Franklin Tax-Free Trust

Transcription

1 JULY 1, 2004 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. PROSPECTUS Franklin Tax-Free Trust 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 High Yield Tax-Free Income Fund Franklin New Jersey Tax-Free Income Fund Franklin Oregon Tax-Free Income Fund Franklin Pennsylvania Tax-Free Income Fund

2 GOF P-11 SUPPLEMENT DATED JANUARY 1, 2005 TO THE CURRENTLY EFFECTIVE PROSPECTUS OF EACH OF THE LISTED FUNDS Franklin California Tax-Free Income Fund, Inc. Franklin California Tax-Free Trust Franklin California Insured Tax-Free Income Fund Franklin California Intermediate-Term Tax-Free Income Fund Franklin California Limited-Term Tax-Free Income Fund Franklin California Tax-Exempt Money Fund Franklin Capital Growth Fund Franklin Custodian Funds, Inc. Franklin DynaTech Fund Franklin Growth Fund Franklin Income Fund Franklin U.S. Government Securities Fund Franklin Utilities Fund Franklin Federal Money Fund Franklin Federal Tax-Free Income Fund Franklin Floating Rate Trust Franklin Global Trust Fiduciary European Smaller Companies Fund Fiduciary Large Capitalization Growth and Income Fund Fiduciary Small Capitalization Equity Fund Fiduciary Core Fixed Income Fund Fiduciary Core Plus Fixed Income Fund Fiduciary High Income Fund Franklin International Smaller Companies Growth Fund Franklin Gold & Precious Metals Fund Franklin High Income Trust Franklin s AGE High Income Fund Franklin Investors Securities Trust Franklin Adjustable U.S. Government Securities Fund Franklin Convertible Securities Fund Franklin Equity Income Fund Franklin Floating Rate Daily Access Fund Franklin Limited Maturity U.S. Government Securities 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 Series Fund Inc. Mutual Beacon Fund Mutual Discovery Fund Mutual European Fund Mutual Financial Services Fund Mutual Qualified Fund Mutual Shares Fund Franklin Mutual Recovery Fund Franklin New York Tax-Free Income Fund Franklin New York Tax-Free Trust Franklin New York Insured Tax-Free Income Fund Franklin New York Intermediate-Term Tax-Free Income Fund Franklin New York Limited-Term Tax-Free Income Fund Franklin New York Tax-Exempt Money Fund Franklin Real Estate Securities Trust Franklin Real Estate Securities Fund Franklin Strategic Mortgage Portfolio Franklin Strategic Series Franklin Aggressive Growth Fund Franklin Biotechnology Discovery Fund Franklin Blue Chip Fund Franklin Flex Cap Growth Fund Franklin Global Communications Fund Franklin Global Health Care Fund Franklin Natural Resources Fund Franklin Small-Mid Cap Growth Fund Franklin Small Cap Growth Fund II Franklin Strategic Income Fund Franklin Technology Fund Franklin U.S. Long-Short Fund Franklin Tax-Exempt Money 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 Insured 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 Insured Tax-Free Income Fund Franklin Michigan Insured Tax-Free Income Fund Franklin Minnesota Insured 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 Insured Tax-Free Income Fund Franklin Oregon Tax-Free Income Fund Franklin Pennsylvania Tax-Free Income Fund Franklin Virginia Tax-Free Income Fund Franklin Templeton Fund Allocator Series Franklin Templeton Conservative Target Fund Franklin Templeton Corefolio Allocation Fund Franklin Templeton Founding Funds Allocation Fund Franklin Templeton Growth Target Fund Franklin Templeton Moderate Target Fund Franklin Templeton Perspectives Allocation Fund Franklin Templeton Global Trust Franklin Templeton Hard Currency Fund Franklin Templeton International Trust Templeton Foreign Smaller Companies Fund Templeton Global Long-Short Fund Franklin Templeton Money Fund Trust Franklin Templeton Money Fund Franklin Value Investors Trust Franklin Balance Sheet Investment Fund Franklin Large Cap Value Fund Franklin MicroCap Value Fund Franklin Small Cap Value Fund Institutional Fiduciary Trust Franklin Cash Reserves Fund Franklin Structured Large Cap Core Equity Fund Franklin Structured Large Cap Growth Equity Fund Money Market Portfolio Templeton Developing Markets Trust Templeton Global Investment Trust Franklin Templeton Non-U.S. Dynamic Core Equity Fund Templeton International (Ex EM) Fund Templeton Global Opportunities Trust Templeton Institutional Funds, Inc. Emerging Fixed Income Markets Series Emerging Markets Series Foreign Equity Series Foreign Smaller Companies Series Franklin Templeton Non-U.S. Core Equity Series The prospectus is amended as follows: I. For the Templeton Institutional Funds, Inc. (Foreign Equity Series, Emerging Market Series, Foreign Smaller Companies Series and Franklin Templeton Non-U.S. Core Equity Series Funds): a. Effective March 1, 2005, all references to a 1% redemption fee shall be replaced with a 2% redemption fee. b. Under the section Qualified Investors the paragraph that begins with Any other investor, including a private investment vehicle is replaced with the following: Any other investor, including a private investment vehicle such as a family trust, or foundation. Minimum initial investment: $5 million. For minimum investment purposes accounts eligible for cumulative quantity discount or under a letter of intent may combine all eligible shares in Franklin Templeton funds for purposes of determining whether it meets the $5 million minimum, as long as $1 million is invested or to be invested in the Funds. Minimum investment: $100,000 initial investment of $1 million to be invested in the Funds. 1

