PROSPECTUS & APPLICATION
FRANKLIN RISING
DIVIDENDS FUND
INVESTMENT STRATEGY
GROWTH & INCOME
FEBRUARY 1, 1998
AS AMENDED AUGUST 3, 1998
FRANKLIN MANAGED TRUST
Please read this prospectus before investing, and keep it for future
reference. It contains important information, including how the fund invests
and the services available to shareholders.
To learn more about the fund and its policies, you may request a copy of the
fund's Statement of Additional Information ("SAI"), dated February 1, 1998,
which we may amend from time to time. We have filed the SAI with the SEC and
have incorporated it by reference into this prospectus.
For a free copy of the SAI or a larger print version of this prospectus,
contact your investment representative or call 1-800/DIAL BEN.
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.
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.
FRANKLIN RISING DIVIDENDS FUND
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE, JURISDICTION OR COUNTRY IN WHICH THE OFFERING IS NOT AUTHORIZED. NO
SALES REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. FURTHER INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.
TABLE OF CONTENTS
ABOUT THE FUND
Expense Summary .................................................. 2
Financial Highlights ............................................. 4
How Does the Fund Invest Its Assets? ............................. 6
What Are the Risks of Investing in the Fund? ..................... 8
Who Manages the Fund? ............................................ 9
How Taxation Affects the Fund and Its Shareholders ............... 11
How Is the Trust Organized? ...................................... 14
ABOUT YOUR ACCOUNT
How Do I Buy Shares? ............................................. 15
May I Exchange Shares for Shares of Another Fund? ................ 23
How Do I Sell Shares? ............................................ 26
What Distributions Might I Receive From the Fund? ................ 29
Transaction Procedures and Special Requirements .................. 30
Services to Help You Manage Your Account ......................... 34
What If I Have Questions About My Account? ....................... 37
GLOSSARY
Useful Terms and Definitions ..................................... 37
FRANKLIN
RISING
DIVIDENDS
FUND
February 1, 1998
as amended August 3, 1998
When reading this prospectus, you will see certain terms beginning with
capital letters. This means the term is explained in our glossary section.
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo
CA 94403-7777
1-800/DIAL BEN(R)
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
fund. It is based on the historical expenses of each class for the fiscal
year ended September 30, 1997. The fund's actual expenses may vary.
CLASS I CLASS II
- ------------------------------------------------------------------------------
A. SHAREHOLDER TRANSACTION EXPENSES+
Maximum Sales Charge
(as a percentage of Offering Price) .. 5.75% 1.99%
Paid at time of purchase ............. 5.75%++ 1.00%+++
Paid at redemption++++ ............... None 0.99%
Exchange Fee (per transaction) ........ $5.00* $5.00*
B. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees ....................... 0.75% 0.75%
Rule 12b-1 Fees ....................... 0.46%** 1.00%**
Other Expenses ........................ 0.20% 0.20%
Total Fund Operating Expenses ......... 1.41% 1.95%
C. EXAMPLE
Assume the annual return for each class is 5%, operating expenses are
as described above, and you sell your shares after the number of years shown.
These are the projected expenses for each $1,000 that you invest in the fund.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------
Class I .................... $71*** $100 $130 $217
Class II ................... $39 $ 71 $114 $235
For the same Class II investment, you would pay projected expenses of
$30 if you did not sell your shares at the end of the first year. Your
projected expenses for the remaining periods would be the same.
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES
OR RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE
SHOWN. The fund pays its operating expenses. The effects of these
expenses are reflected in the Net Asset Value or dividends of each
class and are not directly charged to your account.
+If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
++There is no front-end sales charge if you invest $1 million or more in
Class I shares.
+++Although Class II has a lower front-end sales charge than Class I, its
Rule 12b-1 fees are higher. Over time you may pay more for Class II shares.
Please see "How Do I Buy Shares? - Choosing a Share Class."
++++A Contingent Deferred Sales Charge may apply to any Class II purchase if
you sell the shares within 18 months and to Class I purchases of $1 million
or more if you sell the shares within one year. A Contingent Deferred Sales
Charge may also apply to purchases by certain retirement plans that qualify
to buy Class I shares without a front-end sales charge. The charge is 1% of
the value of the shares sold or the Net Asset Value at the time of purchase,
whichever is less. The number in the table shows the charge as a percentage
of Offering Price. While the percentage is different depending on whether the
charge is shown based on the Net Asset Value or the Offering Price, the
dollar amount you would pay is the same. See "How Do I Sell Shares? -
Contingent Deferred Sales Charge" for details.
*$5.00 fee is only for Market Timers. We process all other exchanges without
a fee.
**These fees may not exceed 0.50% for Class I and 1.00% for Class II. The
combination of front-end sales charges and Rule 12b-1 fees could cause
long-term shareholders to pay more than the economic equivalent of the
maximum front-end sales charge permitted under the NASD's rules.
***Assumes a Contingent Deferred Sales Charge will not apply.
FINANCIAL HIGHLIGHTS
This table summarizes the fund's financial history. The information has been
audited by Tait, Weller and Baker, the fund's independent auditors. Their
audit report covering each of the most recent five years appears in the
Trust's Annual Report to Shareholders for the fiscal year ended September 30,
1997. The Annual Report to Shareholders also includes more information about
the fund's performance. For a free copy, please call Fund Information.
<TABLE>
<CAPTION>
Class I Shares
Year Ended September 30, Year Ended December 31
1997 1996 1995 1994 19931 1992 1991 1990 1989 19882
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout the year)
Net Asset Value,
beginning of year $20.03 $17.31 $14.67 $15.43 $16.18 $14.91 $11.21 $11.58 $10.01 $ 8.72
Income from
investment operations:
Net investment income .16 .28 .33 .28 .19 .24 .28 .33 .37 .33
Net realized and unrealized
gains (losses) 8.23 2.78 2.61 (.80) (.74) 1.29 3.72 (.31) 1.56 1.28
Total from
investment operations 8.39 3.06 2.94 (.52) (.55) 1.53 4.00 .02 1.93 1.61
Less distributions from:
Net investment income (.18) (.34) (.30) (.24) (.20) (.26) (.30) (.39) (.36) (.32)
Net realized gains (1.31)-- -- -- -- -- -- -- -- --
Total distributions (1.49) (.34) (.30) (.24) (.20) (.26) (.30) (.39) (.36) (.32)
Net Asset Value,
end of year $26.93$20.03 $17.31 $14.67 $15.43 $16.18 $14.91 $11.21 $11.58 $10.01
Total return* 44.10%17.83% 20.32% (3.38)% (3.43)% 10.38% 35.95% .26% 19.60% 18.80%
Ratios/Supplemental Data
Net assets,
end of year (000's) $394,873 $277,746$260,917 $261,461 $356,708 $197,804$71,380 $39,907 $40,550 $31,792
Ratios to average net assets:
Expenses 1.41% 1.40% 1.43% 1.43% 1.40%** 1.46% 1.53% 1.60% 1.70% 1.62%
Net investment income .71% 1.49% 2.10% 1.81% 1.73%** 1.67% 2.16% 2.99% 3.28% 3.44%
Portfolio turnover rate 39.47%31.55% 14.60% 25.75% 11.48% 12.73% 16.83% 28.87% 26.87% 18.19%
Average commission
rate paid*** $.0511$.0508 -- -- -- -- -- -- -- --
</TABLE>
Class II Shares
Year Ended September 30,
1997 1996 19953
Per Share Operating Performance
(for a share outstanding throughout the year)
Net Asset Value, beginning of year $19.98 $17.28 $15.47
Income from investment operations:
Net investment income .08 .21 .11
Net realized and unrealized gains 8.17 2.74 1.83
Total from investment operations 8.25 2.95 1.94
Less distributions from:
Net investment income (.07) (.25) (.13)
Net realized gains (1.31) -- --
Total distributions (1.38) (.25) (.13)
Net Asset Value, end of year $26.85 $19.98 $17.28
Total return* 43.37% 17.16% 12.56%
Ratios/Supplemental Data
Net assets, end of year (000's) $14,526 $3,882 $1,060
Ratios to average net assets
Expenses 1.95% 1.95% 1.90%**
Net investment income .17% .94% 1.92%**
Portfolio turnover rate 39.47% 31.55% 14.60%
Average commission rate paid*** $.0511 $.0508 --
*Total return does not reflect sales commissions or the Contingent Deferred
Sales Charge, and is not annualized.
**Annualized.
***Relates to purchases and sales of equity securities. Prior to fiscal year
end 1996, disclosure of average commission rate was not required.
1For the nine months ended September 30, 1993.
2On June 28, 1988, the investment manager changed from L.F. Rothschild Fund
Management, Inc. to Franklin Advisers, Inc., an affiliate of Advisory
Services.
3For the period May 1, 1995 (effective date) to September 30, 1995.
