o FIST1 *P3
CLASS REDESIGNATION
EFFECTIVE JANUARY 1, 1999
Class A - Formerly Class I
Class B - New Share Class
(Equity Fund Only)
Class C - Formerly Class II
SHARE CLASS REDESIGNATION
EFFECTIVE JANUARY 1, 1999
SUPPLEMENT DATED JANUARY 11, 1999
TO THE PROSPECTUS OF
FRANKLIN INVESTORS SECURITIES TRUST
(FIST1 - FRANKLIN GLOBAL GOVERNMENT INCOME FUND,
FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND,
FRANKLIN CONVERTIBLE SECURITIES FUND AND FRANKLIN EQUITY INCOME FUND)
DATED MARCH 1, 1998, AS AMENDED AUGUST 3, 1998
The prospectus is amended as follows:
I. As of January 1, 1999, the Equity Fund offers three classes of shares:
Class A, Class B and Class C. The Global Fund also offers three classes of
shares: Class A, Class C and Advisor Class. The Short-Intermediate Fund
offers two classes of shares: Class A and Advisor Class. The Convertible
Fund also offers two classes of shares: Class A and Class C.
Before January 1, 1999, Class A shares were designated Class I and Class C
shares were designated Class II. All references in the prospectus to Class
I shares are replaced with Class A, and all references to Class II shares
are replaced with Class C.
II. The second paragraph on the cover of the prospectus is replaced with the
following:
This prospectus describes each fund's Class A shares, the Equity Fund's
Class B shares, and the Global Fund's, Convertible Fund's and Equity Fund's
Class C shares. The Global Fund and Short-Intermediate Fund currently offer
another share class with a different sales charge and expense structure,
which affects performance.
III. The section "Expense Summary" is replaced with the following:
This table is designed to help you understand the costs of investing in the
funds. It is based on the funds' historical expenses for the fiscal year
ended October 31, 1997. The funds' actual expenses may vary.
SHORT-
GLOBAL INTERMEDIATE CONVERTIBLE EQUITY
FUND FUND FUND FUND
- --------------------------------------------------------------------------------
A. SHAREHOLDER TRANSACTION EXPENSES1
CLASS A2
Maximum Sales Charge (as a
percentage of Offering Price) 4.25% 2.25% 5.75% 5.75%
Paid at time of purchase3 4.25% 2.25% 5.75% 5.75%
Paid at redemption4 NONE NONE NONE NONE
Exchange Fee (per transaction)5 NONE NONE NONE NONE
CLASS B6
Maximum Sales Charge (as a
percentage of Offering Price) --- --- --- 4.00%
Paid at time of purchase3 --- --- --- NONE
Paid at redemption4 --- --- --- 4.00%
Exchange Fee (per transaction)5 --- --- --- NONE
CLASS C2
Maximum Sales Charge (as a
percentage of Offering Price) 1.99% --- 1.99% 1.99%
Paid at time of purchase3 1.00% --- 1.00% 1.00%
Paid at redemption4 0.99% --- 0.99% 0.99%
Exchange Fee (per transaction)5 NONE --- NONE NONE
B. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
CLASS A2
Management Fees 0.60% 0.56% 0.57% 0.53%
Rule 12b-1 Fees7 0.10% 0.08% 0.25% 0.25%
Other Expenses 0.20% 0.14% 0.18% 0.19%
-----------------------------------------
Total Fund Operating Expenses 0.90% 0.78% 1.00% 8 0.97%
=========================================
CLASS B6
Management Fees --- --- --- 0.53%
Rule 12b-1 Fees7 --- --- --- 1.00%
Other Expenses --- --- --- 0.19%
-----------------------------------------
Total Fund Operating Expenses --- --- --- 1.72%
=========================================
CLASS C2
Management Fees 0.60% --- 0.57% 0.53%
Rule 12b-1 Fees7 0.65% --- 0.99% 1.00%
Other Expenses 0.20% --- 0.18% 0.19%
-----------------------------------------
Total Fund Operating Expenses 1.45% --- 1.74% 1.72%
=========================================
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 $10,000 that you
invest in a fund.
