Prospectus
Franklin Strategic Series
FRANKLIN BLUE CHIP FUND - CLASS A, CLASS B AND CLASS C
FRANKLIN MIDCAP GROWTH FUND - CLASS A
INVESTMENT STRATEGY GROWTH
SEPTEMBER 1, 1999 AS AMENDED MAY 1, 2000
[Insert Franklin Templeton Ben Head]
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.
CONTENTS
THE FUNDS
[Begin callout]
INFORMATION ABOUT EACH FUND YOU SHOULD KNOW BEFORE INVESTING
[End callout]
2 Franklin Blue Chip Fund
10 Franklin MidCap Growth Fund
18 Distributions and Taxes
YOUR ACCOUNT
[Begin callout]
INFORMATION ABOUT SALES CHARGES, ACCOUNT TRANSACTIONS AND SERVICES
[End callout]
19 Choosing a Share Class
24 Buying Shares
26 Investor Services
29 Selling Shares
31 Account Policies
34 Questions
FOR MORE INFORMATION
[Begin callout]
WHERE TO LEARN MORE ABOUT EACH FUND
[END CALLOUT]
Back Cover
FRANKLIN BLUE CHIP FUND
[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES
GOAL The fund's investment goal is long-term capital appreciation.
PRINCIPAL INVESTMENTS Under normal market conditions, the fund will invest at
least 80% of its total assets in equity securities of blue chip companies
located in the U.S.
For purposes of the fund's investments, blue chip companies are well-established
companies with a record of growth in earnings, revenue, or EBITDA (earnings
before interest, taxes, depreciation and amortization) relative to other
companies in their respective industries. These companies generally dominate or
are expected to dominate their respective industries and have a reputation for
quality management as well as superior products and services.
[Begin callout]
The fund invests primarily in blue chip companies' common stocks.
[End callout]
Equity securities generally entitle the holder to participate in a company's
general operating results. They include common stocks, preferred stocks,
convertible securities and warrants. The fund tries to be fully invested at all
times in equity securities, and it invests primarily in common stocks.
In choosing equity investments, the fund's manager focuses on companies that
have a sustainable competitive advantage, a strong financial record, and a
market capitalization of more than $1 billion. The manager searches for
investments across a large number of industries. The fund intends to limit its
investment in foreign securities not publicly traded in the U.S. to 10% of total
assets. This may include companies in developed or emerging markets.
TEMPORARY INVESTMENTS The manager may take a temporary defensive position when
it believes the securities trading markets or the economies where the fund
invests are experiencing excessive volatility or a prolonged general decline, or
other adverse conditions exist. Under these circumstances, the fund may be
unable to pursue its investment goal, because it may not invest or may invest
substantially less in blue chip companies' common stocks.
[Insert graphic of chart with line going up and down] MAIN RISKS
[Begin call out]
Because the securities the fund holds fluctuate in price, the value of your
investment in the fund will go up and down. This means you could lose money over
short or even extended periods. [End call out]
STOCKS While stocks have historically outperformed other asset classes over the
long term, they tend to go up and down more dramatically over the short term.
These price movements may result from factors affecting individual companies,
industries or the securities market as a whole.
FOREIGN SECURITIES Securities of companies located outside the U.S. may involve
risks that can increase the potential for losses in the fund. Investments in
depositary receipts also involve some or all of the following risks.
COUNTRY. General securities market movements in any country where the fund
has investments are likely to affect the value of the securities the fund
owns that trade in that country.
COMPANY. Foreign companies may not be subject to the same disclosure,
accounting, auditing and financial reporting standards and practices as U.S.
companies and their securities may not be as liquid as securities of similar
U.S. companies. Foreign markets and their participants generally have less
government supervision and regulation than in the U.S.
CURRENCY To the extent the fund's investments are denominated in foreign
currencies, changes in foreign currency exchange rates will affect the value of
what the fund owns and the fund's share price. Generally, when the U.S. dollar
rises in value against a foreign currency, an investment in that country loses
value because that currency is worth fewer U.S. dollars. Devaluation of a
currency by a country's government or banking authority also will have a
significant impact on the value of any securities denominated in that currency.
Currency markets generally are not as regulated as securities markets.
EURO. 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.
Because this change to a single currency is new and untested, it is not possible
to predict the impact of the euro on the business or financial condition of
European issuers which the fund may hold in its portfolio, and their impact on
fund performance. To the extent the fund holds non-U.S. dollar (euro or other)
denominated securities, it will still be exposed to currency risk due to
fluctuations in those currencies versus the U.S. dollar.
MARKET A security's value may be reduced by market activity or the results of
supply and demand. This is a basic risk associated with all securities. When
there are more sellers than buyers, prices tend to fall. Likewise, when there
are more buyers than sellers, prices tend to rise.
More detailed information about the fund, its policies, and risks can be found
in the fund's Statement of Additional Information (SAI).
[Begin callout]
Mutual fund shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and are not 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.
[End callout]
[Insert graphic of a bull and a bear] PERFORMANCE
This bar chart and table show the volatility of the fund's returns, which is one
indicator of the risks of investing in the fund. The bar chart shows changes in
the fund's returns from year to year over the past three calendar years. The
table shows how the fund's average annual total returns compare to those of two
broad-based securities market indices. Of course, past performance cannot
predict or guarantee future results.
ANNUAL TOTAL RETURNS 1
7.45% 18.24% 34.62%
- ---------------------------------------------------------------------------
97 98 99
YEAR
[Begin callout]
BEST QUARTER:
Q4 '99 20.63%
WORST QUARTER:
Q3 '98 -10.85%
[End callout]
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999
SINCE INCEPTION
1 YEAR (6/3/96)
- -----------------------------------------------------------------
Franklin Blue Chip Fund 2 26.87% 16.00%
S&P 500 Index 3,4 21.04% 26.58%
MSCI World Index 4,5 25.34% 20.33%
1. Figures do not reflect sales charges. If they did, returns would be lower. As
of March 31, 2000, the fund's year to date return was 7.01% for Class A.
2. Figures reflect sales charges.
All fund performance assumes reinvestment of dividends and capital gains.
3. Source: Standard & Poor's Micropal. The S&P 500(R) Index is an unmanaged
group of widely held common stocks covering a variety of industries. It
includes reinvested dividends. One cannot invest directly in an index, nor is
an index representative of the fund's portfolio.
