00130041
GOF P-9 12/14
SUPPLEMENT DATED DECEMBER 15, 2014
TO THE CURRENTLY EFFECTIVE PROSPECTUSES
OF
EACH OF THE LISTED FUNDS
Franklin Alternative Strategies Funds
Franklin K2 Alternative Strategies Fund
Franklin Pelagos Commodities Strategy Fund
Franklin California Tax-Free Income Fund
Franklin California Tax-Free Trust
Franklin California Insured Tax-Free Income Fund
Franklin California Intermediate-Term Tax-Free Income Fund
Franklin California Tax-Exempt Money Fund
Franklin Custodian Funds
Franklin DynaTech Fund
Franklin Growth Fund
Franklin Income Fund
Franklin U.S. Government Securities Fund
Franklin Utilities Fund
Franklin Federal Tax-Free Income Fund
Franklin Fund Allocator Series
Franklin Conservative Allocation Fund
Franklin Corefolio Allocation Fund
Franklin Founding Funds Allocation Fund
Franklin Growth Allocation Fund
Franklin Moderate Allocation Fund
Franklin LifeSmartTM 2015 Retirement Target Fund
Franklin LifeSmartTM 2020 Retirement Target Fund
Franklin LifeSmartTM 2025 Retirement Target Fund
Franklin LifeSmartTM 2030 Retirement Target Fund
Franklin LifeSmartTM 2035 Retirement Target Fund
Franklin LifeSmartTM 2040 Retirement Target Fund
Franklin LifeSmartTM 2045 Retirement Target Fund
Franklin LifeSmartTM 2050 Retirement Target Fund
Franklin Multi-Asset Real Return Fund
Franklin Global Trust
Franklin Global Listed Infrastructure Fund
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Franklin Global Real Estate Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Franklin Large Cap Equity Fund
Franklin Emerging Market Debt Opportunities Fund
Franklin Gold and Precious Metals Fund
Franklin High Income Trust
Franklin High Income Fund
Franklin Investors Securities Trust
Franklin Adjustable U.S. Government Securities Fund
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Total Return Fund
Franklin Managed Trust
Franklin Rising Dividends Fund
Franklin Money Fund
Franklin Municipal Securities Trust
Franklin California High Yield Municipal Fund
Franklin Tennessee Municipal Bond Fund
Franklin Mutual Recovery Fund
Franklin Mutual Series Funds
Franklin Mutual Beacon Fund
Franklin Mutual European Fund
Franklin Mutual Financial Services Fund
Franklin Mutual Global Discovery Fund
Franklin Mutual International Fund
Franklin Mutual Quest Fund
Franklin Mutual Shares Fund
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Trust
Franklin New York Intermediate-Term Tax-Free Income Fund
Franklin Real Estate Securities Trust
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Franklin Real Estate Securities Fund
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
Franklin Biotechnology Discovery Fund
Franklin Flex Cap Growth Fund
Franklin Focused Core Equity Fund
Franklin Global Government Bond Fund
Franklin Growth Opportunities Fund
Franklin Natural Resources Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Strategic Income Fund
Franklin Tax-Free Trust
Franklin Alabama Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Double Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free Income Fund
Franklin Federal Limited-Term Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin High Yield Tax-Free Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin Massachusetts Tax-Free Income Fund
Franklin Michigan Tax-Free Income Fund
Franklin Minnesota Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin New Jersey Tax-Free Income Fund
Franklin North Carolina Tax-Free Income Fund
Franklin Ohio Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Templeton Global Trust
Templeton Hard Currency Fund
Franklin Templeton International Trust
Franklin India Growth Fund
Franklin Global Allocation Fund
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Franklin World Perspectives Fund
Templeton Foreign Smaller Companies Fund
Franklin Templeton Money Fund Trust
Franklin Templeton Money Fund
Franklin Value Investors Trust
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Institutional Fiduciary Trust
Money Market Portfolio
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Funds
Templeton Foreign Fund
Templeton World Fund
Templeton Global Investment Trust
Templeton BRIC Fund
Templeton Emerging Markets Balanced Fund
Templeton Emerging Markets Small Cap Fund
Templeton Frontier Markets Fund
Templeton Global Balanced Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Constrained Bond Fund
Templeton Emerging Markets Bond Fund
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund
Templeton Institutional Funds
Emerging Markets Series
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Foreign Equity Series
Foreign Smaller Companies Series
Global Equity Series
The Prospectus is amended as follows:
I. For all Funds except Franklin Emerging Market Debt Opportunities Fund, Money Funds, Tax Free Funds and Templeton Institutional Funds the “Fund Details – Choosing a Share Class – Sales Charge Waivers” section is revised as follows:
Sales Charge Waivers
Class A shares may be purchased without an initial sales charge or contingent deferred sales charge (CDSC) by certain investors. If you would like information about available sales charge waivers, call your investment representative or call Shareholder Services at (800) 632-2301.