SHORT-
GLOBAL INTERMEDIATE CONVERTIBLE EQUITY
FUND FUND FUND FUND
- --------------------------------------------------------------------------------
CLASS A
1 Year9 ............ $ 513 $ 303 $ 671 $ 668
3 Years ............ $ 700 $ 469 $ 875 $ 866
5 Years ............ $ 902 $ 649 $ 1,096 $ 1,080
10 Years ........... $ 1,486 $ 1,169 $ 1,729 $ 1,696
CLASS B
Assuming you sold your shares
at the end of the period
1 Year ............. $ --- $ --- $ --- $ 575
3 Years ............ $ --- $ --- $ --- $ 842
5 Years ............ $ --- $ --- $ --- $ 1,133
10 Years10 ......... $ --- $ --- $ --- $ 1,831
Assuming you stayed in the
fund
1 Year ............. $ --- $ --- $ --- $ 175
3 Years ............ $ --- $ --- $ --- $ 542
5 Years ............ $ --- $ --- $ --- $ 933
10 Years10 ......... $ --- $ --- $ --- $ 1,831
CLASS C
1 Year11 ........... $ 344 $ --- $ 373 $ 371
3 Years ............ $ 554 $ --- $ 643 $ 636
5 Years ............ $ 884 $ --- $ 1,034 $ 1,024
10 Years ........... $ 1,818 $ --- $ 2,131 $ 2,110
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 funds pay their 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.
1. If your transaction is processed through your Securities Dealer, you may
be charged a fee by your Securities Dealer for this service.
2. Before January 1, 1999, Class A shares were designated Class I and Class
C shares were designated Class II.
3. There is no front-end sales charge if you invest $1 million or more in
Class A shares. Although Class B and C have a lower front-end sales charge
than Class A, their Rule 12b-1 fees are higher. Over time you may pay more
for Class B and C shares. Please see "How Do I Buy Shares? - Choosing a
Share Class."
4. A Contingent Deferred Sales Charge of 1% may apply to Class A purchases
of $1 million or more if you sell the shares within one year and to any
Class C purchase if you sell the shares within 18 months. A Contingent
Deferred Sales Charge of up to 4% may apply to any Class B purchase if you
sell the shares within six years. A Contingent Deferred Sales Charge may
also apply to purchases by certain retirement plans that qualify to buy
Class A shares without a front-end sales charge. The charge is based on 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 for Class C 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. There is a $5 fee for exchanges by Market Timers.
6. The Equity Fund began offering Class B shares on January 1, 1999. Annual
fund operating expenses are based on the expenses for Class A and C for the
fiscal year ended October 31, 1997. The Rule 12b-1 fees are based on the
maximum fees allowed under Class B's Rule 12b-1 plan.
7. These fees may not exceed 0.15% for Global Fund - Class A, 0.10% for
Short-Intermediate Fund, 0.25% for Convertible Fund - Class A and Equity
Fund - Class A, 0.65% for Global Fund - Class C, and 1.00% for Convertible
Fund - Class C and Class B and C of Equity Fund. 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.
8. Class A total fund operating expenses are different than the ratio of
expenses to average net assets shown under "Financial Highlights" due to a
timing difference between the end of the 12b-1 plan year and the fund's
fiscal year end.
9. Assumes a Contingent Deferred Sales Charge will not apply.
10. Assumes conversion of Class B shares to Class A shares after eight
years, lowering your annual expenses from that time on.
11. For the same Class C investment, you would pay projected expenses of
$246 (Global Fund), $275 (Convertible Fund), and $273 (Equity Fund) 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.