4. The S&P 500 Index is replacing the MSCI World Index as the fund's
benchmark. The manager believes the composition of the S&P 500 Index provides
a more appropriate comparison to the fund's current portfolio because the
fund now has a more domestic focus. The MSCI World Index may be excluded from
this comparison in the future.
5. Source: Standard & Poor's Micropal. The unmanaged MSCI World Index tracks
the performance of approximately 1500 securities in 22 countries and is
designed to measure world stock market performance. It includes reinvested
dividends. One cannot invest directly in an index, nor is an index
representative of the fund's portfolio.
[Insert graphic of percentage sign] FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A CLASS B 1 CLASS C 1
- -------------------------------------------------------------------------------
Maximum sales charge (load) as a 5.75% 4.00% 1.99%
percentage of offering price
Load imposed on purchases 5.75% None 1.00%
Maximum deferred sales charge (load) None 2 4.00% 3 0.99% 4
Exchange fee 5 $5.00 $5.00 $5.00
Please see "Choosing a Share Class" on page 19 for an explanation of how and
when these sales charges apply.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
CLASS A CLASS B 1 CLASS C 1
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Management fees 6 0.75% 0.75% 0.75%
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
Other expenses 0.46% 0.46% 0.46%
================================
Total annual fund operating expenses 6 1.51% 2.21% 2.21%
================================
1. The fund began offering Class B and C shares on February 1, 2000. Annual fund
operating expenses for Class B and C are based on the expenses for Class A for
the fiscal year ended April 30, 1999. The distribution and service (12b-1) fees
are based on the maximum fees allowed under the respective Rule 12b-1 plan for
Class B and C.
2. Except for investments of $1 million or more (see page 19) and
purchases by certain retirement plans without an initial sales charge.
3.Declines to zero after six years.
4. This is equivalent to a charge of 1% based on net asset value.
5. This fee is only for market timers (see page 32).
6. For the fiscal year ended April 30, 1999, the manager had agreed in advance
to limit its management fees. With this reduction, management fees were 0.49%
and total annual fund operating expenses were 1.25% for Class A, and would
have been 1.95% for Class B and C. The manager may end this arrangement at
any time upon notice to the fund's Board of Trustees.
EXAMPLE
This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds. It assumes:
o You invest $10,000 for the periods shown; o Your investment has a 5% return
each year; and o The fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
If you sell your shares at the end of the period:
CLASS A $7201 $1,026 $1,353 $2,277
CLASS B $624 $991 $1,385 $2,3672
CLASS C $420 $784 $1,273 $2,619
If you do not sell your shares:
CLASS B $224 $691 $1,185 $2,3672
CLASS C $322 $784 $1,273 $2,619
1. Assumes a contingent deferred sales charge (CDSC) will not apply.
2. Assumes conversion of Class B shares to Class A shares after eight years,
lowering your annual expenses from that time on.
[Insert graphic of briefcase] MANAGEMENT
Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is the fund's investment manager. Together, Advisers and its affiliates
manage over $229 billion in assets.
The team responsible for the fund's management is:
SALLY EDWARDS HAFF, SENIOR VICE PRESIDENT OF ADVISERS
Ms. Haff has been a manager of the fund since 1999. She joined the Franklin
Templeton Group in 1986.
ALYSSA RIEDER, PORTFOLIO MANAGER OF ADVISERS
Ms. Rieder has been a manager of the fund since 1999. She joined the Franklin
Templeton Group in 1998. Previously, she was in financial management roles at
T. Rowe Price Associates, Inc. and YFA.
The fund pays Advisers a fee for managing the fund's assets. For the fiscal year
ended April 30, 1999, management fees, before any advance waiver, were 0.75% of
the fund's average daily net assets. Under an agreement by the manager to limit
its fees, the fund paid 0.49% of its average daily net assets to the manager for
its services. The manager may end this arrangement at any time upon notice to
the fund's Board of Trustees.
[Insert graphic of dollar bill] FINANCIAL HIGHLIGHTS
This table presents the fund's financial performance since its inception. This
information has been audited by PricewaterhouseCoopers LLP.
YEAR ENDED APRIL 30,
SIX MONTHS 1999 1998 1997 1
ENDED
OCTOBER 31,
1999
(UNAUDITED)4
PER SHARE DATA ($)
Net asset value, beginning of 14.41 12.46 10.85 10.00
year
-------------------------------------------
Net investment income .04 .09 .09
Net realized and unrealized 1.08 1.97 1.67 .82
gains
-------------------------------------------
Total from investment - 2.01 1.76 .91
operations
-------------------------------------------
Distributions from net - (.06) (.06) (.06)
investment income
Distributions from net - - (.09) -
realized gains
-------------------------------------------
Total distributions - (.06) (.15) (.06)
-------------------------------------------
Net asset value, end of year 15.49 14.41 12.46 10.85
===========================================
Total return (%) 2 7.49 16.18 16.41 9.14
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x
1,000) 74,779 54,880 16,836 5,600
Ratios to average net assets:
(%)
Expenses 1.25 3 1.25 1.25 1.25 3
Expenses excluding waiver 1.39 3 1.51 1.95 2.22 3
and payments by affiliate
Net investment income .55 1.04 1.07 3
Net investment loss (.06) 3
Portfolio turnover rate (%) 29.38 35.74 57.67 11.14
1. For the period June 3, 1996 (effective date) to April 30, 1997.
2. Total return does not include sales charges, and is not annualized.
3. Annualized.
4. Based on average shares outstanding
FRANKLIN MIDCAP GROWTH FUND
PROPOSED MERGER
On February 15, 2000, Franklin Strategic Series' Board of Trustees approved a
proposal to merge the Franklin MidCap Growth Fund into the Franklin California
Growth Fund, subject to shareholder approval. The investment goal of Franklin
MidCap Growth Fund is long-term capital growth. The investment goal of Franklin
California Growth Fund is capital appreciation. These goals are fundamental,
which means they may not be changed without shareholder approval. The board
believes this proposed merger will benefit shareholders.
It is anticipated that this summer shareholders of Franklin MidCap Growth Fund
will receive a proxy and proxy statement requesting their votes on the merger.
Franklin MidCap Growth Fund was closed to new investors after the close of
business on March 6, 2000. If you were a shareholder of record as of the close
of business on March 6, 2000, you may continue to add to your account, subject
to your applicable minimum additional investment amount, or buy additional
shares through reinvestment of dividend or capital gain distributions until the
merger is approved by Franklin MidCap Growth Fund's shareholders. If the merger
is approved by Franklin MidCap Growth Fund's shareholders, the Franklin MidCap
Growth Fund also will be closed to purchases by existing shareholders, except
through the reinvestment of dividend or capital gain distributions or through
established automatic investment plans.