3 II. For all Funds that offer Advisor Class shares, under the section Qualified Investors the paragraph that begins with Defined contribution plans such as employer stock, bonus, pension or profit sharing is replaced with the following: Defined contribution plans such as employer stock, bonus, pension or profit sharing plans that meet the requirements for qualification under section 401 of the Internal Revenue Code, including salary reduction plans qualified under section 401(k) of the Internal Revenue Code, and that are sponsored by an employer (i) with retirement plan assets of $100 million or more, or (ii) with retirement plan assets of $20 million or more and who has contracted for current participant level record keeping with the Defined Contribution Services (DCS) division of Franklin Templeton Investor Services or is receiving current DCS services by contracting with the entity identified in DCS promotional material for participant level record keeping related to those DCS services. No initial minimum investment. III. For all funds that offer Advisor Class, replace the paragraph that begins with Broker-dealers, registered investment advisors or certified financial planners with the following paragraph under the section Qualified Investors : A registered investment adviser (RIA) who buys through a broker-dealer or trust company sponsored mutual fund trading platform on behalf of clients who have entered into a comprehensive fee or other advisory fee arrangement with the RIA, provided that the RIA is not an affiliated or associated person of the firm sponsoring the mutual fund trading platform and such broker has entered into an agreement with Distributors that authorizes the sale of Fund shares through the trading platform. Minimum initial investment: $100,000 for an individual client or $250,000 for multiple clients. IV. For all funds that offer Advisor Class, replace the paragraph that begins with Trust companies and bank trust departments initially investing with the following paragraph under the section Qualified Investors : Trust companies and bank trust departments investing in Franklin Templeton funds assets held in a fiduciary, agency, advisory, custodial or similar capacity and over which the trust companies and bank trust departments or other plan fiduciaries or participants in the case of certain retirement plans, have full or shared investment discretion. Minimum initial investment: $1 million. V. For all Funds with Class R shares, the eligible investors under SALES CHARGES - Class R - Retirement Plans are replaced with the following. Retirement Plans Class R shares are available to the following investors: Employer Sponsored Retirement Plans Any trust or plan established as part of a qualified tuition program under Section 529 of the Internal Revenue Code Health Reimbursement Accounts and Health Savings Accounts, either as a direct investment or as a separate or managed account. VI. For all funds that are offered with an initial sales charge, the section Cumulative Quantity Discount is amended to read as follows: 1. Cumulative Quantity Discount - lets you combine certain existing holdings of Franklin Templeton fund shares - referred to as cumulative quantity discount eligible shares - with your current purchase of Class A shares to determine if you qualify for a sales charge breakpoint. Cumulative quantity discount eligible shares are shares: (i) Registered to (or held for): You, individually; Your spouse or domestic partner, as recognized by applicable state law; You jointly with your spouse or domestic partner; You jointly with another unrelated (not a spouse or domestic partner) person if that other person has not included the value of the shares as cumulative quantity discount eligible shares for purposes of that person s separate investments in Franklin Templeton fund shares; A trustee/custodian of a Coverdell Education Savings account for which you are the identified responsible person on the records of the current purchase broker-dealer (as defined below) or its affiliate; A trustee/custodian of your IRA (which includes a Roth IRA and an employer sponsored IRA such as a SIMPLE IRA) or your non-erisa covered 403(b), if the shares are registered with the Fund (or in the current purchase broker-dealer s brokerage account) under your social security number or the trustee/custodian is providing IRA custody services for clients of the current purchase broker-dealer as an affiliate of, or under contract with, the firm; or 2

4 Any entity over which you or your spouse or domestic partner have individual or shared authority, as principal, to buy and sell shares for the account (for example, an UGMA/UTMA for a child on which you or your spouse or domestic partner are the custodian, a trust on which you or your spouse or domestic partner are the trustee, a business account [not to include retirement plans] for your solely owned business (or the solely owned business of your spouse or domestic partner) on which you (or your spouse or domestic partner) are the authorized signer); that are (ii) in one or more accounts maintained by the transfer agent for the Franklin Templeton funds on which your current purchase broker-dealer (as defined below) is the broker-dealer of record or one or more brokerage accounts maintained with your current purchase broker-dealer. Your current purchase broker-dealer is the broker-dealer (financial advisor) for the Fund account (or brokerage account) that will hold the shares from your current purchase. If you do not select a broker-dealer (financial advisor) for your current purchase, we will consider the distributor of the Fund s shares to be your current purchase broker-dealer for purposes of identifying cumulative quantity discount eligible shares that might be combined with your current purchase. If you believe there are cumulative quantity discount eligible shares that can be combined with your current purchase to achieve a sales charge breakpoint, you must, at the time of your purchase (including at the time of any future purchase) specifically identify those shares to your current purchase broker-dealer. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their highest current public offering price. You should retain any records necessary to substantiate historical share costs because your current purchase broker-dealer may not have or maintain this information. If there are cumulative quantity discount eligible shares that would qualify for combining with your current purchase and you do not tell your current purchase broker-dealer at the time of your current purchase or any future purchase, you may not receive the benefit of a reduced sales charge that might otherwise be available. Franklin Templeton fund shares held as follows cannot be combined with your current purchase for purposes of the Cumulative Quantity Discount: Shares held indirectly through financial intermediaries other than your current purchase broker-dealer (for example, shares held in a different broker-dealer s brokerage account or with a bank, an insurance company separate account or an investment advisor); Shares held through an administrator or trustee/custodian of an Employer Sponsored Retirement Plan (for example a 401(k) plan); Shares held in a 529 college savings plan; or Shares held directly in a Franklin Templeton fund account on which the broker-dealer (financial advisor) of record is different than your current purchase broker-dealer. Franklin Templeton fund assets held in multiple Employer Sponsored Retirement Plans may be combined in order to qualify for sales charge breakpoints at the plan level if the plans are sponsored by the same employer. 2. Letter of Intent (LOI) - expresses your intent to buy a stated dollar amount of cumulative quantity discount eligible shares (as defined in the Cumulative Quantity Discount section above) 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 5% of your total intended purchase in Class A shares registered in your name until you fulfill your LOI to cover any additional sales charge that may apply if you do not buy the amount stated in your LOI. Please refer to the SAI for more LOI details. To sign up for these programs, complete the appropriate section of your account application. VII. For all Funds, except the money funds and Fiduciary High Income Fund, all references to a redemption fee assessed on Fund shares sold within five (5) New York Stock Exchange trading days following their purchase date is changed to a redemption fee assessed on Fund shares sold within seven (7) calendar days following their purchase date. VIII. For all Funds, except the Franklin Global Trust Funds, the following is added to the Investor Services section: Valued Investor Program You may be eligible for the Valued Investor Program (VIP) if you are currently eligible for the $250,000 sales charge breakpoint based solely on shares registered directly with the Franklin Templeton funds transfer agent and excluding shares held indirectly through brokerage accounts. Franklin Templeton VIP shareholders enjoy enhanced service and transaction capabilities. Please contact Shareholder Services at for additional information on this program. 3

5 IX. The following replaces the paragraph Selling Recently Purchased Shares under the section Selling Shares : Selling Recently Purchased Shares If you sell shares recently purchased, we may delay sending you the proceeds until your check, draft or wire/electronic funds transfer has cleared, which may take seven business days or more. X. For the Franklin Mutual Series Fund Inc., the team responsible for the Funds management under the section Management is replaced with the following: The team responsible for the Funds management is: Anne E. Gudefin, CFA, Portfolio Manager of Franklin Mutual Ms. Gudefin has been a member of the management team of the Funds since 2000, when she joined Franklin Templeton Investments. Ms. Gudefin has been a portfolio manager for Mutual Qualified Fund since Previously, she was an analyst at Perry Capital. Todd J. Jonasz, Portfolio Manager of Franklin Mutual Mr. Jonasz has been a member of the management team of the Funds since 2002, when he joined Franklin Templeton Investments. He has been a portfolio manager for Mutual Financial Services Fund since Previously, he was a research analyst with Lazard Asset Management. Also, he was Vice President in Donaldson, Lufkin & Jenrette s equity research department. Charles M. Lahr, Assistant Portfolio Manager of Franklin Mutual Mr. Lahr has been as assistant portfolio manager for Mutual Beacon Fund since He joined Franklin Templeton Investments in Previously, he was a senior analyst for the State of Wisconsin Investment Board and also worked for U.S. Bancorp and the Principal Financial Group. F. David Segal CFA, Assistant Portfolio Manager of Franklin Mutual Mr. Segal has been as assistant portfolio manager for Mutual Discovery Fund since He joined Franklin Templeton Investments in Previously, he was an analyst in the Structured Finance Group of MetLife. Shawn M. Tumulty, Assistant Portfolio Manager of Franklin Mutual Mr. Tumulty has been an assistant portfolio manager for Mutual Qualified Fund since He joined Franklin Templeton Investments in Prior to joining Franklin Templeton Investments, Mr. Tumulty was an analyst and portfolio manager at Hamilton Partners Limited. Deborah A. Turner, CFA, Assistant Portfolio Manager of Franklin Mutual Ms. Turner has been an assistant portfolio manager for Mutual Shares Fund since She joined Franklin Templeton Investments in David J. Winters, CFA, President, Chief Executive Officer and Chief Investment Officer of Franklin Mutual Mr. Winters has been a member of the management team of the Funds since 1987, and is the portfolio manager with primary responsibility for the investments of Mutual Shares Fund, Mutual Beacon Fund, Mutual European Fund and Mutual Discovery Fund. He joined Franklin Templeton Investments