PROSPECTUS
TEMPLETON
GLOBAL BOND
FUND
ADVISOR CLASS
INVESTMENT STRATEGY
GLOBAL GROWTH
AND INCOME
January 1, 1999
[FRANKLIN TEMPLETON LOGO]
FRANKLIN(R) TEMPLETON(R)
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
8 Management
10 Distributions and Taxes
11 Financial Highlights
YOUR ACCOUNT
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INFORMATION ABOUT 12 Qualified Investors
QUALIFIED INVESTORS,
ACCOUNT TRANSACTIONS 14 Buying Shares
AND SERVICES
15 Investor Services
17 Selling Shares
19 Account Policies
21 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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[GRAPHIC OF ARROW IN BULLSEYE]
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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[GRAPHIC OF LINE GRAPH]
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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[GRAPHIC OF BEAR AND BULL]
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.
ADVISOR CLASS ANNUAL TOTAL RETURNS(1,2)
YEAR TOTAL RETURN
----------------
88 7.07% BEST
89 8.54% QUARTER:
90 9.89% Q2 '92
91 14.91% 7.23%
92 3.12%
93 10.35% WORST
94 -3.58% QUARTER
95 18.21% Q1 '94
96 11.20% -3.51%
97 2.09% ------------------
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1997
1 YEAR 5 YEARS 10 YEARS
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Templeton Global Bond Fund - Advisor Class(2) 2.09% 7.38% 8.01%
SB WGBI Index(3) 0.23% 7.47% 7.88%
1. As of September 30, 1998, the fund's year-to-date return was 4.40%.
2. Performance figures reflect a "blended" figure combining the following
methods of calculation: (a) For periods before January 1, 1997, a restated
figure is used based on the fund's Class A performance, excluding the effect of
Class A's maximum initial sales charge and including the effect of the Class A
distribution and service (12b-1) fees; and (b) for periods after January 1,
1997, an actual Advisor Class figure is used reflecting a deduction of all
applicable charges and fees for that class. This blended figure assumes
reinvestment of dividends and capital gains.
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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[GRAPHIC OF PERCENT SYMBOL]
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)
ADVISOR CLASS
--------------------------------------------------------------------
Maximum sales charge (Load) imposed on purchases None
Exchange fee(1) None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
ADVISOR CLASS
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Management fees 0.49%
Distribution and service (12b-1) fees None
Other expenses 0.42%
----
Total annual fund operating expenses 0.91%
====
1. There is a $5 fee for each exchange by a market timer (see page 20).
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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------
<S> <C> <C> <C> <C>
$93 $290 $504 $1,120
</TABLE>
PAGE
8
MANAGEMENT
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[GRAPHIC OF BRIEFCASE]
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
Templeton Global Bond Fund 9
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
10
DISTRIBUTIONS AND TAXES
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[GRAPHIC OF COINS]
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 will
generally 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
Templeton Global Bond Fund 11
FINANCIAL HIGHLIGHTS
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[GRAPHIC OF PAPER CURRENCY]
This table presents the financial performance for Advisor Class since its
inception. This information has been audited by McGladrey & Pullen, LLP.
<TABLE>
<CAPTION>
ADVISOR CLASS YEAR ENDED AUGUST 31,
- --------------------------------------------------------------------------------------
1998 1997(1)
- --------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE DATA ($)
Net asset value, beginning of year 9.82 10.16
------ ------
Net investment income .62 .42
Net realized and unrealized losses (.32) (.34)
------ ------
Total from investment operations .30 .08
------ ------
Dividends from net investment income (.57) (.42)
Distributions from net realized gains (.06) --
------ ------
Total distributions (.63) (.42)
------ ------
Net asset value, end of year 9.49 9.82
====== ======
Total return (%)(2) 3.08 .80
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 1,000) 11,330 12,742
Ratios to average net assets: (%)
Expenses .91 .88(3)
Net investment income 6.38 6.76(3)
Portfolio turnover rate (%) 75.95 166.69
</TABLE>
1. For the period January 2, 1997 (effective date) through August 31, 1997.
2. Total return is not annualized.
3. Annualized.
PAGE
12
YOUR ACCOUNT
QUALIFIED INVESTORS
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[GRAPHIC OF PENCIL MAKING MARK]
The following investors may qualify to buy Advisor Class shares of the fund.
- Qualified registered investment advisors or certified financial
planners with clients invested in any series of Franklin Mutual
Series Fund Inc. on October 31, 1996, or who buy through a
broker-dealer or service agent who has an agreement with Franklin
Templeton Distributors, Inc. (Distributors). Minimum investments:
$1,000 initial and $50 additional.
- Broker-dealers, registered investment advisors or certified
financial planners who have an agreement with Distributors for
clients participating in comprehensive fee programs. Minimum
investments: $250,000 initial ($100,000 initial for an individual
client) and $50 additional.
- Officers, trustees, directors and full-time employees of Franklin
Templeton and their immediate family members. Minimum
investments: $100 initial ($50 for accounts with an automatic
investment plan) and $50 additional.
- Each series of the Franklin Templeton Fund Allocator Series.
Minimum investments: $1,000 initial and $1,000 additional.
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.
- Governments, municipalities, and tax-exempt entities that meet
the requirements for qualification under section 501 of the
Internal Revenue Code. Minimum investments: $1 million initial
investment in Advisor Class or Class Z shares of any of the
Franklin Templeton Funds and $50 additional.
- Accounts managed by the Franklin Templeton Group. Minimum
investments: No initial minimum and $50 additional.
- The Franklin Templeton Profit Sharing 401(k) Plan. Minimum
investments: No initial minimum and $50 additional.