HOW DOES THE FUND INVEST ITS ASSETS?
THE FUND'S INVESTMENT OBJECTIVE
The fund's investment objective is long-term capital appreciation. The
objective is a fundamental policy of the fund and may not be changed without
shareholder approval. Preservation of capital, while not an objective, is
also an important consideration. Incidental to seeking its investment
objective of long-term capital appreciation, the fund seeks current income.
Of course, there is no assurance that the fund will achieve its objective.
TYPES OF SECURITIES IN WHICH THE FUND MAY INVEST
The fund seeks to achieve its investment objective by investing at least 65%
of its total assets in financially sound companies that have paid
consistently rising dividends (as described below) based on Advisory
Services' investment philosophy that the securities of such companies,
because of their dividend record, have a strong potential to increase in
value. Normally, the fund's investments are in common stocks, securities
convertible into common stocks, or rights or warrants to subscribe for or
purchase common stocks. The remaining 35% of the fund's assets typically are
invested in dividend-paying equity securities with similar characteristics
that may not meet all of the criteria listed below. The fund diversifies its
investments among different companies in different industry segments with no
more than 25% of the fund's portfolio concentrated in any one industry.
As a fundamental policy, under normal market conditions at least 65% of the
fund's portfolio is invested in the securities of companies that meet the
following criteria:
o Consistent dividend increases - A company should have increased its
dividend in at least eight out of the last ten years with no year showing
a decrease.
o Substantial dividend increases - A company must have increased its
dividend at least 100% over the past ten years.
o Reinvested earnings - Dividend payout should be less than 65% of current
earnings (except for utility companies).
o Strong balance sheet - Long-term debt should be no more than 30% of total
capitalization (except for utility companies).
o Attractive price - The current price should either be in the lower half
of the stock's price/earnings ratio range for the past ten years or less
than the current market price/earnings ratio of the stocks comprising the
Standard & Poor's 500 Stock Index. This criterion applies only at the time
of purchase.
Advisory Services believes that a focus on companies with a pattern of rising
dividends will help the fund attain its objective of long-term capital
appreciation. In addition, because capital preservation is an important
consideration, Advisory Services also reviews a company's stability and the
strength of its balance sheet in selecting among eligible growth companies
generally. Advisory Services also considers other factors, such as return on
shareholder's equity, rate of earnings growth and anticipated price/earnings
ratios, in selecting investments for the fund.
Following these policies, the fund will invest predominantly in equity
securities issued by large-cap and mid-cap U.S. companies. Large-cap U.S.
companies are those which have market capitalization of $5 billion or more;
mid-cap U.S. companies generally have market capitalizations of $1 to $5
billion. It may also invest to a lesser degree in smaller capitalization
companies, which may be subject to different and greater risks. See "What Are
the Risks of Investing in the Fund? - Small Companies."
Foreign Securities. The fund may invest in foreign securities, generally by
purchasing sponsored or unsponsored American Depositary Receipts ("ADRs"),
Global Depositary Receipts ("GDRs") and European Depositary Receipts (EDRs").
ADRs evidence ownership of, and represent the right to receive, securities of
a foreign issuer deposited in a U.S. bank or a correspondent bank. GDRs and
EDRs are typically issued by foreign banks or trust companies and evidence
ownership of underlying securities issued by either a foreign or a U.S.
corporation. The fund may also purchase the securities of foreign issuers
directly in foreign markets. The fund currently intends to limit its foreign
investments to no more than 10% of its net assets. Foreign securities have
risks that U.S. securities do not have. For more information about foreign
securities and their risks, please see "What Are the Risks of Investing in
the Fund?" in this prospectus and "How Does the Fund Invest Its Assets? -
Rising Dividends Fund - Foreign Securities" in the SAI.
OTHER INVESTMENT POLICIES OF THE FUND
In any period of stock market weakness or of uncertain market or economic
conditions as determined by Advisory Services, the fund may establish a
defensive position to preserve capital by temporarily having all or a part of
its assets invested in short-term, fixed-income securities or retained in
cash or cash equivalents. These investments would include U.S. government
securities, bank CDs, bankers' acceptances and high-quality commercial paper
issued by domestic corporations.
REPURCHASE AGREEMENTS. In a repurchase agreement, the fund buys U.S.
government securities from a bank or broker-dealer at one price and agrees to
sell them back to the bank or broker-dealer at a higher price on a specified
date. The securities subject to resale are held on behalf of the fund by a
custodian bank approved by the Board. The bank or broker-dealer must transfer
to the custodian securities with an initial market value of at least 102% of
the repurchase price to help secure the obligation to repurchase the
securities at a later date. The securities are then marked-to-market daily to
maintain coverage of at least 100%. If the bank or broker-dealer does not
repurchase the securities as agreed, the fund may experience a loss or delay
in the liquidation of the securities underlying the repurchase agreement and
may also incur liquidation costs. The fund, however, intends to enter into
repurchase agreements only with banks or broker-dealers that are considered
creditworthy by Advisory Services.
LOANS OF PORTFOLIO SECURITIES. Consistent with procedures approved by the
Board, the fund may lend its portfolio securities to qualified securities
dealers or other institutional investors. Although permitted to lend up to
30% of its total assets, the fund currently intends to limit its lending of
securities to no more than 5% of its total assets. For a description of the
fund's securities lending procedures, please see the SAI.
ILLIQUID INVESTMENTS. The fund's policy is not to invest more than 10% of its
net assets in illiquid securities. Illiquid securities are generally
securities that cannot be sold within seven days in the normal course of
business at approximately the amount at which the fund has valued them.
OTHER POLICIES AND RESTRICTIONS. The fund has a number of additional
investment policies and restrictions that govern its activities. Those that
are identified as "fundamental" may only be changed with shareholder
approval. The others may be changed by the Board alone. For a list of these
restrictions and more information about the fund's investment policies,
including those described above, please see "How Does the Fund Invest Its
Assets?" and "Investment Restrictions" in the SAI.
Generally, the policies and restrictions discussed in this prospectus and in
the SAI apply when the fund makes an investment. In most cases, the fund is
not required to sell a security because circumstances change and the security
no longer meets one or more of the fund's policies or restrictions.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
The value of your shares will increase as the value of the securities owned
by the fund increases and will decrease as the value of the fund's
investments decrease. In this way, you participate in any change in the value
of the securities owned by the fund. In addition to the factors that affect
the value of any particular security that the fund owns, the value of fund
shares may also change with movements in the stock market as a whole.
FOREIGN SECURITIES. Foreign investing involves special risks, including currency
fluctuations and economic and political uncertainties. The fund's current
foreign investment strategy is to focus on purchasing ADRs, GDRs and EDRs.
Investments in Depositary Receipts reduce but do not eliminate all the risk
associated with foreign investments. If the fund acquires Depositary Receipts
through banks that do not have a contractual relationship with the foreign
issuer of the security underlying the Depositary Receipt to issue and service
such Depositary Receipts, there may be an increased possibility that the fund
would not become aware of, and be able to respond to corporate actions such as
stock splits or rights offerings involving the foreign issuer in a timely
manner. Please see "How Does the Fund Invest Its Assets? - Rising Dividends Fund
- - Foreign Securities" in the SAI for more information.
SMALL COMPANIES. The fund may invest in companies that have relatively small
revenues and limited product lines. Small companies may lack depth of
management, they may be unable to internally generate funds necessary for
growth or potential development or to generate such funds through external
financing on favorable terms. Due to these and other factors, small companies
may suffer significant losses, as well as realize substantial growth.
Historically, small capitalization stocks have been more volatile than larger
capitalization stocks and are therefore more speculative than investments in
larger companies. Among the reasons for the greater price volatility are the
less certain growth prospects of smaller firms, the lower degree of liquidity
in the markets for such stocks, and the greater sensitivity of small
companies to changing economic conditions. Besides exhibiting greater
volatility, small company stocks may, to a degree, fluctuate independently of
larger company stocks. Small company stocks may decline in price as large
company stocks rise, or rise in price as large company stocks decline.
Market and Currency Risk. If there is a general market decline in any country
where the fund is invested, the fund's share price may also decline. Changes
in currency valuations will also affect the value of what the fund owns, and
thus the price of fund shares. The value of stock markets and currency
valuations throughout the world have increased and decreased in the past.
These changes are unpredictable.
WHO MANAGES THE FUND?
THE BOARD. The Board oversees the management of the fund and elects its
officers. The officers are responsible for the fund's day-to-day operations.
The Board also monitors the fund to ensure no material conflicts exist among
the fund's classes of shares. While none is expected, the Board will act
appropriately to resolve any material conflict that may arise.