in XI. The Management section regarding regulatory issues is revised as follows: On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the Company) claiming violations of the Massachusetts Uniform Securities Act (Massachusetts Act) with respect to an alleged arrangement to permit market timing (the Mass. Proceeding). On September 20, 2004, Franklin Resources, Inc. announced that an agreement had been reached by two of its subsidiaries, Franklin Advisers, Inc. (Advisers) and Franklin Templeton Alternative Strategies, Inc. (FTAS), with the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts (the State of Massachusetts) related to the Mass. Proceeding. Under the terms of the settlement consent order issued by the State of Massachusetts, Advisers and FTAS have consented to the entry of a cease and desist order and agreed to pay a $5 million administrative fine to the State of Massachusetts. The administrative complaint addressed one instance of market timing that was also a subject of the August 2, 2004 settlement that Advisers reached with the Securities and Exchange Commission described below. On November 19, 2004, the Company reached a second agreement with the State of Massachusetts regarding an administrative complaint filed on October 25, The second complaint alleged that the Company s Form 8-K filing describing the original settlement failed to state the company had admitted the Statements of Fact portion of the settlement order when it stated, Franklin did not admit or deny engaging in any wrongdoing. As a result of the November 19, 2004 settlement with the State of Massachusetts, the Company filed a new Form 8-K. The terms of the original settlement did not change and there was no monetary fine associated with this second settlement. 4

6 On November 17, 2004, the Company announced that Franklin Templeton Distributors, Inc. (Distributors) (the principal underwriter of shares of the Franklin Templeton mutual funds) reached an agreement with the California Attorney General s Office (CAGO), resolving the issues resulting from the CAGO s investigation concerning marketing support payments to securities dealers who sell fund shares. Under the terms of the settlement with the CAGO, Distributors has agreed to pay $2 million as a civil penalty, $14 million to Franklin Templeton funds and $2 million to the CAGO. The Company, in addition to most of the mutual funds within Franklin Templeton Investments, has been named in shareholder class actions related to the matter described above that were filed in the United States District Courts in California, Florida, Nevada, New Jersey and New York. These parties, as well as certain of the mutual funds trustees/ directors, have also been named in a shareholder class action filed in March 2004 in the United States District Court in New Jersey. This lawsuit alleges violations of certain provisions of the federal securities laws and state common law fiduciary obligations in connection with Rule 12b-1 fees and brokerage commissions paid by the mutual funds. These lawsuits seek damages of unspecified amounts. The Company believes that the claims made in the lawsuits are without merit and it intends to defend vigorously against the allegations. It is anticipated that additional similar civil actions related to the matters described above may be filed in the future. On August 2, 2004, Franklin Resources, Inc. announced that Advisers (adviser to many of the funds within Franklin Templeton Investments, and an affiliate of the adviser to the other funds) had reached a settlement with the U.S. Securities and Exchange Commission (SEC) that resolved an SEC investigation of market timing activity in the Franklin Templeton Investments funds. As part of the settlement, on August 2, 2004, the SEC issued an Order instituting administrative and cease-and-desist proceedings pursuant to sections 203(e) and 203(k) of the Investment Advisers Act of 1940 and sections 9(b) and 9(f) of the Investment Company Act of 1940, making findings and imposing remedial sanctions and a cease and desist order (the August Order). The SEC s August Order concerns the activities of a limited number of third parties that ended in 2000 and those that are the subject of the Mass. Proceeding described above. Under the terms of the SEC s August Order, Advisers, while neither admitting nor denying any of the findings therein, has agreed to pay $50 million, of which $20 million is a civil penalty, to be distributed to fund shareholders in accordance with a plan to be developed by an Independent Distribution Consultant. Because the distribution methodology has not yet been developed, it is presently not possible to say which particular funds will be determined to have been affected or which particular groups of fund shareholders will receive distributions or in what proportion and amounts. In the August Order, the SEC notes that the Company has generally sought to detect, discourage and prevent market timing in its funds and began to increase its efforts to control market timing in The August Order also requires Advisers to, among other things: Enhance and periodically review compliance policies and procedures, and establish a corporate ombudsman; Establish a new internal position whose responsibilities shall include compliance matters related to conflicts of interests; and Retain an Independent Distribution Consultant to develop a plan to distribute the $50 million settlement to fund shareholders. On December 13, 2004, the Company announced that it reached an agreement with the SEC, resolving the issues resulting from the SEC s investigation concerning marketing support payments to securities dealers who sell fund shares. The settlement agreement relates to an order (December Order) the SEC issued instituting administrative