Waivers for certain investors. The following investors or investments qualify to buy Class A shares without an initial sales charge or CDSC due to anticipated economies in sales efforts and expenses, including:
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· [For Templeton Growth Fund only] Banks and securities institutions investing assets held in a fiduciary, agency, advisory, custodial or similar capacity and over which they have full and exclusive investment discretion and that have entered into an agreement with Distributors or Franklin Templeton Investment Services GMbH. Such purchases are subject to minimum investment requirements, which are available from Distributors or Franklin Templeton Investment Services GMbH.
II. The below “Fund Details – Choosing a Share Class – Sales Charge Waivers” section language still applies to Funds that offer Class C shares to the FT Charitable Giving Fund:
Class C shares may be purchased without limit or CDSC by the Franklin Templeton Charitable Giving Fund.
III. For the Tax Free Funds the “Fund Details – Choosing a Share Class – Sales Charge Waivers” section is revised as follows:
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Sales Charge Waivers
Class A shares may be purchased without an initial sales charge or contingent deferred sales charge (CDSC) by certain investors. If you would like information about available sales charge waivers, call your investment representative or call Shareholder Services at (800) 632-2301.
Waivers for certain investors. The following investors or investments qualify to buy Class A shares without an initial sales charge or CDSC due to anticipated economies in sales efforts and expenses, including:
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IV. For all Funds except Franklin Emerging Markets Debt Opportunities Fund, Money Funds, Tax Free Funds and Templeton Institutional Funds the “Fund Details – Choosing a Share Class – Retirement plans” section is revised as follows:
Retirement plans. Provided that Franklin Templeton Investor Services, LLC is notified, Class A shares at NAV are available for:
V. The Franklin Emerging Market Debt Opportunities Fund and Templeton Institutional Funds “Fund Details - Qualified Investors” section bullet points are revised as follows:
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VI. For all Funds except Franklin Emerging Market Debt Opportunities Fund, Money Funds and Templeton Institutional Funds the “Fund Details – Choosing a Share Class – Reinstatement Privilege” section is revised as follows:
Reinstatement Privilege
If you sell any class of shares of a Franklin Templeton Investment Fund, you may reinvest all or a portion of the proceeds from that sale within 90 days within the same share class without an initial sales charge. If at the time of investment your shares are registered directly with the Fund’s transfer agent: Class C or Class R shares will be reinvested in Class A shares if the account does not have an investment representative of record; and, proceeds from the earlier sale of Class Z shares from another fund may also be reinvested in Class A shares.
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This Reinstatement Privilege does not apply to: (i) a purchase of Fund shares made through a regularly scheduled automatic investment plan such as a purchase by a regularly scheduled payroll deduction or transfer from a bank account, or (ii) a purchase of Fund shares with proceeds from the sale of Franklin Templeton fund shares that were held indirectly through a non-Franklin Templeton individual or employer sponsored IRA.
Generally, if you paid a CDSC when you sold your Class A or Class C shares, Franklin Templeton Distributors, Inc. (Distributors) will credit back to you the CDSC paid on the amount you are reinvesting within 90 days of the sale by adding it to the amount of your reinvestment. For Class A shares reinvested with a CDSC credit, a new CDSC will apply and the CDSC holding period will begin again. For Class C shares reinvested with a CDSC credit in Class A shares, you will not receive a CDSC credit in the new Class A shares and your reinvestment will not be subject to any otherwise applicable CDSC.
