TEMPLETON GLOBAL SMALLER COMPANIES FUND INC
497, 1998-01-02
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                              PROSPECTUS & APPLICATION

                            INVESTMENT STRATEGY:
                            GLOBAL GROWTH         Templeton
                                                  Global Smaller
                                                  Companies Fund, Inc.
                                                  ADVISOR CLASS

                                                  JANUARY 1, 1998
                                                  [LOGO FRANKLIN TEMPLETON]


- ------------------------------------------------------------------------------
This prospectus  describes the Advisor Class shares of Templeton  Global Smaller
Companies  Fund,  Inc. (the  "Fund").  It contains  information  you should know
before investing in the Fund. Please keep it for future reference.

The Fund currently  offers other classes of shares with  different  sales charge
and expense structures, which affect performance. These classes are described in
a  separate   prospectus.   For  more   information,   contact  your  investment
representative or call 1-800/DIAL BEN.

The Fund has a  Statement  of  Additional  Information  ("SAI")  for its Advisor
Class,  dated  January  1,  1998,  which may be  amended  from time to time.  It
includes more information about the Fund's procedures and policies.  It has been
filed with the SEC and is incorporated by reference into this prospectus.  For a
free copy or a larger print version of this prospectus, call 1-800/DIAL BEN.

SHARES OF THE FUND 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.  SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.


LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE  SEC OR ANY  STATE  SECURITIES  COMMISSION  NOR  HAS  THE  SEC OR ANY  STATE
SECURITIES  COMMISSION  PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.


<PAGE>



TEMPLETON GLOBAL
SMALLER COMPANIES FUND, INC.
- -------------------------------------------------------------------------------

THIS  PROSPECTUS IS NOT AN OFFERING OF THE  SECURITIES  HEREIN  DESCRIBED IN ANY
STATE, JURISDICTION OR COUNTRY IN WHICH THE OFFERING IS NOT AUTHORIZED. NO SALES
REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.  FURTHER
INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.



<PAGE>



TEMPLETON GLOBAL 
SMALLER COMPANIES FUND, INC.  --  ADVISOR CLASS
- ------------------------------------------------------------------------------
January 1, 1998

When reading this prospectus, you will see certain terms beginning with capital
letters.  This means the term is explained in our glossary section.
 

    TABLE OF CONTENTS

    ABOUT THE FUND

    Expense Summary ..................2
    Financial Highlights .............3
    How Does the Fund Invest  
     Its Assets? .....................3
    What Are the Risks of
     Investing in the Fund? ..........6
    Who Manages the Fund? ............8
    How Does the Fund Measure
     Performance? ...................10
    How Taxation Affects the Fund
     and Its Shareholders ...........11
    How Is the Fund Organized?.......15

    ABOUT YOUR ACCOUNT

    How Do I Buy Shares? ............16
    May I Exchange Shares for
     Shares of Another Fund? ........19
    How Do I Sell Shares?  ..........21
    What Distributions Might I
     Receive From the Fund? .........23
    Transaction Procedures and
     Special Requirements ...........24
   Services to Help You Manage  
    Your Account  ...................29
    What If I Have Questions
     About My Account? ..............31

    GLOSSARY

    Useful Terms and Definitions ....32

    100 Fountain Parkway
    P.O. Box 33030
    St. Petersburg, FL
    33733-8030

    1-800/DIAL BEN



<PAGE>



    ABOUT THE  FUND

    EXPENSE SUMMARY

    This table is designed to help you  understand the costs of investing in the
    Fund.  It is based on the  historical  expenses of the Advisor Class for the
    period from January 2, 1997 (commencement of sales) through August 31, 1997.
    The expenses are annualized. The Fund's actual expenses may vary.

A.  SHAREHOLDER TRANSACTION EXPENSES(+)

      Maximum Sales Charge Imposed on Purchases                NONE
      Exchange Fee (per transaction)                          $5.00*

B.  ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
      AVERAGE NET ASSETS)

      Management Fees                                         0.75%
      Rule 12b-1 Fees                                         NONE
      Other Expenses                                          0.30%
                                                           --------
      Total Fund Operating Expenses                           1.05%
                                                           -------- 

C. EXAMPLE

    Assume the  annual  return for the class is 5%,  operating  expenses  are as
    described  above,  and you sell your shares after the number of years shown.
    These are the  projected  expenses  for each  $1,000  that you invest in the
    Fund.

<TABLE>
<CAPTION>


         ONE YEAR                  THREE YEARS                   FIVE YEARS                TEN YEARS
      ------------------------- ------------------------------ ------------------------- -------------
     <S>                       <C>                             <C>                      <C>    
           $11                        $ 33                          $ 58                     $ 128
</TABLE>


    THIS IS JUST AN EXAMPLE.  IT DOES NOT REPRESENT  PAST OR FUTURE  EXPENSES OR
    RETURNS.  ACTUAL  EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
    The Fund pays its  operating  expenses.  The effects of these  expenses  are
    reflected in its Net Asset Value or dividends  and are not directly  charged
    to your account.

(+)IF YOUR TRANSACTION IS PROCESSED THROUGH YOUR SECURITIES  DEALER,  YOU MAY BE
CHARGED A FEE BY YOUR SECURITIES DEALER FOR THIS SERVICE.
*$5.00 FEE IS ONLY FOR MARKET TIMERS.  WE PROCESS ALL OTHER EXCHANGES  WITHOUT A
FEE.



<PAGE>



FINANCIAL HIGHLIGHTS

This table  summarizes the financial  history of the Fund's  Advisor Class.  The
information has been audited by McGladrey & Pullen,  LLP, the Fund's independent
auditors.  Their audit report  covering  the period  shown below  appears in the
financial  statements in the Fund's Annual Report to Shareholders for the fiscal
year ended August 31, 1997. The Annual Report to Shareholders also includes more
information  about the Fund's  performance.  For a free copy,  please  call Fund
Information.

<TABLE>
<CAPTION>

ADVISOR CLASS SHARES
PERIOD ENDED AUGUST 31                                                      1997(1)
- ------------------------------------------------------------------------ -------------
<S>                                                                      <C>  
Per Share Operating Performance
(for a share outstanding throughout the period)
Net Asset Value, beginning of period.................................    $   8.33
                                                                         --------
Income from investment operations:
  Net investment income..............................................         .10
  Net realized and unrealized gain...................................        1.12
                                                                         --------
Total from investment operations.....................................        1.22
                                                                         --------
Net Asset Value, end of period.......................................    $   9.55
                                                                         ========
Total return(2)......................................................       14.65%
Ratios/Supplemental Data:
Net assets, end of period (000)......................................    $ 7,895
Ratios to average net assets:
  Expenses...........................................................        1.05%(3)
  Net investment income..............................................        2.18%(3)
Portfolio turnover rate..............................................       25.60%
Average commission rate paid(4)......................................    $  .0009
</TABLE>

(1)FOR THE PERIOD FROM JANUARY 2, 1997  (COMMENCEMENT  OF SALES)  THROUGH AUGUST
31, 1997.
(2)TOTAL RETURN IS NOT ANNUALIZED.
(3)ANNUALIZED.
(4)RELATES TO PURCHASES AND SALES OF EQUITY SECURITIES.


HOW DOES THE FUND INVEST ITS ASSETS?

WHAT IS THE FUND'S GOAL?

The  investment  goal of the Fund is  long-term  capital  growth.  This  goal is
fundamental which means that it may not be changed without shareholder approval.
<PAGE>

WHAT KINDS OF SECURITIES DOES THE FUND PURCHASE?

The Fund tries to achieve its  investment  goal by  investing  primarily  in the
equity  securities  of smaller  companies  of any nation.  Under  normal  market
conditions,  the Fund will  invest at least 65% of its total  assets in  issuers
located in at least three countries (including the U.S.). The Fund may invest up
to 35% of its assets in securities other than equity securities,  including debt
securities.

SMALLER  COMPANIES.  The Fund  expects to invest 75% of its assets in  companies
whose market  capitalizations  would place them (at the time of purchase) in the
same size  range as  companies  falling  in  approximately  the lowest 20% range
(based on their total market  capitalization) whose equity securities are listed
on a U.S. national securities exchange or traded in the NASDAQ system.  Based on
recent U.S. share prices, these companies typically have market  capitalizations
between approximately $50 million and $1 billion.  Because the Fund is permitted
to apply the U.S. size standard on a global basis, it may invest in issuers that
might rank above the lowest 20% by total market  capitalization in local markets
and, in fact, might in some countries rank among the largest  companies in terms
of capitalization.  The Board has adopted an operating policy that the Fund will
not purchase securities of companies with market capitalizations of more than $1
billion. This policy may be changed by the Board without shareholder approval.

EQUITY  SECURITIES  generally  entitle the holder to  participate in a company's
general  operating  results.   These  include  common  stock;  preferred  stock;
convertible securities; warrants or rights.

In selecting  these equity  securities,  Investment  Counsel does a  company-by-
company  analysis,  rather  than  focusing  on a specific  industry  or economic
sector.  Investment  Counsel  concentrates  primarily  on the market  price of a
company's  securities  relative to its view  regarding the  company's  long-term
earnings  potential.  A company's  historical  value measures,  including price/
earnings ratios, profit margins and liquidation value, will also be considered.