and cease-and-desist proceedings, making findings, and imposing remedial sanctions against Distributors and Advisers. In connection with this settlement, Advisers and Distributors also agreed to implement certain measures and undertakings relating to marketing support payments to broker-dealers for the promotion or sale of Fund shares, and to make additional disclosures in the Funds Prospectuses and Statements of Additional Information. Under the terms of the SEC s December Order, Advisers and Distributors, while neither admitting nor denying any of the findings therein, agreed to pay $20 million as a civil penalty, and $1 as restitution to be distributed to Franklin Templeton funds in accordance with a plan to be developed by an Independent Distribution Consultant. Because the distribution methodology has not yet been developed, it is presently not possible to say which particular funds will be determined to have been affected or will receive distributions or in what proportion and amounts. These issues were previously disclosed by the Company as being under investigation by government authorities and the subject of an internal inquiry by the Company in its regulatory filings and on its public website. Any further updates on these matters will be disclosed on the Company s website at franklintempleton.com under Statement on Current Industry Issues. XII. For all funds that are offered with an initial sales charge, effective February 1, 2005, the section Reinstatement Privilege is replaced with the following: If you sell shares of a Franklin Templeton fund that were held indirectly for your benefit in an account with your investment representative s firm or your bank s trust department or that were registered to you directly by the Fund s transfer agent (or, to an affiliated custodian or trustee of the Fund s transfer agent), you may reinvest all or a portion of the 5

7 proceeds from that sale within 90 days of the sale without an initial sales charge. 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 an Employer Sponsored Retirement Plan that is not a DCS Plan or a non-franklin Templeton individual or employer sponsored IRA. In order to take advantage of this Reinstatement Privilege, you must inform your investment representative or the Fund s transfer agent of this privilege at the time of your investment. The proceeds from the earlier sale must also be invested within the same share class as that of the sold shares, except proceeds from the sale of Class B shares, Class C shares or Class R shares will be reinvested in Class A shares if at the time of investment you have not appointed an investment representative (financial advisor) of record for the Fund account(s) in which the purchased shares will be held. Proceeds from the earlier sale of Class Z shares may also be invested in Class A shares under this Reinstatement Privilege. If you paid a CDSC when you sold your Class A, C or R shares, we 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 example, if you are reinvesting $10,000 within 90 days of an earlier $10,000 sale on which you paid a $100 CDSC, the amount of your reinvestment will equal $10,100). The new shares issued with your reinvestment WILL BE subject to any otherwise applicable CDSC. If, however, you (excepting Employer Sponsored Retirement Plans) paid a CDSC when you sold (1) Class B; or (2) Class C or R shares held at the time of sale in a Franklin Templeton fund account without an investment representative (financial advisor) appointed by you and invest the proceeds from that sale in Class A shares within 90 days of the sale, you will not be credited with any CDSC paid at the time of sale. In this case, the new Class A shares issued with your reinvestment WILL NOT BE subject to any otherwise applicable CDSC. 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 90 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. XIII. For all funds that offer B shares: The Boards of Directors/Trustees of all of the above-referenced funds have approved the termination of offering Class B shares (and Class B1 shares in the case of the Franklin Income Fund series of Franklin Custodian Funds, Inc.). The termination of the offering of Class B shares is effective March 1, Existing shareholders of Class B shares (and Class B1 shares) may continue as Class B shareholders, continue to reinvest dividends into Class B shares (and Class B1 shares) and exchange their Class B shares for Class B shares of other Franklin Templeton funds as permitted by the current exchange privileges. New or additional investments into Class B (or Class B1) will not be permitted after February 28, For Class B (or Class B1) shares outstanding on February 28, 2005 and Class B (or Class B1) shares acquired upon reinvestment of dividends, all Class B (or Class B1) share attributes, including the associated Rule 12b-1 fee, contingent deferred sales charge and conversion features, will continue. Please keep this supplement for future reference. 6

