PROSPECTUS
TEMPLETON
FOREIGN
FUND
ADVISOR CLASS
INVESTMENT STRATEGY
GLOBAL GROWTH
January 1, 1999
[FRANKLIN TEMPLETON LOGO]
FRANKLIN(R) TEMPLETON(R)
LIKE ALL MUTUAL FUND SHARES, 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.
<PAGE>
CONTENTS
THE FUND
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INFORMATION ABOUT THE 2 Goal and Strategies
FUND YOU SHOULD KNOW
BEFORE INVESTING 3 Main Risks
6 Performance
7 Fees and Expenses
8 Management
10 Distributions and Taxes
11 Financial Highlights
YOUR ACCOUNT
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INFORMATION ABOUT 12 Qualified Investors
QUALIFIED INVESTORS,
ACCOUNT TRANSACTIONS 13 Buying Shares
AND SERVICES
14 Investor Services
16 Selling Shares
18 Account Policies
20 Questions
FOR MORE INFORMATION
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WHERE TO LEARN MORE Back Cover
ABOUT THE FUND
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2
THE FUND
GOAL AND STRATEGIES
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[GRAPHIC OF TARGET]
GOAL The fund's investment goal is long-term capital growth.
PRINCIPAL INVESTMENTS Under normal market conditions, the fund will invest
primarily in the equity securities of companies located outside the U.S.,
including in emerging markets.
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The fund invests primarily in an internationally diversified portfolio of common
stocks.
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Equity securities generally entitle the holder to participate in a company's
general operating results. These include common stocks and preferred stocks. The
fund also invests in American, European and Global Depositary Receipts, which
are certificates typically issued by a bank or trust company that give their
holders the right to receive securities issued by a foreign or domestic company.
Depending upon current market conditions, the fund generally invests up to 25%
of its total assets in debt securities of companies and governments located
anywhere in the world. Debt securities represent an obligation of the issuer to
repay a loan of money to it, and generally provide for the payment of interest.
These include bonds, notes and debentures.
The Templeton investment philosophy is "bottom-up", value-oriented, and
long-term. In choosing equity investments, the fund's manager will focus on the
market price of a company's securities relative to its evaluation of the
company's long-term earnings, asset value and cash flow potential. A company's
historical value measures, including price/earnings ratio, profit margins and
liquidation value, will also be considered.
TEMPORARY INVESTMENTS The manager may take a temporary defensive position when
the manager believes 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 less in international stocks.
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Templeton Foreign Fund 3
MAIN RISKS
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[GRAPHIC LINE GRAPH]
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 markets as a whole. Value stock prices are
considered "cheap" relative to the company's perceived value. They may not
increase in value, as anticipated by the manager, if other investors fail to
recognize the company's value and bid up the price or in markets favoring
faster-growing companies.
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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.
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FOREIGN SECURITIES Securities of companies and governments 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. These movements will affect the fund's share price and
fund performance.
The political, economic and social structures of some countries the fund invests
in may be less stable and more volatile than those in the U.S. The risks of
investing in these countries include the possibility of the imposition of
exchange controls, currency devaluations, foreign ownership limitations,
expropriation, restrictions on removal of currency or other assets,
nationalization of assets, punitive taxes and certain custody and settlement
risks.
The fund's investments in developing or emerging markets are subject to all of
the risks of foreign investing generally, and have additional heightened risks
due to a lack of established legal, business and social frameworks to support
securities markets. Foreign securities markets, including emerging markets, may
have substantially lower trading volumes than U.S. markets, resulting in less
liquidity and more volatility than experienced in the U.S. While short-term
volatility in these markets can be disconcerting, declines in excess of 50% are
not unusual.
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4
COMPANY. Foreign companies are not 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 stock exchanges, trading systems, brokers and companies generally have
less government supervision and regulation than in the U.S. The fund may have
greater difficulty voting proxies, exercising shareholder rights, pursuing legal
remedies and obtaining judgments with respect to foreign investments in foreign
courts than with respect to U.S. companies in U.S. courts.
CURRENCY Many of 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 currency by a
country's government or banking authority also has a significant impact on the
value of any securities denominated in that currency.
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Mutual fund shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and are not federally 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.