VII. For all Funds that offer Class R6 shares the following bullet point is added to the “Fund Details – Choosing a Share Class – Qualified Investors–Class R6 – section:
· Unaffiliated U.S. registered mutual funds, including those that operate as “fund of funds.”
VIII. For all Funds that offer Advisor Class shares (or Class Z shares, as applicable) the “Fund Details - Choosing a Share Class - Qualified Investors-Advisor Class” section bullet point that begins with “Unaffiliated U.S. registered mutual funds...” is revised as follows:
· Unaffiliated U.S. registered mutual funds, including those that operate as “fund of funds.”
IX. The Templeton Institutional Funds “Qualified Investors” section bullet point on page 78 that begins with “Unaffiliated U.S. Registered mutual funds...” is revised as follows:
· Unaffiliated U.S. registered mutual funds, including those that operate as “fund of funds.”
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X. For all Funds that offer Advisor Class shares (or Class Z shares, as applicable) except for Franklin Emerging Market Debt Opportunities Fund and Templeton Institutional Funds, the below bullet point is added to the “Fund Details - Choosing A Share Class - Qualified Investors-Advisor Class” section:
XI. For all Funds that offer Advisor Class shares (or Class Z shares, as applicable) except for Franklin Emerging Market Debt Opportunities Fund and Templeton Institutional Funds, the “Fund Details - Choosing A Share Class - Qualified Investors - Advisor Class” section bullet point that begins with “Employer Sponsored Retirement Plans...” is revised as follows.
· Employer Sponsored Retirement Plans (“Plans” or individually, the “Plan”) that invest through a record-keeper or third party retirement platform.
XII. For all Funds except Franklin Emerging Market Debt Opportunities Fund and Templeton Institutional Funds, the “Fund Details – Buying Shares” section “Minimum Investments” table note that begins with “Please note that you may...” is revised as follows:
Please note that you may only buy shares (including the purchase side of an exchange) of a fund eligible for sale in your state or jurisdiction. The Fund and other Franklin Templeton funds are intended for sale to residents of the United States, and, with very limited exceptions, are not registered or otherwise offered for sale in other jurisdictions.
XIII. For all Funds the “Fund Details – Buying Shares” section paragraph that begins with “In addition, the Fund is not registered...” is revised as follows:
In particular, the Fund is not registered in any provincial or territorial jurisdiction in Canada, and shares of the Fund have not been qualified for sale in any Canadian jurisdiction. The shares offered by this prospectus may not be directly or indirectly offered or sold in any provincial or territorial jurisdiction in Canada or to or for the benefit of residents thereof. Prospective investors may be required to declare that they are not Canadian residents and are not acquiring shares on behalf of any Canadian residents. Similarly, the Fund is not registered, and shares of the Fund have not been qualified for distribution, in any member country of the European Union (EU) or European Economic Area (EEA), and may not be directly or indirectly offered or distributed in any such country. If an investor becomes a Canadian, EU or EEA resident after purchasing shares of the Fund, the investor will not be able to purchase any additional shares of the Fund (other than reinvestment of dividends and capital gains) or exchange shares of the Fund for other U.S. registered Franklin Templeton funds.
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XIV. For all Funds the Fund Details “Buying Shares” and “Selling Shares” table references to “by 1:00 p.m.” are changed to “prior to 1:00 p.m.”
XV. Effective January 1, 2015, for all Funds except Franklin Emerging Market Debt Opportunities Fund, Money Funds and Templeton Institutional Funds, the Fund Details “Account Policies - Dealer Compensation – Other dealer and financial intermediary compensation” section is revised as follows:
Other dealer and financial intermediary compensation. Distributors may make payments (a portion of which may be reimbursable under the terms of the Fund's Rule 12b-1 distribution plans) to certain dealers who have sold shares of Franklin Templeton mutual funds. In the case of any one dealer, marketing support payments will generally not exceed 0.05% of the total assets of Franklin Templeton mutual funds attributable to that dealer, on an annual basis. For a dealer exceeding $50 billion in total assets of Franklin Templeton mutual funds, Distributors may agree to marketing support payments up to 0.06% of such assets, on an annual basis. Marketing support payments made to organizations located outside the U.S., with respect to investments in the Fund by non-U.S. persons, may exceed this limitation. Distributors makes these payments in connection with the qualifying dealers' efforts to educate financial advisors about Franklin Templeton funds. Any assets held on behalf of Employer Sponsored Retirement Plans for which payment is made to a financial intermediary pursuant to the following paragraph will be excluded from the calculation of marketing support payments pursuant to this paragraph.