INVESTMENT MANAGER. Advisory Services manages the fund's assets and makes its
investment decisions. Advisory Services also performs similar services for
other funds. It is wholly owned by Resources, a publicly owned company
engaged in the financial services industry through its subsidiaries. Charles
B. Johnson and Rupert H. Johnson, Jr. are the principal shareholders of
Resources. Together, Advisory Services and its affiliates manage over $239
billion in assets. Please see "Investment Management and Other Services" and
"Miscellaneous Information" in the SAI for information on securities
transactions and a summary of the fund's Code of Ethics.
MANAGEMENT TEAM. The team responsible for the day-to-day management of the
fund's portfolio is: Donald G. Taylor since 1996, William J. Lippman since
the fund's inception, Gerard P. Sullivan since March 1998, and Margaret McGee
since 1988.
Donald G. Taylor
Senior Vice President of Advisory Services
Mr. Taylor received his Bachelor of Science degree from the University of
Pennsylvania - The Wharton School. He has been with the Franklin Templeton
Group since 1996. Before 1996 he was a portfolio manager for Fidelity
Management & Research Co.
William J. Lippman
President of Advisory Services
Mr. Lippman holds a Master of Business Administration degree from New York
University and a Bachelor of Business Administration degree from City College
New York. Mr. Lippman has been in the securities industry for over 30 years and
with the Franklin Templeton Group since 1988.
Gerard P. Sullivan
Senior Vice President of Advisory Services
Mr. Sullivan holds a Master of Business Administration degree in Finance and
Accounting from the Columbia Graduate School of Business and a Bachelor of
Arts degree in Political Science from Columbia University. He has been with
the Franklin Templeton Group since March 1998. Previously, he was a Portfolio
Manager for SunAmerica Asset Management from February 1995 to February 1998
and a Portfolio Manager for Texas Commerce Investment Management & Co. from
July 1993 to February 1995.
Margaret McGee
Vice President of Advisory Services
Ms. McGee holds a Bachelor of Arts degree in Business Administration from
William Paterson University. She has been in the securities industry since
1985 and with the Franklin Templeton Group since 1988.
MANAGEMENT FEES. During the fiscal year ended September 30, 1997, management
fees totaling 0.75% of the average daily net assets of the fund were paid to
Advisory Services. Total expenses, including fees paid to Advisory Services,
were 1.41% for Class I and 1.95% for Class II.
PORTFOLIO TRANSACTIONS. Advisory Services tries to obtain the best execution
on all transactions. If Advisory Services believes more than one broker or
dealer can provide the best execution, it may consider research and related
services and the sale of fund shares, as well as shares of other funds in the
Franklin Templeton Group of Funds, when selecting a broker or dealer. Please
see "How Does the Fund Buy Securities for Its Portfolio?" in the SAI for more
information.
ADMINISTRATIVE SERVICES. Under an agreement with Advisory Services, FT
Services provides certain administrative services and facilities for the
fund. Please see "Investment Management and Other Services" in the SAI for
more information.
THE RULE 12B-1 PLANS
Class I and Class II have separate distribution plans or "Rule 12b-1 Plans"
under which they may pay or reimburse Distributors or others for the expenses
of activities that are primarily intended to sell shares of the class. These
expenses may include, among others, distribution or service fees paid to
Securities Dealers or others who have executed a servicing agreement with the
fund, Distributors or its affiliates; a prorated portion of Distributors'
overhead expenses; and the expenses of printing prospectuses and reports used
for sales purposes, and preparing and distributing sales literature and
advertisements.
Payments by the fund under the Class I plan may not exceed 0.25% per year of
Class I's average daily net assets. All distribution expenses over this
amount will be borne by those who have incurred them. During the first year
after certain Class I purchases made without a sales charge, Securities
Dealers may not be eligible to receive the Rule 12b-1 fees associated with
the purchase.
Under the Class II plan, the fund may pay Distributors up to 0.75% per year
of Class II's average daily net assets to pay Distributors or others for
providing distribution and related services and bearing certain Class II
expenses. All distribution expenses over this amount will be borne by those
who have incurred them. During the first year after a purchase
of Class II shares, Securities Dealers may not be eligible to receive this
portion of the Rule 12b-1 fees associated with the purchase.
Each class may also pay a servicing fee of up to 0.25% of the average daily
net assets under its plan. This fee may be used to pay Securities Dealers or
others for, among other things, helping to establish and maintain customer
accounts and records, helping with requests to buy and sell shares, receiving
and answering correspondence, monitoring dividend payments from the fund on
behalf of customers, and similar servicing and account maintenance activities.
The Rule 12b-1 fees charged to each class are based only on the fees
attributable to that particular class. For more information, please see "The
Fund's Underwriter" in the SAI.
HOW TAXATION AFFECTS THE FUND
AND ITS SHAREHOLDERS
ON AUGUST 5, 1997, PRESIDENT CLINTON SIGNED INTO LAW THE TAXPAYER RELIEF ACT
OF 1997 (THE "1997 ACT"). THIS NEW LAW MAKES SWEEPING CHANGES IN THE CODE.
BECAUSE MANY OF THESE CHANGES ARE COMPLEX THEY ARE DISCUSSED IN THE SAI.
TAXATION OF THE FUND'S INVESTMENTS. HOW DOES THE FUND
The fund invests your money in the EARN INCOME AND GAINS?
stocks and other securities that are
described in the section "How Does the The fund earns dividends and interest
Fund Invest Its Assets?" Special tax (the fund's "income") on its
rules may apply in determining the investments. When the fund sells a
income and gains that the fund earns security for a price that is higher
on its investments. These rules may, than it paid, it has a gain. When the
in turn, affect the amount of fund sells a security for a price that
distributions that the fund pays to is lower than it paid, it has a loss.
you. These special tax rules are If the fund has held the security for
discussed in the SAI. more than one year, the gain or loss
will be a long-term capital gain or
TAXATION OF THE FUND. As a regulated loss. If the fund has held the
investment company, the fund generally security for one year or less, the
pays no federal income tax on the gain or loss will be a short-term
income and gains that it distributes capital gain or loss. The fund's gains
to you. and losses are netted together, and,
if the fund has a net gain (the fund's
FOREIGN TAXES. Foreign governments may "gains"), that gain will generally be
impose taxes on the income and gains distributed to you.
from the fund's investments in foreign
stocks and other securities.
TAXATION OF SHAREHOLDERS. WHAT IS A DISTRIBUTION?
Distributions. Distributions from the As a shareholder, you will receive
fund, whether you receive them in cash your share of the fund's income and
or in additional shares, are generally gains on its investments in stocks and
subject to income tax. The fund will other securities. The fund's income
send you a statement in January of the and short term capital gains are paid
current year that reflects the amount to you as ordinary dividends. The
of ordinary dividends, capital gain fund's long-term capital gains are
distributions and non-taxable paid to you as capital gain
distributions you received from the distributions. If the fund pays you an
fund in the prior year. This statement amount in excess of its income and
will include distributions declared in gains, this excess will generally be
December and paid to you in January of treated as a non-taxable distribution.
the current year, but which are These amounts, taken together, are
taxable as if paid on December 31 of what we call the fund's distributions
the prior year. The IRS requires you to you.
to report these amounts on your income
tax return for the prior year. The
fund's statement for the prior year
will tell you how much of your capital
gain distribution represents 28% rate
gain property. The remainder of the
capital gain distribution represents
20% rate gain.
Distributions to Retirement Plans. Fund distributions received by your
qualified retirement plan, such as a section 401(k) plan or IRA, are generally
tax-deferred; this means that you are not required to report fund
distributions on your income tax return when paid to your plan, but, rather,
when your plan makes payments to you.
Dividends-Received Deduction. Corporate investors may be entitled to a
dividends-received deduction on a portion of the ordinary dividends they
receive from the fund.
Redemptions and Exchanges. If you WHAT IS A REDEMPTION?
redeem your shares or if you exchange
your shares in the fund for shares in A redemption is a sale by you to the
another Franklin Templeton Fund, you fund of some or all of your shares in
will generally have a gain or loss the fund. The price per share you
that the IRS requires you to report on receive when you redeem fund shares
your income tax return. If you may be more or less than the price at
exchange fund shares held for 90 days which you purchased those shares. An
or less and pay no sales charge, or a exchange of shares in the fund for
reduced sales charge, for the new shares of another Franklin Templeton
shares, all or a portion of the sales Fund is treated as a redemption of
charge you paid on the purchase of the fund shares and then a purchase of
shares you exchanged is not included shares of the other fund. When you
in their cost for purposes of redeem or exchange your shares, you
computing gain or loss on the will generally have a gain or loss,
exchange. If you hold your shares for depending upon whether the basis in
six months or less, any loss you have your shares is more or less than your
will be treated as a long-term capital cost or other basis in the shares.
loss to the extent of any capital gain Call Franklin Templeton Fund
distributions received by you from the Information for a free shareholder Tax
fund. All or a portion of any loss on Information Handbook if you need more
the redemption or exchange of your information in calculating the gain or
shares will be disallowed by the IRS loss on the redemption or exchange of
if you purchase other shares in the your shares.
fund within 30 days before or after
your redemption or exchange.