Although you may redeem your shares, please keep in mind that if you sell all
the shares in your account, your account will be closed and you will not be
allowed to buy additional shares of Franklin MidCap Growth Fund or to reopen
your account in the Franklin MidCap Growth Fund. If you sell your shares in the
fund, you may reinvest some or all of the proceeds in Class A shares of most of
the other Franklin Templeton Funds within 365 days without an initial sales
charge.
[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES
GOAL The fund's investment goal is long-term capital growth.
PRINCIPAL INVESTMENTS The fund normally invests primarily in equity securities
of mid-cap growth companies located in the U.S.
[Begin callout]
The fund invests primarily in U.S. mid-cap growth companies' equity
securities.
[End callout]
For purposes of the fund's investments, mid-cap growth companies include
companies with market capitalization of $1 to $8 billion that the manager
believes are positioned for rapid growth in revenues or earnings and assets,
characteristics that may provide for significant capital appreciation.
Equity securities generally entitle the holder to participate in a company's
general operating results. They include common stocks, preferred stocks,
convertible securities and warrants. The fund tries to be fully invested at all
times in equity securities, and its principal investments are in common stocks.
In choosing equity investments, the fund's manager considers such factors as the
financial strength of the company, the expertise of management, the growth
potential of the company within the industry, and the growth potential of the
industry itself.
TEMPORARY INVESTMENTS The manager may take a temporary defensive position when
it believes the securities trading markets or the economy are experiencing
excessive volatility or a prolonged general decline, or other adverse conditions
exist. Under these circumstances, the fund may be unable to pursue its
investment goal, because it may not invest or may invest substantially less in
U.S. mid-cap growth companies' equity securities.
[Insert graphic of chart with line going up and down] MAIN RISKS
MID-CAP COMPANIES Historically, mid-cap company securities have been more
volatile in price than large company securities, especially over the short term.
Among the reasons for the greater price volatility are the less certain growth
prospects of mid-cap companies, the lower degree of liquidity in the markets for
such securities, and the greater sensitivity of mid-cap companies to changing
economic conditions.
In addition, mid-cap companies may lack depth of management, they may be unable
to generate funds necessary for growth or development, or they may be developing
or marketing new products or services for which markets are not yet established
and may never become established.
Mid-cap companies involve greater risks than larger, more established companies
and should be considered speculative.
Because the securities the fund holds fluctuate in price, the value of your
investment in the fund will go up and down. This means you could lose money over
short or even extended periods.
STOCKS While stocks have historically outperformed other asset classes over the
long term, they tend to go up and down more dramatically over the shorter term.
These price movements may result from factors affecting individual companies,
industries or the securities market as a whole.
The prices of growth stocks are based largely on projections of the issuer's
future earnings and revenues. If a company's earnings or revenues fall short of
expectations, its stock price may fall dramatically. Growth stocks may be more
expensive relative to their earnings or assets compared to value or other
stocks. Because the fund invests in growth stocks, its share price may be more
volatile than other types of investments.
MARKET A security's value may be reduced by market activity or the results of
supply and demand. This is a basic risk associated with all securities. When
there are more sellers than buyers, prices tend to fall. Likewise, when there
are more buyers than sellers, prices tend to rise.
More detailed information about the fund, its policies, and risks can be found
in the fund's Statement of Additional Information (SAI).
[Begin callout]
Mutual fund shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and are not 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.
[End callout]
[Insert graphic of bull and bear] PERFORMANCE
This bar chart and table show the volatility of the fund's returns, which is one
indicator of the risks of investing in the fund. The bar chart shows changes in
the fund's returns from year to year over the past six calendar years. The table
shows how the fund's average annual total returns compare to those of two
broad-based securities market indices. Of course, past performance cannot
predict or guarantee future results.
ANNUAL TOTAL RETURNS 1
-2.90% 33.08% 23.46% 17.43% -1.84% 54.32%
- --------------------------------------------------------------------------------
94 95 96 97 98 99
YEAR
[Begin callout]
BEST QUARTER:
Q4 '99
46.08%
WORST QUARTER:
Q3 '98
- -23.19%
[End callout]
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999
SINCE
INCEPTION
1 YEAR 5 YEARS (8/17/93)
- --------------------------------------------------------------------------------
Franklin MidCap Growth Fund 2 45.44% 22.47% 17.57%
S&P 500 Index 3 21.04% 28.56% 22.66%
S&P MidCap 400 Index 4 14.72% 23.05% 18.03%
1. Figures do not reflect sales charges. If they did, returns would be lower. As
of March 31, 2000, the fund's year to date return was 17.77%.
2. Figures reflect sales charges.
All fund performance assumes reinvestment of dividends and capital gains.
June 1, 1996, the fund implemented a Rule 12b-1 plan, which affects
subsequent performance.
3. Source: Standard & Poor's Micropal. The S&P 500(R) Index is an unmanaged
group of widely held common stocks covering a variety of industries. It
includes reinvested dividends. One cannot invest directly in an index, nor is
an index representative of the fund's portfolio.
4. Source: Standard & Poor's Micropal. The unmanaged S&P MidCap 400 Index
consists of 400 domestic stocks chosen for market size, liquidity, and
industry group representation. It is a market-value weighted index and
includes reinvested dividends. One cannot invest directly in an index, nor is
an index representative of the fund's portfolio.
[Insert graphic of percentage sign] FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum sales charge (load) as a percentage of 5.75%
offering price
Load imposed on purchases 5.75%
Maximum deferred sales charge (load) None 1
Exchange fee 2 $5.00
Please see "Choosing a Share Class" on page 19 for an explanation of how and
when these sales charges apply.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
Management fees 0.65%
Distribution and service (12b-1) fees 0.26%
Other expenses 0.33%
Total annual fund operating expenses 1.24%
1. Except for investments of $1 million or more (see page 19) and purchases by
certain retirement plans without an initial sales charge.
2. This fee is only for market timers (see page 32).
EXAMPLE
This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds. It assumes:
o You invest $10,000 for the periods shown; o Your investment has a 5% return
each year; o The fund's operating expenses remain the same; and o You sell your
shares at the end of the periods shown.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------
$694 1 $946 $1,217 $1,989
1. Assumes a contingent deferred sales charge (CDSC) will not apply.
[Insert graphic of briefcase] MANAGEMENT
Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94403, is the fund's investment manager. Together, Advisers and its affiliates
manage over $229 billion in assets.