Distributors and/or its affiliates may also make payments (a portion of which may be reimbursable under the terms of the Fund's Rule 12b-1 distribution plans) to certain financial intermediaries in connection with their activities that are intended to assist in the sale of shares of Franklin Templeton mutual funds, directly or indirectly, to certain Employer Sponsored Retirement Plans. In the case of any one financial intermediary, such payments will not exceed 0.10% of the total assets of Franklin Templeton mutual funds held, directly or indirectly, by such Employer Sponsored Retirement Plans, on an annual basis.
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A number of factors will be considered in determining these payments, including the qualifying dealer or financial intermediary's sales, assets and redemption rates, the nature and quality of any servicing provided by the financial intermediary, and the quality of the dealer or financial intermediary's relationship with Distributors. Distributors will, on an annual basis, determine the advisability of continuing these payments. These payments may be in addition to any shareholder servicing fees paid by the Fund's transfer agent from payments it receives under its agreement with the Fund.
To the extent permitted by SEC and Financial Industry Regulatory Authority rules and other applicable laws and regulations, Distributors may pay or allow other promotional incentives or payments to dealers.
Sales of Fund shares, as well as shares of other funds in Franklin Templeton Investments, is not considered a factor in the selection of broker-dealers to execute the Fund's portfolio transactions. Accordingly, the allocation of portfolio transactions for execution by broker-dealers that sell Fund shares is not considered marketing support payments to such broker-dealers.
You can find further details in the SAI about the payments made by Distributors and the services provided by your financial advisor. Your financial advisor may charge you additional fees or commissions other than those disclosed in this prospectus. You should ask your financial advisor for information about any payments it receives from Distributors and any services it provides, as well as about fees and/or commissions it charges.
XVI. For Franklin Global Government Bond Fund the following is added immediately above the “Fund Details – Principal Investment Policies and Practices – Exclusion of Investment Manager from Commodity Pool Definition” section on page 16:
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Portfolio Selection
The investment manager allocates the Fund’s assets based upon its assessment of changing market, political and economic conditions. It considers various factors, including evaluation of interest rates, currency exchange rate changes and credit risks. The investment manager uses top-down macroeconomic research, bottom-up sector-specific research and quantitative analysis in order to identify and to seek to exploit market inefficiencies while employing a disciplined risk management process. The investment manager may consider selling a security when it believes the security has become fully valued due to either its price appreciation or changes in the issuer’s fundamentals, or when the investment manager believes another security is a more attractive investment opportunity.
XVII. For Franklin Strategic Income Fund, Franklin Low Duration Total Return Fund and Franklin Total Return Fund, the “Fund Summary – Principal Risks – Derivative Instruments” section is revised as follows:
Derivative Instruments The performance of derivative instruments depends largely on the performance of an underlying instrument, such as a currency, security, interest rate or index, and such instruments often have risks similar to the underlying instrument, in addition to other risks. Derivatives involve costs and can create economic leverage in the Fund’s portfolio which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. Other risks include illiquidity, mispricing or improper valuation of the derivative instrument, and imperfect correlation between the value of the derivative and the underlying instrument so that the Fund may not realize the intended benefits. When used for hedging, the change in value of the derivative may also not correlate specifically with the currency, security or other risk being hedged. With over-the-counter derivatives, there is the risk that the other party to the transaction will fail to perform.
XVIII. For Franklin Low Duration Total Return Fund, the “Fund Summary – Principal Investment Strategies” section paragraph that begins with “To pursue its investment goal...” is revised as follows:
To pursue its investment goal, the Fund regularly enters into various derivative transactions, including currency and cross-currency forwards, currency, currency index, bond and interest rate futures contracts and options on interest rate futures contracts, and swap agreements, including interest rate, fixed income total return, currency and credit default swaps, and options on interest rate and credit default swap agreements. The use of these derivative transactions may allow the Fund to obtain net long or short exposures to select currencies, interest rates, countries, duration or credit risks. These derivatives may be used to enhance Fund returns, increase liquidity, gain exposure to certain instruments or markets in a more efficient or less expensive way and/or hedge risks associated with its other portfolio investments.