Non-U.S. Investors. Ordinary dividends generally will be subject to U.S.
income tax withholding. Your home country may also tax ordinary dividends,
capital gain distributions and gains arising from redemptions or exchanges of
your fund shares. Fund shares held by the estate of a non-U.S. investor may be
subject to U.S. estate tax. You may wish to contact your tax advisor to
determine the U.S. and non-U.S. tax consequences of your investment in the
fund.
State Taxes. Ordinary dividends and WHAT IS A BACKUP WITHHOLDING?
capital gain distributions that you
receive from the fund, and gains Backup withholding occurs when the
arising from redemptions or exchanges fund is required to withhold and pay
of your fund shares will generally be over to the IRS 31% of your
subject to state and local income tax. distributions and redemption proceeds.
The holding of fund shares may also be You can avoid backup withholding by
subject to state and local intangibles providing the fund with your TIN, and
taxes. You may wish to contact your by completing the tax certifications
tax advisor to determine the state and on your shareholder application that
local tax consequences of your you were asked to sign when you opened
investment in the fund. your account. However, if the IRS
instructs the fund to begin backup
Backup Withholding. When you open an withholding, it is required to do so
account, IRS regulations require that even if you provided the fund with
you provide your taxpayer your TIN and these tax certifications,
identification number ("TIN"), certify and backup withholding will remain in
that it is correct, and certify that place until the fund is instructed by
you are not subject to backup the IRS that it is no longer required.
withholding under IRS rules. If you
fail to provide a correct TIN or the
proper tax certifications, the fund is
required to withhold 31% of all the
distributions (including ordinary
dividends and capital gain
distributions), and redemption
proceeds paid to you. The fund is also
required to begin backup withholding
on your account if the IRS instructs
the fund to do so. The fund reserves
the right not to open your account,
or, alternatively, to redeem your
shares at the current net asset value,
less any taxes withheld, if you fail
to provide a correct TIN, fail to
provide the proper tax certifications,
or the IRS instructs the fund to begin
backup withholding on your account.
THIS TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY. PROSPECTIVE INVESTORS
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES OF AN INVESTMENT IN THE FUND. A MORE COMPLETE
DISCUSSION OF THESE RULES AND RELATED MATTERS IS CONTAINED IN THE SECTION
ENTITLED "ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES" IN THE SAI. THE
TAX TREATMENT TO YOU OF DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, FOREIGN TAXES
PAID AND INCOME TAXES WITHHELD IS ALSO DISCUSSED IN A FREE FRANKLIN TEMPLETON
TAX INFORMATION HANDBOOK WHICH IS AVAILABLE BY CONTACTING OUR FUND
INFORMATION DEPARTMENT.
HOW IS THE TRUST ORGANIZED?
The fund is a diversified series of Franklin Managed Trust (the "Trust"), an
open-end management investment company, commonly called a mutual fund. It was
organized as a Massachusetts business trust on July 15, 1986, and is
registered with the SEC. The fund offers two classes of shares: Franklin
Rising Dividends Fund - Class I and Franklin Rising Dividends Fund - Class
II. All shares outstanding before the offering of Class II shares are
considered Class I shares. Additional series and classes of shares may be
offered in the future.
Shares of each class represent proportionate interests in the assets of the
fund and have the same voting and other rights and preferences as any other
class of the fund for matters that affect the fund as a whole. For matters
that only affect one class, however, only shareholders of that class may
vote. Each class will vote separately on matters affecting only that class,
or expressly required to be voted on separately by state or federal law.
Shares of each class of a series have the same voting and other rights and
preferences as the other classes and series of the Trust for matters that
affect the Trust as a whole.
The Trust has noncumulative voting rights. This gives holders of more than
50% of the shares voting the ability to elect all of the members of the
Board. If this happens, holders of the remaining shares voting will not be
able to elect anyone to the Board.
The Trust does not intend to hold annual shareholder meetings. The Trust or a
series of the Trust may hold special meetings, however, for matters requiring
shareholder approval. A meeting may also be called by the Board in its
discretion or by shareholders holding at least 10% of the outstanding shares. In
certain circumstances, we are required to help you communicate with other
shareholders about the removal of a Board member.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, please follow the steps below. This will help avoid any
delays in processing your request.
1. Read this prospectus carefully.
2. Determine how much you would like to invest. The fund's minimum
investments are:
To open a regular, non-retirement account..................... $1,000
To open an IRA, IRA Rollover,
Roth IRA, or Education IRA.................................... $ 250*
To open a custodial account for a minor
(an UGMA/UTMA account)......................................... $ 100
To open an account with an automatic
investment plan............................................... $ 50**
To add to an account.......................................... $ 50***
*For all other retirement accounts, there is no minimum investment
requirement.
**$25 for an Education IRA.
***For all retirement accounts except IRAs, IRA Rollovers, Roth IRAs, or
Education IRAs, there is no minimum to add to an account.
We reserve the right to change the amount of these minimums from time to
time or to waive or lower these minimums for certain purchases. We also
reserve the right to refuse any order to buy shares.
3. Carefully complete and sign the enclosed shareholder application,
including the optional shareholder privileges section. By applying for
privileges now, you can avoid the delay and inconvenience of having to
send an additional application to add privileges later. PLEASE ALSO
INDICATE WHICH CLASS OF SHARES YOU WANT TO BUY. IF YOU DO NOT SPECIFY A
CLASS, WE WILL AUTOMATICALLY INVEST YOUR PURCHASE IN CLASS I SHARES. It is
important that we receive a signed application since we will not be able
to process any redemptions from your account until we receive your signed
application.
4. Make your investment using the table below.
METHOD STEPS TO FOLLOW
BY MAIL For an initial investment:
Return the application to the fund with your check
made payable to the fund.
For additional investments:
Send a check made payable to the fund. Please include
your account number on the check.
BY WIRE 1. Call Shareholder Services or, if that number is
busy, call 1-650/312-2000 collect, to receive a
wire control number and wire instructions. You
need a new wire control number every time you
wire money into your account. If you do not have
a currently effective wire control number, we
will return the money to the bank, and we will
not credit the purchase to your account.
2. For an initial investment you must also return
your signed shareholder application to the fund.
IMPORTANT DEADLINES: If we receive your call before
1:00 p.m. Pacific time and the bank receives the
wired funds and reports the receipt of wired funds to
the fund by 3:00 p.m. Pacific time, we will credit
the purchase to your account that day. If we receive
your call after 1:00 p.m. or the bank receives the
wire after 3:00 p.m., we will credit the purchase to
your account the following business day.
THROUGH YOUR DEALER Call your investment representative
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. The class that may be best
for you depends on a number of factors, including the amount and length of
time you expect to invest. Generally, Class I shares may be more attractive
for long-term investors or investors who qualify to buy Class I shares at a
reduced sales charge. Your financial representative can help
you decide.
CLASS I CLASS II
- --------------------------------------------------------------------------------
o Higher front-end sales charges o Lower front-end sales charges than
than Class II shares. There are Class I shares
several ways to reduce these
charges, as described below. There
is no front-end sales charge for
purchases of $1 million or more.*
o Contingent Deferred Sales Charge o Contingent Deferred Sales Charge
on purchases of $1 million or more on purchases sold within 18 months
sold within one year
o Lower annual expenses than Class o Higher annual expenses than Class
II shares I shares
*If you are investing $1 million or more, it is generally more beneficial for
you to buy Class I shares because there is no front-end sales charge and the
annual expenses are lower. Therefore, ANY PURCHASE OF $1 MILLION OR MORE IS
AUTOMATICALLY INVESTED IN CLASS I SHARES. You may accumulate more than $1
million in Class II shares through purchases over time. If you plan to do
this, however, you should determine if it would be better for you to buy
Class I shares through a Letter of Intent.
PURCHASE PRICE OF FUND SHARES
For Class I shares, the sales charge you pay depends on the dollar amount you
invest, as shown in the table below. The sales charge for Class II shares is
1% and, unlike Class I, does not vary based on the size of your purchase.
TOTAL SALES CHARGE AMOUNT PAID
AS A PERCENTAGE OF TO DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
CLASS I
Under $50,000....................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000...... 4.50% 4.71% 3.75%
$100,000 but less than $250,000..... 3.50% 3.63% 2.80%
$250,000 but less than $500,000..... 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000... 2.00% 2.04% 1.60%
$1,000,000 or more*................. None None None
CLASS II
Under $1,000,000*................... 1.00% 1.01% 1.00%
*A Contingent Deferred Sales Charge of 1% may apply to Class I purchases of
$1 million or more and any Class II purchase. Please see "How Do I Sell
Shares? - Contingent Deferred Sales Charge." Please also see "Other Payments
to Securities Dealers" below for a discussion of payments Distributors may
make out of its own resources to Securities Dealers for certain purchases.
