o 460 *PA1
SUPPLEMENT DATED OCTOBER 1, 1998
TO THE PROSPECTUS OF
FRANKLIN BOND FUND - ADVISOR CLASS
DATED AUGUST 3, 1998
The prospectus is amended as follows:
I. The section "Expense Summary" is replaced in its entirety with the
following:
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
fund. It is based on the fund's estimated expenses for the current fiscal year.
The fund's actual expenses may vary.
A. SHAREHOLDER TRANSACTION EXPENSES+ Maximum Sales Charge Imposed on Purchases
None Exchange Fee (per transaction) None*
B. ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees 0.03%** Rule 12b-1 Fees None Other Expenses 0.22%** Total
Fund Operating Expenses 0.25%**
C. Example
Assume the annual return for the 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
--------------------
$3 $8
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 its Net Asset Value or dividends 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 a $5.00 fee for exchanges by Market Timers.
**Advisers and FT Services have agreed in advance to limit their respective
management and administration fees and to assume as their own expense certain
expenses otherwise payable by the fund so the fund's total operating expenses
do not exceed 0.25% for the current fiscal year. Without this reduction,
contractual and expected management fees would be 0.43%, other expenses would
be 0.43%, and total fund operating expenses would be 0.86%. After October 31,
1999, Advisers and FT Services may end this arrangement at any time.
II. The third paragraph in the section "Management Fees," found under "Who
Manages the Fund?", is replaced with the following:
During the fund's start-up period, Advisers has agreed in advance to limit its
management fees and to assume as its own expense certain expenses otherwise
payable by the fund so the fund's total operating expenses do not exceed 0.25%
for the current fiscal year. After October 31, 1999, Advisers may end this
agreement at any time.
III. The section "Administrative Services," found under "Who Manages the Fund?",
is replaced in its entirety with the following:
ADMINISTRATIVE SERVICES. FT Services provides certain administrative services
and facilities for the fund. Under its administration agreement, the fund pays
FT Services a monthly administration fee equal to an annual rate of 0.20% of
the fund's average daily net assets. During the fund's start-up period, FT
Services has agreed in advance to limit its administration fees so the fund's
total operating expenses do not exceed 0.25% for the current fiscal year. After
October 31, 1999, FT Services may end this agreement at any time. Please see
"Investment Management and Other Services" in the SAI for more information.
IV. The first paragraph in the section "What Distributions Might I Receive From
the Fund?" is replaced with the following
The fund declares dividends from its net investment income daily and pays them
monthly on or about the last day of the month. The daily allocation of net
investment income begins on the day after we receive your money or settlement
of a wire order trade and continues to accrue through the day we receive your
request to sell your shares or the settlement of a wire order trade. The fund
does not expect to declare or pay any dividends until late 1998.
V. Distribution option 3 in the section "What Distributions Might I Receive From
the Fund? - Distribution Options" is replaced with the following:
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 or savings account, you may need a signature guarantee.
If you send the money to a checking or savings account, please see "Electronic
Fund Transfers" under "Services to Help You Manage Your Account."
VI. The second sentence in the section "Services to Help You Manage Your Account
- - Automatic Investment Plan" is replaced with the following:
Under the plan, you can have money transferred automatically from your checking
or savings account to the fund each month to buy additional shares.
VII. The second paragraph under "Services to Help You Manage Your Account
Systematic Withdrawal Plan" is replaced with the following:
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 or savings account. If you choose to have the
money sent to a checking or savings account, please see "Electronic Fund
Transfers" below. Once your plan is established, any distributions paid by the
fund will be automatically reinvested in your account.
VIII. The following new section is added after the section "Services to Help You
Manage Your Account - Systematic Withdrawal Plan":
ELECTRONIC FUND TRANSFERS
You may choose to have dividend and capital gain distributions or payments
under a systematic withdrawal plan sent directly to a checking or savings
account. If the 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.
IX. The following paragraphs are added to the end of the section "What Are the
Risks of Investing in the Fund?":
EURO. On January 1, 1999, the European Monetary Union (EMU) plans to introduce
a new single currency, the Euro, which will replace the national currency for
participating member countries. If the fund holds investments in countries with
currencies replaced by the Euro, the investment process, including trading,
foreign exchange, payments, settlements, cash accounts, custody and accounting
will be impacted.
The process to establish the Euro may result in market volatility. It is not
possible to predict the impact of the Euro on the business or financial
condition of European issuers or on the fund. The transition and the
elimination of currency risk among EMU countries may change the economic
environment and behavior of investors, particularly in European markets. To the
extent the fund holds non-U.S. dollar (Euro or other) denominated securities,
it will still be exposed to currency risk due to fluctuations in those
currencies versus the U.S. dollar.
Resources has created an interdepartmental team to handle all Euro-related
changes to enable the Franklin Templeton Funds to process transactions
accurately and completely with minimal disruption to business activities. While
there can be no assurance that the fund will not be adversely affected,
Advisers and its affiliated service providers are taking steps that they
believe are reasonably designed to address the Euro issue.
Please keep this supplement for future reference.