IV. The following information is added to the section "Financial Highlights":
GLOBAL FUND SIX MONTHS ENDED
APRIL 30, 1998
(UNAUDITED)
---------------------------
CLASS A CLASS C
---------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period $8.41 $8.41
---------------------------
Income from investment operations:
Net investment income .31 .29
Net realized and unrealized gains .01 .02
---------------------------
Total from investment operations .32 .31
---------------------------
Less distributions from:
Net investment income (.30) (.28)
In excess of net investment income (.01) (.01)
---------------------------
Total distributions (.31) (.29)
===========================
Net asset value, end of period $8.42 $8.43
===========================
Total return* 3.87% 3.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $114,102 $5,605
Ratios to average net assets:
Expenses .93%** 1.48%**
Net investment income 7.33%** 6.78%**
Portfolio turnover rate 19.16% 19.16%
SHORT-INTERMEDIATE FUND SIX MONTHS ENDED
APRIL 30, 1998
(UNAUDITED)
------------------
CLASS A
------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period $10.29
------------------
Income from investment operations:
Net investment income .27
Net realized and unrealized gains (losses) (.01)
------------------
Total from investment operations .26
------------------
Less distributions from:
Net investment income (.28)
Net realized gains --
------------------
Total distributions (.28)
==================
Net asset value, end of period $10.27
==================
Total return* 2.63%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $187,528
Ratios to average net assets:
Expenses .78%**
Net investment income 5.30%**
Portfolio turnover rate 37.06%
CONVERTIBLE FUND SIX MONTHS ENDED
APRIL 30, 1998
(UNAUDITED)
---------------------------
CLASS A CLASS C
---------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period $14.74 $14.68
------------------------
Income from investment operations:
Net investment income .31 .25
Net realized and unrealized gains .42 .42
-----------------------
Total from investment operations .73 .67
------------------------
Less distributions from:
Net investment income (.35) (.29)
Net realized gains (1.04) (1.04)
--------------------------
Total distributions (1.39) (1.33)
==========================
Net asset value, end of period $14.08 $14.02
==========================
Total return* 5.38% 4.98%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $224,824 $52,030
Ratios to average net assets:
Expenses .96%** 1.70%**
Net investment income 4.46%** 3.74%**
Portfolio turnover rate 45.53% 45.53%
Average commission rate paid*** $.0501 $.0501
EQUITY FUND SIX MONTHS ENDED
APRIL 30, 1998
(UNAUDITED)
-------------------------
CLASS A CLASS C
-------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period $19.31 $19.26
-------------------------
Income from investment operations:
Net investment income .31 .24
Net realized and unrealized gains 2.51 2.49
-------------------------
Total from investment operations 2.82 2.73
-------------------------
Less distributions from:
Net investment income (.34)+ (.26)+
Net realized gains (.80) (.80)
-------------------------
Total distributions (1.14) (1.06)
-------------------------
Net asset value, end of period $20.99 $20.93
=========================
Total return* 15.05% 14.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $440,140 $77,348
Ratios to average net assets:
Expenses .90%** 1.64%**
Net investment income 3.02%** 2.22%**
Portfolio turnover rate 14.87% 14.87%
Average commission rate paid*** $.0500 $.0500
* 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.
+ Includes distributions in excess of net investment income in the amount
of $.002.
V. The following paragraphs are added under "What Are the Risks of Investing
in the Fund?" (the section "Euro Risk" does not apply to the
Short-Intermediate Fund):
YEAR 2000. When evaluating current and potential portfolio positions, Year
2000 is one of the factors Advisers considers.
Advisers will rely upon public filings and other statements made by issuers
about their Year 2000 readiness. Issuers in countries outside the U.S.,
particularly in emerging markets, may not be required to make the same
level of disclosure about Year 2000 readiness as is required in the U.S.
Advisers, of course, cannot audit each issuer and its major suppliers to
verify their Year 2000 readiness.
If an issuer in which a fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its security will also be
adversely affected. A decrease in the value of one or more of a fund's
portfolio holdings will have a similar impact on the price of the fund's
shares. Please see "Year 2000 Problem" under "Who Manages the Fund?" for
more information.
EURO RISK. On January 1, 1999, the European Monetary Union (EMU) introduced
a new single currency, the euro, which will replace the national currency
for participating member countries. If a 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 a 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 a 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 a 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.
VI. In the section "Who Manages the Fund?",
(a) the following replaces the second paragraph under "Investment Manager"
in the section "Who Manages the Fund?":
Under an agreement with Advisers, Investment Counsel, through its Templeton
Global Bond Managers division ("Global Bond Managers"), is the sub-advisor
of the Global Fund. A team from Global Bond Managers provides Advisers with
investment management advice and assistance.
(b) the following replaces the section "Management Team - Global Fund":
The day-to-day portfolio management of the fund is provided by a team from
Global Bond Managers.
(c) the section "Management Team - Equity Fund" is replaced with the
following:
Frank Felicelli since the fund's inception and Kent P. Shepherd since
August 1998.
(d) the following is added to the end of the section:
Kent P. Shepherd
Vice President of Advisers
Mr. Shepherd holds undergraduate degrees in Economics and Political Science
from Northwestern University and an MBA in International Finance from UCLA.
In addition, Mr. Shepherd is a Chartered Financial Analyst and a Chartered
Investment Counselor. Mr. Shepherd has been with the Franklin Templeton
Group since 1991.