Purchases of Class II shares are limited to purchases below $1 million.
Please see "Choosing a Share Class."
SALES CHARGE REDUCTIONS AND WAIVERS
- - IF YOU QUALIFY TO BUY SHARES UNDER ONE OF THE SALES CHARGE REDUCTION OR
WAIVER CATEGORIES DESCRIBED BELOW, PLEASE INCLUDE A WRITTEN STATEMENT WITH
EACH PURCHASE ORDER EXPLAINING WHICH PRIVILEGE APPLIES. If you don't include
this statement, we cannot guarantee that you will receive the sales charge
reduction or waiver.
CUMULATIVE QUANTITY DISCOUNTS - Class I Only. To determine if you may pay a
reduced sales charge, the amount of your current Class I purchase is added to
the cost or current value, whichever is higher, of your existing shares in
the Franklin Templeton Funds, as well as those of your spouse, children under
the age of 21 and grandchildren under the age of 21. If you are the sole
owner of a company, you may also add any company accounts, including
retirement plan accounts. Companies with one or more retirement plans may add
together the total plan assets invested in the Franklin Templeton Funds to
determine the sales charge that applies.
LETTER OF INTENT - Class I Only. You may buy Class I shares at a reduced
sales charge by completing the Letter of Intent section of the shareholder
application. A Letter of Intent is a commitment by you to invest a specified
dollar amount during a 13 month period. The amount you agree to invest
determines the sales charge you pay on Class I shares.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION,
YOU ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
o You authorize Distributors to reserve 5% of your total intended purchase
in Class I shares registered in your name until you fulfill your Letter.
o You give Distributors a security interest in the reserved shares and
appoint Distributors as attorney-in-fact.
o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
o Although you may exchange your shares, you may not sell reserved shares
until you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on
the reserved shares as you direct. Our policy of reserving shares does not
apply to certain retirement plans.
If you would like more information about the Letter of Intent privilege,
please see "How Do I Buy, Sell and Exchange Shares? - Letter of Intent" in
the SAI or call Shareholder Services.
GROUP PURCHASES - Class I Only. If you are a member of a qualified group, you
may buy Class I shares at a reduced sales charge that applies to the group as
a whole. The sales charge is based on the combined dollar value of the group
members' existing investments, plus the amount of the current purchase.
A qualified group is one that:
o Was formed at least six months ago,
o Has a purpose other than buying fund shares at a discount,
o Has more than 10 members,
o Can arrange for meetings between our representatives and group members,
o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to
Distributors,
o Agrees to arrange for payroll deduction or other bulk transmission of
investments to the fund, and
o Meets other uniform criteria that allow Distributors to achieve cost
savings in distributing shares.
A qualified group does not include a 403(b) plan that only allows salary
deferral contributions. 403(b) plans that only allow salary deferral
contributions and that purchased Class I shares of the fund at a reduced
sales charge under the group purchase privilege before February 1, 1998,
however, may continue to do so.
SALES CHARGE WAIVERS. If one of the following sales charge waivers applies to
you or your purchase of fund shares, you may buy shares of the fund without a
front-end sales charge or a Contingent Deferred Sales Charge. All of the
sales charge waivers listed below apply to purchases of Class I shares only,
except for items 1 and 2 which also apply to Class II purchases.
Certain distributions, payments or redemption proceeds that you receive may
be used to buy shares of the fund without a sales charge if you reinvest them
within 365 days of their payment or redemption date. They include:
1. Dividend and capital gain distributions from any Franklin Templeton
Fund. The distributions generally must be reinvested in the same class
of shares. Certain exceptions apply, however, to Class II shareholders
who chose to reinvest their distributions in Class I shares of the fund
before November 17, 1997, and to Advisor Class or Class Z shareholders
of a Franklin Templeton Fund who may reinvest their distributions in
Class I shares of the fund.
2. Redemption proceeds from the sale of shares of any Franklin Templeton
Fund if you originally paid a sales charge on the shares and you
reinvest the money in the same class of shares. This waiver does not
apply to exchanges.
If you paid a Contingent Deferred Sales Charge when you redeemed your
shares from a Franklin Templeton Fund, a Contingent Deferred Sales
Charge will apply to your purchase of fund shares and a new Contingency
Period will begin. We will, however, credit your fund account with
additional shares based on the Contingent Deferred Sales Charge you paid
and the amount of redemption proceeds that you reinvest.
If you immediately placed your redemption proceeds in a Franklin Bank
CD, you may reinvest them as described above. The proceeds must be
reinvested within 365 days from the date the CD matures, including any
rollover.
3. Dividend or capital gain distributions from a real estate investment
trust (REIT) sponsored or advised by Franklin Properties, Inc.
4. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment
option the Franklin Valuemark Funds, or the Templeton Variable Products
Series Fund. You should contact your tax advisor for information on any
tax consequences that may apply.
5. Redemption proceeds from a repurchase of shares of Franklin Floating
Rate Trust, if the shares were continuously held for at least 12 months.
If you immediately placed your redemption proceeds in a Franklin Bank CD
or a Franklin Templeton money fund, you may reinvest them as described
above. The proceeds must be reinvested within 365 days from the date the
CD matures, including any rollover, or the date you redeem your money
fund shares.
6. Redemption proceeds from the sale of Class A shares of any of the
Templeton Global Strategy Funds if you are a qualified investor.
If you paid a contingent deferred sales charge when you redeemed your
Class A shares from a Templeton Global Strategy Fund, a Contingent
Deferred Sales Charge will apply to your purchase of fund shares and a
new Contingency Period will begin. We will, however, credit your fund
account with additional shares based on the contingent deferred sales
charge you paid and the amount of the redemption proceeds that you
reinvest.
If you immediately placed your redemption proceeds in a Franklin
Templeton money fund, you may reinvest them as described above. The
proceeds must be reinvested within 365 days from the date they are
redeemed from the money fund.
7. Distributions from an existing retirement plan invested in the Franklin
Templeton Funds
Various individuals and institutions also may buy Class I shares without a
front-end sales charge or Contingent Deferred Sales Charge, including:
1. Trust companies and bank trust departments agreeing to invest in
Franklin Templeton Funds over a 13 month period 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. We will
accept orders for these accounts by mail accompanied by a check or by
telephone or other means of electronic data transfer directly from the
bank or trust company, with payment by federal funds received by the
close of business on the next business day following the order.
2. An Eligible Governmental Authority. Please consult your legal and
investment advisors to determine if an investment in the fund is
permissible and suitable for you and the effect, if any, of payments by
the fund on arbitrage rebate calculations.
3. Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for
clients participating in comprehensive fee programs. The minimum initial
investment is $250.
4. Qualified registered investment advisors who buy through a broker-dealer
or service agent who has entered into an agreement with Distributors
5. Registered Securities Dealers and their affiliates, for their investment
accounts only
6. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer
7. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family
members, consistent with our then-current policies. The minimum initial
investment is $100.
8. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer
9. Accounts managed by the Franklin Templeton Group
10. Certain unit investment trusts and their holders reinvesting
distributions from the trusts
11. Group annuity separate accounts offered to retirement plans
12. Chilean retirement plans that meet the requirements described under
"Retirement Plans" below
RETIREMENT PLANS. Retirement plans that (i) are sponsored by an employer with
at least 100 employees, or (ii) have plan assets of $1 million or more, or
(iii) agree to invest at least $500,000 in the Franklin Templeton Funds over
a 13 month period may buy Class I shares without a front-end sales charge.
Retirement plans that are not Qualified Retirement Plans, SIMPLEs or SEPs
must also meet the requirements described under "Group Purchases - Class I
Only" above to be able to buy Class I shares without a front-end sales
charge. We may enter into a special arrangement with a Securities Dealer,
based on criteria established by the fund, to add together certain small
Qualified Retirement Plan accounts for the purpose of meeting these
requirements.
For retirement plan accounts opened on or after May 1, 1997, a Contingent
Deferred Sales Charge may apply if the retirement plan is transferred out of
the Franklin Templeton Funds or terminated within 365 days of the retirement
plan account's initial purchase in the Franklin Templeton Funds. Please see
"How Do I Sell Shares? - Contingent Deferred Sales Charge" for details.
HOW DO I BUY SHARES IN CONNECTION WITH RETIREMENT PLANS?
Your individual or employer-sponsored retirement plan may invest in the fund.
Plan documents are required for all retirement plans. Trust Company can
provide the plan documents for you and serve as custodian or trustee.
Trust Company can provide you with brochures containing important information
about its plans. To establish a Trust Company retirement plan, you will need
an application other than the one included in this prospectus. For a
retirement plan brochure or application, call Retirement Plan Services.