The fund's portfolio manager is:
EDWARD B. JAMIESON, EXECUTIVE VICE PRESIDENT OF ADVISERS
Mr. Jamieson has been a manager of the fund since 1996. He joined the
Franklin Templeton Group in 1987.
The fund pays Advisers a fee for managing the fund's assets. For the fiscal year
ended April 30, 1999, the fund paid 0.65% of its average daily net assets to the
manager for its services.
[Insert graphic of dollar bill] FINANCIAL HIGHLIGHTS
This table presents the fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.
YEAR ENDED APRIL 30,
SIX MONTHS 1999 1998 1997 1996 1995
ENDED
OCTOBER 1,
1999
(UNAUDITED) 3
PER SHARE DATA ($)
Net asset value,
beginning of year 16.15 17.44 13.34 14.24 10.81 10.05
----- ----- ----- ----- ----- -----
Net investment income (.02) .04 - (.02) .18 .21
(loss)
Net realized and
unrealized
gains (losses) 2.18 (1.17) 4.66 .93 3.59 .77
---- ------ ---- --- ---- ---
Total from investment
operations 2.16 (1.13) 4.66 .91 3.77 .98
---- ------ ---- --- ---- ---
Distributions from net
investment income (.02) - - (.05) (.21) (.20)
Distributions from net
realized gains (.02) (.16) (.56) (1.76) (.13) (.02)
----- ----- ----- ------ ----- -----
Total distributions (.04) (.16) (.56) (1.81) (.34) (.22)
----- ----- ----- ------ ----- -----
Net asset value, end of
year 18.27 16.15 17.44 13.34 14.24 10.81
===== ===== ===== ===== ===== =====
Total return (%) 1 13.41 (6.36) 35.53 6.31 35.40 10.06
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year 40,535 33,901 29,864 12,853 7,575 5,591
($ x 1,000)
Ratios to average net
assets: (%)
Expenses 1.24 2 1.24 1.17 1.07 .16 -
Expenses excluding
waiver and
payments by affiliate - 1.24 1.17 1.07 .96 .98
Net investment income (.24) 2 .30 (.03) (.22) 1.42 2.12
(loss)
Portfolio turnover rate 33.79 59.97 50.16 76.35 102.65 163.54
(%)
1. Total return does not include sales charges.
2. Annualized.
3. Based on average shares outstanding.
[INSERT GRAPHIC OF DOLLAR SIGNS AND STACKS OF COINS] DISTRIBUTIONS AND TAXES
INCOME AND CAPITAL GAINS DISTRIBUTIONS Each fund intends to pay a dividend at
least annually representing substantially all of its net investment income and
any net realized capital gains. The amount of these distributions will vary and
there is no guarantee any fund will pay dividends.
To receive a distribution, you must be a shareholder on the record date. The
record dates for each fund's distributions will vary. Please keep in mind that
if you invest in a fund shortly before the record date of a distribution, any
distribution will lower the value of the fund's shares by the amount of the
distribution and you will receive some of your investment back in the form of a
taxable distribution. If you would like information on upcoming record dates for
a fund's distributions, please call 1-800/DIAL BEN(R).
TAX CONSIDERATIONS In general, fund distributions are taxable to you as either
ordinary income or capital gains. This is true whether you reinvest your
distributions in additional fund shares or receive them in cash. Any capital
gains a fund distributes are taxable to you as long-term capital gains no matter
how long you have owned your shares.
Backup Withholding
[Begin callout]
By law, a fund must withhold 31% of your taxable distributions and redemption
proceeds if you do not provide your correct social security or taxpayer
identification number and certify that you are not subject to backup
withholding, or if the IRS instructs the fund to do so. [End callout]
Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.
When you sell your shares of a fund, you may have a capital gain or loss. For
tax purposes, an exchange of your fund shares for shares of a different Franklin
Templeton Fund is the same as a sale. The individual tax rate on any gain from
the sale or exchange of your shares depends on how long you have held your
shares.
Fund distributions and gains from the sale or exchange of your fund shares
generally will be subject to state and local taxes. Non-U.S. investors may be
subject to U.S. withholding and estate tax. You should consult your tax
advisor about the federal, state, local or foreign tax consequences of your
investment in a fund.
YOUR ACCOUNT
[Insert graphic of pencil marking an X] CHOOSING A SHARE CLASS
Each class of the Blue Chip Fund 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. The MidCap Fund only offers Class A shares.
It is closed to new investors.
CLASS B (BLUE CHIP CLASS C (BLUE CHIP
CLASS A FUND ONLY) FUND ONLY)
- -------------------------------------------------------------------------
o Initial sales o No initial sales o Initial sales
charge of 5.75% or charge charge of 1%
less
o Deferred sales o Deferred sales o Deferred sales
charge of 1% on charge of 4% on charge of 1% on
purchases of $1 shares you sell shares you sell
million or more sold within the first within 18 months
within 12 months year, declining to
1% within six years
and eliminated
after that
o Lower annual o Higher annual o Higher annual
expenses than Class expenses than Class expenses than Class
B or C due to lower A (same as Class C) A (same as Class B)
distribution fees due to higher due to higher
distribution fees. distribution fees.
Automatic No conversion to
conversion to Class Class A shares, so
A shares after annual expenses do
eight years, not decrease.
reducing future
annual expenses.
THE BLUE CHIP FUND BEGAN OFFERING CLASS B AND C SHARES ON FEBRUARY 1, 2000.
SALES CHARGES - CLASS A
THE SALES CHARGE
MAKES UP THIS % OF WHICH EQUALS THIS % OF
WHEN YOU INVEST THIS AMOUNT THE OFFERING PRICE YOUR NET INVESTMENT
- -------------------------------------------------------------------------------
Under $50,000 5.75 6.10
$50,000 but under $100,000 4.50 4.71
$100,000 but under $250,000 3.50 3.63
$250,000 but under $500,000 2.50 2.56
$500,000 but under $1 million 2.00 2.04
INVESTMENTS OF $1 MILLION OR MORE If you invest $1 million or more, either as a
lump sum or through our cumulative quantity discount or letter of intent
programs (see page 22) you can buy Class A shares without an initial sales
charge. However, there is a 1% contingent deferred sales charge (CDSC) on any
shares you sell within 12 months of purchase. The way we calculate the CDSC is
the same for each class (please see page 21).