(e) Howard M. McEldowney's general involvement with the investment strategy
of the Equity Fund remains unchanged.
(f) the following is added after the "Administrative Services" section:
YEAR 2000 PROBLEM. The funds' business operations depend on a worldwide
network of computer systems that contain date fields, including securities
trading systems, securities transfer agent operations and stock market
links. Many of the systems currently use a two digit date field to
represent the date, and unless these systems are changed or modified, they
may not be able to distinguish the Year 1900 from the Year 2000 (commonly
referred to as the Year 2000 problem). In addition, the fact that the Year
2000 is a non-standard leap year may create difficulties for some systems.
When the Year 2000 arrives, the funds' operations could be adversely
affected if the computer systems used by Advisers, its service providers
and other third parties it does business with are not Year 2000 ready. For
example, the funds' portfolio and operational areas could be impacted,
including securities trade processing, interest and dividend payments,
securities pricing, shareholder account services, reporting, custody
functions and others. The funds could experience difficulties in effecting
transactions if any of their foreign subcustodians, or if foreign
broker-dealers or foreign markets are not ready for Year 2000.
Advisers and its affiliated service providers are making a concerted effort
to take steps they believe are reasonably designed to address their Year
2000 problems. Of course, the funds' ability to reduce the effects of the
Year 2000 problem is also very much dependent upon the efforts of third
parties over which the funds and Advisers may have no control.
(g) the first sentence under "The Rule 12b-1 Plans" is replaced with the
following:
Each class has a separate distribution or "Rule 12b-1" plan under which the
fund shall pay or may reimburse Distributors or others for the expenses of
activities that are primarily intended to sell shares of the class.
(h) and the following paragraphs are added to the section "The Rule 12b-1
Plans":
Under the Class B plan, the Equity Fund pays Distributors up to 0.75% per
year of Class B's average daily net assets to pay Distributors for
providing distribution and related services and bearing certain Class B
expenses. All distribution expenses over this amount will be borne by those
who have incurred them. Securities Dealers are not eligible to receive this
portion of the Rule 12b-1 fees associated with the purchase.
The Equity Fund may also pay a servicing fee of up to 0.25% per year of
Class B's average daily net assets under the Class B 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. Securities Dealers
may be eligible to receive this portion of the Rule 12b-1 fees from the
date of purchase. After 8 years, Class B shares convert to Class A shares
and Securities Dealers may then receive the Rule 12b-1 fees applicable to
Class A.
The expenses relating to the Class B plan are also used to pay Distributors
for advancing the commission costs to Securities Dealers with respect to
the initial sale of Class B shares. Further, the expenses relating to the
Class B plan may be used by Distributors to pay third party financing
entities that have provided financing to Distributors in connection with
advancing commission costs to Securities Dealers.
VII. Under "How Is the Trust Organized?",
(a) the first paragraph is replaced with the following:
The Global Fund is a non-diversified series, and each other fund is a
diversified series of Franklin Investors Securities Trust (the "Trust"), an
open-end management investment company, commonly called a mutual fund. The
Trust was organized as a Massachusetts business trust on December 22, 1986,
and is registered with the SEC. The Equity Fund and Global Fund each offers
three classes of shares: Franklin Equity Income Fund - Class A, Franklin
Equity Income Fund - Class B and Franklin Equity Income Fund - Class C; and
Franklin Global Government Income Fund - Class A, Franklin Global
Government Income Fund - Class C and Franklin Global Government Income Fund
- Advisor Class. The Convertible Fund and Short-Intermediate Fund each
offers two classes of shares: Franklin Convertible Securities Fund - Class
A and Franklin Convertible Securities Fund - Class C; and Franklin
Short-Intermediate U.S. Government Securities Fund - Class A and Franklin
Short-Intermediate U.S. Government Securities Fund - Advisor Class.
Additional series and classes of shares may be offered in the future.
(b) and the following is added:
As of December 7, 1998, Templeton Funds Trust Company and Franklin
Templeton Trust Company each owned of record and beneficially more than 25%
of the outstanding Advisor Class shares of the Short-Intermediate Fund, and
Franklin Templeton Trust Company, as trustee for ValuSelect, owned of
record and beneficially more than 25% of the outstanding Advisor Class
shares of the Global Fund.