Please consult your legal, tax or retirement plan specialist before choosing
a retirement plan. Your investment representative or advisor can help you
make investment decisions within your plan.
OTHER PAYMENTS TO SECURITIES DEALERS
The payments described below may be made to Securities Dealers who initiate
and are responsible for Class II purchases and certain Class I purchases made
without a sales charge. The payments are subject to the sole discretion of
Distributors, and are paid by Distributors or one of its affiliates and not
by the fund or its shareholders.
1. Class II purchases - up to 1% of the purchase price.
2. Class I purchases of $1 million or more - up to 1% of the amount
invested.
3. Class I purchases made without a front-end sales charge by certain
retirement plans described under "Sales Charge Reductions and Waivers -
Retirement Plans" above - up to 1% of the amount invested.
4. Class I purchases by trust companies and bank trust departments,
Eligible Governmental Authorities, and broker-dealers or others on
behalf of clients participating in comprehensive fee programs - up to
0.25% of the amount invested.
5. Class I purchases by Chilean retirement plans - up to 1% of the amount
invested.
A Securities Dealer may receive only one of these payments for each
qualifying purchase. Securities Dealers who receive payments in connection
with investments described in paragraphs 1, 2 or 5 above or a payment of up
to 1% for investments described in paragraph 3 will be eligible to receive
the Rule 12b-1 fee associated with the purchase starting in the thirteenth
calendar month after the purchase.
FOR BREAKPOINTS THAT MAY APPLY AND INFORMATION ON ADDITIONAL COMPENSATION
PAYABLE TO SECURITIES DEALERS IN CONNECTION WITH THE SALE OF FUND SHARES,
PLEASE SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES? - OTHER PAYMENTS TO
SECURITIES DEALERS" IN THE SAI.
FOR INVESTORS OUTSIDE THE U.S.
The distribution of this prospectus and the offering of fund shares may be
limited in many jurisdictions. An investor who wishes to buy shares of the
fund should determine, or have a broker-dealer determine, the applicable laws
and regulations of the relevant jurisdiction. Investors are responsible for
compliance with tax, currency exchange or other regulations applicable to
redemption and purchase transactions in any jurisdiction to which they may be
subject. Investors should consult appropriate tax and legal advisors to
obtain information on the rules applicable to these transactions.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and
a purchase of shares, an exchange is a taxable transaction.
If you own Class I shares, you may exchange into any of our money funds
except Franklin Templeton Money Fund II ("Money Fund II"). Money Fund II is
the only money fund exchange option available to Class II shareholders.
Unlike our other money funds, shares of Money Fund II may not be purchased
directly and no drafts (checks) may be written on Money Fund II accounts.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment
objective and policies, and its rules and requirements for exchanges. For
example, some Franklin Templeton Funds do not accept exchanges and others may
have different investment minimums. Some Franklin Templeton Funds do not
offer Class II shares.
METHOD STEPS TO FOLLOW
BY MAIL 1. Send us signed written instructions
2. Include any outstanding share certificates for
the shares you want to exchange
BY PHONE Call Shareholder Services or TeleFACTS(R)
- If you do not want the ability to exchange by
phone to apply to your account, please let us know.
THROUGH YOUR DEALER Call your investment representative
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
You generally will not pay a front-end sales charge on exchanges. If you have
held your shares less than six months, however, you will pay the percentage
difference between the sales charge you previously paid and the applicable
sales charge of the new fund, if the difference is more than 0.25%. If you
have never paid a sales charge on your shares because, for example, they have
always been held in a money fund, you will pay the fund's applicable sales
charge no matter how long you have held your shares. These charges may not
apply if you qualify to buy shares without a sales charge.
CONTINGENT DEFERRED SALES CHARGE. We will not impose a Contingent Deferred
Sales Charge when you exchange shares. Any shares subject to a Contingent
Deferred Sales Charge at the time of exchange, however, will remain so in the
new fund.
For accounts with shares subject to a Contingent Deferred Sales Charge, we
will first exchange any shares in your account that are not subject to the
charge. If there are not enough of these to meet your exchange request, we
will exchange shares subject to the charge in the order they were purchased.
If you exchange Class I shares into one of our money funds, the time your
shares are held in that fund will not count towards the completion of any
Contingency Period. If you exchange your Class II shares for shares of Money
Fund II, however, the time your shares are held in that fund will count
towards the completion of any Contingency Period.
For more information about the Contingent Deferred Sales Charge, please see
"How Do I Sell Shares?"
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
o You must meet the applicable minimum investment amount of the fund you
are exchanging into, or exchange 100% of your fund shares
o You may only exchange shares within the SAME CLASS, except as noted below.
o The accounts must be identically registered. You may, however, exchange
shares from a fund account requiring two or more signatures into an
identically registered money fund account requiring only one signature for
all transactions. Please notify us in writing if you do not want this
option to be available on your account. Additional procedures may apply.
Please see "Transaction Procedures and Special Requirements."
o Trust Company IRA or 403(b) retirement plan accounts may exchange shares
as described above. Restrictions may apply to other types of retirement
plans. Please contact Retirement Plan Services for information on
exchanges within these plans.
o The fund you are exchanging into must be eligible for sale in your state.
o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
o Your exchange may be restricted or refused if you have: (i) requested an
exchange out of the fund within two weeks of an earlier exchange request,
(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. Shares under common ownership or control
are combined for these limits. If you have exchanged shares as described
in this paragraph, you will be considered a Market Timer. Each exchange by
a Market Timer, if accepted, will be charged $5.00. Some of our funds do
not allow investments by Market Timers.
Because excessive trading can hurt fund performance, operations and
shareholders, we may refuse any exchange purchase if (i) we believe the fund
would be harmed or unable to invest effectively, or (ii) the fund receives or
anticipates simultaneous orders that may significantly affect the fund.
LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES
Certain funds in the Franklin Templeton Funds offer classes of shares not
offered by the fund, such as "Advisor Class" or "Class Z" shares. Because the
fund does not currently offer an Advisor Class, you may exchange Advisor
Class shares of any Franklin Templeton Fund for Class I shares of the fund at
Net Asset Value. If you do so and you later decide you would like to exchange
into a fund that offers an Advisor Class, you may exchange your Class I
shares for Advisor Class shares of that fund. Certain shareholders of Class Z
shares of Franklin Mutual Series Fund Inc. may also exchange their Class Z
shares for Class I shares of the fund at Net Asset Value.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
METHOD STEPS TO FOLLOW
BY MAIL 1. Send us signed written instructions. If you would like
your redemption proceeds wired to a bank account, your
instructions should include:
o The name, address and telephone number of the bank
where you want the proceeds sent
o Your bank account number
o The Federal Reserve ABA routing number
o If you are using a savings and loan or credit union,
the name of the corresponding bank and the account
number
2. Include any outstanding share certificates for the
shares you are selling
3. Provide a signature guarantee if required
4. Corporate, partnership and trust accounts may need to
send additional documents. Accounts under court
jurisdiction may have other requirements.
BY PHONE Call Shareholder Services. If you would like your
redemption proceeds wired to a bank account, other than
an escrow account, you must first sign up for the wire
feature. To sign up, send us written instructions, with a
signature guarantee. To avoid any delay in processing,
the instructions should include the items listed in "By
Mail" above.
Telephone requests will be accepted:
o If the request is $50,000 or less. Institutional
accounts may exceed $50,000 by completing a separate
agreement. Call Institutional Services to receive a
copy.
o If there are no share certificates issued for the
shares you want to sell or you have already returned
them to the fund
o Unless you are selling shares in a Trust Company
retirement plan account
o Unless the address on your account was changed by
phone within the last 15 days
- If you do not want the ability to redeem by phone to
apply to your account, please let us know.
THROUGH
YOUR DEALER Call your investment representative
We will send your redemption check within seven days after we receive your
request in proper form. If you would like the check sent to an address other
than the address of record or made payable to someone other than the
registered owners on the account, send us written instructions signed by all
account owners, with a signature guarantee. We are not able to receive or pay
out cash in the form of currency.
The wiring of redemption proceeds is a special service that we make available
whenever possible for redemption requests of $1,000 or more. If we receive
your request in proper form before 1:00 p.m. Pacific time, your wire payment
will be sent the next business day. For requests received in proper form
after 1:00 p.m. Pacific time, the payment will be sent the second business
day. By offering this service to you, the fund is not bound to meet any
redemption request in less than the seven day period prescribed by law.
Neither the fund nor its agents shall be liable to you or any other person
if, for any reason, a redemption request by wire is not processed as
described in this section.
If you sell shares you 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.
Under unusual circumstances, we may suspend redemptions or postpone payment
for more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under
age 591/2, unless the distribution meets an exception stated in the Code. To
obtain the necessary forms, please call Retirement Plan Services.