DISTRIBUTION AND SERVICE (12B-1) FEES Class A has a distribution plan, sometimes
known as a Rule 12b-1 plan, that allows the Blue Chip Fund and MidCap Fund to
pay distribution fees of up to 0.35% per year to those who sell and distribute
Class A shares and provide other services to shareholders. Because these fees
are paid out of Class A's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
SALES CHARGES - CLASS B
IF YOU SELL YOUR SHARES WITHIN THIS % IS DEDUCTED FROM
THIS MANY YEARS AFTER BUYING THEM YOUR PROCEEDS AS A CDSC
- ---------------------------------------------------------------
1 YEAR 4
2 YEARS 4
3 YEARS 3
4 YEARS 3
5 YEARS 2
6 YEARS 1
7 YEARS 0
With Class B shares, there is no initial sales charge. However, there is a CDSC
if you sell your shares within six years, as described in the table above. The
way we calculate the CDSC is the same for each class (please see page 21). After
8 years, your Class B shares automatically convert to Class A shares, lowering
your annual expenses from that time on.
MAXIMUM PURCHASE AMOUNT The maximum amount you may invest in Class B shares at
one time is $249,999. We place any investment of $250,000 or more in Class A
shares, since a reduced initial sales charge is available and Class A's annual
expenses are lower.
RETIREMENT PLANS Class B shares are available to certain retirement plans,
including IRAs (of any type), Franklin Templeton Trust Company 403(b) plans, and
Franklin Templeton Trust Company qualified plans with participant or earmarked
accounts.
DISTRIBUTION AND SERVICE (12B-1) FEES Class B has a distribution plan, sometimes
known as a Rule 12b-1 plan, that allows the fund to pay distribution and other
fees of up to 1% per year for the sale of Class B shares and for services
provided to shareholders. Because these fees are paid out of Class B's assets on
an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES - CLASS C
THE SALES CHARGE
MAKES UP THIS % OF WHICH EQUALS THIS % OF
WHEN YOU INVEST THIS AMOUNT THE OFFERING PRICE YOUR NET INVESTMENT
- -------------------------------------------------------------------------------
Under $1 million 1.00 1.01
WE PLACE ANY INVESTMENT OF $1 MILLION OR MORE IN CLASS A SHARES, SINCE THERE
IS NO INITIAL SALES CHARGE AND CLASS A'S ANNUAL EXPENSES ARE LOWER.
CDSC There is a 1% contingent deferred sales charge (CDSC) on any Class C shares
you sell within 18 months of purchase. The way we calculate the CDSC is the same
for each class (please see below).
DISTRIBUTION AND SERVICE (12B-1) FEES Class C has a distribution plan, sometimes
known as a Rule 12b-1 plan, that allows the fund to pay distribution and other
fees of up to 0.75% per year for the sale of Class C shares and for services
provided to shareholders. Because these fees are paid out of Class C's assets on
an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
CONTINGENT DEFERRED SALES CHARGE (CDSC) - CLASS A, B & C
The CDSC for each class is based on the current value of the shares being sold
or their net asset value when purchased, whichever is less. There is no CDSC on
shares you acquire by reinvesting your dividends or capital gains distributions.
[Begin callout]
The holding period for the CDSC begins on the day you buy your shares. Your
shares will age one month on that same date the next month and each following
month.
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.
[End callout]
To keep your CDSC as low as possible, each time you place a request to sell
shares we will first sell any shares in your account that are not subject to a
CDSC. If there are not enough of these to meet your request, we will sell the
shares in the order they were purchased. We will use this same method if you
exchange your shares into another Franklin Templeton Fund (please see page 27
for exchange information).
SALES CHARGE REDUCTIONS AND WAIVERS
If you qualify for any of the sales charge reductions or waivers below, please
let us know at the time you make your investment to help ensure you receive the
lower sales charge.
QUANTITY DISCOUNTS We offer several ways for you to combine your purchases in
the Franklin Templeton Funds to take advantage of the lower sales charges for
large purchases of Class A shares.
[Begin callout]
The FRANKLIN TEMPLETON FUNDS include all of the Franklin Templeton U.S.
registered mutual funds, except Franklin Templeton Variable Insurance
Products Trust and Templeton Capital Accumulator Fund, Inc.
[End callout]
o CUMULATIVE QUANTITY DISCOUNT - lets you combine all of your shares in the
Franklin Templeton Funds for purposes of calculating the sales charge. You
also may combine the shares of your spouse, and your children or
grandchildren, if they are under the age of 21. Certain company and
retirement plan accounts also may be included.
o LETTER OF INTENT (LOI) - expresses your intent to buy a stated dollar amount
of shares over a 13-month period and lets you receive the same sales charge
as if all shares had been purchased at one time. We will reserve a portion of
your shares to cover any additional sales charge that may apply if you do not
buy the amount stated in your LOI.
TO SIGN UP FOR THESE PROGRAMS, COMPLETE THE
APPROPRIATE SECTION OF YOUR ACCOUNT APPLICATION.
REINSTATEMENT PRIVILEGE If you sell shares of a Franklin Templeton Fund, you may
reinvest some or all of the proceeds within 365 days without an initial sales
charge. The proceeds must be reinvested within the same share class, except
proceeds from the sale of Class B shares will be reinvested in Class A shares.
If you paid a CDSC when you sold your Class A or C shares, we will credit your
account with the amount of the CDSC paid but a new CDSC will apply. For Class B
shares reinvested in Class A, a new CDSC will not apply, although your account
will not be credited with the amount of any CDSC paid when you sold your Class B
shares.
Proceeds immediately placed in a Franklin Bank Certificate of Deposit (CD) also
may be reinvested without an initial sales charge if you reinvest them within
365 days from the date the CD matures, including any rollover.
This privilege does not apply to shares you buy and sell under our exchange
program. Shares purchased with the proceeds from a money fund may be subject to
a sales charge.
SALES CHARGE WAIVERS Class A shares may be purchased without an initial sales
charge or CDSC by various individuals, institutions and retirement plans or by
investors who reinvest certain distributions and proceeds within 365 days.
Certain investors also may buy Class C shares of Blue Chip Fund without an
initial sales charge. The CDSC for each class may be waived for certain
redemptions and distributions. If you would like information about available
sales charge waivers, call your investment representative or call Shareholder
Services at 1-800/632-2301. For information about retirement plans, you may call
Retirement Services at 1-800/527-2020. A list of available sales charge waivers
also may be found in the Statement of Additional Information (SAI).
GROUP INVESTMENT PROGRAM Allows established groups of 11 or more investors to
invest as a group. For sales charge purposes, the group's investments are added
together. There are certain other requirements and the group must have a purpose
other than buying fund shares at a discount.