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XIX. For Franklin Total Return Fund, the “Fund Summary – Principal Investment Strategies” section paragraph that begins with “To pursue its investment goals...” is revised as follows:
To pursue its investment goals, the Fund regularly enters into various derivative transactions, including currency and cross-currency forwards, currency, currency index, bond and interest rate futures contracts and options on interest rate futures contracts, and swap agreements, including interest rate, fixed income total return, currency and credit default swaps, and options on interest rate and credit default swap agreements. The use of these derivative transactions may allow the Fund to obtain net long or short exposures to select currencies, interest rates, countries, duration or credit risks. These derivatives may be used to enhance Fund returns, increase liquidity, gain exposure to certain instruments or markets in a more efficient or less expensive way and/or hedge risks associated with its other portfolio investments.
XX. For Franklin Low Duration Total Return Fund, the “Fund Details – Principal Investment Policies and Practices” section paragraph that begins with “For purposes of pursuing its investment goal...” is revised as follows:
For purposes of pursuing its investment goal, the Fund regularly enters into interest rate, credit and currency-related transactions involving certain derivative instruments, including interest rate or bond futures contracts, options on such contracts, swap agreements, which may include interest rate, fixed income total return, currency, inflation index and credit default swaps, futures contracts on credit default swaps on indices (also known as credit index futures), options on interest rate and credit default swaps, currency and cross currency forwards, currency options, and currency and currency index futures contracts. The use of these derivative transactions may allow the Fund to obtain net long or net negative (short) exposures to selected interest rates, countries, duration or credit risks, or currencies. These derivatives may be used to enhance Fund returns, increase liquidity, gain exposure to certain instruments or markets in a more efficient or less expensive way and/or hedge risks associated with its other portfolio investments. The results of such transactions may also represent, from time to time, a significant component of the Fund’s investment returns. The investment manager considers various factors, such as availability and cost, in deciding whether, when and to what extent to enter into derivative transactions. Derivatives whose reference securities are investment grade are considered by the Fund to be investment grade.
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XXI. For Franklin Total Return Fund, the “Fund Details – Principal Investment Policies and Practices” section paragraph that begins with “To pursue its investment goals...” is revised as follows:
To pursue its investment goals, the Fund regularly enters into interest rate, credit and currency-related transactions involving certain derivative instruments, including currency and cross-currency forwards, currency options, currency, currency index, bond and interest rate futures contracts and options on interest rate futures contracts, and swap agreements, including interest rate, fixed income total return, currency, inflation index and credit default swaps, futures contracts on credit default swaps on indices (also known as credit index futures), and options on interest rate and credit default swap agreements. The use of these derivative transactions may allow the Fund to obtain net long or short exposures to select currencies, interest rates, countries, duration or credit risks. These derivatives may be used to enhance Fund returns, increase liquidity, gain exposure to certain instruments or markets in a more efficient or less expensive way and/or hedge risks associated with its other portfolio investments. The results of such transactions may also represent, from time to time, a significant component of the Fund’s investment returns.
XXII. For Franklin Strategic Income Fund, the “Fund Summary – Principal Investment Strategies” section paragraph that begins with “For purposes of pursuing its investment goals...” is revised as follows:
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For purposes of pursuing its investment goals, the Fund regularly enters into various currency-related transactions involving derivative instruments, including currency and cross currency forwards, currency swaps, and currency and currency index futures contracts. The Fund may also enter into interest rate and credit-related transactions involving derivative instruments, including interest rate, fixed income total return and credit default swaps and bond/interest rate futures contracts. The use of these derivative transactions may allow the Fund to obtain net long or net short exposures to selected currencies, interest rates, durations or credit risks. These derivative instruments may be used for hedging purposes, to enhance Fund returns or to obtain exposure to various market sectors.