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EURO. On January 1, 1999, the European Monetary Union (EMU) plans to introduce a
new single currency, the euro, which will replace the national currency for the
eleven participating member countries. If the fund holds investments in
countries with currencies replaced by the euro, the investment process,
including trading, foreign exchange, payments, settlements, cash accounts,
custody and accounting will be impacted.
Because this change to a single currency is new and untested, the establishment
of the euro may result in market volatility. For the same reason, 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 the value of fund shares and 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.
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Templeton Foreign Fund 5
ILLIQUID SECURITIES The fund may invest up to 10% of its total assets in
securities with a limited trading market. Such a market can result from
political or economic conditions affecting previously established securities
markets, particularly in emerging market countries.
INTEREST RATE When interest rates rise, debt security prices fall. The opposite
is also true; debt security prices go up when interest rates fall. Generally,
interest rates rise during times of inflation or a growing economy, and fall
during an economic slowdown or recession. Securities with longer maturities
usually are more sensitive to interest rate changes than securities with shorter
maturities.
CREDIT This is the possibility that an issuer will be unable to make interest
payments or repay principal. Changes in an issuer's financial strength or in a
security's credit rating may affect its value and, thus, impact the value of
fund shares.
YEAR 2000 When evaluating current and potential portfolio positions, Year 2000
is one of the factors the fund's manager considers.
The manager will rely upon public filings and other statements made by companies
about their Year 2000 readiness. Issuers in countries outside the U.S.,
particularly in emerging markets, may not be required to make the same level of
disclosure about Year 2000 readiness as is required in the U.S. The manager, of
course, cannot audit any company and its major suppliers to verify their Year
2000 readiness.
If a company in which the fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its security will also be adversely
affected. A decrease in the value of one or more of the fund's portfolio
holdings will have a similar impact on the price of the fund's shares. Please
see page 9 for more information.
More detailed information about the fund, its policies and risks can be found in
the fund's Statement of Additional Information (SAI).
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6
PERFORMANCE
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[GRAPHIC OF BULL AND BEAR]
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 10 calendar years. The table
shows how the fund's average annual total returns compare to those of a
broad-based securities market index. Of course, past performance cannot predict
or guarantee future results.
ADVISOR CLASS ANNUAL TOTAL RETURNS (1, 2)
[GRAPHIC OF BAR CHART]
YEAR TOTAL RETURN
- ----------------------------- ---------------
88 21.99% Best Quarter:
89 30.53% Q3 '89 13.32%
90 -3.01%
91 18.25% Worst Quarter:
92 0.10% Q3 '90 -11.65%
93 36.82% ----------------
94 0.35%
95 11.15%
96 18.00%
97 6.99%
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1997
1 Year 5 Years 10 Years
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Templeton Foreign Fund - Advisor Class(2) 6.99% 14.01% 13.42%
MSCI EAFE Index(3) 2.06% 11.71% 6.56%
1. As of September 30, 1998, the fund's year-to-date return was -15.06%.
2. Performance figures reflect a "blended" figure combining the following
methods of calculation: (a) For periods before January 1, 1997, a restated
figure is used based on the fund's Class A performance, excluding the effect of
Class A's maximum initial sales charge and including the effect of the Class A
distribution and service (12b-1) fees; and (b) for periods after January 1,
1997, an actual Advisor Class figure is used reflecting a deduction of all
applicable charges and fees for that class. This blended figure assumes
reinvestment of dividends and capital gains.
3. Source: Standard & Poor's(R) Micropal. The unmanaged MSCI Europe Australia
Far East (EAFE) Index tracks the performance of approximately 1,000 securities
in 21 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.
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Templeton Foreign Fund 7
FEES AND EXPENSES
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[GRAPHIC OF PERCENT SIGN]
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund. It is based on the fund's expenses for the fiscal year ended
August 31, 1998.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENt)
Advisor Class
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Maximum sales charge (Load) imposed on purchases None
Exchange fee(1) None
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
Advisor Class
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Management fees 0.61%
Distribution and service (12b-1) fees None
Other expenses 0.26%
----
Total annual fund operating expenses 0.87%
====
1. There is a $5 fee for each exchange by a market timer (see page 19).
EXAMPLE
This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
The example assumes you invest $10,000 for the periods shown and then sell all
of your shares at the end of those periods. The example also assumes your
investment has a 5% return each year and 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
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$89 $278 $482 $1,073
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8
MANAGEMENT
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[GRAPHIC OF SUITCASE]
Templeton Global Advisors Limited (Global Advisors), Lyford Cay, Nassau,
Bahamas, is the fund's investment manager. Together, Global Advisors and its
affiliates manage over $216 billion in assets.