DEBT  SECURITIES  represent an obligation of the issuer to repay a loan of money
to it, and generally, provides for the payment of interest. These include bonds,
notes and debentures; commercial paper; time deposits; bankers' acceptances; and
structured investments which are described more fully in the SAI.
<PAGE>

The Fund may buy both rated and  unrated  debt  securities.  Independent  rating
organizations  rate debt securities based upon their assessment of the financial
soundness of the issuer.  Generally,  a lower rating  indicates  higher risk. At
present,  the Fund does not intend to invest more than 5% of its total assets in
non-investment grade securities (rated lower than BBB by S&P or Baa by Moody's).
Please see the SAI for more  details on the risks  associated  with  lower-rated
securities.

DEPOSITARY RECEIPTS.  The Fund may also invest in American,  European and Global
Depositary Receipts.  Depositary Receipts 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 corporation.

GENERAL.  The Fund may invest  without  percentage  limitation  in  domestic  or
foreign  securities.  The  Fund  may  invest  up to 5% of its  total  assets  in
securities issued by any one company or foreign government.  The Fund may invest
any amount of its assets in U.S. government  securities.  The Fund may invest in
any industry although it will not concentrate (invest more than 25% of its total
assets) in any one  industry.  The Fund may invest up to 10% of its total assets
in  restricted  securities,   securities  with  a  limited  trading  market  and
securities which are not otherwise readily marketable.

Please see the SAI for more details on the types of securities in which the Fund
invests.

WHAT ARE SOME OF THE FUND'S OTHER INVESTMENT STRATEGIES AND PRACTICES?

TEMPORARY  INVESTMENTS.  When  Investment  Counsel  believes that the securities
trading  markets or the  economy  are  experiencing  excessive  volatility  or a
prolonged general decline,  or other adverse conditions exist, it may invest the
Fund's portfolio in a temporary defensive manner. Under such circumstances,  the
Fund may invest up to 100% of its assets in: (1) debt securities of companies of
any  nation;  (2)  debt  securities  of the  U.S.  government  or its  political
subdivisions and of other governments; (3) short-term (maturities up to 60 days)
time deposits with banks; (4) commercial  paper;  and (5) repurchase  agreements
with banks and broker-dealers.
<PAGE>

REPURCHASE  AGREEMENTS.  The Fund will generally have a portion of its assets in
cash or cash  equivalents  for a variety  of  reasons  including  waiting  for a
special investment opportunity or taking a defensive position. To earn income on
this portion of its assets,  the Fund may enter into repurchase  agreements with
certain banks and broker-dealers.  Under a repurchase agreement, the Fund agrees
to buy a U.S. government security from one of these issuers and then to sell the
security back to the issuer after a short period of time  (generally,  less than
seven days) at a higher price.  The bank or  broker-dealer  must transfer to the
Fund's custodian securities with an initial value of at least 102% of the dollar
amount invested by the Fund in each repurchase agreement.

SHORT-TERM  TRADING AND  PORTFOLIO  TURNOVER.  The Fund  invests  for  long-term
capital growth and does not intend to emphasize  short-term trading profits.  It
is  anticipated,  therefore,  that the Fund's  annual  portfolio  turnover  rate
generally  will be below  50%;  although  this rate may be  higher or lower,  in
relation to market conditions.  A portfolio turnover rate of less than 50% means
that in a one year  period,  less  than  one-half  of the  Fund's  portfolio  is
changed.

OTHER POLICIES AND RESTRICTIONS.  The Fund has a number of additional investment
restrictions that govern its activities.  Some of these restrictions may only be
changed  with  shareholder  approval and some may be changed by the Board alone.
For a  list  of  these  restrictions  and  more  information  about  the  Fund's
investment  policies,  including those  described  above,  and their  associated
risks,  please  see "How  Does the Fund  Invest  Its  Assets?"  and  "Investment
Restrictions" in the SAI.

The policies and  restrictions  discussed in this  prospectus and in the SAI are
applied  at the time the Fund makes an  investment.  The Fund is  generally  not
required to sell a security because of a change in circumstances.

WHAT ARE THE RISKS OF INVESTING IN THE FUND?

GENERAL RISK. There is no assurance that the Fund's investment goal will be met.
The Fund will seek to spread investment risk by diversifying its investments but
the possibility of losses remain. Generally, if the securities owned by the Fund
<PAGE>

increase  in  value,  the  value of the  shares  of the Fund  which you own will
increase.  Similarly, if the securities owned by the Fund decrease in value, the
value of your shares will also  decline.  In this way,  you  participate  in any
change in the value of the securities owned by the Fund.

FOREIGN  SECURITIES RISK. The value of foreign (and U.S.) securities is affected
by general  economic  conditions  and individual  company and industry  earnings
prospects.  While foreign  securities may offer  significant  opportunities  for
gain,  they also involve  additional  risks that can increase the  potential for
losses in the Fund. These risks can be significantly  greater for investments in
emerging markets. Investments in Depositary Receipts also involve some or all of
the risks described below.

The  political,  economic and social  structures of some  countries in which the
Fund  invests 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,  expropriation,  restrictions  on removal of currency or
other assets, nationalization of assets, and punitive taxes.

There may be less  publicly  available  information  about a foreign  company or
government  than  about a U.S.  company  or public  entity.  Certain  countries'
financial  markets and  services  are less  developed  than those in the U.S. or
other  major  economies.  As a  result,  they may not have  uniform  accounting,
auditing  and  financial  reporting  standards  and  may  have  less  government
supervision  of  financial   markets.   Foreign   securities  markets  may  have
substantially  lower  trading  volumes  than  U.S.  markets,  resulting  in less
liquidity and more volatility than experienced in the U.S.  Transaction costs on
foreign  securities markets are generally higher than in the U.S. The settlement
practices  may be  cumbersome  and result in delays  that may  affect  portfolio
liquidity.  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 domestic  issuers
in U.S. courts.

Some of the  countries  in which the Fund may invest  such as Russia and certain
Asian and Eastern  European  countries  are  considered  developing  or emerging
markets. Investments in these markets are subject to all of the risks of foreign
investing  generally,  and have additional and heightened risks due to a lack of
legal, business and social frameworks to support securities markets.

<PAGE>

Emerging markets involve significant  additional risks,  including political and
social uncertainty (for example,  regional conflicts and risk of war),  currency
exchange  rate  volatility,  pervasiveness  of corruption  and crime,  delays in
settling  portfolio  transactions  and risk of loss arising out of the system of
share  registration  and  custody.  The Fund may  invest up to 100% of its total
assets in emerging  markets,  including  up to 5% of its total assets in Russian
securities.  For more  information on the risks associated with emerging markets
securities, please see the SAI.

On July 1, 1997,  Hong Kong reverted to the  sovereignty  of China.  As with any
major  political  transfer of power,  this could  result in  political,  social,
economic,  market or other  developments in Hong Kong,  China or other countries
that could affect the value of Fund investments.

SMALLER COMPANIES RISK. Historically,  smaller company securities have been more
volatile  in price than larger  company  securities,  especially  over the short
term.  Among the reasons for the greater price  volatility  are the less certain
growth  prospects  of smaller  companies,  the lower  degree of liquidity in the
markets for such securities and the greater  sensitivity of smaller companies to
changing economic conditions.

In addition, smaller companies may lack depth of management,  they may be unable
to generate funds  necessary for growth or development or they may be developing
or marketing new products or services for which markets are not yet  established
and may never become established.

Therefore,  while smaller companies may offer greater  opportunities for capital
growth than larger, more established companies,  they also involve greater risks
and should be considered speculative.

MARKET,  CURRENCY,  AND  INTEREST  RATE RISK.  General  market  movements in any
country  where the Fund has  investments  are  likely to affect the value of the
securities  which the Fund owns in that  country and the Fund's  share price may
also  be  affected.  The  Fund's  investments  may  be  denominated  in  foreign
currencies so that changes in foreign  currency  exchange rates will also affect
the value of what the Fund owns, and thus the price of its shares. To the extent
the Fund invests in debt  securities,  changes in interest  rates in any country
where the Fund is invested  will affect the value of the Fund's  portfolio  and,

<PAGE>

consequently,  its share price.  Rising interest rates, which often occur during
times of inflation or a growing economy, are likely to cause the face value of a
debt security to decrease,  having a negative  effect on the value of the Fund's
shares.  Of course,  individual and worldwide stock markets,  interest rates and
currency   valuations   have  both  increased  and  decreased,   sometimes  very
dramatically, in the past. These changes are likely to occur again in the future
at unpredictable times.

CREDIT AND ISSUER RISK. The Fund's investments in debt securities involve credit
risk. This is the risk that the issuer of a debt security will be unable to make
principal and interest payments in a timely manner and the debt security will go
into  default.  The Fund may invest up to 10% of its total  assets in  defaulted
debt securities.  The purchase of defaulted debt securities involves significant
additional  risks, such as the possibility of complete loss of the investment in
the event the issuer does not  restructure  or reorganize to enable it to resume
paying interest and principal to holders.