XXIII. For Franklin Strategic Income Fund, the “Fund Details – Principal Investment Policies and Practices” section the paragraph that begins with “For purposes of pursuing its investment goals...” is revised as follows:
For purposes of pursuing its investment goals, the Fund regularly enters into currency-related transactions involving derivative instruments, including currency and cross currency forwards, currency swaps, currency and currency index futures contracts, and currency options. The Fund may also enter into interest rate and credit-related transactions involving certain derivative instruments, including interest rate and credit default swaps and interest rate and/or bond futures contracts (including U.S. Treasury futures contracts) and options thereon, and fixed income total return and inflation index swaps. The use of such derivative transactions may allow the Fund to obtain net long or net short exposures to selected currencies, interest rates, countries, durations or credit risks. The Fund may use currency, interest rate or credit-related derivative strategies for the purposes of enhancing Fund returns, increasing liquidity, gaining exposure to particular instruments in more efficient or less expensive ways and/or hedging risks relating to changes in currency exchange rates, credit risks, interest rates and other market factors.
XXIV. For Franklin Strategic Income Fund, Franklin Low Duration Total Return Fund and Franklin Total Return Fund, the “Fund Details – Principal Investment Policies and Practices” section that begins with “Swap agreements, such as interest rate...” is revised as follows:
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Swap agreements, such as interest rate, fixed income total return, currency, inflation index and credit default swaps, are contracts between the Fund and another party (the swap counterparty) involving the exchange of payments on specified terms over periods ranging from a few days to multiple years. A swap agreement may be negotiated bilaterally and traded over-the-counter (OTC) between the two parties (for an uncleared swap) or, in some instances, must be transacted through a futures commission merchant (FCM) and cleared through a clearinghouse that serves as a central counterparty (for a cleared swap). In a basic swap transaction, the Fund agrees with the swap counterparty to exchange the returns (or differentials in rates of return) earned or realized on a particular “notional amount” of underlying instruments. The notional amount is the set amount selected by the parties as the basis on which to calculate the obligations that they have agreed to exchange. The parties typically do not actually exchange the notional amount. Instead, they agree to exchange the returns that would be earned or realized if the notional amount were invested in given instruments or at given interest rates.
XXV. For Franklin Low Duration Total Return Fund and Franklin Total Return Fund, the following paragraph is added to the “Fund Details – Principal Investment Policies and Practices” section immediately following the paragraph that begins with “For credit default swaps...”:
Credit index futures are exchange-traded contracts whereby a Fund agrees to buy or sell a specified quantity of an underlying credit default swap on an index at a specified price at a specified later date. Although some futures contracts by their terms require the actual delivery or acquisition of the underlying reference asset, credit index futures require cash settlement at maturity. The purchase or sale of credit index futures will therefore allow a Fund to obtain long or short exposure to credit default swaps on indices without having to enter into the underlying swap agreements. Credit index futures generally have the same uses and are subject to the same risks as futures contracts and credit default swaps, described above.
XXVI. For Franklin Strategic Income Fund, Franklin Low Duration Total Return Fund and Franklin Total Return Fund, the following paragraph is added to the “Fund Details – Principal Investment Policies and Practices” section immediately following the paragraph that begins with “An interest rate swap...”:
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A total return swap is an agreement between two parties, pursuant to which one pays (and the other receives) an amount equal to the total return (including, typically, income and capital gains distributions, principal prepayment or credit losses) of an underlying reference asset (e.g., a note, bond or securities index) in exchange for a regular payment, at a floating rate based on LIBOR, or alternatively at a fixed rate or the total rate of return on another financial instrument. A Fund may take either position in a total return swap (i.e., the Fund may receive or pay the total return on the underlying reference asset).
XXVII. For Franklin Low Duration Total Return Fund and Franklin Total Return Fund, the following paragraph is added to the “Fund Details – Principal Investment Policies and Practices” section immediately following the paragraph that begins with “A currency swap...”:
A currency option is a contract, typically negotiated bilaterally and traded OTC between two parties, that grants the holder the right, but not the obligation, to buy or sell a specific currency at a specified exchange rate, called the “strike price,” during a specified period of time. Generally, upon exercise, a currency option triggers a spot foreign exchange transaction at the strike price, meaning the parties actually exchange currencies. However, some currency options are U.S. dollar-settled, in which case no delivery or receipt of foreign currency occurs.
Please keep this supplement with your prospectus for future reference.
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