CONTINGENT DEFERRED SALES CHARGE
For Class I purchases, if you did not pay a front-end sales charge because
you invested $1 million or more or agreed to invest $1 million or more under
a Letter of Intent, a Contingent Deferred Sales Charge may apply if you sell
all or a part of your investment within the Contingency Period. Once you have
invested $1 million or more, any additional Class I investments you make
without a sales charge may also be subject to a Contingent Deferred Sales
Charge if they are sold within the Contingency Period. For any Class II
purchase, a Contingent Deferred Sales Charge may apply if you sell the shares
within the Contingency Period. The charge is 1% of the value of the shares
sold or the Net Asset Value at the time of purchase, whichever is less.
Certain retirement plan accounts opened on or after May 1, 1997, and that
qualify to buy Class I shares without a front-end sales charge may also be
subject to a Contingent Deferred Sales Charge if the retirement plan is
transferred out of the Franklin Templeton Funds or terminated within 365 days
of the account's initial purchase in the Franklin Templeton Funds.
We will first redeem any shares in your account that are not subject to the
charge. If there are not enough of these to meet your request, we will redeem
shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT,
we will redeem additional shares to cover any Contingent Deferred Sales
Charge. For requests to sell a stated NUMBER OF SHARES, we will deduct the
amount of the Contingent Deferred Sales Charge, if any, from the sale
proceeds.
WAIVERS. We waive the Contingent Deferred Sales Charge for:
o Account fees
o Sales of shares purchased without a front-end sales charge by certain
retirement plan accounts if (i) the account was opened before May 1, 1997,
or (ii) the Securities Dealer of record received a payment from
Distributors of 0.25% or less, or (iii) Distributors did not make any
payment in connection with the purchase, or (iv) the Securities Dealer of
record has entered into a supplemental agreement with Distributors
o Redemptions by the fund when an account falls below the minimum required
account size
o Redemptions following the death of the shareholder or beneficial owner
o Redemptions through a systematic withdrawal plan set up before February
1, 1995
o Redemptions through a systematic withdrawal plan set up on or after
February 1, 1995, at a rate of up to 1% a month of an account's Net Asset
Value. For example, if you maintain an annual balance of $1 million in
Class I shares, you can redeem up to $120,000 annually through a
systematic withdrawal plan free of charge. Likewise, if you maintain an
annual balance of $10,000 in Class II shares, $1,200 may be redeemed
annually free of charge.
o Distributions from IRAs due to death or disability or upon periodic
distributions based on life expectancy
o Tax-free returns of excess contributions from employee benefit plans
o Redemptions by Trust Company employee benefit plans or employee benefit
plans serviced by ValuSelect(R)
o Participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee
benefit plans
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?
The fund declares dividends from its net investment income quarterly in
March, June, September and December to shareholders of record on the last
business day of that month and pays them on or about the 15th day of the next
month. Capital gains, if any, may be distributed annually, usually in
December.
Dividends and capital gains are calculated and distributed the same way for
each class. The amount of any income dividends per share will differ,
however, generally due to the difference in the Rule 12b-1 fees of Class I
and Class II.
Dividend payments are not guaranteed, are subject to the Board's discretion
and may vary with each payment. THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE
ANY FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that
any distribution will lower the value of the fund's shares by the amount of
the distribution and you will then receive a portion of the price you paid
back in the form of a taxable distribution.
DISTRIBUTION OPTIONS
You may receive your distributions from the fund in any of these ways:
1. BUY ADDITIONAL SHARES OF THE FUND - You may buy additional shares of the
fund (without a sales charge or imposition of a Contingent Deferred Sales
Charge) by reinvesting capital gain distributions, or both dividend and
capital gain distributions. This is a convenient way to accumulate additional
shares and maintain or increase your earnings base.
2. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
distributions to buy shares of another Franklin Templeton Fund (without a
sales charge or imposition of a Contingent Deferred Sales Charge). Many
shareholders find this a convenient way to diversify their investments.
3. RECEIVE DISTRIBUTIONS IN CASH - You may receive dividends, or both
dividend and capital gain distributions in cash. If you have the money sent
to another person or to a checking account, you may need a signature
guarantee. If you send the money to a checking account, please see
"Electronic Fund Transfers - Class I Only" under "Services to Help You Manage
Your Account."
Distributions may be reinvested only in the same class of shares, except as
follows: (i) Class II shareholders who chose to reinvest their distributions
in Class I shares of the fund or another Franklin Templeton Fund before
November 17, 1997, may continue to do so; and (ii) Class II shareholders may
reinvest their distributions in shares of any Franklin Templeton money fund.
To select one of these options, please complete sections 6 and 7 of the
shareholder application included with this prospectus or tell your investment
representative which option you prefer. If you do not select an option, we
will automatically reinvest dividend and capital gain distributions in the
same class of the fund. You may change your distribution option at any time
by notifying us by mail or phone. Please allow at least seven days before the
record date for us to process the new option. For Trust Company retirement
plans, special forms are required to receive distributions in cash.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
SHARE PRICE
When you buy shares, you pay the Offering Price. This is the Net Asset Value
per share of the class you wish to purchase, plus any applicable sales
charges. When you sell shares, you receive the Net Asset Value per share
minus any applicable Contingent Deferred Sales Charges.
The Net Asset Value we use when you buy or sell shares is the one next
calculated after we receive your transaction request in proper form. If you
buy or sell shares through your Securities Dealer, however, we will use the
Net Asset Value next calculated after your Securities Dealer receives your
request, which is promptly transmitted to the fund. Your redemption proceeds
will not earn interest between the time we receive the order from your dealer
and the time we receive any required documents.
HOW AND WHEN SHARES ARE PRICED
The fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share of each class as of the close of the NYSE, normally
1:00 p.m. Pacific time. You can find the prior day's closing Net Asset Value
and Offering Price for each class in many newspapers.
The Net Asset Value of all outstanding shares of each class is calculated on
a pro rata basis. It is based on each class' proportionate participation in
the fund, determined by the value of the shares of each class. Each class,
however, bears the Rule 12b-1 fees payable under its Rule 12b-1 plan. To
calculate Net Asset Value per share of each class, the assets of each class
are valued and totaled, liabilities are subtracted, and the balance, called
net assets, is divided by the number of shares of the class outstanding. The
fund's assets are valued as described under "How Are Fund Shares Valued?" in
the SAI.
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any
delay in processing your transaction, they should include:
o Your name,
o The fund's name,
o The class of shares,
o A description of the request,
o For exchanges, the name of the fund you are exchanging into,
o Your account number,
o The dollar amount or number of shares, and
o A telephone number where we may reach you during the day, or in the
evening if preferred.
JOINT ACCOUNTS. For accounts with more than one registered owner, we accept
written instructions signed by only one owner for certain types of
transactions or account changes. These include transactions or account
changes that you could also make by phone, such as certain redemptions of
$50,000 or less, exchanges between identically registered accounts, and
changes to the address of record. For most other types of transactions or
changes, written instructions must be signed by all registered owners.
Please keep in mind that if you have previously told us that you do not want
telephone exchange or redemption privileges on your account, then we can only
accept written instructions to exchange or redeem shares if they are signed
by all registered owners on the account.
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered
owners,
3) The proceeds are not being sent to the address of record, preauthorized
bank account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential
claims based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You should
be able to obtain a signature guarantee from a bank, broker, credit union,
savings association, clearing agency, or securities exchange or association.
A notarized signature is not sufficient.
SHARE CERTIFICATES
We will credit your shares to your fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate
is lost, stolen or destroyed, you may have to pay an insurance premium of up
to 2% of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the fund if you want
to sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do
this either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form and to send the certificate and assignment form in separate
envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions and changes to your account by phone.
Please refer to the sections of this prospectus that discuss the transaction
you would like to make or call Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We may also record calls. If our lines
are busy or you are otherwise unable to reach us by phone, you may wish to
ask your investment representative for assistance or send us written
instructions, as described elsewhere in this prospectus.
For your protection, we may delay a transaction or not implement one if we
are not reasonably satisfied that the instructions are genuine. If this
occurs, we will not be liable for any loss. We also will not be liable for
any loss if we follow instructions by phone that we reasonably believe are
genuine or if you are unable to execute a transaction by phone.
TRUST COMPANY RETIREMENT PLAN ACCOUNTS. We cannot accept instructions to sell
shares or change distribution options on Trust Company retirement plans by
phone. While you may exchange shares of Trust Company IRA and 403(b)
retirement accounts by phone, certain restrictions may be imposed on other
retirement plans.
To obtain any required forms or more information about distribution or
transfer procedures, please call Retirement Plan Services.