WHO MANAGES THE FUND?


THE  BOARD.  The  Board  oversees  the  management  of the Fund and  elects  its
officers. The officers are responsible for the Fund's day-to-day operations. The
Board also  monitors  the Fund to ensure no material  conflicts  exist among the
Fund's  classes  of  shares.  While  none  is  expected,   the  Board  will  act
appropriately to resolve any material conflict that may arise.

INVESTMENT  MANAGER.  Investment Counsel manages the Fund's assets and makes its
investment  decisions.  Investment  Counsel also performs  similar  services for
other funds.  It is wholly owned by Resources,  a publicly owned company engaged
in the financial services industry through its subsidiaries.  Charles B. Johnson
and  Rupert  H.  Johnson,  Jr.  are the  principal  shareholders  of  Resources.
Together,  Investment  Counsel and its  affiliates  manage over $223  billion in
assets.  The Templeton  organization  has been  investing  globally  since 1940.
Investment  Counsel and its  affiliates  have offices in  Argentina,  Australia,
Bahamas,  Canada,  France,  Germany,  Hong Kong,  India,  Italy,  Japan,  Korea,
Luxembourg,  Poland,  Russia,  Singapore,  South Africa, Taiwan, United Kingdom,
U.S., and Vietnam.  Please see  "Investment  Management and Other  Services" and
"Miscellaneous   Information"   in  the  SAI  for   information   on  securities
transactions and a summary of the Fund's Code of Ethics.
<PAGE>

PORTFOLIO  MANAGEMENT.  The Fund's lead portfolio manager since 1997 is Peter A.
Nori.  Mr. Nori is a vice  president  of  Investment  Counsel.  He holds a BS in
finance  and an MBA with an  emphasis  in  finance  from the  University  of San
Francisco.  He is a Chartered  Financial Analyst and a member of the Association
for Investment Management and Research. Mr. Nori completed Franklin's management
training  program  before  moving into  portfolio  research in 1990 as an equity
analyst and co-portfolio manager of the Franklin Convertible Securities Fund. He
joined the Templeton organization in January of 1994. As a portfolio manager and
research  analyst,  Mr. Nori currently  manages  several  separate  accounts and
mutual  funds,  and  a  variable   annuity  product.   He  has  global  research
responsibilities  for the  steel and data  processing  industries,  and  country
coverage of Austria.

Simon  Rudolph  and  Juan  Benito-Martin  have  secondary  portfolio  management
responsibilities  for the Fund.  Mr.  Rudolph is a vice  president of Investment
Counsel.  He holds a BA in economic  history from Durham  University in England,
and is a  Chartered  Accountant  and a  member  of the  Institute  of  Chartered
Accountants  of England and Wales.  Mr.  Rudolph has been a  securities  analyst
since 1986. Before joining the Franklin  Templeton  organization in 1997, he was
an executive  director with Morgan Stanley and was  responsible  for analysis of
continental  European insurance companies.  Currently,  Mr. Rudolph has research
responsibilities  for the  shipping  industry,  small-cap  Asian  companies  and
country  coverage of India. Mr.  Benito-Martin is currently a portfolio  manager
and research  analyst for Investment  Counsel.  He holds an MBA from the Harvard
Business School and a BS/MS in engineering from the Polytechnical  University of
Valencia,  Spain.  Prior to joining  the  Templeton  organization  in 1996,  Mr.
Benito-Martin  was a  management  consultant  and case team leader with  Monitor
Company, a leading global strategy  consulting firm in Cambridge,  Massachusetts
(1994-1996).  His  previous  experience  includes  being  an  internal  planning
consultant with Duke Power (1993-1994),  a business development  consultant with
IBM Consulting  Group (1992),  and a regional  manager with  Iberdrola,  a large
power utility company in Spain (1987-1991). Mr. Benito-Martin's current research
responsibilities include coverage of European small-cap companies.


MANAGEMENT  FEES.  During the period  ended  August 31,  1997,  management  fees
totaling  0.75%  of the  average  daily  net  assets  of the Fund  were  paid to
Investment Counsel.  Total expenses,  including fees paid to Investment Counsel,
were 1.05% of the average daily net assets of Advisor Class.
<PAGE>

PORTFOLIO TRANSACTIONS. Investment Counsel tries to obtain the best execution on
all transactions.  If Investment Counsel believes more than one broker or dealer
can provide the best execution,  it may consider  research and related  services
and the sale of Fund  shares,  as well as shares of other funds in the  Franklin
Templeton  Group of Funds,  when  selecting a broker or dealer.  Please see "How
Does  the  Fund  Buy  Securities  for  Its  Portfolio?"  in  the  SAI  for  more
information.

ADMINISTRATIVE  SERVICES. FT Services provides certain  administrative  services
and  facilities  for  the  Fund.  During  the  period  ended  August  31,  1997,
administration  fees totaling  0.11% of the average daily net assets of the Fund
were  paid to FT  Services.  These  fees are  included  in the  amount  of total
expenses shown above.  Please see "Investment  Management and Other Services" in
the SAI for more information.

HOW DOES THE FUND MEASURE PERFORMANCE?

From time to time, the Advisor Class of the Fund advertises its  performance. A
commonly used measure of performance is total return.

Total return is the change in value of an  investment  over a given  period. It
assumes any dividends and capital gains are reinvested.

The investment results of the Advisor Class will vary.  Performance  figures are
always based on past performance and do not guarantee future results. For a more
detailed description of how the Fund calculates its performance figures,  please
see "How Does the Fund Measure Performance?" in the SAI.

HOW TAXATION AFFECTS THE FUND AND ITS SHAREHOLDERS

ON AUGUST 5, 1997,  PRESIDENT CLINTON SIGNED INTO LAW THE TAXPAYER RELIEF ACT OF
1997 (THE "1997 ACT"). THIS NEW LAW MAKES SWEEPING CHANGES IN THE CODE.  BECAUSE
MANY OF THESE CHANGES ARE COMPLEX, THEY ARE DISCUSSED IN THE SAI.

TAXATION OF THE FUND'S  INVESTMENTS.  The Fund invests your money in the stocks,
bonds and other  securities that are described in the section "How Does the Fund
Invest Its Assets?"  Special tax rules may apply in  determining  the income and
gains the Fund earns on its  investments.  These rules may, in turn,  affect the
amount of  distributions  that the Fund pays to you. These special tax rules are
discussed in the SAI.
<PAGE>

TAXATION OF THE FUND. As a regulated investment company, the Fund generally pays
no federal income tax on the income and gains that it distributes to you.

HOW DOES THE FUND EARN INCOME AND GAINS?

The Fund earns dividends and interest (the Fund's  "income") on its investments.
When the Fund sells a security for a price that is higher than it paid, it has a
gain.  When the Fund sells a security for a price that is lower than it paid, it
has a loss.  If the Fund has held the security for more than one year,  the gain
or loss  will be a  long-term  capital  gain or  loss.  If the Fund has held the
security  for one year or less,  the gain or loss will be a  short-term  capital
gain or loss. The Fund's gains and losses are netted together,  and, if the Fund
has a net gain (the Fund's "gains"),  that gain will generally be distributed to
you.

FOREIGN TAXES. Foreign governments may impose taxes on the income and gains from
the Fund's  investments in foreign stocks and bonds. These taxes will reduce the
amount  of the  Fund's  distributions  to you.  The Fund may also  invest in the
securities of foreign companies that are "passive foreign investment  companies"
("PFICs"). These investments in PFICs may cause the Fund to pay income taxes and
interest charges.  If possible,  the Fund will not invest in PFICs or will adopt
other strategies to avoid these taxes and charges.

TAXATION OF SHAREHOLDERS

DISTRIBUTIONS.  Distributions from the Fund, whether you receive them in cash or
in additional  shares,  are generally  subject to income tax. The Fund will send
you a statement in January of the current  year showing the ordinary  dividends,
capital gain  distributions and non-taxable  distributions you received from the
Fund in the prior year. The amounts on this statement will include distributions
declared  in  December  of the prior  year,  and paid to you in  January  of the
current  year.  These  distributions  are taxable as if you had received them on
December 31 of the prior year.  The IRS requires you to report these  amounts on
your income tax return for the prior year.

WHAT IS A DISTRIBUTION?

As a shareholder,  you will receive your share of the Fund's income and gains on
its  investments in stocks,  bonds and other  securities.  The Fund's income and
short-term  capital  gains are paid to you as  ordinary  dividends.  The  Fund's
long-term  capital gains are paid to you as capital gain  distributions.  If the
Fund pays you an amount in excess of its  income  and gains,  this  excess  will
generally  be  treated  as a  non-taxable  distribution.  These  amounts,  taken
together, are what we call the Fund's distributions to you.
<PAGE>

The Fund's  statement  for the prior year will tell you how much of your capital
gain distribution represents 28% rate gain, or 25% rate gain, if applicable. The
remainder of the capital gain distribution, after subtracting out these amounts,
represents 20% rate gain.