8 GOF P-9 SUPPLEMENT DATED OCTOBER 1, 2004 TO THE CURRENTLY EFFECTIVE PROSPECTUS OF EACH OF THE LISTED FUNDS Franklin California Tax-Free Income Fund, Inc. Franklin California Tax-Free Trust Franklin California Insured Tax-Free Income Fund Franklin California Intermediate-Term Tax-Free Income Fund Franklin California Limited-Term Tax-Free Income Fund Franklin California Tax-Exempt Money Fund Franklin Capital Growth Fund Franklin Custodian Funds, Inc. Franklin DynaTech Fund Franklin Growth Fund Franklin Income Fund Franklin U.S. Government Securities Fund Franklin Utilities Fund Franklin Federal Money Fund Franklin Federal Tax-Free Income Fund Franklin Floating Rate Trust Franklin Gold & Precious Metals Fund Franklin Global Trust Fiduciary European Smaller Companies Fund Fiduciary Large Capitalization Growth and Income Fund Fiduciary Small Capitalization Equity Fund Fiduciary Core Fixed Income Fund Fiduciary Core Plus Fixed Income Fund Fiduciary High Income Fund Franklin International Smaller Companies Growth Fund Franklin High Income Trust Franklin s AGE High Income Fund Franklin Investors Securities Trust Franklin Adjustable U.S. Government Securities Fund Franklin Convertible Securities Fund Franklin Equity Income Fund Franklin Floating Rate Daily Access Fund Franklin Short-Intermediate U.S. Government Securities 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 Series Fund Inc. Mutual Beacon Fund Mutual Discovery Fund Mutual European Fund Mutual Financial Services Fund Mutual Qualified Fund Mutual Shares Fund Franklin Mutual Recovery Fund Franklin New York Tax-Free Income Fund Franklin New York Tax-Free Trust Franklin New York Insured Tax-Free Income Fund Franklin New York Intermediate-Term Tax-Free Income Fund Franklin New York Limited-Term Tax-Free Income Fund Franklin New York Tax-Exempt Money Fund Franklin Real Estate Securities Trust Franklin Real Estate Securities Fund Franklin Strategic Mortgage Portfolio Franklin Strategic Series Franklin Aggressive Growth Fund Franklin Biotechnology Discovery Fund Franklin Blue Chip Fund Franklin Flex Cap Growth Fund Franklin Global Communications Fund Franklin Global Health Care Fund Franklin Natural Resources Fund Franklin Small-Mid Cap Growth Fund Franklin Small Cap Growth Fund II Franklin Strategic Income Fund Franklin Technology Fund Franklin U.S. Long-Short Fund Franklin Tax-Exempt Money 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 Insured 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 Insured Tax-Free Income Fund Franklin Michigan Insured Tax-Free Income Fund Franklin Minnesota Insured 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 Insured Tax-Free Income Fund Franklin Oregon Tax-Free Income Fund Franklin Pennsylvania Tax-Free Income Fund Franklin Virginia Tax-Free Income Fund 1 S109 Franklin Templeton Fund Allocator Series Franklin Templeton Conservative Target Fund Franklin Templeton Corefolio Allocation Fund Franklin Templeton Founding Funds Allocation Fund Franklin Templeton Growth Target Fund Franklin Templeton Moderate Target Fund Franklin Templeton Global Trust Franklin Templeton Hard Currency Fund Franklin Templeton International Trust Templeton Foreign Smaller Companies Fund Templeton Global Long-Short Fund Franklin Templeton Money Fund Trust Franklin Templeton Money Fund Franklin Value Investors Trust Franklin Balance Sheet Investment Fund Franklin Large Cap Value Fund Franklin MicroCap Value Fund Franklin Small Cap Value Fund Institutional Fiduciary Trust Franklin Cash Reserves Fund Franklin Structured Large Cap Core Equity Fund Franklin Structured Large Cap Growth Equity Fund Money Market Portfolio Templeton China World Fund Templeton Developing Markets Trust Templeton Funds, Inc. Templeton Foreign Fund Templeton World Fund Templeton Global Investment Trust Franklin Templeton Non-U.S. Dynamic Core Equity Fund Templeton International (Ex EM) Fund Templeton Global Opportunities Trust Templeton Global Smaller Companies Fund Templeton Growth Fund, Inc. Templeton Income Trust Templeton Global Bond Fund Templeton Institutional Funds, Inc. Emerging Fixed Income Markets Series Emerging Markets Series Foreign Equity Series - Primary Shares Foreign Smaller Companies Series Franklin Templeton Non-U.S. Core Equity Series

9 The prospectus is amended as follows: I. The section DEALER COMPENSATION is revised as follows: A) For all Funds and Classes, except for Advisor or Z Class, Money Market Funds, and Franklin Floating Rate Trust, the first paragraph is replaced with the following: 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 received from purchasing or redeeming shareholders, from distribution and service (12b-1) fees from the Fund(s) and from Distributors other financial resources. Dealers may also receive shareholder servicing fees for servicing investors who indirectly hold Franklin Templeton fund shares through dealer-maintained brokerage accounts as more fully described under Shareholder Servicing and Transfer Agent in the Statement of Additional Information. These fees are paid by the Fund s transfer agent from payments it receives under its agreement with the Fund. B) For all Funds and Classes, except for Advisor or Z Class, Money Market Funds, and Franklin Floating Rate Trust, the paragraph after the commission table entitled Market Timers is replaced with the following: If any dealer commissions are paid in connection with a purchase which is subsequently rejected or results in any trading restriction placed on the purchaser as a result of a determination by the Fund s manager or transfer agent that the purchase may be connected with trading activity that may be detrimental to the Fund as described in the Fund s Market Timing Trading Policy, the Dealer shall, upon demand, refund such commissions to Distributors. C) For all Funds and Classes, except for Advisor or Z Class and Money Market Funds, the following is added to the end of the section: Other dealer compensation. Distributors may make payments from 12b-1 or distribution fees received from the Fund(s) and from its other financial resources, to certain dealers who have sold shares of the Franklin Templeton mutual funds. In the case of any one dealer, marketing support payments will not exceed the sum of 0.10% of that dealer s current year s total sales of Franklin Templeton mutual funds, and 0.05% (or 0.03%) of the total assets of equity (or fixed income) funds attributable to that dealer, on an annual basis. Distributors makes these payments in connection with the qualifying dealers efforts to educate financial advisors about the Franklin Templeton funds. A number of factors will be considered in determining payments, including the qualifying dealer s sales, assets and redemption rates, and the quality of the dealer s relationship with Distributors. Distributors will, on an annual basis, determine the advisability of continuing these payments. To the extent permitted by SEC and NASD rules and other applicable laws and regulations, Distributors may pay or allow other promotional incentives or payments to dealers. Sale 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 can 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. 2