[Insert graphic of a paper with lines
and someone writing] BUYING SHARES
The MidCap Fund is closed to new investors. If you were a shareholder of record
as of the close of business on March 6, 2000, you may continue to add to your
account, subject to your applicable minimum additional investment amount, or buy
additional shares through the reinvestment of dividend or capital gain
distributions.
MINIMUM INVESTMENTS
- ---------------------------------------------------------------------------
INITIAL ADDITIONAL
- ---------------------------------------------------------------------------
Regular accounts $1,000 $50
- ---------------------------------------------------------------------------
Automatic investment plans $50 ($25 for $50 ($25 for
an Education an Education
IRA) IRA)
- ---------------------------------------------------------------------------
UGMA/UTMA accounts $100 $50
- ---------------------------------------------------------------------------
Retirement accounts no minimum no minimum
(other than IRAs, IRA rollovers, Education
IRAs or Roth IRAs)
- ---------------------------------------------------------------------------
IRAs, IRA rollovers, Education IRAs or Roth
IRAs $250 $50
- ---------------------------------------------------------------------------
Broker-dealer sponsored wrap account programs
$250 $50
- ---------------------------------------------------------------------------
Full-time employees, officers, trustees and directors of Franklin Templeton
entities, and their immediate family members
$100 $50
- ---------------------------------------------------------------------------
PLEASE NOTE THAT YOU MAY ONLY BUY SHARES OF A FUND ELIGIBLE
FOR SALE IN YOUR STATE OR JURISDICTION.
ACCOUNT APPLICATION If you are opening a new account, please complete and sign
the enclosed account application. Make sure you indicate the share class you
have chosen. If you do not indicate a class, we will place your purchase in
Class A shares. To save time, you can sign up now for services you may want on
your account by completing the appropriate sections of the application (see the
next page).
BUYING SHARES
- ------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- -------------------------------------------------------------------------------
[Insert graphic of hands Contact your investment Contact your investment
shaking] representative representative
THROUGH YOUR
INVESTMENT
REPRESENTATIVE
- -------------------------------------------------------------------------------
[Insert graphic of Make your check payable Make your check payable to
envelope] to the fund. the fund. Include your
account number on the
BY MAIL Mail the check and your check.
signed application to
Investor Services. Fill out the deposit slip
from your account
statement. If you do not
have a slip, include a
note with your name, the
fund name, and your
account number.
Mail the check and deposit
slip or note to Investor
Services.
- -------------------------------------------------------------------------------
[Insert graphic of three Call to receive a wire Call to receive a wire
lightning bolts] control number and wire control number and wire
instructions. instructions.
BY WIRE
Wire the funds and mail To make a same day wire
your signed application investment, please call us
1-800/632-2301 to Investor Services. by 1:00 p.m. Pacific time
(or 1-650/312-2000 Please include the wire and make sure your wire
collect) control number or your arrives by 3:00 p.m.
new account number on the
application.
To make a same day wire
investment, please call
us by 1:00 p.m. Pacific
time and make sure your
wire arrives by 3:00 p.m.
- --------------------------------------------------------------------------------
[Insert graphic of two Call Shareholder Services Call Shareholder Services
arrows pointing in at the number below, or at the number below or our
opposite directions] send signed written automated TeleFACTS
instructions. The system, or send signed
BY EXCHANGE TeleFACTS system cannot written instructions.
be used to open a new
TeleFACTS(R) account. (Please see page 27 for
1-800/247-1753 information on exchanges.)
(around-the-clock (Please see page 27 for
access) information on exchanges.)
- --------------------------------------------------------------------------------
FRANKLIN TEMPLETON INVESTOR SERVICES P.O. BOX 997151,
SACRAMENTO, CA 95899-9983
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
[Insert graphic of person with headset] INVESTOR SERVICES
AUTOMATIC INVESTMENT PLAN This plan offers a convenient way for you to invest in
a fund by automatically transferring money from your checking or savings account
each month to buy shares. To sign up, complete the appropriate section of your
account application and mail it to Investor Services. If you are opening a new
account, please include the minimum initial investment of $50 with your
application.
AUTOMATIC PAYROLL DEDUCTION You may invest in a fund automatically by
transferring money from your paycheck to the fund by electronic funds transfer.
If you are interested, indicate on your application that you would like to
receive an Automatic Payroll Deduction Program kit.
DISTRIBUTION OPTIONS You may reinvest distributions you receive from a fund in
an existing account in the same share class* of the fund or another Franklin
Templeton Fund. Initial sales charges and CDSCs will not apply if you reinvest
your distributions within 365 days. You can also have your distributions
deposited in a bank account, or mailed by check. Deposits to a bank account may
be made by electronic funds transfer.
[Begin callout]
For Franklin Templeton Trust Company retirement plans, special forms may be
needed to receive distributions in cash. Please call 1-800/527-2020 for
information.
[End callout]
Please indicate on your application the distribution option you have chosen,
otherwise we will reinvest your distributions in the same share class of the
fund.
*Class B and C shareholders may reinvest their distributions in Class A shares
of any Franklin Templeton money fund.
RETIREMENT PLANS Franklin Templeton offers a variety of retirement plans for
individuals and businesses. These plans require separate applications and their
policies and procedures may be different than those described in this
prospectus. For more information, including a free retirement plan brochure or
application, please call Retirement Services at 1-800/527-2020.
TELEFACTS(R) Our TeleFACTS system offers around-the-clock access to information
about your account or any Franklin Templeton Fund. This service is available
from touch-tone phones at 1-800/247-1753. For a free TeleFACTS brochure, call
1-800/DIAL BEN.
TELEPHONE PRIVILEGES You will automatically receive telephone privileges when
you open your account, allowing you and your investment representative to sell
or exchange your shares and make certain other changes to your account by phone.
For accounts with more than one registered owner, telephone privileges also
allow the funds to accept written instructions signed by only one owner for
transactions and account changes that could otherwise be made by phone. For all
other transactions and changes, all registered owners must sign the
instructions.
As long as we take certain measures to verify telephone requests, we will not be
responsible for any losses that may occur from unauthorized requests. Of course,
you can decline telephone exchange or redemption privileges on your account
application.
EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton Funds
within the same class*, generally without paying any additional sales charges.
If you exchange shares held for less than six months, however, you may be
charged the difference between the initial sales charge of the two funds if the
difference is more than 0.25%. If you exchange shares from a money fund, a sales
charge may apply no matter how long you have held the shares.