The fund's lead portfolio manager is:
MARK G. HOLOWESKO CFA, PRESIDENT OF GLOBAL ADVISORS
Mr. Holowesko has been a manager of the fund since 1987. He joined the Franklin
Templeton Group in 1985.
The following individuals have secondary portfolio management responsibilities:
JEFFREY A. EVERETT CFA, EXECUTIVE VICE PRESIDENT OF GLOBAL ADVISORS
Mr. Everett has been a manager of the fund since 1994. He joined the Franklin
Templeton Group in 1989.
RICHARD SEAN FARRINGTON CFA, VICE PRESIDENT OF GLOBAL ADVISORS
Mr. Farrington has been a manager of the fund since 1993. He joined the Franklin
Templeton Group in 1991.
The fund pays the manager a fee for managing the fund's assets and making its
investment decisions. For the fiscal year ended August 31, 1998, the fund paid
0.61% of its average daily net assets to the manager.
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Templeton Foreign Fund 9
YEAR 2000 PROBLEM The fund's business operations depend on a worldwide network
of computer systems that contain date fields, including securities trading
systems, securities transfer agent operations and stock market links. Many of
the systems currently use a two digit date field to represent the date, and
unless these systems are changed or modified, they may not be able to
distinguish the Year 1900 from the Year 2000 (commonly referred to as the Year
2000 problem). In addition, the fact that the Year 2000 is a non-standard leap
year may create difficulties for some systems.
When the Year 2000 arrives, the fund's operations could be adversely affected if
the computer systems used by the manager, its service providers and other third
parties it does business with are not Year 2000 ready. For example, the fund's
portfolio and operational areas could be impacted, including securities trade
processing, interest and dividend payments, securities pricing, shareholder
account services, reporting, custody functions and others. The fund could
experience difficulties in effecting transactions if any of its foreign
subcustodians, or if foreign broker-dealers or foreign markets are not ready for
Year 2000.
The fund's manager and its affiliated service providers are making a concerted
effort to take steps they believe are reasonably designed to address their Year
2000 problems. Of course, the fund's ability to reduce the effects of the Year
2000 problem is also very much dependent upon the efforts of third parties over
which the fund and its manager may have no control.
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10
DISTRIBUTIONS AND TAXES
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[GRAPHIC OF MONEY]
INCOME AND CAPITAL GAINS DISTRIBUTIONS The 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 this distribution will vary and
there is no guarantee the fund will pay dividends.
To receive a distribution, you must be a shareholder on the record date. The
record date for the fund's distributions will vary. Please keep in mind that if
you invest in the 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
the fund's distributions, please call 1-800/DIAL BEN.
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 shares of the fund or receive them in cash. Any
capital gains the fund distributes are taxable to you as long-term capital gains
no matter how long you have owned your shares.
BACKUP WITHHOLDING
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By law, the fund must withhold 31% of your taxable distributions and proceeds
if you do not provide your correct taxpayer identification number (TIN) or
certify that your TIN is correct, or if the IRS instructs the fund to do so.
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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, 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 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 shares will
generally be subject to state and local income tax. Any foreign taxes the fund
pays on its investments may be passed through to you as a foreign tax credit.
Non-U.S. investors may be subject to U.S. withholding and estate tax. You should
consult your tax advisor about federal, state, local or foreign tax consequences
of your investment in the fund.
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Templeton Foreign Fund 11
FINANCIAL HIGHLIGHTS
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[GRAPHIC OF MONEY]
This table presents the financial performance for Advisor Class since its
inception. This information has been audited by McGladrey & Pullen, LLP.