DISTRIBUTIONS TO RETIREMENT PLANS. Fund distributions received by your qualified
retirement   plan,  such  as  a  Section  401(k)  plan  or  IRA,  are  generally
tax-deferred;  this means that you are not required to report Fund distributions
on your income tax return when paid to your plan,  but,  rather,  when your plan
makes payments to you.

DIVIDENDS  --  RECEIVED  DEDUCTION. Corporate investors  may be  entitled to a
dividends-received  deduction  on a portion of the ordinary  dividends  received
from the Fund.

REDEMPTIONS  AND  EXCHANGES.  If you redeem your shares or if you exchange  your
shares in the Fund for  shares in  another  Franklin  Templeton  Fund,  you will
generally have a gain or loss that the IRS requires you to report on your income
tax  return.  If you  exchange  Fund  shares held for 90 days or less and pay no
sales charge, or a reduced sales charge for the new shares,  all or a portion of
the sales  charge you paid on the  purchase of the shares you  exchanged  is not
included in their cost for purposes of computing  gain or loss on the  exchange.
If you hold  your  shares  for six  months  or less,  any loss you have  will be
treated  as a  long-term  capital  loss  to  the  extent  of  any  capital  gain
distributions received by you from the Fund. All or a portion of any loss on the
redemption  or  exchange of your  shares  will be  disallowed  by the IRS if you
purchase other shares in the Fund within 30 days before or after your redemption
or exchange.

WHAT IS A REDEMPTION?

A  redemption  is a sale by you to the Fund of some or all of your shares in the
Fund. The price per share you receive when you redeem Fund shares may be more or
less than the price at which you purchased  those shares.  An exchange of shares
in the Fund for  shares of  another  Franklin  Templeton  Fund is  treated  as a
redemption of Fund shares and then a purchase of shares of the other Fund.  When
you redeem or exchange  your  shares,  you will  generally  have a gain or loss,
depending  upon  whether the basis in your shares is more or less than your cost
or other basis in the shares. Call Fund Information at 1-800-342-5236 for a free
Shareholder Tax Information Handbook if you need more information in calculating
the gain or loss on the redemption or exchange of your shares.
<PAGE>

FOREIGN  TAXES.  If more than 50% of the value of the Fund's assets  consists of
foreign  securities,  the Fund may elect to  pass-through  to you the  amount of
foreign taxes it paid. If the Fund makes this election,  your year-end statement
will show more taxable income than was actually distributed to you. However, you
will be entitled to either  deduct  your share of such taxes in  computing  your
taxable  income or claim a foreign tax credit for such taxes  against  your U.S.
federal income tax. Your year-end statement,  showing the amount of deduction or
credit  available to you, will be distributed to you in January along with other
shareholder information records including your Fund Form 1099-DIV.

WHAT IS A FOREIGN TAX CREDIT?

A foreign  tax  credit is a tax  credit  for the  amount of taxes  imposed  by a
foreign  country on  earnings of the Fund.  When a foreign  company in which the
Fund invests pays a dividend to the Fund, the dividend will generally be subject
to a withholding  tax. The taxes  withheld in foreign  countries  create credits
that you may use to offset your U.S. federal income tax.

The 1997 Act  included  a  provision  that  allows  you to claim  these  credits
directly  on your  income tax return  (Form 1040) and  eliminates  the  previous
requirement that you complete a detailed  supporting form. To qualify,  you must
have  $600 or less in  joint  return  foreign  taxes  ($300  or less on a single
return), all of which are reported to you on IRS Form 1099-DIV.  THIS SIMPLIFIED
PROCEDURE APPLIES ONLY FOR CALENDAR YEARS 1998 AND BEYOND,  AND IS NOT AVAILABLE
IN 1997.

NON-U.S. INVESTORS.  Ordinary dividends generally will be subject to U.S. income
tax withholding. Your home country may also tax ordinary dividends, capital gain
distributions  and gains  arising  from  redemptions  or  exchanges of your Fund
shares. Fund shares held by the estate of a non-U.S.  investor may be subject to
U.S.  estate tax. You may wish to contact your tax advisor to determine the U.S.
and non-U.S. tax consequences of your investment in the Fund.
<PAGE>

STATE TAXES.  Ordinary dividends and capital gain distributions that you receive
from the Fund as well as gains  arising  from  redemptions  or exchanges of your
Fund shares will generally be subject to state and local income tax. The holding
of Fund shares may also be subject to state and local intangibles taxes. You may
wish to  contact  your  tax  advisor  to  determine  the  state  and  local  tax
consequences of your investment in the Fund.

BACKUP WITHHOLDING.  When you open an account,  IRS regulations require that you
provide your taxpayer identification number ("TIN"), certify that it is correct,
and certify that you are not subject to backup  withholding  under IRS rules. If
you fail to provide a correct TIN or the proper tax certifications,  the Fund is
required to withhold 31% of all the distributions  (including ordinary dividends
and capital gain distributions) and redemption proceeds paid to you. The Fund is
also required to begin backup  withholding  on your account if the IRS instructs
the Fund to do so.  The Fund  reserves  the right not to open your  account  or,
alternatively,  to redeem your shares at the current net asset  value,  less any
taxes withheld, if you fail to provide a correct TIN, fail to provide the proper
tax certifications, or the IRS instructs the Fund to begin backup withholding on
your account.

WHAT IS A BACKUP WITHHOLDING?

Backup  withholding occurs when the Fund is required to withhold and pay over to
the IRS 31% of your distributions and redemption proceeds.  You can avoid backup
withholding  by  providing  the Fund with your TIN,  and by  completing  the tax
certifications on your account  application that you were asked to sign when you
opened your  account.  However,  if the IRS  instructs  the Fund to begin backup
withholding, it is required to do so even if you provided the Fund with your TIN
and these tax certifications,  and backup withholding will remain in place until
the Fund is instructed by the IRS that it is no longer required.

THIS TAX  DISCUSSION  IS FOR GENERAL  INFORMATION  ONLY.  PROSPECTIVE  INVESTORS
SHOULD CONSULT THEIR OWN TAX ADVISORS  CONCERNING THE FEDERAL,  STATE,  LOCAL OR
FOREIGN  TAX  CONSEQUENCES  OF AN  INVESTMENT  IN  THE  FUND.  A  MORE  COMPLETE
DISCUSSION  OF THESE  RULES AND  RELATED  MATTERS IS  CONTAINED  IN THE  SECTION
ENTITLED "ADDITIONAL  INFORMATION ABOUT DISTRIBUTIONS AND TAXES" IN THE SAI. THE
TAX   TREATMENT   OF   DISTRIBUTIONS   OF  ORDINARY   DIVIDENDS,   CAPITAL  GAIN
DISTRIBUTIONS,  FOREIGN TAXES PAID,  AND INCOME TAXES WITHHELD IS ALSO DISCUSSED
IN A FREE SHAREHOLDER TAX INFORMATION HANDBOOK,  AVAILABLE FROM FUND INFORMATION
AT 1-800-342-5236.
<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified,  open-end  management  investment  company,  commonly
called a mutual fund. It was organized as a Maryland  corporation on February 4,
1981,  and is  registered  with the SEC.  As of January 1, 1997,  the Fund began
offering a new class of shares  designated  Templeton  Global Smaller  Companies
Fund,  Inc. -- Advisor  Class.  All shares  outstanding  before the  offering of
Advisor Class shares have been  designated  Templeton  Global Smaller  Companies
Fund, Inc. -- Class I and Templeton Global Smaller Companies Fund, Inc. -- Class
II. Additional classes of shares may be offered in the future.

Shares of each class represent proportionate interests in the assets of the Fund
and have the same voting and other rights and  preferences as any other class of
the Fund for  matters  that affect the Fund as a whole.  For  matters  that only
affect one class,  however, only shareholders of that class may vote. Each class
will vote separately on matters affecting only that class, or expressly required
to be voted on separately by state or federal law.

The Fund has noncumulative voting rights. This gives holders of more than 50% of
the shares voting the ability to elect all of the members of the Board.  If this
happens, holders of the remaining shares voting will not be able to elect anyone
to the Board.

The Fund  does not  intend  to hold  annual  shareholder  meetings.  It may hold
special meetings, however, for matters requiring shareholder approval. A meeting
may  also be  called  by the  Board  in its  discretion  or for the  purpose  of
considering  the removal of a Board  member if  requested in writing to do so by
shareholders  holding  at  least  10%  of the  outstanding  shares.  In  certain
circumstances,  we are required to help you communicate with other  shareholders
about the removal of a Board member.

As of November  26,  1997,  Franklin  Templeton  Trust  Company,  as trustee for
ValuSelect-Resources  Profit  Sharing  Plan,  P.O.  Box  2438,  Rancho  Cordova,
California  95741-2438,  owned of record and  beneficially  more than 25% of the
outstanding shares of Advisor Class of the Fund.
<PAGE>

ABOUT  YOUR  ACCOUNT

HOW DO I BUY SHARES?

OPENING YOUR ACCOUNT

Shares  of the  Fund may be  purchased  without  a sales  charge.  To open  your
account,  contact  your  investment  representative  or  complete  and  sign the
enclosed shareholder application and return it to the Fund with your check.