10 II. The first and third paragraphs under the section Management or Who Manages the Fund? are replaced with the following: On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the Company ) claiming violations of the Massachusetts Uniform Securities Act ( Massachusetts Act ) with respect to an alleged arrangement to permit market timing (the Mass. Proceeding ). On September 20, 2004, Franklin Resources, Inc. announced that an agreement has been reached by two of its subsidiaries, Franklin Advisers, Inc. ( Franklin Advisers ) and Franklin Templeton Alternative Strategies, Inc. ( FTAS ), with the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts (the State of Massachusetts ) related to the Mass. Proceeding. Under the terms of the settlement consent order issued by the State of Massachusetts, Franklin Advisers and FTAS have consented to the entry of a cease and desist order and agreed to pay a $5 million administrative fine to the State of Massachusetts. The administrative complaint addressed one instance of market timing that was also a subject of the August 2, 2004 settlement that Franklin Advisers reached with the Securities and Exchange Commission described below. On August 2, 2004, Franklin Resources, Inc. announced that Franklin Advisers, Inc. (adviser to many of the funds within Franklin Templeton Investments, and an affiliate of the adviser to the other funds) had reached a settlement with the U.S. Securities and Exchange Commission ( SEC ) that resolved an SEC investigation of market timing activity in the Franklin Templeton Investments funds. As part of the settlement, on August 2, 2004, the SEC issued an Order instituting administrative and cease-anddesist proceedings pursuant to sections 203(e) and 203(k) of the Investment Advisers Act of 1940 and sections 9(b) and 9(f) of the Investment Company Act of 1940, making findings and imposing remedial sanctions and a cease and desist order (the Order ). The SEC s Order concerns the activities of a limited number of third parties that ended in 2000 and those that are the subject of the Mass. Proceeding described above. Under the terms of the SEC s Order, pursuant to which Franklin Advisers, Inc., neither admits nor denies any wrongdoing, Franklin Advisers, Inc. has agreed to pay $50 million, of which $20 million is a civil penalty, to be distributed to fund shareholders in accordance with a plan to be developed by an Independent Distribution Consultant ( IDC ). Because the IDC has not yet been retained and the distribution methodology has not yet been developed, it is presently not possible to say which particular funds will be determined to have been affected or which particular groups of fund shareholders will receive distributions or in what proportion and amounts. In the Order, the SEC notes that the Company has generally sought to detect, discourage and prevent market timing in its funds and began to increase its efforts to control market timing in The Order also requires Franklin Advisers to, among other things: Enhance and periodically review compliance policies and procedures, and establish a corporate ombudsman; Establish a new internal position whose responsibilities shall include compliance matters related to conflicts of interests; and Retain an Independent Distribution Consultant to develop a plan to distribute the $50 million settlement to fund shareholders. The Staff of the SEC has also informed the Company that it is considering recommending a civil action or proceeding against Franklin Advisers, Inc. and Franklin Templeton Distributors, Inc. ( Distributors ) 3

11 (the principal underwriter of shares of the Franklin Templeton mutual funds) concerning payments to securities dealers who sell fund shares (commonly referred to as revenue sharing ). The staff of the California Attorney General s Office also has advised that the California Attorney General may bring a civil action against Franklin Resources, Inc. and Distributors arising from the same events. Even though the Company currently believes that the contemplated charges are unwarranted, it also believes that it is in the best interest of the Company and fund shareholders to resolve these issues voluntarily, to the extent the Company can reasonably do so. If it is found that the Company bears responsibility for any unlawful or improper conduct, the Company has committed to making the funds or their shareholders whole, as appropriate. These issues were previously disclosed by the Company as being under investigation by government authorities and the subject of an internal inquiry by the Company in its regulatory filings and on its public website. Any further updates on these matters will be disclosed on the Company s website at franklintempleton.com under Statement on Current Industry Issues. III. For funds that offer Class B shares, the paragraph Retirement Plans under the section Sales Charges-Class B is revised as follows: Class B shares are not available to Employer Sponsored Retirement Plans. IV. For Franklin Strategic Series funds, Franklin Real Estate Securities Fund, and Franklin Federal Tax-Free Income Fund, add the following paragraph under the section Sales Charges-Class B : Class B shares are not available to Employer