<TABLE>
<CAPTION>
ADVISOR CLASS Year ended August 31,
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1998 1997(1)
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<S> <C> <C>
PER SHARE DATA ($)
Net asset value, beginning of year 11.42 10.26
--------------------------
Net investment income .33 .07
Net realized and unrealized gains (losses) (2.12) 1.09
--------------------------
Total from investment operations (1.79) 1.16
--------------------------
Dividends from net investment income (.35) --
Distributions from net realized gains (.84) --
--------------------------
Total distributions (1.19) --
--------------------------
Net asset value, end of year 8.44 11.42
==========================
Total return (%)(2) (17.75) 11.31
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 1,000) 50,022 139,100
Ratios to average net assets: (%)
Expenses .87 .83(3)
Net investment income 3.08 3.37(3)
Portfolio turnover rate (%) 38.27 37.28
</TABLE>
1. For the period January 2, 1997 (effective date) to August 31, 1997.
2. Total return is not annualized.
3. Annualized.
<PAGE>
12
YOUR ACCOUNT
QUALIFIED INVESTORS
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[GRAPHIC OF PENCIL AND PAPER]
The following investors may qualify to buy Advisor Class shares of the fund.
- - Qualified registered investment advisors or certified financial
planners with clients invested in any series of Franklin Mutual Series
Fund Inc. on October 31, 1996, or who buy through a broker-dealer or
service agent who has an agreement with Franklin Templeton
Distributors, Inc. (Distributors). Minimum investments: $1,000 initial
and $50 additional.
- - Broker-dealers, registered investment advisors or certified financial
planners who have an agreement with Distributors for clients
participating in comprehensive fee programs. Minimum investments:
$250,000 initial ($100,000 initial for an individual client) and $50
additional.
- - Officers, trustees, directors and full-time employees of Franklin
Templeton and their immediate family members. Minimum investments: $100
initial ($50 for accounts with an automatic investment plan) and $50
additional.
- - Each series of the Franklin Templeton Fund Allocator Series. Minimum
investments: $1,000 initial and $1,000 additional.
- - Accounts managed by the Franklin Templeton Group. Minimum investments:
No initial minimum and $50 additional.
- - The Franklin Templeton Profit Sharing 401(k) Plan. Minimum investments:
No initial minimum and $50 additional.
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Templeton Foreign Fund 13
BUYING SHARES
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[GRAPHIC OF PEN AND PAPER]
ACCOUNT APPLICATION If you are opening a new account, please complete and sign
the enclosed account application. 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).
<TABLE>
<CAPTION>
BUYING SHARES
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Opening an account Adding to an account
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<S> <C> <C> <C>
[GRAPHIC OF HANDSHAKE] THROUGH YOUR Contact your investment Contact your investment
INVESTMENT representative representative
REPRESENTATIVE
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[GRAPHIC OF ENVELOPE] BY MAIL Make your check payable to Make your check payable to
Templeton Foreign Fund. Templeton Foreign Fund. Include
your account number
Mail the check and your signed on the check.
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.
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[GRAPHIC OF WIRE] BY WIRE Call to receive a wire control Call to receive a wire control number
number and wire instructions. and wire instructions.
1-800/632-2301
(or 1-650/312-2000 Mail your signed application to To make a same day wire invest-
collect) Investor Services. Please include ment, please call us by 1:00 p.m.
the wire control number or your pacific time and make sure your
new account number on the wire arrives by 3:00 p.m.
application.
To make a same day wire invest-
ment, please call us by 1:00 p.m.
pacific time and make sure your
wire arrives by 3:00 p.m.
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[GRAPHIC OF ARROWS] BY EXCHANGE Call Shareholder Services at the num- Call Shareholder Services at the
ber below, or send signed written number below or send signed writ-
instructions. (Please see page 15 for ten instructions. (Please see page 15
information on exchanges.) for information on exchanges.)
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</TABLE>
FRANKLIN TEMPLETON INVESTOR SERVICES 100 FOUNTAIN PARKWAY, P.O. BOX 33030,
ST. PETERSBURG, FL 33733-8030
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME)
<PAGE>
14
INVESTOR SERVICES
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[GRAPHIC OF PERSON]
AUTOMATIC INVESTMENT PLAN This plan offers a convenient way for you to invest in
the 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.