VIII.The sections "Choosing a Share Class" and "Purchase Price of Fund Shares,"
found under "How Do I Buy Shares?", are replaced with the following:
<TABLE>
<CAPTION>
CHOOSING A SHARE CLASS
Each class has its own sales charge and expense structure, allowing you to
choose the class that best meets your situation. Your investment
representative can help you decide.
CLASS A* CLASS B* CLASS C*
(Only applicable to the
Equity Fund)
----------------------------------------------------------------------------------
<S> <C> <C>
o Front-end sales o No front-end sales o Front-end sales
charge of 5.75% charge charge of 1%
or less
(Convertible Fund
and Equity Fund),
4.25% or less
(Global Fund) or
2.25% or less
(Short-Intermediate
Fund)
o Contingent o Contingent Deferred o Contingent Deferred
Deferred Sales Sales Charge of 4% or Sales Charge of 1% on
Charge of 1% on less on shares you shares you sell within
purchases of $1 sell within six years 18 months
million or more
sold within one
year
o Lower annual o Higher annual o Higher annual
expenses than expenses than Class A expenses than Class A
Class B or C due (same as Class C) due (same as Class B) due
to lower Rule to higher Rule 12b-1 to higher Rule 12b-1
12b-1 fees fees. Automatic fees. No conversion to
conversion to Class A Class A shares, so
shares after eight annual expenses do not
years, reducing future decrease.
annual expenses.
o No maximum o Maximum purchase o Maximum purchase
purchase amount amount of $249,999. We amount of $999,999. We
invest any investment invest any investment
of $250,000 or more in of $1 million or more
Class A shares, since in Class A shares,
a reduced front-end since there is no
sales charge is front-end sales charge
available and Class and Class A's annual
A's annual expenses expenses are lower.
are lower.
</TABLE>
*Before January 1, 1999, Class A shares were designated Class I and Class C
shares were designated Class II. The Equity Fund began offering Class B
shares on January 1, 1999. Class B shares are not available to all
retirement plans. Class B shares are only available to IRAs (of any type),
Trust Company 403(b) plans, and Trust Company qualified plans with
participant or earmarked accounts.
PURCHASE PRICE OF FUND SHARES
For Class A shares, the sales charge you pay depends on the dollar amount
you invest, as shown in the table below. The sales charge for Class C
shares is 1% and, unlike Class A, does not vary based on the size of your
purchase. There is no front-end sales charge for Class B shares.
TOTAL SALES CHARGE AMOUNT PAID TO
AS A PERCENTAGE OF TO DEALER
--------------------------- AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
---------------------------------------------------------------------------
CLASS A - CONVERTIBLE FUND
AND EQUITY FUND
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 3.50% 3.63% 2.80%
$250,000
$250,000 but less than 2.50% 2.56% 2.00%
$500,000
$500,000 but less than 2.00% 2.04% 1.60%
$1,000,000
$1,000,000 or more* None None None
CLASS A - GLOBAL FUND
Under $100,000 4.25% 4.44% 4.00%
$100,000 but less than 3.50% 3.63% 3.25%
$250,000
$250,000 but less than 2.50% 2.56% 2.25%
$500,000
$500,000 but less than 2.00% 2.04% 1.85%
$1,000,000
$1,000,000 or more* None None None
CLASS A -
SHORT-INTERMEDIATE FUND
Under $100,000 2.25% 2.31% 2.00%
$100,000 but less than 1.75% 1.78% 1.50%
$250,000
$250,000 but less than 1.25% 1.27% 1.00%
$500,000
$500,000 but less than 1.00% 1.01% 0.85%
$1,000,000
$1,000,000 or more* None None None
CLASS B* - EQUITY FUND None None None
CLASS C - CONVERTIBLE
FUND, EQUITY FUND AND
GLOBAL FUND
Under $1,000,000* 1.00% 1.01% 1.00%
*A Contingent Deferred Sales Charge of 1% may apply to Class A purchases of
$1 million or more and any Class C purchase. A Contingent Deferred Sales
Charge of up to 4% may apply to any Class B 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.
IX. In the section "Sales Charge Waivers," found under "How Do I Buy Shares? -
Sales Charge Reductions and Waivers,"
(a) the first paragraph is replaced with the following:
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 A
shares only, except for items 1 and 2 which also apply to Class B and C
purchases.
(b) the second waiver category is replaced with the following:
2. Redemption proceeds from the sale of shares of any Franklin Templeton
Fund. The proceeds must be reinvested in the same class of shares,
except proceeds from the sale of Class B shares will be reinvested in
Class A shares.