                                            MINIMUM
                                         INVESTMENTS*
              ---------------------- -----------------
               To Open Your Account.     $5,000,000
               To Add to Your
                 Account............     $       25

*We waive or lower these  minimums for certain  investors  listed below.  We may
also refuse any order to buy shares.

To determine if you meet the minimum investment requirement,  the amount of your
current purchase is added to the cost or current value,  whichever is higher, of
your existing  shares in the Franklin  Templeton  Funds.  At least $1 million of
this amount, however, must be invested in Advisor Class or Class Z shares of any
of the Franklin Templeton Funds.

The Fund's minimum initial  investment  requirement  will not apply to purchases
by:

1.   Broker-dealers, registered investment advisors or certified financial
     planners who have entered into an agreement with Distributors for clients
     participating in comprehensive fee programs
<PAGE>

2.   Qualified  registered  investment  advisors or certified financial planners
     who have  clients  invested  in the  Franklin  Mutual  Series  Fund Inc. on
     October 31, 1996, or who buy through a  broker-dealer  or service agent who
     has entered into an agreement with Distributors

3.  Officers,  trustees,  directors  and  full-time  employees  of the  Franklin
    Templeton  Funds or the  Franklin  Templeton  Group and their  immediate  
    family members, subject to a $100 minimum investment requirement

4.   Accounts managed by the Franklin Templeton Group

5.   The Franklin Templeton Profit Sharing 401(k) Plan

6.   Each series of the Franklin Templeton Fund Allocator Series, subject to a
     $1,000 minimum initial and subsequent investment requirement

7.   Employer  stock,  bonus,  pension  or profit  sharing  plans  that meet the
     requirements  for  qualification  under Section 401 of the Code,  including
     salary reduction plans qualified under Section 401(k) of the Code, and that
     (i) are  sponsored by an employer  with at least 5,000  employees,  or (ii)
     have plan assets of $50 million or more

8.   Trust  companies  and bank trust  departments  initially  investing  in the
     Franklin Templeton Funds at least $1 million of 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
<PAGE>

9.   Defined  benefit  plans  or  governments,  municipalities,  and  tax-exempt
     entities that meet the requirements for qualification  under Section 501 of
     the Code,  subject  to a $1 million  initial  investment  in Advisor  Class
     shares

10.  Any other investor, including a private investment vehicle such as a family
     trust or foundation,  who is a member of a qualified group, if the group as
     a whole meets the $5 million minimum  investment  requirement.  A qualified
     group is one that:

          Was formed at least six months ago,

          Has a purpose other than buying Fund shares at a discount,

          Has more than 10 members,

          Can arrange for meetings between our representatives and grou
           members,

          Agrees to include Franklin Templeton Fund sales and other materials in
         publications  and  mailings  to its  members  at  reduced or no cost to
         Distributors,

         Agrees to arrange for payroll deduction or other bulk transmission of
         investments to the Fund, and

          Meets other uniform  criteria that allow  Distributors to achieve cost
          savings in distributing shares.

HOW DO I BUY SHARES IN CONNECTION WITH RETIREMENT PLANS?

Your  individual or  employer-sponsored  retirement plan may invest in the Fund.
Plan documents are required for all retirement plans.  Trust Company can provide
the plan documents for you and serve as custodian or trustee.

Trust Company can provide you with brochures  containing  important  information
about its plans. To establish a Trust Company  retirement plan, you will need an
application  other than the one  included in this  prospectus.  For a retirement
plan brochure or application, call Retirement Plan Services.
<PAGE>

Please consult your legal,  tax or retirement plan specialist  before choosing a
retirement  plan.  Your investment  representative  or advisor can help you make
investment decisions within your plan.

PAYMENTS TO SECURITIES DEALERS

Securities  Dealers who initiate and are  responsible  for  purchases of Advisor
Class  shares may  receive up to 0.25% of the amount  invested.  The  payment is
subject to the sole discretion of  Distributors,  and is paid by Distributors or
one of its affiliates and not by the Fund or its shareholders.

For  information  on additional  compensation  payable to Securities  Dealers in
connection  with the sale of Fund  shares,  please  see "How Do I Buy,  Sell and
Exchange Shares? -- Other Payments to Securities Dealers" in the SAI.

MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?

We  offer a wide  variety  of  funds.  If you  would  like,  you can  move  your
investment  from your Fund  account  to an  existing  or new  account in another
Franklin Templeton Fund (an "exchange").  Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.

Before  making  an  exchange,  please  read the  prospectus  of the fund you are
interested in. This will help you learn about the fund, its investment objective
and policies,  and its rules and requirements for exchanges.  For example,  some
Franklin  Templeton Funds do not accept  exchanges and some do not offer Advisor
Class shares.

 METHOD                    STEPS TO FOLLOW
- ------------------------ --------------------------------------------------
BY MAIL                   1.   Send us signed written instructions

                          2.   Include any outstanding share certificates
                               for the shares you want to exchange
<PAGE>

- ------------------------- --------------------------------------------------
 BY PHONE                  Call Shareholder Services

                              If  you  do  not  want  the
                              ability to  exchange by phone
                              to  apply  to  your  account,
                              please let us know.
- ------------------------ --------------------------------------------------
THROUGH YOUR DEALER       Call your investment representative
- ------------------------ --------------------------------------------------

Please refer to "Transaction Procedures and Special Requirements"  for other
important information on how to exchange shares.

EXCHANGE RESTRICTIONS

Please be aware that the following restrictions apply to exchanges:

      You may only exchange shares within the SAME CLASS, except as noted below.

      The accounts must be identically  registered.  You may, however,  exchange
     shares  from a Fund  account  requiring  two or  more  signatures  into  an
     identically  registered money fund account requiring only one signature for
     all  transactions.  PLEASE  NOTIFY  US IN  WRITING  IF YOU DO NOT WANT THIS
     OPTION TO BE AVAILABLE ON YOUR ACCOUNT.  Additional  procedures  may apply.
     Please see "Transaction Procedures and Special Requirements."

      Trust Company IRA or 403(b)  retirement  plan accounts may exchange shares
     as described  above.  Restrictions  may apply to other types of  retirement
     plans. Please contact Retirement Plan Services for information on exchanges
     within these plans.

      The fund you are exchanging into must be eligible for sale in your state.
<PAGE>

      We may modify or discontinue  our exchange  policy if we give you 60 days'
      written notice.

      Your exchange may be  restricted or refused if you have:  (i) requested an
     exchange out of the Fund within two weeks of an earlier  exchange  request,
     (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.  Shares under common ownership or control
     are combined for these limits. If you have exchanged shares as described in
     this paragraph,  you will be considered a Market Timer.  Each exchange by a
     Market Timer, if accepted,  will be charged $5.00. Some of our funds do not
     allow investments by Market Timers.

Because   excessive   trading  can  hurt  Fund   performance,   operations   and
shareholders,  we may refuse any  exchange  purchase  if (i) we believe the Fund
would be harmed or unable to invest  effectively,  or (ii) the Fund  receives or
anticipates simultaneous orders that may significantly affect the Fund.

LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES

If you want to  exchange  into a fund that does not  currently  offer an Advisor
Class,  you may exchange  your  Advisor  Class shares for Class I shares of that
fund at Net Asset  Value.  If you do not qualify to buy Advisor  Class shares of
Templeton  Developing Markets Trust,  Templeton Foreign Fund or Templeton Growth
Fund,  you may exchange  the Advisor  Class shares you own for Class I shares of
those funds or of Templeton Institutional Funds, Inc. at Net Asset Value. If you
do so and you later decide you would like to exchange into a fund that offers an
Advisor Class,  you may exchange your Class I shares for Advisor Class shares of
that fund. You may also exchange your Advisor Class shares for Class Z shares of
Franklin Mutual Series Fund Inc.

HOW DO I SELL SHARES?

You may sell (redeem) your shares at any time.

 METHOD                   STEPS TO FOLLOW
- ------------------------ -----------------------------------------------------
BY MAIL                  1.  Send us signed written instructions. If
                             you would like your redemption proceeds wired
                             to a bank account, your instructions
                             should include:

                             o  The name, address and telephone number of
                                the bank where you want the proceeds sent

                             o  Your bank account number

                             o  The Federal Reserve ABA routing number

                             o  If you are using a savings and loan or
                                credit union, the name of the corresponding
                                bank and the account number

                         2. Include any outstanding share certificates
                            for the shares you are selling
<PAGE>

                         3. Provide a signature guarantee if required

                         4. Corporate, partnership and trust accounts
                            may need to send additional documents.
                            Accounts under court jurisdiction may have
                            other requirements.
- ------------------------ ------------------------------------------------------
BY PHONE                 Call Shareholder Services. If you would like
                         your redemption proceeds wired to a bank
                         account, other than an escrow account, you
                         must first sign up for the wire feature. To
                         sign up, send us written instructions, with a
                         signature guarantee. To avoid any delay in
                         processing, the instructions should include
                         the items listed in "By Mail" above.

