o460 *P
SUPPLEMENT DATED OCTOBER 1, 1998
TO THE PROSPECTUS OF
FRANKLIN BOND FUND
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
(as a percentage of Offering Price) 4.25%++
Deferred Sales Charge 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 0.25%***
Other Expenses 0.22%**
Total Fund Operating Expenses 0.50%**
C. EXAMPLE
Assume the annual return for the fund 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
-----------------
$47**** $58
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 no front-end sales charge if you invest $1 million or more.
+++A Contingent Deferred Sales Charge of 1% may apply to 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 shares without a front-end sales charge. See "How
Do I Sell Shares? - Contingent Deferred Sales Charge" for details.
*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 0.50% 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
1.11%. After October 31, 1999, Advisers and FT Services may end this
arrangement at any time.
***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.
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 0.50% 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
0.50% 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.