If you paid a Contingent Deferred Sales Charge when you sold your
Class A or C shares, we will credit your account with the amount of
the Contingent Deferred Sales Charge paid but a new Contingent
Deferred Sales Charge will apply. For Class B shares reinvested in
Class A, a new Contingent Deferred Sales Charge will not apply,
although your account will not be credited with the amount of any
Contingent Deferred Sales Charge paid when you sold your Class B
shares. If you own both Class A and B shares and you later sell your
shares, we will sell your Class A shares first, unless otherwise
instructed.
Proceeds immediately placed in a Franklin Bank CD also may be
reinvested without a front-end sales charge if you reinvest them
within 365 days from the date the CD matures, including any rollover.
This waiver does not apply to shares you buy and sell under our
exchange program. Shares purchased with proceeds from a money fund may
be subject to a sales charge.
(c) and the following new category 12 is added to the end of the second
list of sales charge waiver categories:
12. Qualified registered investment advisors who buy through a
broker-dealer or service agent who has entered into an agreement with
Distributors
X. The section "How Do I Buy Shares in Connection with Retirement Plans?",
found under "How Do I Buy Shares?", is replaced with the following:
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. These plans require separate applications and
their policies and procedures may be different than those described in this
prospectus. For more information, including a free retirement plan brochure
or application, please call Retirement Plan Services.
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.
XI. The section "How Do I Buy Shares? - Other Payments to Securities Dealers"
is replaced with the following:
OTHER PAYMENTS TO SECURITIES DEALERS
The payments described below may be made to Securities Dealers who initiate
and are responsible for Class B and C purchases and certain Class A
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 A purchases of $1 million or more - up to 1% of the amount
invested (Convertible Fund and Equity Fund) or up to 0.75% of the
amount invested (Global Fund and Short-Intermediate Fund).
2. Class B purchases - up to 4% of the amount invested.
3. Class C purchases - up to 1% of the purchase price.
4. Class A 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.
5. Class A 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.
6. Class A 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, 3 or 6 above or a payment of up
to 1% for investments described in paragraph 4 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.
XII. The second and third paragraphs under "May I Exchange Shares for Shares of
Another Fund?" are replaced with the following:
If you own Class A shares, you may exchange into any of our money funds
except Franklin Templeton Money Fund. Franklin Templeton Money Fund is the
only money fund exchange option available to Class B and C shareholders.
Unlike our other money funds, shares of Franklin Templeton Money Fund may
not be purchased directly and no drafts (checks) may be written on Franklin
Templeton Money Fund 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 goal
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 B or C shares.
XIII.In the section "Contingent Deferred Sales Charge," found under "May I
Exchange Shares for Shares of Another Fund? - Will Sales Charges Apply to
My Exchange?",
(a) the following sentence is added to the end of the first paragraph:
The purchase price for determining a Contingent Deferred Sales Charge on
exchanged shares will be the price you paid for the original shares.
(b) and the third paragraph is replaced with the following:
If you exchange Class A 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 B or C shares for the same
class of shares of Franklin Templeton Money Fund, however, the time your
shares are held in that fund will count towards the completion of any
Contingency Period.
XIV. The second and third bulleted items in the section "Exchange Restrictions,"
found under "May I Exchange Shares for Shares of Another Fund?", are
replaced with the following:
o You may only exchange shares within the same class, except as noted
below. If you exchange your Class B shares for the same class of
shares of another Franklin Templeton Fund, the time your shares are
held in that fund will count towards the eight year period for
automatic conversion to Class A shares.
o Generally exchanges may only be made between identically registered
accounts, unless you send written instructions with a signature
guarantee. 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."
XV. In the "By Phone" section of the chart under "How Do I Sell Shares?",
(a) the first bulleted item is replaced with the following:
o If the request is $100,000 or less. Institutional accounts may exceed
$100,000 by completing a separate agreement. Call Institutional
Services to receive a copy.
(b) and the third bulleted item is deleted.
XVI. In the section "Contingent Deferred Sales Charge," found under "How Do I
Sell Shares?",
(a) the following is added after the second paragraph:
For Class B shares, there is a Contingent Deferred Sales Charge if you sell
your shares within six years, as described in the table below. The charge
is based on the value of the shares sold or the Net Asset Value at the time
of purchase, whichever is less.