                         Telephone requests will be accepted:

                         o   If the request is $50,000 or less.
                             Institutional accounts may exceed $50,000 by
                             completing a separate agreement. Call
                             Institutional Services to receive a copy.

                         o   If there are no share certificates  
                             issued for the shares you want to
                             sell or you have already returned them to
                             the Fund

                        o   Unless you are selling shares in a Trust
                            Company retirement plan account

                        o   Unless the address on your account was
                            changed by phone within the last 15 days

                              If you do not want the ability to redeem
                              by phone to apply to your account, please let
                              us know.
- ------------------------ ------------------------------------------------------
THROUGH YOUR DEALER      Call your investment representative
- ------------------------ ------------------------------------------------------
We will send your  redemption  check  within  seven days  after we receive  your
request in proper  form.  If you would  like the check sent to an address  other
than the address of record or made payable to someone other than the  registered
owners on the  account,  send us  written  instructions  signed  by all  account
owners, with a signature  guarantee.  We are not able to receive or pay out cash
in the form of currency.
<PAGE>

The wiring of redemption  proceeds is a special  service that we make  available
whenever possible for redemption  requests of $1,000 or more. If we receive your
request in proper form before 4:00 p.m.  Eastern time, your wire payment will be
sent the next business day. For requests received in proper form after 4:00 p.m.
Eastern time, the payment will be sent the second business day. By offering this
service  to you,  the Fund is not bound to meet any  redemption  request in less
than the seven day period  prescribed  by law.  Neither  the Fund nor its agents
shall be liable to you or any other  person if,  for any  reason,  a  redemption
request by wire is not processed as described in this section.

If you sell shares you recently  purchased  with a check or draft,  we may delay
sending you the  proceeds  for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.

Under unusual circumstances,  we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.

Please refer to  "Transaction  Procedures  and Special  Requirements"  for other
important information on how to sell shares.

TRUST COMPANY RETIREMENT PLAN ACCOUNTS

To comply with IRS  regulations,  you need to complete  additional  forms before
selling  shares  in a Trust  Company  retirement  plan  account.  Tax  penalties
generally apply to any distribution  from these plans to a participant under age
59 -1/2,  unless the  distribution  meets an  exception  stated in the Code.  To
obtain the necessary forms, please call Retirement Plan Services.

WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?

The Fund intends to pay a dividend at least annually representing  substantially
all of its net investment income and any net realized capital gains.
<PAGE>

Dividend payments are not guaranteed,  are subject to the Board's discretion and
may vary with each  payment.  THE FUND DOES NOT PAY  "INTEREST" OR GUARANTEE ANY
FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.

If you buy shares shortly  before the record date,  please keep in mind that any
distribution  will  lower the value of the  Fund's  shares by the  amount of the
distribution  and you will then  receive a portion of the price you paid back in
the form of a taxable distribution.

DISTRIBUTION OPTIONS

You may receive your distributions from the Fund in any of these ways:

1. BUY  ADDITIONAL  SHARES OF THE FUND -- You may buy  additional  shares of the
same  class of the Fund by  reinvesting  capital  gain  distributions,  dividend
distributions, or both. This is a convenient way to accumulate additional shares
and maintain or increase your earnings base.

2.  BUY  SHARES  OF  OTHER  FRANKLIN  TEMPLETON  FUNDS  -- You may  direct  your
distributions  to buy the same  class of shares of  another  Franklin  Templeton
Fund.  You may also direct your  distributions  to buy Class I shares of another
Franklin  Templeton  Fund.  Many  shareholders  find  this a  convenient  way to
diversify their investments.

3. RECEIVE  DISTRIBUTIONS IN CASH -- You may receive capital gain distributions,
dividend  distributions,  or both in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee.

TO  SELECT  ONE  OF  THESE  OPTIONS,  PLEASE  COMPLETE  SECTIONS  6 AND 7 OF THE
SHAREHOLDER  APPLICATION  INCLUDED WITH THIS  PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE  WHICH OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL
AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE SAME CLASS
OF THE FUND. You may change your distribution option at any time by notifying us
by mail or phone. Please allow at least seven days before the record date for us
to process the new option. For Trust Company retirement plans, special forms are
required to receive distributions in cash.
<PAGE>

TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS

SHARE PRICE

You buy and sell Advisor Class shares at the Net Asset Value per share.  The Net
Asset Value we use when you buy or sell shares is the one next calculated  after
we receive your  transaction  request in proper form.  If you buy or sell shares
through your Securities  Dealer,  however,  we will use the Net Asset Value next
calculated after your Securities Dealer receives your request, which is promptly
transmitted to the Fund. Your redemption proceeds will not earn interest between
the time we  receive  the order from your  dealer  and the time we  receive  any
required documents.

HOW AND WHEN SHARES ARE PRICED

The Fund is open for business  each day the NYSE is open.  We determine  the Net
Asset Value per share as of the scheduled close of the NYSE, generally 4:00 p.m.
Eastern  time.  You can find the prior  day's  closing  Net Asset  Value in many
newspapers.

The Net Asset Value of all  outstanding  shares of each class is calculated on a
pro rata basis. It is based on each class'  proportionate  participation  in the
Fund,  determined  by the value of the shares of each class.  To  calculate  Net
Asset  Value per share of each  class,  the  assets of each class are valued and
totaled,  liabilities are  subtracted,  and the balance,  called net assets,  is
divided by the number of shares of the class outstanding.  The Fund's assets are
valued as described under "How are Fund Shares Valued?" in the SAI.

PROPER FORM

An order to buy shares is in proper form when we receive your signed shareholder
application and check. Written requests to sell or exchange shares are in proper
form when we receive signed written instructions,  with a signature guarantee if
necessary.  We must also receive any outstanding  share  certificates  for those
shares.
<PAGE>

WRITTEN INSTRUCTIONS

Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:

      Your name,

      The Fund's name,

      The class of shares,

      A description of the request,

      For exchanges, the name of the fund you are exchanging into,

      Your account number,

      The dollar amount or number of shares, and

      A  telephone  number  where we may reach  you  during  the day,  or in the
evening if preferred.

JOINT  ACCOUNTS.  For accounts with more than one  registered  owner,  we accept
written  instructions signed by only one owner for certain types of transactions
or account changes. These include transactions or account changes that you could
also make by phone,  such as certain  redemptions of $50,000 or less,  exchanges
between identically  registered accounts,  and changes to the address of record.
For most other types of transactions or changes,  written  instructions  must be
signed by all registered owners.

Please  keep in mind  that if you have  previously  told us that you do not want
telephone  exchange or redemption  privileges on your account,  then we can only
accept written  instructions  to exchange or redeem shares if they are signed by
all registered owners on the account.
<PAGE>

SIGNATURE GUARANTEES

For our mutual  protection,  we require a signature  guarantee in the  following
situations:

1) You wish to sell over $50,000 worth of shares,

2) You want the proceeds to be paid to someone other than the registered owners,

3) The proceeds are not being sent to the address of record,  preauthorized bank
account, or preauthorized brokerage firm account,

4) We receive instructions from an agent, not the registered owners,

5) We believe a signature  guarantee would protect us against  potential claims
based on the instructions received.

A signature guarantee verifies the authenticity of your signature. You should be
able to obtain a signature guarantee from a bank, broker,  credit union, savings
association, clearing agency, or securities exchange or association. A NOTARIZED
SIGNATURE IS NOT SUFFICIENT.

SHARE CERTIFICATES

We will  credit  your  shares  to  your  Fund  account.  We do not  issue  share
certificates  unless you  specifically  request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate is
lost, stolen or destroyed,  you may have to pay an insurance premium of up to 2%
of the value of the certificate to replace it.
<PAGE>

Any outstanding  share  certificates must be returned to the Fund if you want to
sell or  exchange  those  shares  or if you  would  like to  start a  systematic
withdrawal plan. The certificates  should be properly endorsed.  You can do this
either  by  signing  the  back  of the  certificate  or by  completing  a  share
assignment  form.  For your  protection,  you may  prefer  to  complete  a share
assignment  form and to send the  certificate  and  assignment  form in separate
envelopes.

TELEPHONE TRANSACTIONS

You may initiate many transactions and changes to your account by phone.  Please
refer to the sections of this  prospectus that discuss the transaction you would
like to make or call Shareholder Services.

When you call,  we will request  personal or other  identifying  information  to
confirm that  instructions  are genuine.  We may also record calls. If our lines
are busy or you are otherwise  unable to reach us by phone,  you may wish to ask
your investment  representative for assistance or send us written  instructions,
as described elsewhere in this prospectus.

For your  protection,  we may delay a transaction or not implement one if we are
not reasonably  satisfied that the instructions are genuine.  If this occurs, we
will not be liable  for any loss.  We also will not be liable for any loss if we
follow  instructions  by phone that we reasonably  believe are genuine or if you
are unable to execute a transaction by phone.

TRUST COMPANY  RETIREMENT PLAN ACCOUNTS.  We cannot accept  instructions to sell
shares or change  distribution  options  on Trust  Company  retirement  plans by
phone.  While you may exchange shares of Trust Company IRA and 403(b) retirement
accounts  by phone,  certain  restrictions  may be imposed  on other  retirement
plans.