PAGE
Templeton Global Bond Fund 13
- Defined contribution plans such as employer stock, bonus, pension
or profit sharing plans that meet the requirements for
qualification under section 401 of the Internal Revenue Code,
including salary reduction plans qualified under section 401(k)
of the Internal Revenue Code, and that are sponsored by an
employer (i) with at least 10,000 employees, or (ii) with
retirement plan assets of $100 million or more. Minimum
investments: No initial minimum and $50 additional.
- Trust companies and bank trust departments initially investing in
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 and bank trust departments or
other plan fiduciaries or participants, in the case of certain
retirement plans, have full or shared investment discretion.
Minimum investments: No initial minimum and $50 additional.
- Individual investors. Minimum investments: $5 million initial and
$50 additional. You may combine all of your shares in the
Franklin Templeton Funds for purposes of determining whether you
meet the $5 million minimum, as long as $1 million is in Advisor
Class or Class Z shares of any of the Franklin Templeton Funds.
- Any other investor, including a private investment vehicle such
as a family trust or foundation, who is a member of an
established group of 11 or more investors. Minimum investments:
$5 million initial and $50 additional. For minimum investment
purposes, the group's investments are added together. The group
may combine all of its shares in the Franklin Templeton Funds for
purposes of determining whether it meets the $5 million minimum,
as long as $1 million is in Advisor Class or Class Z shares of
any of the Franklin Templeton Funds. There are certain other
requirements and the group must have a purpose other than buying
fund shares without a sales charge.
Please note that Advisor Class shares of the fund are no longer available to
retirement plans through Franklin Templeton's ValuSelect(R) program. Retirement
plans in the ValuSelect program before January 1, 1998, however, may continue to
invest in the fund's Advisor Class shares.
PAGE
14
BUYING SHARES
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[GRAPHIC OF PENCIL AND PAPER]
ACCOUNT APPLICATION If you are opening a new account, please complete and sign
the enclosed account application. 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).
<TABLE>
<CAPTION>
BUYING SHARES
- ---------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------
[ENVELOPE 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] number and wire instructions. and wire instructions.
1-800/632-2301
(or 1-650/312-2000 Mail your signed application to To make a same day wire
collect) Investor Services. Please include the investment, please call us by
wire control number or your new 1:00 p.m. pacific time and make
account number on the application. sure your 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] number below, or send signed number below, or send signed
written instructions. (Please see written instructions. (Please see
page 16 for information on page 16 for information on
exchanges.) 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
Templeton Global Bond Fund 15
INVESTOR SERVICES
- -------------------------------------------------------------------------------
[GRAPHIC OF PERSON]
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. 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 in Advisor Class or
Class A shares of another Franklin Templeton Fund. To reinvest your
distributions in Advisor Class shares of another Franklin Templeton Fund, you
must qualify to buy that fund's Advisor Class shares. For distributions
reinvested in Class A shares of another Franklin Templeton Fund, initial sales
charges and contingent deferred sales charges (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.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
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.
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.
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.
PAGE
16
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.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton Funds
within the same class. You also may exchange your Advisor Class shares for Class
A shares of a fund that does not currently offer an Advisor Class (without any
sales charge)* or for Class Z shares of Franklin Mutual Series Fund Inc.
If you do not qualify to buy Advisor Class shares of Templeton Developing
Markets Trust, Templeton Foreign Fund or Templeton Growth Fund, you also may
exchange your shares for Class A shares of those funds (without any sales
charge)* or for shares of Templeton Institutional Funds, Inc.
Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee.
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
20).
* If you exchange into Class A shares and you later decide you would like to
exchange into a fund that offers an Advisor Class, you may exchange your Class A
shares for Advisor Class shares if you otherwise qualify to buy the fund's
Advisor Class shares.
SYSTEMATIC WITHDRAWAL PLAN This plan allows you to automatically sell your
shares and receive regular payments from your account. Certain terms and
minimums apply. To sign up, complete the appropriate section of your
application.
PAGE
Templeton Global Bond Fund 17
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.
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18
<TABLE>
<CAPTION>
SELLING SHARES
- --------------------------------------------------------------------
To sell some or all of your shares
- --------------------------------------------------------------------------------
<S> <C> <C>
[HANDSHAKE Through your Contact your investment representative
GRAPHIC] investment
representative
- --------------------------------------------------------------------------------
[ENVELOPE By Mail Send written instructions and endorsed share
GRAPHIC] certificates (if you hold share 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.
- --------------------------------------------------------------------------------
[PHONE By Phone As long as your transaction is for $100,000 or
GRAPHIC] less, you do not hold share certificates and you
1-800/632-2301 have not changed your address by phone within the
last 15 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
GRAPHIC] of $1,000 or more wired to a 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
GRAPHIC] considering.
Call Shareholder Services at the number below, or
send signed written instructions. See the policies
above for selling shares by mail or phone.
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 19
ACCOUNT POLICIES
- --------------------------------------------------------------------------------
[PEN AND 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). The NAV for Advisor Class is calculated by
dividing its net assets by the number of its shares outstanding.
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 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.
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.
PAGE
20
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.
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.
PAGE
Templeton Global Bond Fund 21
- 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 mergency or if the payment by check would be harmful to existing
shareholders.
- 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 Advisor Class shares may receive
up to 0.25% of the amount invested. This amount is paid by Franklin Templeton
Distributors, Inc. from its own resources.
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.
<TABLE>
<CAPTION>
HOURS (PACIFIC TIME,
DEPARTMENT NAME TELEPHONE NUMBER MONDAY THROUGH FRIDAY)
--------------------------------------------------------------------------------
<S> <C> <C>
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.
</TABLE>
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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 PA 01/99