THIS % IS DEDUCTED FROM YOUR
IF YOU SELL YOUR CLASS B SHARES PROCEEDS AS A CONTINGENT
WITHIN THIS MANY YEARS AFTER BUYING THEM DEFERRED SALES CHARGE
---------------------------------------------------------------------------
1 Year 4
2 Years 4
3 Years 3
4 Years 3
5 Years 2
6 Years 1
7 Years 0
(b) and the section "Waivers" is replaced with the following:
WAIVERS. We waive the Contingent Deferred Sales Charge for:
o Account fees
o Sales of Class A 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, up to 1% monthly, 3% quarterly, 6% semiannually or
12% annually of your account's Net Asset Value depending on the
frequency of your plan
o Redemptions by Trust Company employee benefit plans or employee
benefit plans serviced by ValuSelect(R) (not applicable to Class B)
o Distributions from IRAs due to death or disability or upon periodic
distributions based on life expectancy (for Class B, this applies to
all retirement plan accounts, not only IRAs)
o Returns of excess contributions (and earnings, if applicable) from
retirement plan accounts
o Participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee
benefit plans (not applicable to Class B)
XVII.The fourth paragraph under "What Distributions Might I Receive From the
Fund?" is replaced with the following:
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 each
class.
XVIII. Distribution option 3 and the paragraph following it 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."
Distributions may be reinvested only in the same class of shares, except as
follows: (i) Class C shareholders who chose to reinvest their distributions
in Class A shares of the fund or another Franklin Templeton Fund before
November 17, 1997, may continue to do so; and (ii) Class B and C
shareholders may reinvest their distributions in shares of any Franklin
Templeton money fund.
XIX. Under "Transaction Procedures and Special Requirements,"
(a) the section "Joint Accounts" is replaced with the following:
JOINT ACCOUNTS. For accounts with more than one registered owner, the fund
accepts written instructions signed by only one owner for transactions and
account changes that could otherwise be made by phone. For all other
transactions and changes, all registered owners must sign the instructions.
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.
(b) the reference to $50,000 in the section "Signature Guarantees" is
replaced with $100,000.
(c) and the section "Trust Company Retirement Plan Accounts," found under
"Telephone Transactions," is deleted.
XX. In the section "Services to Help You Manage Your Account":
(a) the second sentence under "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.
(b) the second paragraph under "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 account 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.
(c) the section "Electronic Fund Transfers - Class I Only" is replaced with
the following:
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.
(d) the third bulleted item under "TeleFACTS(R)" is replaced with the
following:
o exchange shares (within the same class) between identically registered
Franklin Templeton Class A, B or C accounts; and
(e) and the last sentence and the chart under "TeleFACTS(R)" are replaced
with the following:
The code numbers for Class A, B and C are:
CLASS A CLASS B CLASS C
------------------------------------------------------------------
Convertible Fund 137 --- 237
Equity Fund 139 339 239
Global Fund 135 --- 235
Short-Intermediate Fund 136 --- ---
XXI. In the "Useful Terms and Definitions" section:
(a) the definition of "Class I, Class II and Advisor Class" is replaced
with the following:
CLASS A, CLASS B, CLASS C AND ADVISOR CLASS - The Equity Fund offers three
classes of shares, designated "Class A," "Class B" and "Class C." The
Global Fund also offers three classes of shares, designated "Class A,"
"Class C" and "Advisor Class." The Short-Intermediate Fund offers two
classes of shares, designated "Class A" and "Advisor Class." The
Convertible Fund also offers two classes of shares, designated "Class A"
and "Class C." The classes have proportionate interests in the fund's
portfolio. They differ, however, primarily in their sales charge and
expense structures.
(b) and the following definitions are revised:
CONTINGENCY PERIOD - For Class A shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. The contingency period is six
years for Class B shares and 18 months for Class C shares. The holding
period begins on the day you buy your shares. For example, if you buy
shares on the 18th of the month, they will age one month on the 18th day of
the next month and each following month.
CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% that may
apply if you sell your Class A or C shares within the Contingency Period.
For Class B, the maximum CDSC is 4% and declines to 0% after six years.
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 A of the Convertible Fund and the
Equity Fund, 4.25% for Class A of the Global Fund, 2.25% for Class A of the
Short-Intermediate Fund and 1% for Class C. There is no front-end sales
charge for Class B. We calculate the offering price to two decimal places
using standard rounding criteria.
Please keep this supplement for future reference.