Sponsored Retirement Plans. V. For all funds that offer online privileges: The ability to change or add a bank account online is no longer available. All references in the prospectus are modified accordingly. VI. For all funds that are offered with an initial sales charge: Effective November 1, 2004, investors may purchase Class B, Class C or Class R shares only for Fund accounts on which they have appointed an investment representative (financial advisor) of record. Unless eligible to purchase Class Z or Advisor Class shares, all purchases by a prospective investor to a Fund account that does not have an appointed investment representative (financial advisor) will be invested in Class A shares at the applicable offering price. Investors who have not appointed an investment representative (financial advisor) to existing Class B, Class C or Class R share Fund accounts, may not make additional purchases to those accounts but may exchange their shares to a Franklin Templeton fund that offers Class B, Class C or Class R shares. Additional purchases by these existing investors will be invested in Class A shares at the applicable offering price. Dividend and capital gain distributions may continue to be reinvested in existing Class B, Class C or Class R share Fund accounts. These provisions do not apply to Employer Sponsored Retirement Plans. VII. For all funds that are offered with an initial sales charge, the first paragraph and the paragraph beginning with, If you paid a CDSC under Reinstatement Privilege are replaced with the following: Effective February 1, 2005, if you sell shares of a Franklin Templeton fund that were registered to you directly by the Fund s transfer agent or by a bank affiliate of the Fund s transfer agent you may reinvest all or a portion of the proceeds from that sale in Fund shares registered to you, or to you jointly with another, within 90 days of the sale without an initial sales charge. 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 4

12 through a financial intermediary such as a broker-dealer, an investment advisor, a bank, an insurance company separate account, a sponsor of a 529 college savings plan, or an administrator or trustee/ custodian of an Employer Sponsored Retirement Plan, an employer sponsored IRA or a regular IRA. In order to take advantage of this Reinstatement Privilege, you must inform the Fund s transfer agent of this privilege at the time of your investment. The proceeds from the earlier sale must also be invested within the same share class as that of the sold shares, except proceeds from the sale of Class B shares (or Class B1 shares in Franklin Income Fund), Class C shares or Class R shares will be reinvested in Class A shares if at the time of investment you have not appointed an investment representative (financial advisor) of record for the Fund account(s) in which the purchased shares will be held. Proceeds from the earlier sale of Class Z shares may also be invested in Class A shares under this Reinstatement Privilege. If you paid a CDSC when you sold your Class A, C or R shares, we 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 example, if you are reinvesting $10,000 within 90 days of an earlier $10,000 sale on which you paid a $100 CDSC, the amount of your reinvestment will equal $10,100). The new shares issued with your reinvestment WILL BE subject to any otherwise applicable CDSC. If, however, you (excepting Employer Sponsored Retirement Plans) paid a CDSC when you sold (1) Class B or B1 shares; or (2) Class C or R shares held at the time of sale in a Franklin Templeton fund account without an investment representative (financial advisor) appointed by you and invest the proceeds from that sale in Class A shares within 90 days of the sale, you will not be credited with any CDSC paid at the time of sale. In this case, the new Class A shares issued with your reinvestment WILL NOT BE subject to any otherwise applicable CDSC. VIII. For all funds that are offered with an initial sales charge, the section Sales charge waivers is replaced with the following: Sales charge waivers. Class A shares may be purchased without an initial sales charge or CDSC by certain investors or for certain payments. If you would like information about available sales charge waivers, call your investment representative or call Shareholder Services at 1-800/ A list of available sales charge waivers also may be found in the Statement of Additional Information (SAI). IX. For all funds, effective February 1, 2005, all references regarding the ability to reinvest redemption proceeds or income distributions within 365 days are revised to 90 days. X. The following is added to the Investor Services section: Valued Investor Program. You may be eligible for the Valued Investor Program (VIP) if the total combined value of Franklin Templeton fund shares held directly with the funds in your name or the name of a legal entity over which you have exclusive control, in the name of your spouse, and in the names of your children or grandchildren who are under the age of 21 exceeds $250,000. Franklin Templeton VIP shareholders enjoy enhanced service and transaction capabilities. Please contact Shareholder Services at 1-800/ for additional information on this program. XI. For all funds, except money funds, the section Exchange limit guidelines under Exchanging Shares - Exchange Privilege is deleted. XII. For all funds that offer Class R shares, revise the paragraph under the bullet point that begins with Investors who open a Franklin Templeton IRA Rollover as follows: Investors who open a Franklin Templeton IRA Rollover with less than $1 million other than a current or former Franklin Templeton employee or as the result of a spousal rollover or a QDRO or with direct rollover proceeds from a DCS Plan. 5