DISTRIBUTION OPTIONS You may reinvest distributions you receive from the fund in
an existing account in the same share class of the fund or in Advisor Class or
Class A shares of another Franklin Templeton Fund. To reinvest your
distributions in Advisor Class shares of another Franklin Templeton Fund, you
must qualify to buy that fund's Advisor Class shares. For distributions
reinvested in Class A shares of another Franklin Templeton Fund, initial sales
charges and contingent deferred sales charges (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.
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.
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 fund 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.
<PAGE>
Templeton Foreign Fund 15
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. You also may exchange your Advisor Class shares for Class
A shares of a fund that does not currently offer an Advisor Class (without any
sales charge)* or for Class Z shares of Franklin Mutual Series Fund Inc.
Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee.
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
19).
*If you exchange into Class A shares and you later decide you would like to
exchange into a fund that offers an Advisor Class, you may exchange your Class A
shares for Advisor Class shares if you otherwise qualify to buy the fund's
Advisor Class shares.
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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. Exchanges also have the same tax consequences as ordinary sales
and purchases.
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SYSTEMATIC WITHDRAWAL PLAN This plan allows you to automatically sell your
shares and receive regular payments from your account. Certain terms and
minimums apply. To sign up, complete the appropriate section of your
application.
<PAGE>
16
SELLING SHARES
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[GRAPHIC OF CERTIFICATE]
You can sell your shares at any time.
SELLING SHARES IN WRITING Requests to sell $100,000 or less can generally 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:
- - you are selling more than $100,000 worth of shares
- - you want your proceeds paid to someone who is not a registered owner
- - you want to send your proceeds somewhere other than the address of
record, or preauthorized bank or brokerage firm account
- - you have changed the address on your account by phone within the last
15 days
We may also 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.
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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.
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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.
<PAGE>
Templeton Foreign Fund 17
SELLING SHARES
<TABLE>
<CAPTION>
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To sell some or all of your shares
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<S> <C> <C>
[GRAPHIC OF HANDS SHAKING] Through your Contact your investment representative
investment
representative
- ----------------------------------------------------------------------------------------------------------------------------
[GRAPHIC OF ENVELOPE] BY MAIL Send written instructions and endorsed share certificates (if you hold share certi-
ficates) 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. 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.
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[GRAPHIC OF TELEPHONE] BY PHONE As long as your transaction is for $100,000 or less, you do not hold share
1-800/632-2301 certificates and you have not changed your address by phone within the last 15
days, 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.
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[GRAPHIC OF WIRE] BY WIRE You can call or write to have redemption proceeds of $1,000 or more wired to a
bank or escrow account. See the policies above for selling shares by mail or
phone.
Before requesting a wire, 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, your bank account number, the
ABA routing number, and a signature guarantee.
Requests received in proper form by 1:00 p.m. pacific time will be wired the next
business day.
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[GRAPHIC OF ARROWS] BY EXCHANGE Obtain a current prospectus for the fund you are considering.
Call Shareholder Services at the number below or send signed written
instructions. See the policies above for selling shares by mail or phone.
If you hold share certificates, you will need to return them to the fund before
your exchange can be processed.
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</TABLE>
FRANKLIN TEMPLETON INVESTOR SERVICES 100 FOUNTAIN PARKWAY, P.O. BOX 33030,
ST. PETERSBURG, FL 33733-8030
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME)
<PAGE>
18
ACCOUNT POLICIES
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[GRAPHIC OF PENCIL AND PAPER]
CALCULATING SHARE PRICE The fund calculates the 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). The NAV for Advisor Class is calculated by
dividing its net assets by the number of its shares outstanding.
The 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 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.
STATEMENTS AND REPORTS You will receive confirmations and account statements
that show your account transactions. You will also 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 will also receive confirmations, account statements and other
information about your account directly from the fund.
<PAGE>
Templeton Foreign Fund 19
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 fund may restrict or refuse exchanges by market timers. If
accepted, each exchange by a market timer will be charged $5. 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 made large or frequent exchanges. Shares under common ownership or
control are combined for these limits.
ADDITIONAL POLICIES Please note that the fund maintains additional policies and
reserves certain rights, including:
- - The fund may refuse any order to buy shares, including any purchase
under the exchange privilege.
- - At any time, the fund may change its investment minimums or waive or
lower its minimums for certain purchases.
- - The fund may modify or discontinue the exchange privilege on 60 days'
notice.