*Certain Class Z shareholders of Franklin Mutual Series Fund Inc. may exchange
into Class A without any sales charge. Advisor Class shareholders of another
Franklin Templeton Fund also may exchange into Class A without any sales charge.
Advisor Class shareholders who exchange their shares for Class A shares and
later decide they would like to exchange into another fund that offers Advisor
Class may do so.
[Begin callout]
An EXCHANGE is really two transactions: a sale of one fund and the purchase of
another. In general, the same policies that apply to purchases and sales apply
to exchanges, including minimum investment amounts. Exchanges also have the same
tax consequences as ordinary sales and purchases.
[End callout]
Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee. Any CDSC will
continue to be calculated from the date of your initial investment and will not
be charged at the time of the exchange. The purchase price for determining a
CDSC on exchanged shares will be the price you paid for the original shares. If
you exchange shares subject to a CDSC into a Class A money fund, the time your
shares are held in the money fund will not count towards the CDSC holding
period.
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.
Frequent exchanges can interfere with fund management or operations and drive up
costs for all shareholders. To protect shareholders, there are limits on the
number and amount of exchanges you may make (please see "Market Timers" on page
32).
SYSTEMATIC WITHDRAWAL PLAN This plan allows you to automatically sell your
shares and receive regular payments from your account. A CDSC may apply to
withdrawals that exceed certain amounts. Certain terms and minimums apply. To
sign up, complete the appropriate section of your application.
[Insert graphic of a certificate] SELLING SHARES
You can sell your shares at any time. Please keep in mind that a contingent
deferred sales charge (CDSC) may apply. Please also keep in mind that if you
sell all the shares in your MidCap Fund account, your MidCap Fund account will
be closed and you will not be able to buy additional MidCap Fund shares or to
reopen your MidCap Fund account.
SELLING SHARES IN WRITING Generally, requests to sell $100,000 or less can be
made over the phone or with a simple letter. Sometimes, however, to protect you
and the fund we will need written instructions signed by all registered owners,
with a signature guarantee for each owner, if:
[Begin callout]
A SIGNATURE GUARANTEE helps protect your account against fraud. You can obtain a
signature guarantee at most banks and securities dealers.
A notary public CANNOT provide a signature guarantee.
[End callout]
o you are selling more than $100,000 worth of shares o you want your proceeds
paid to someone who is not a registered owner o you want to send your proceeds
somewhere other than the address of
record, or preauthorized bank or brokerage firm account
We also may require a signature guarantee on instructions we receive from an
agent, not the registered owners, or when we believe it would protect the fund
against potential claims based on the instructions received.
SELLING RECENTLY PURCHASED SHARES If you sell shares recently purchased with a
check or draft, we may delay sending you the proceeds until your check or draft
has cleared, which may take seven business days or more. A certified or
cashier's check may clear in less time.
REDEMPTION PROCEEDS Your redemption check will be sent within seven days after
we receive your request in proper form. We are not able to receive or pay out
cash in the form of currency. Redemption proceeds may be delayed if we have not
yet received your signed account application.
RETIREMENT PLANS You may need to complete additional forms to sell shares in a
Franklin Templeton Trust Company retirement plan. For participants under age 59
1/2, tax penalties may apply. Call Retirement Services at 1-800/527-2020 for
details.
SELLING SHARES
- ------------------------------------------------------------------------------
TO SELL SOME OR ALL OF YOUR SHARES
- -------------------------------------------------------------------------------
[Insert graphic of hands shaking] Contact your investment representative
THROUGH YOUR
INVESTMENT
REPRESENTATIVE
- -------------------------------------------------------------------------------
[Insert graphic of envelope] Send written instructions and endorsed
share certificates (if you hold share
BY MAIL certificates) to Investor Services.
Corporate, partnership or trust accounts
may need to send additional documents.
Specify the fund, the account number and
the dollar value or number of shares you
wish to sell. If you own both Class A and B
shares, also specify the class of shares,
otherwise we will sell your Class A shares
first. Be sure to include all necessary
signatures and any additional documents, as
well as signature guarantees if required.
A check will be mailed to the name(s) and
address on the account, or otherwise
according to your written instructions.
- -------------------------------------------------------------------------------
[Insert graphic of phone] As long as your transaction is for
$100,000 or less, you do not hold share
BY PHONE certificates and you have not changed your
address by phone within the last 15 days,
1-800/632-2301 you can sell your shares by phone.
A check will be mailed to the name(s) and
address on the account. Written
instructions, with a signature guarantee,
are required to send the check to another
address or to make it payable to another
person.
- -------------------------------------------------------------------------------
[Insert graphic of three lightning You can call or write to have redemption
bolts] proceeds sent to a bank account. See the
policies above for selling shares by mail
or phone.
Before requesting to have redemption
ELECTRONIC FUNDS TRANSFER (ACH) proceeds sent to a bank account, please
make sure we have your bank account
information on file. If we do not have
this information, you will need to send
written instructions with your bank's name
and address, a voided check or savings
account deposit slip, and a signature
guarantee if the ownership of the bank and
fund accounts is different.
If we receive your request in proper form
by 1:00 p.m. Pacific time, proceeds sent by
ACH generally will be available within two
to three business days.
- -------------------------------------------------------------------------------
[Insert graphic of two arrows Obtain a current prospectus for the fund
pointing in opposite directions] you are considering.
BY EXCHANGE Call Shareholder Services at the number
below or our automated TeleFACTS system,
TeleFACTS(R) or send signed written instructions. See
1-800/247-1753 the policies above for selling shares by
(around-the-clock mail or phone.
access)
If you hold share certificates, you will
need to return them to the fund before your
exchange can be processed.
- -------------------------------------------------------------------------------
FRANKLIN TEMPLETON INVESTOR SERVICES P.O. BOX 997151,
SACRAMENTO, CA 95899-9983
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
[Insert graphic of paper and pen] ACCOUNT POLICIES
CALCULATING SHARE PRICE Each fund calculates its net asset value per share (NAV)
each business day at the close of trading on the New York Stock Exchange
(normally 1:00 p.m. Pacific time). Each class's NAV is calculated by dividing
its net assets by the number of its shares outstanding.
[Begin callout]
When you buy shares, you pay the offering price. The offering price is the NAV
plus any applicable sales charge.
When you sell shares, you receive the NAV minus any applicable contingent
deferred sales charge (CDSC).
