You can obtain a
signature guarantee at most banks and securities dealers.
A notary public CANNOT provide a signature guarantee.
- -------------------------------------------------------------------------------
SELLING RECENTLY PURCHASED SHARES If you sell shares recently purchased with a
check or draft, we may delay sending you the proceeds until your check or draft
has cleared, which may take seven business days or more. A certified or
cashier's check may clear in less time.
REDEMPTION PROCEEDS Your redemption check will be sent within seven days after
we receive your request in proper form. We are not able to receive or pay out
cash in the form of currency. Redemption proceeds may be delayed if we have not
yet received your signed account application.
RETIREMENT PLANS Before you can sell shares in a Franklin Templeton Trust
Company retirement plan, you may need to complete additional forms. For
participants under age 59 1/2, tax penalties may apply. Call Retirement Plan
Services at 1-800/527-2020 for details.
<PAGE>
24
SELLING SHARES
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
To sell some or all of your shares
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
[HANDSHAKE Through your Contact your investment representative
GRAPHIC] investment
representative
- --------------------------------------------------------------------------------------------------------------------------
[LETTER By Mail Send written instructions and endorsed share certificates (if you hold share
GRAPHIC] certificates) to Investor Services. Corporate, partnership or trust accounts
may need to send additional documents.
Specify the fund, the account number and the dollar value or number of shares
you wish to sell. Be sure to include all necessary signatures and any additional
documents, as well as signature guarantees if required.
A check will be mailed to the name(s) and address on the account, or otherwise
according to your written instructions.
- --------------------------------------------------------------------------------------------------------------------------
[TELEPHONE By Phone As long as your transaction is for $100,000 or less, you do not hold share
GRAPHIC] certificates and you have not changed your address by phone within the last 15
1-800/632-2301 days, you can sell your shares by phone.
A check will be mailed to the name(s) and address on the account. Written
instructions, with a signature guarantee, are required to send the check to
another address or to make it payable to another person.
- --------------------------------------------------------------------------------------------------------------------------
[WIRE By Wire You can call or write to have redemption proceeds of $1,000 or more wired to a
GRAPHIC] bank or escrow account. See the policies above for selling shares by mail or
phone.
Before requesting a wire, please make sure we have your bank account information
on file. If we do not have this information, you will need to send written
instructions with your bank's name and address, your bank account number, the
ABA routing number, and a signature guarantee.
Requests received in proper form by 1:00 p.m. pacific time will be wired the
next business day.
- --------------------------------------------------------------------------------------------------------------------------
[ARROW By Exchange Obtain a current prospectus for the fund you are considering.
GRAPHIC]
TeleFACTS(R) Call Shareholder Services at the number below or our automated TeleFACTS system,
1-800/247-1753 or send signed written instructions. See the policies above for selling shares
by mail or phone.
(around-the-clock
access)
If you hold share certificates, you will need to return them to the fund before
your exchange can be processed.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
FRANKLIN TEMPLETON INVESTOR SERVICES 100 FOUNTAIN PARKWAY, P.O. BOX 33030,
ST. PETERSBURG, FL 33733-8030
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME)
<PAGE>
Templeton Global Bond Fund 25
ACCOUNT POLICIES
- -------------------------------------------------------------------------------
[PEN & PAPER GRAPHIC]
CALCULATING SHARE PRICE The fund calculates the net asset value per share (NAV)
each business day at the close of trading on the New York Stock Exchange
(normally 1:00 p.m. pacific time). Each class's NAV is calculated by dividing
its net assets by the number of its shares outstanding.
- -------------------------------------------------------------------------------
When you buy shares, you pay the offering price. The offering price is the NAV
plus any applicable sales charge.
When you sell shares, you receive the NAV minus any applicable contingent
deferred sales charge (CDSC).
- -------------------------------------------------------------------------------
The fund's assets are generally valued at their market value. If market prices
are unavailable, or if an event occurs after the close of the trading market
that materially affects the values, assets may be valued at their fair value. If
the fund holds securities listed primarily on a foreign exchange that trades on
days when the fund is not open for business, the value of your shares may change
on days that you cannot buy or sell shares.
Requests to buy and sell shares are processed at the NAV next calculated after
we receive your request in proper form.