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights
and ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register
the account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of
survivorship" is shown as "Jt Ten" on your account statement. For any account
with two or more owners, we cannot accept instructions to change owners on
the account unless all owners agree in writing, even if the law in your state
says otherwise. If you would like another person or owner to sign for you,
please send us a current power of attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this
form of registration, a minor may not be named as an account owner.
TRUSTS. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please
send us the following documents when you open your account. This will help
avoid delays in processing your transactions while we verify who may sign on
the account.
TYPE OF ACCOUNT DOCUMENTS REQUIRED
CORPORATION Corporate Resolution
PARTNERSHIP 1. The pages from the partnership agreement that
identify the general partners, or
2. A certification for a partnership agreement
TRUST 1. The pages from the trust document that identify the
trustees, or
2. A certification for trust
STREET OR NOMINEE ACCOUNTS. If you have fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the
shares to the street or nominee name account of another Securities Dealer.
Both dealers must have an agreement with Distributors or we cannot process
the transfer. Contact your Securities Dealer to initiate the transfer. We
will process the transfer after we receive authorization in proper form from
your delivering Securities Dealer. Accounts may be transferred electronically
through the NSCC. For accounts registered in street or nominee name, we may
take instructions directly from the Securities Dealer or your nominee.
IMPORTANT INFORMATION IF YOU HAVE AN INVESTMENT REPRESENTATIVE
If there is a Securities Dealer or other representative of record on your
account, we are authorized: (1) to provide confirmations, account statements
and other information about your account directly to your dealer and/or
representative; and (2) to accept telephone and electronic instructions
directly from your dealer or representative, including instructions to
exchange or redeem your shares. Electronic instructions may be processed
through established electronic trading systems and programs used by the fund.
Telephone instructions directly from your representative will be accepted
unless you have told us that you do not want telephone privileges to apply to
your account.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $250, or less than $50
for employee accounts and custodial accounts for minors. We will only do this
if the value of your account fell below this amount because you voluntarily
sold your shares and your account has been inactive (except for the
reinvestment of distributions) for at least six months. Before we close your
account, we will notify you and give you 30 days to increase the value of
your account to $1,000, or $100 for employee accounts and custodial accounts
for minors. These minimums do not apply to IRAs and other retirement plan
accounts or to accounts managed by the Franklin Templeton Group.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in the fund.
Under the plan, you can have money transferred automatically from your
checking account to the fund each month to buy additional shares. If you are
interested in this program, please refer to the automatic investment plan
application included with this prospectus or contact your investment
representative. The market value of the fund's shares may fluctuate and a
systematic investment plan such as this will not assure a profit or protect
against a loss. You may discontinue the program at any time by notifying
Investor Services by
mail or phone.
AUTOMATIC PAYROLL DEDUCTION - CLASS I ONLY
You may have money transferred from your paycheck to the fund to buy
additional Class I shares. Your investments will continue automatically until
you instruct the fund and your employer to discontinue the plan. To process
your investment, we must receive both the check and payroll deduction
information in required form. Due to different procedures used by employers
to handle payroll deductions, there may be a delay between the time of the
payroll deduction and the time we receive the money.
SYSTEMATIC WITHDRAWAL PLAN
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or
annual basis. The value of your account must be at least $5,000 and the
minimum payment amount for each withdrawal must be at least $50. For
retirement plans subject to mandatory distribution requirements, the $50
minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete
the systematic withdrawal plan section of the shareholder application
included with this prospectus and indicate how you would like to receive your
payments. You may choose to direct your payments to buy the same class of
shares of another Franklin Templeton Fund or have the money sent directly to
you, to another person, or to a checking account. If you choose to have the
money sent to a checking account, please see "Electronic Fund Transfers -
Class I Only" below. Once your plan is established, any distributions paid by
the fund will be automatically reinvested in your account.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
To avoid paying sales charges on money you plan to withdraw within a short
period of time, you may not want to set up a systematic withdrawal plan if
you plan to buy shares on a regular basis. Shares sold under the plan may
also be subject to a Contingent Deferred Sales Charge. Please see "Contingent
Deferred Sales Charge" under "How Do I Sell Shares?"
You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us by
mail or by phone at least seven business days before the end of the month
preceding a scheduled payment. Please see "How Do I Buy, Sell and Exchange
Shares? - Systematic Withdrawal Plan" in the SAI for more information.
ELECTRONIC FUND TRANSFERS - CLASS I ONLY
You may choose to have dividend and capital gain distributions from Class I
shares of the fund or payments under a systematic withdrawal plan sent
directly to a checking account. If the checking account is with a bank that
is a member of the Automated Clearing House, the payments may be made
automatically by electronic funds transfer. If you choose this option, please
allow at least fifteen days for initial processing. We will send any payments
made during that time to the address of record on your account.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS(R) system (day or night) at
1-800/247-1753 to:
o obtain information about your account;
o obtain price and performance information about any Franklin Templeton
Fund;
o exchange shares (within the same class) between identically registered
Franklin Templeton Class I and Class II accounts; and
o request duplicate statements and deposit slips for Franklin Templeton
accounts.
You will need the code number for each class to use TeleFACTS(R). The code
number is 158 for Class I and 258 for Class II.
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
o Confirmation and account statements reflecting transactions in your
account, including additional purchases and dividend reinvestments. PLEASE
VERIFY THE ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
o Financial reports of the fund will be sent every six months. To reduce
fund expenses, we attempt to identify related shareholders within a
household and send only one copy of a report. Call Fund Information if you
would like an additional free copy of the fund's financial reports.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of the fund may be
available to institutional accounts. Institutional investors may also be
required to complete an institutional account application. For more
information, call Institutional Services.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your
shares are held by a financial institution, in a street name account, or
networked through the NSCC,
the fund may not be able to offer these services directly to you. Please
contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor
Services at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California
94403-7777. The fund and Distributors are also located at this address.
Advisory Services is located at One Parker Plaza, Sixteenth Floor, Fort Lee,
New Jersey 07024. You may also contact us by phone at one of the numbers
listed below.
HOURS OF OPERATION
(PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 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.
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.
Your phone call may be monitored or recorded to ensure we provide you with
high quality service. You will hear a regular beeping tone if your call is
being recorded.
GLOSSARY
USEFUL TERMS AND DEFINITIONS
ADVISORY SERVICES - Franklin Advisory Services, Inc., the fund's investment
manager
BOARD - The Board of Trustees of the Trust
CD - Certificate of deposit
CLASS I AND CLASS II - The fund offers two classes of shares, designated
"Class I" and "Class II." The two classes have proportionate interests in the
fund's portfolio. They differ, however, primarily in their sales charge
structures and Rule 12b-1 plans.
CODE - Internal Revenue Code of 1986, as amended
CONTINGENCY PERIOD - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the
contingency period is 18 months. The holding period for Class I begins on the
first day of the month in which you buy shares. Regardless of when during the
month you buy Class I shares, they will age one month on the last day of that
month and each following month. The holding period for Class II begins on the
day you buy your shares. For example, if you buy Class II 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) - A sales charge of 1% that may apply
if you sell your shares within the Contingency Period.
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
ELIGIBLE GOVERNMENTAL AUTHORITY - Any state or local government or any
instrumentality, department, authority or agency thereof that has determined
the fund is a legally permissible investment and that can only buy shares of
the fund without paying sales charges.
FRANKLIN TEMPLETON FUNDS - The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Templeton Capital Accumulator Fund, Inc., and Templeton Variable
Products Series Fund
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies
in the Franklin Group of Funds(R) and the Templeton Group of Funds
FT SERVICES - Franklin Templeton Services, Inc., the fund's administrator
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the fund's
shareholder servicing and transfer agent
IRA - Individual retirement account or annuity qualified under section 408 of
the Code
IRS - Internal Revenue Service
LETTER - Letter of Intent
MARKET TIMERS - Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange
shares based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.
NASD - National Association of Securities Dealers, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by
the number of shares outstanding.
NSCC - National Securities Clearing Corporation
NYSE - New York Stock Exchange
OFFERING PRICE - The public offering price is based on the Net Asset Value
per share of the class and includes the front-end sales charge. The maximum
front-end sales charge is 5.75% for Class I and 1% for Class II. We calculate
the offering price to two decimal places using standard rounding criteria.
QUALIFIED RETIREMENT PLANS - An employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
SEP - An employer sponsored simplified employee pension plan established
under section 408(k) of the Code
SIMPLE (Savings Incentive Match Plan for Employees) - An employer sponsored
salary deferral plan established under section 408(p) of the Code
TELEFACTS(R)- Franklin Templeton's automated customer servicing system
TRUST COMPANY - Franklin Templeton Trust Company. Trust Company is an
affiliate of Distributors and both are wholly owned subsidiaries of Resources.
WE/OUR/US - Unless the context indicates a different meaning, these terms
refer to the fund and/or Investor Services, Distributors, or other wholly
owned subsidiaries of Resources.