[End callout]
Each fund's assets are generally valued at their market value. If market prices
are unavailable, or if an event occurs after the close of the trading market
that materially affects the values, assets may be valued at their fair value. If
the fund holds securities listed primarily on a foreign exchange that trades on
days when the fund is not open for business, the value of your shares may change
on days that you cannot buy or sell shares.
Requests to buy and sell shares are processed at the NAV next calculated after
we receive your request in proper form.
ACCOUNTS WITH LOW BALANCES If the value of your account falls below $250 ($50
for employee and UGMA/UTMA accounts) because you sell some of your shares, we
may mail you a notice asking you to bring the account back up to its applicable
minimum investment amount. If you choose not to do so within 30 days, we may
close your account and mail the proceeds to the address of record. You will not
be charged a CDSC if your account is closed for this reason.
STATEMENTS AND REPORTS You will receive quarterly account statements that show
all your account transactions during the quarter. You also will receive written
notification after each transaction affecting your account (except for
distributions and transactions made through automatic investment or withdrawal
programs, which will be reported on your quarterly statement). You also will
receive the fund's financial reports every six months. To reduce fund expenses,
we try to identify related shareholders in a household and send only one copy of
the financial reports. If you need additional copies, please call 1-800/DIAL
BEN.
If there is a dealer or other investment representative of record on your
account, he or she also will receive copies of all notifications and statements
and other information about your account directly from the fund.
STREET OR NOMINEE ACCOUNTS You may transfer your shares from the street or
nominee name account of one dealer to another, as long as both dealers have an
agreement with Franklin Templeton Distributors, Inc. We will process the
transfer after we receive authorization in proper form from your delivering
securities dealer.
JOINT ACCOUNTS Unless you specify a different registration, accounts with two or
more owners are registered as "joint tenants with rights of survivorship" (shown
as "Jt Ten" on your account statement). To make any ownership changes to a joint
account, all owners must agree in writing, regardless of the law in your state.
MARKET TIMERS The funds may restrict or refuse exchanges by market timers. If
accepted, each exchange by a market timer will be charged $5 by
Franklin/Templeton Investor Services, Inc., the fund's transfer agent. You will
be considered a market timer if you have (i) requested an exchange out of the
fund within two weeks of an earlier exchange request, or (ii) exchanged shares
out of the fund more than twice in a calendar quarter, or (iii) exchanged shares
equal to at least $5 million, or more than 1% of the fund's net assets, or (iv)
otherwise seem to follow a timing pattern. Shares under common ownership or
control are combined for these limits.
ADDITIONAL POLICIES Please note that the funds maintain additional policies and
reserve certain rights, including:
o The funds may refuse any order to buy shares, including any purchase under
the exchange privilege.
o At any time, the funds may change their investment minimums or waive or lower
their minimums for certain purchases.
o The funds may modify or discontinue the exchange privilege on 60 days'
notice.
o In unusual circumstances, we may temporarily suspend redemptions, or postpone
the payment of proceeds, as allowed by federal securities laws.
o For redemptions over a certain amount, each fund reserves the right to make
payments in securities or other assets of the fund, in the case of an
emergency or if the payment by check, wire or electronic funds transfer would
be harmful to existing shareholders.
o To permit investors to obtain the current price, dealers are responsible for
transmitting all orders to the funds promptly.
DEALER COMPENSATION Qualifying dealers who sell fund shares may receive sales
commissions and other payments. These are paid by Franklin Templeton
Distributors, Inc. (Distributors) from sales charges, distribution and service
(12b-1) fees and its other resources.
CLASS A CLASS B CLASS C
- -------------------------------------------------------------------------------
COMMISSION (%) --- 4.00 2.00
Investment under $50,000 5.00 --- ---
$50,000 but under $100,000 3.75 --- ---
$100,000 but under $250,000 2.80 --- ---
$250,000 but under $500,000 2.00 --- ---
$500,000 but under $1 million 1.60 --- ---
$1 million or more up to 1.00 1 --- ---
12B-1 FEE TO DEALER 0.25 2 0.25 3 1.00 4
A dealer commission of up to 1% may be paid on Class A NAV purchases by certain
retirement plans1 and on Class C NAV purchases. A dealer commission of up to
0.25% may be paid on Class A NAV purchases by certain trust companies and bank
trust departments, eligible governmental authorities, and broker-dealers or
others on behalf of clients participating in comprehensive fee programs.
1. During the first year after purchase, dealers may not be eligible to receive
the 12b-1 fee.
2. Each fund may pay up to 0.35% to Distributors or others, out
of which 0.10% generally will be retained by Distributors for its distribution
expenses.
3. Dealers may be eligible to receive up to 0.25% from the date of
purchase. After 8 years, Class B shares convert to Class A shares and dealers
may then receive the 12b-1 fee applicable to Class A.
4. Dealers may be eligible to receive up to 0.25% during the first year after
purchase and may be eligible to receive the full 12b-1 fee starting in
the 13th month.
[Insert graphic of question mark] QUESTIONS
If you have any questions about the funds or your account, you can write to us
at P.O. Box 997151, Sacramento, CA 95899-9983. You can also call us at one of
the following numbers. For your protection and to help ensure we provide you
with quality service, all calls may be monitored or recorded.
HOURS (PACIFIC TIME,
DEPARTMENT NAME TELEPHONE NUMBER MONDAY THROUGH FRIDAY)
- ----------------------------------------------------------------------------
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
6:30 a.m. to 2:30 p.m.
(Saturday)
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 Services 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Advisor Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.
FOR MORE INFORMATION
You can learn more about each fund in the following documents:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Includes a discussion of recent market conditions and fund strategies, financial
statements, detailed performance information, portfolio holdings and the
auditor's report.
STATEMENTS OF ADDITIONAL INFORMATION (SAIS)
Contains more information about each fund, its investments and policies. It is
incorporated by reference (is legally a part of this prospectus).
For a free copy of the current annual/semiannual report or the SAI, please
contact your investment representative or call us at the number below.
FRANKLIN(R)TEMPLETON(R)
1-800/DIAL BEN(R) (1-800/342-5236)
TDD (Hearing Impaired) 1-800/851-0637
www.franklintempleton.com
You also can obtain information about each fund by visiting the SEC's Public
Reference Room in Washington, D.C. (phone 1-202/942-8090) or the EDGAR Database
on the SEC's Internet site at http://www.sec.gov. You can obtain copies of this
information, after paying a duplicating fee, by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102 or by electronic request at the
following E-mail address: [email protected].
Investment Company Act file #811-6243 BCMCG P 05/00