To obtain any required forms or more information about  distribution or transfer
procedures, please call Retirement Plan Services.
<PAGE>

ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS

When  you open an  account,  we need  you to tell us how you  want  your  shares
registered.  How you register your account will affect your ownership rights and
ability  to make  certain  transactions.  If you  have  questions  about  how to
register your account,  you should  consult your  investment  representative  or
legal advisor.  Please keep the following  information in mind when  registering
your account.

JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account  as "joint  tenants  with  rights of  survivorship"  unless  you tell us
otherwise.  An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, we cannot accept instructions to change owners on the account unless ALL
owners agree in writing,  even if the law in your state says  otherwise.  If you
would like  another  person or owner to sign for you,  please  send us a current
power of attorney.

GIFTS AND  TRANSFERS TO MINORS.  You may set up a custodial  account for a minor
under your state's Uniform  Gifts/Transfers  to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.

TRUSTS.  You should  register  your  account as a trust only if you have a valid
written trust  document.  This avoids future  disputes or possible  court action
over who owns the account.

REQUIRED DOCUMENTS. For corporate,  partnership and trust accounts,  please send
us the  following  documents  when you open your  account.  This will help avoid
delays in  processing  your  transactions  while we  verify  who may sign on the
account.

TYPE OF ACCOUNT           DOCUMENTS REQUIRED
- ------------------------- ---------------------------------------------
CORPORATION               Corporate Resolution
- ------------------------- ---------------------------------------------
PARTNERSHIP               1.  The pages from the partnership agreement
                              that identify the general partners, or

                          2.  A certification for a partnership
                              agreement
- ------------------------ ---------------------------------------------
TRUST                     1.  The pages from the trust document that
                              identify the trustees, or

                          2.  A certification for trust
- ------------------------- ---------------------------------------------
<PAGE>

STREET OR  NOMINEE  ACCOUNTS.  If you have Fund  shares  held in a  "street"  or
"nominee" name account with your Securities  Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement  with  Distributors  or we cannot  process the  transfer.
Contact your  Securities  Dealer to initiate the  transfer.  We will process the
transfer  after we receive  authorization  in proper  form from your  delivering
Securities Dealer. Accounts may be transferred  electronically through the NSCC.
For accounts  registered  in street or nominee  name,  we may take  instructions
directly from the Securities Dealer or your nominee.

IMPORTANT INFORMATION IF YOU HAVE AN INVESTMENT REPRESENTATIVE

If there is a  Securities  Dealer  or other  representative  of  record  on your
account, we are authorized: (1) to provide confirmations, account statements and
other   information   about  your  account   directly  to  your  dealer   and/or
representative; and (2) to accept telephone and electronic instructions directly
from your dealer or representative, including instructions to exchange or redeem
your  shares.  Electronic  instructions  may be  processed  through  established
electronic trading systems and programs used by the Fund. Telephone instructions
directly from your  representative will be accepted unless you have told us that
you do not want telephone privileges to apply to your account.

KEEPING YOUR ACCOUNT OPEN

Due to the relatively  high cost of  maintaining a small  account,  we may close
your  account if the value of your shares is less than $50. We will only do this
if the value of your account fell below this amount because you voluntarily sold
your shares and your account has been inactive  (except for the  reinvestment of
distributions)  for at least six months.  Before we close your account,  we will
notify you and give you 30 days to increase  the value of your  account to $100.
These  minimums  do not apply if you fall within  categories  4, 5, 6 or 7 under
"How Do I Buy Shares? -- Opening Your Account."
<PAGE>

SERVICES TO HELP YOU MANAGE YOUR ACCOUNT

AUTOMATIC INVESTMENT PLAN

Our  automatic  investment  plan offers a convenient  way to invest in the Fund.
Under the plan, you can have money transferred  automatically from your checking
account to the Fund each month to buy additional  shares.  If you are interested
in this program,  please refer to the shareholder application included with this
prospectus or contact your  investment  representative.  The market value of the
Fund's shares may fluctuate and a systematic  investment  plan such as this will
not assure a profit or protect  against a loss. You may  discontinue the program
at any time by notifying Investor Services by mail or phone.

SYSTEMATIC WITHDRAWAL PLAN

Our  systematic  withdrawal  plan  allows you to sell your  shares  and  receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum payment
amount for each withdrawal must be at least $50. For retirement plans subject to
mandatory distribution requirements, the $50 minimum will not apply.

If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder  application included with
this  prospectus and indicate how you would like to receive your  payments.  You
may choose to direct  your  payments  to buy the same class of shares of another
Franklin  Templeton  Fund or have the money  sent  directly  to you,  to another
person,  or  to  a  checking  account.  Once  your  plan  is  established,   any
distributions paid by the Fund will be automatically reinvested in your account.

You will  generally  receive  your  payment  by the end of the  month in which a
payment is  scheduled.  When you sell your shares under a systematic  withdrawal
plan, it is a taxable transaction.

You may discontinue a systematic withdrawal plan, change the amount and schedule
of  withdrawal  payments,  or suspend one payment by  notifying us in writing at
least  seven  business  days  before the end of the month  preceding a scheduled
payment.  Please see "How Do I Buy,  Sell and  Exchange  Shares?  --  Systematic
Withdrawal Plan" in the SAI for more information.
<PAGE>

TELEFACT (R)

From a touch-tone phone, you may call our TeleFACTS(R) system (day or night)
at 1-800/247-1753 to:

      obtain information about your account; and

      obtain price information about any Franklin Templeton Fund.

You will need the Fund's  code  number to use  TeleFACTS (R).  The Fund's code
number is 603.

STATEMENTS AND REPORTS TO SHAREHOLDERS

We will send you the following statements and reports on a regular basis:

     Confirmation  and  account  statements  reflecting   transactions  in  your
    account,  including additional purchases and dividend reinvestments.  PLEASE
    VERIFY THE ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.

     Financial reports of the Fund will be sent every six months. To reduce Fund
    expenses, we attempt to identify related shareholders within a household and
    send only one copy of a report.  Call Fund  Information if you would like an
    additional free copy of the Fund's financial reports.

INSTITUTIONAL ACCOUNTS

Additional  methods of buying,  selling or exchanging  shares of the Fund may be
available  to  institutional  accounts.  Institutional  investors  may  also  be
required to complete an institutional account application. For more information,
call Institutional Services.
<PAGE>

AVAILABILITY OF THESE SERVICES

The services above are available to most shareholders.  If, however, your shares
are held by a financial  institution,  in a street name  account,  or  networked
through the NSCC, the Fund may not be able to offer these  services  directly to
you. Please contact your investment representative.

WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?

If you have any questions about your account, you may write to Investor Services
at 100 Fountain Parkway, P.O. Box 33030, St. Petersburg, Florida 33733-8030. The
Fund and  Distributors are also located at this address.  Investment  Counsel is
located at Broward Financial Centre, Fort Lauderdale,  Florida  33394-3091.  You
may also contact us by phone at one of the numbers listed below.

<TABLE>
<CAPTION>

                                                        HOURS OF OPERATION (EASTERN TIME)
  DEPARTMENT NAME                  TELEPHONE NO.      (MONDAY THROUGH FRIDAY)
- ------------------------------- ------------------ -------------------------------------------
<S>                             <C>                <C>    
Shareholder Services             1-800/632-2301     8:30 a.m. to 8:00 p.m.

Dealer Services                  1-800/524-4040     8:30 a.m. to 8:00 p.m.

Fund Information                 1-800/DIAL BEN     8:30 a.m. to 11:00 p.m.
                                (1-800/342-5236)   9:30 a.m. to 5:30 p.m. (Saturday)

Retirement Plan Services         1-800/527-2020     8:30 a.m. to 8:00 p.m.

Institutional Services           1-800/321-8563     9:00 a.m. to 8:00 p.m.

TDD (hearing impaired)           1-800/851-0637     8:30 a.m. to 8:00 p.m.
</TABLE>


Your phone call may be  monitored or recorded to ensure we provide you with high
quality  service.  You will  hear a regular  beeping  tone if your call is being
recorded.


<PAGE>


GLOSSARY

USEFUL TERMS AND DEFINITIONS

BOARD - The Board of Directors of the Fund

CD - Certificate of Deposit

CLASS I, CLASS II AND ADVISOR  CLASS - The Fund offers three  classes of shares,
designated  "Class I," "Class II," and "Advisor  Class." The three  classes have
proportionate interests in the Fund's portfolio. They differ, however, primarily
in their sales charge and expense structures.

CODE - Internal Revenue Code of 1986, as amended

DEPOSITARY  RECEIPTS - are  certificates  that give their  holders  the right to
receive  securities  (a) of a foreign  issuer  deposited in a U.S. bank or trust
company  (American  Depositary  Receipts,  "ADRs");  or (b) of a foreign or U.S.
issuer deposited in a foreign bank or trust company (Global Depositary Receipts,
"GDRs" or European Depositary Receipts, "EDRs").

DISTRIBUTORS  -  Franklin/Templeton  Distributors,  Inc.,  the Fund's  principal
underwriter.  The SAI lists the  officers and Board  members who are  affiliated
with Distributors. See "Officers and Directors."