ACCOUNTS WITH LOW BALANCES If the value of your account falls below $250 ($50
for employee and UGMA/UTMA accounts) because you sell some of your shares, we
may mail you a notice asking you to bring the account back up to its applicable
minimum investment amount. If you choose not to do so within 30 days, we may
close your account and mail the proceeds to the address of record. You will not
be charged a CDSC if your account is closed for this reason.
STATEMENTS AND REPORTS You will receive confirmations and account statements
that show your account transactions. You will also receive the fund's financial
reports every six months. To reduce fund expenses, we try to identify related
shareholders in a household and send only one copy of the financial reports. If
you need additional copies, please call 1-800/DIAL BEN.
If there is a dealer or other investment representative of record on your
account, he or she will also receive confirmations, account statements and other
information about your account directly from the fund.
<PAGE>
26
STREET OR NOMINEE ACCOUNTS You may transfer your shares from the street or
nominee name account of one dealer to another, as long as both dealers have an
agreement with Franklin Templeton Distributors, Inc. We will process the
transfer after we receive authorization in proper form from your delivering
securities dealer.
JOINT ACCOUNTS Unless you specify a different registration, accounts with two or
more owners are registered as "joint tenants with rights of survivorship" (shown
as "Jt Ten" on your account statement). To make any ownership changes to a joint
account, all owners must agree in writing, regardless of the law in your state.
MARKET TIMERS The fund may restrict or refuse exchanges by market timers. If
accepted, each exchange by a market timer will be charged $5. You will be
considered a market timer if you have (i) requested an exchange out of the fund
within two weeks of an earlier exchange request, or (ii) exchanged shares out of
the fund more than twice in a calendar quarter, or (iii) exchanged shares equal
to at least $5 million, or more than 1% of the fund's net assets, or (iv)
otherwise made large or frequent exchanges. Shares under common ownership or
control are combined for these limits.
ADDITIONAL POLICIES Please note that the fund maintains additional policies and
reserves certain rights, including:
- - The fund may refuse any order to buy shares, including any purchase under the
exchange privilege.
- - At any time, the fund may change its investment minimums or waive or lower its
minimums for certain purchases.
- - The fund may modify or discontinue the exchange privilege on 60 days' notice.
- - You may only buy shares of a fund eligible for sale in your state or
jurisdiction.
- - In unusual circumstances, we may temporarily suspend redemptions, or postpone
the payment of proceeds, as allowed by federal securities laws.
- - For redemptions over a certain amount, the fund reserves the right to make
payments in securities or other assets of the fund, in the case of an
emergency or if the payment by check would be harmful to existing
shareholders.
<PAGE>
Templeton Global Bond Fund 27
- - To permit investors to obtain the current price, dealers are responsible for
transmitting all orders to the fund promptly.
DEALER COMPENSATION Qualifying dealers who sell fund shares may receive sales
commissions and other payments. These are paid by Franklin Templeton
Distributors, Inc. (Distributors) from sales charges, distribution and service
(12b-1) fees and its other resources.
Class A Class C
------- -------
Commission (%) -- 2.00
Investment under $100,000 4.00 --
$100,000 but under $250,000 3.25 --
$250,000 but under $500,000 2.25 --
$500,000 but under $1 million 1.85 --
$1 million or more up to 0.75(1) --
12b-1 fee to dealer 0.25 0.65(2)
A dealer commission of up to 1% may be paid on Class A NAV purchases by certain
retirement plans(1) and up to 0.25% on Class A NAV purchases by certain trust
companies and bank trust departments, eligible governmental authorities, and
broker-dealers or others on behalf of clients participating in comprehensive fee
programs. For certain retirement plans that do not qualify to buy Class A shares
at NAV but that qualify to buy Class A shares with a maximum initial sales
charge of 4%, a dealer commission of 3.2% may be paid.
1. During the first year after purchase, dealers may not be eligible to receive
the 12b-1 fee.
2. Dealers may be eligible to receive up to 0.15% during the first year after
purchase and may be eligible to receive the full 12b-1 fee starting in the 13th
month.
<PAGE>
28
QUESTIONS
- -------------------------------------------------------------------------------
[QUESTION MARK GRAPHIC]
If you have any questions about the fund or your account, you can write to us at
100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL 33733-8030. You can
also call us at one of the following numbers. For your protection and to help
ensure we provide you with quality service, all calls may be monitored or
recorded.