- - You may only buy shares of a fund eligible for sale in your state or
jurisdiction.
- - In unusual circumstances, we may temporarily suspend redemptions, or
postpone the payment of proceeds, as allowed by federal securities
laws.
<PAGE>
20
- - For redemptions over a certain amount, the 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 would be harmful to existing
shareholders.
- - To permit investors to obtain the current price, dealers are
responsible for transmitting all orders to the fund promptly.
DEALER COMPENSATION Qualifying dealers who sell Advisor Class shares may receive
up to 0.25% of the amount invested. This amount is paid by Franklin Templeton
Distributors, Inc. from its own resources.
QUESTIONS
- --------------------------------------------------------------------------------
[GRAPHIC OF QUESTION MARK]
If you have any questions about the fund or your account, you can write to us at
100 Fountain Parkway, P.O. Box 33030, St. Petersburg, FL 33733-8030. 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.
<TABLE>
<CAPTION>
Hours (pacific time,
Department Name Telephone Number Monday through Friday)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholder Services 1-800/ 632-2301 5:30 a.m. to 5:00 p.m.
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 Plan Services 1-800/ 527-2020 5:30 a.m. to 5:00 p.m.
Dealer 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.
</TABLE>
<PAGE>
FRANKLIN TEMPLETON LITERATURE REQUEST
Call 1-800/DIAL BEN(R) (1-800/342-5236) today for a free descriptive brochure
and prospectus on any of the funds listed below. The prospectus contains more
complete information, including fees, sales charges and expenses, and should be
read carefully before investing or sending money.
GLOBAL GROWTH
Franklin Global Health Care Fund
Mutual Discovery Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Global Infrastructure Fund
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH
AND INCOME
Franklin Global Utilities Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
GLOBAL INCOME
Franklin Global Government Income Fund
Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Templeton Americas Government Securities Fund
GROWTH
Franklin Biotechnology Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet Investment Fund*
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund*
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
FUND ALLOCATOR SERIES
Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
INCOME
Franklin Adjustable Rate Securities Fund
Franklin Adjustable U.S. Government Securities Fund
Franklin's AGE High Income Fund
Franklin Bond Fund
Franklin Floating Rate Trust
Franklin Investment Grade Income Fund
Franklin Short-Intermediate U.S. Government Securities Fund
Franklin Strategic Income Fund
Franklin U.S. Government Securities Fund
Franklin Money Fund
TAX-FREE INCOME
Federal Intermediate-Term Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
STATE-SPECIFIC TAX-FREE INCOME
Alabama
Arizona**
Arkansas***
California**
Colorado
Connecticut
Florida**
Georgia
Hawaii***
Indiana
Kentucky
Louisiana
Maryland
Massachusetts+
Michigan**
Minnesota+
Missouri
New Jersey
New York**
North Carolina
Ohio+
Oregon
Pennsylvania
Tennessee***
Texas
Virginia
Washington***
VARIABLE ANNUITIES++
Franklin Valuemark(R)
Franklin Templeton Valuemark
Income Plus (an immediate
annuity)
* These funds are now closed to new accounts, with the exception of
retirement plan accounts.
** Two or more fund options available: long-term portfolio,
intermediate-term portfolio, a portfolio of insured municipal
securities, and/or a high yield portfolio (CA) and a money market
portfolio (CA and NY).
*** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
+ Portfolio of insured municipal securities.
++ Franklin Valuemark and Franklin Templeton Valuemark Income Plus are
issued by Allianz Life Insurance Company of North America or by its
wholly owned subsidiary, Preferred Life Insurance Company of New York,
and distributed by NALAC Financial Plans, LLC. The Franklin Valuemark
Funds are managed by Franklin Advisers, Inc. and its Templeton and
Franklin affiliates.
12/98
<PAGE>
FOR MORE INFORMATION
You can learn more about the 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.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more information about the 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.franklin-templeton.com
You can also obtain information about the fund by visiting the SEC's
Public Reference Room in Washington D.C. (phone 1-800/SEC-0330) or
by sending your request and a duplicating fee to the SEC's Public
Reference Section, Washington, DC 20549-6009. You can also visit the
SEC's Internet site at http://www.sec.gov.
Investment Company Act file #811-2781 104 PA 01/99