Hours (pacific time,
Department Name Telephone Number Monday through Friday)
- -------------------------------------------------------------------------------
Shareholder Services 1-800/ 632-2301 5:30 a.m. to 5:00 p.m.
Fund Information 1-800/ DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/ 342-5236) 6:30 a.m. to 2:30 p.m. (Saturday)
Retirement Plan Services 1-800/ 527-2020 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/ 524-4040 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/ 321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/ 851-0637 5:30 a.m. to 5:00 p.m.
<PAGE>
FRANKLIN TEMPLETON LITERATURE REQUEST
Call 1-800/DIAL BEN(R) (1-800/342-5236) today for a free descriptive brochure
and prospectus on any of the funds listed below. The prospectus contains more
complete information, including fees, sales charges and expenses, and should be
read carefully before investing or sending money.
GLOBAL GROWTH
Franklin Global Health Care Fund
Mutual Discovery Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Global Infrastructure Fund
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government Income Fund
Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Templeton Americas Government Securities Fund
GROWTH
Franklin Biotechnology Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet Investment Fund*
Franklin Convertible Securities Fund
Franklin Equity Income Fund Franklin Income Fund
Franklin MicroCap Value Fund*
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
FUND ALLOCATOR SERIES
Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
INCOME
Franklin Adjustable Rate Securities Fund
Franklin Adjustable U.S. Government Securities Fund
Franklin's AGE High Income Fund
Franklin Bond Fund
Franklin Floating Rate Trust
Franklin Investment Grade Income Fund
Franklin Short-Intermediate U.S. Government Securities Fund
Franklin Strategic Income Fund
Franklin U.S. Government Securities Fund
Franklin Money Fund
TAX-FREE INCOME
Federal Intermediate-Term Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
STATE-SPECIFIC TAX-FREE INCOME
Alabama
Arizona**
Arkansas***
California**
Colorado
Connecticut
Florida**
Georgia
Hawaii***
Indiana
Kentucky
Louisiana
Maryland
Massachusetts+
Michigan**
Minnesota+
Missouri
New Jersey
New York**
North Carolina
Ohio+
Oregon
Pennsylvania
Tennessee***
Texas
Virginia
Washington***
VARIABLE ANNUITIES++
Franklin Valuemark(R)
Franklin Templeton Valuemark Income Plus (an immediate annuity)
* These funds are now closed to new accounts, with the exception of
retirement plan accounts.
** Two or more fund options available: long-term portfolio,
intermediate-term portfolio, a portfolio of insured municipal
securities, and/or a high yield portfolio (CA) and a money market
portfolio (CA and NY).
*** The fund may invest up to 100% of its assets in bonds that pay
interest subject to the federal alternative minimum tax.
+ Portfolio of insured municipal securities.
++ Franklin Valuemark and Franklin Templeton Valuemark Income Plus are
issued by Allianz Life Insurance Company of North America or by its
wholly owned subsidiary, Preferred Life Insurance Company of New
York, and distributed by NALAC Financial Plans, LLC. The Franklin
Valuemark Funds are managed by Franklin Advisers, Inc. and its
Templeton and Franklin affiliates.
12/98
<PAGE>
For More Information
You can learn more about the fund in the following documents:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Includes a discussion of recent market conditions and fund
strategies, financial statements, detailed performance information,
portfolio holdings, and the auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more information about the fund, its investments and
policies. It is incorporated by reference (is legally a part of this
prospectus).
For a free copy of the current annual/semiannual report or the SAI,
please contact your investment representative or call us at the
number below.
FRANKLIN(R)TEMPLETON(R)
1-800/DIAL BEN(R) (1-800/342-5236)
TDD (Hearing Impaired) 1-800/851-0637
www.franklin-templeton.com
You can also obtain information about the fund by visiting the SEC's
Public Reference Room in Washington D.C. (phone 1-800/SEC-0330) or
by sending your request and a duplicating fee to the SEC's Public
Reference Section, Washington, DC 20549-6009. You can also visit the
SEC's Internet site at http://www.sec.gov.
Investment Company Act file #811-4706 406 P 01/99