FRANKLIN  TEMPLETON  FUNDS - The U.S.  registered  mutual  funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin  Valuemark
Funds,  Templeton  Capital  Accumulator Fund, Inc.,  Templeton  Variable Annuity
Fund, and Templeton Variable Products Series Fund

FRANKLIN  TEMPLETON GROUP - Franklin  Resources,  Inc., a publicly owned holding
company, and its various subsidiaries

FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered  investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds
<PAGE>

FT SERVICES - Franklin Templeton Services, Inc., the Fund's administrator

INVESTMENT COUNSEL - Templeton  Investment Counsel,  Inc., the Fund's investment
manager

INVESTOR  SERVICES -  Franklin/Templeton  Investor  Services,  Inc.,  the Fund's
shareholder servicing and transfer agent

IRS - Internal Revenue Service

MARKET  TIMERS  -  Market  Timers  generally  include  market  timing  or  asset
allocation services, accounts administered so as to buy, sell or exchange shares
based  on  predetermined  market  indicators,  or  any  person  or  group  whose
transactions  seem to  follow a timing  pattern  or whose  transactions  include
frequent or large exchanges.

MOODY'S - Moody's Investors Service, Inc.

NASDAQ - National Association of Securities Dealers Automated Quotations

NET ASSET VALUE (NAV) - The value of a mutual fund is  determined  by  deducting
the fund's  liabilities  from the total assets of the  portfolio.  The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.

NSCC - National Securities Clearing Corporation

NYSE - New York Stock Exchange

RESOURCES - Franklin Resources, Inc.

SAI - Statement of Additional Information

S&P - Standard & Poor's Corporation

SEC - U.S. Securities and Exchange Commission
<PAGE>

SECURITIES  DEALER - A financial  institution  that,  either directly or through
affiliates,  has an agreement with  Distributors  to handle  customer orders and
accounts  with the Fund.  This  reference is for  convenience  only and does not
indicate a legal conclusion of capacity.

TELEFACTS(R) - FRANKLIN TEMPLETON'S AUTOMATED CUSTOMER SERVICING SYSTEM

TRUST COMPANY - Franklin Templeton Trust Company.  Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.

U.S. - United States

WE/OUR/US - Unless the context indicates a different meaning,  these terms refer
to the Fund  and/or  Investor  Services,  Distributors,  or other  wholly  owned
subsidiaries of Resources.


<PAGE>


INSTRUCTIONS AND  IMPORTANT  NOTICE

SUBSTITUTE W-9 INSTRUCTIONS INFORMATION

GENERAL.  Backup withholding is not an additional tax. Rather, the tax liability
of persons  subject to backup  withholding  will be reduced by the amount of tax
withheld.  If  withholding  results in an  overpayment of taxes, a refund may be
obtained from the IRS.

OBTAINING  A  NUMBER.  If you do not  have  a  Social  Security  Number/Taxpayer
Identification Number or you do not know your SSN/TIN, you must obtain Form SS-5
or Form SS-4 from your local Social Security or IRS office and apply for one. If
you  have  checked  the  "Awaiting  TIN"  box  and  signed  the   certification,
withholding will apply to payments relating to your account unless you provide a
certified TIN within 60 days.

WHAT SSN/TIN TO GIVE. Please refer to the following guidelines:

<TABLE>
<CAPTION>

 ACCOUNT TYPE                 GIVE SSN OF      ACCOUNT TYPE          GIVE EMPLOYER ID #OF
- ---------------------------- ---------------- --------------------- ---------------------------
<S>                         <C>              <C>                   <C>
o   Individual               Individual       o  Trust, Estate,     Trust, Estate, or
                                                 or Pension Plan    Pension Plan Trust
                                                 Trust
- --------------------------- ---------------- --------------------- ---------------------------
o   Joint Individual         Owner who        o  Corporation,       Corporation,
                             will be             Partnership, or    Partnership, or
                             paying tax          other              other organization
                             organization
                             or
                             first-named
                             individual
- ---------------------------- ---------------- --------------------- ---------------------------
o   Unif. Gift/              Minor            o  Broker nominee     Broker nominee
    Transfer to Minor
- ---------------------------- ---------------- --------------------- ---------------------------
o   Sole Proprietor          Owner of
                             business
- ---------------------------- ---------------- --------------------- ---------------------------
o   Legal Guardian           Ward,
                             Minor, or
                             Incompetent
- --------------------------- ---------------- --------------------- ---------------------------
</TABLE>

EXEMPT RECIPIENTS.  Please provide your TIN and check the "Exempt Recipient" box
if you are an exempt recipient. Exempt recipients include:

A corporation                                 An organization exempt from
                                              tax under section 501(a), or an
A financial institution                       individual retirement plan

A registered dealer in securities             An exempt charitable remainder
or commodities registered in                  trust or a non-exempt trust
the U.S. or a U.S. possession                 described in section 4947(a)(1)

A real estate investment trust                An entity registered at all times
                                              under the Investment Company
A common trust fund operated                  Act of 1940
by a bank under section 584(a)

IRS PENALTIES. If you do not supply us with your SSN/TIN, you will be subject to
an IRS $50  penalty  unless  your  failure  is due to  reasonable  cause and not
willful neglect. If you fail to report certain income on your federal income tax
return,  you will be treated as  negligent  and subject to an IRS 20% penalty on
any  underpayment  of tax  attributable  to such  negligence,  unless  there was
reasonable cause for the resulting  underpayment and you acted in good faith. If
you falsify information on this form or make any other false statement resulting
in no  backup  withholding  on an  account  which  should be  subject  to backup
withholding,  you may be subject to an IRS $500  penalty  and  certain  criminal
penalties including fines and imprisonment.

SUBSTITUTE W-8 INSTRUCTIONS INFORMATION

EXEMPT FOREIGN PERSON. Check the "Exempt Foreign Person" box if you qualify as a
non-resident  alien or  foreign  entity  that is not  subject  to  certain  U.S.
information return reporting or to backup  withholding rules.  Dividends paid to
your  account  may be subject to  withholding  of up to 30%.  You are an "Exempt
Foreign  Person" if you are not (1) a citizen or resident of the U.S.,  or (2) a
U.S. corporation,  partnership,  estate, or trust. In the case of an individual,
an "Exempt Foreign  Person" is one who has been  physically  present in the U.S.
for less than 31 days during the current  calendar  year. An  individual  who is
physically  present in the U.S. for at least 31 days during the current calendar
year will  still be treated as an "Exempt  Foreign  Person,"  provided  that the
total number of days physically present in the current calendar year and the two
preceding  calendar  years does not exceed 183 days (counting all of the days in
the current  calendar year,  only  one-third of the days in the first  preceding
calendar year and only  one-sixth of the days in the second  preceding  calendar
year). In addition,  lawful permanent residents or green card holders may not be
treated as "Exempt Foreign Persons." If you are an individual or an entity,  you
must not now be,  or at this  time  expect  to be,  engaged  in a U.S.  trade or
business  with respect to which any gain derived from  transactions  effected by
the Fund/Payer during the calendar year is effectively connected to the U.S. (or
your transactions are exempt from U.S. taxes under a tax treaty).

PERMANENT  ADDRESS.  The  Shareholder  Application  must contain your  permanent
address if you are an "Exempt Foreign Person." If you are an individual, provide
your permanent  address.  If you are a partnership or  corporation,  provide the
address of your  principal  office.  If you are an estate or trust,  provide the
address of your permanent residence or the principal office of any fiduciary.

NOTICE OF CHANGE IN STATUS.  If you become a U.S.  citizen or resident after you
have provided  certification  of your foreign  status,  or if you cease to be an
"Exempt Foreign  Person," you must notify the Fund/Payer  within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and backup
withholding  may also begin  unless you certify to the  Fund/Payer  that (1) the
taxpayer  identification  number you have given is correct, and (2) the Internal
Revenue Service has not notified you that you are subject to backup  withholding
because you failed to report certain  interest or dividend  income.  You may use
Form  W-9,   "Payer's   Request   for   Taxpayer   Identification   Number   and
Certification," to make these certifications. If an account is no longer active,
you do not have to notify a Fund/Payer or broker of your change in status unless
you also have another account with the same Fund/Payer that is still active.  If
you receive  interest  from more than one  Fund/Payer or have dealings with more
than one broker or barter  exchange,  file a certificate  with each. If you have
more than one account with the same  Fund/Payer,  the Fund/Payer may require you
to file a separate certificate for each account.

WHEN TO FILE. File these  certifications  with the Fund before a payment is made
to you,  unless  you have  already  done  this in  either  of the two  preceding
calendar years.

HOW OFTEN YOU MUST FILE. This certificate  generally remains in effect for three
calendar  years.  A  Fund/Payer  or  broker,  however,  may  require  that a new
certificate  be filed each time a payment is made.  On joint  accounts for which
each joint  owner is a foreign  person,  each must  provide a  certification  of
foreign status.


<PAGE>


                                             RESOLUTION SUPPORTING AUTHORITY OF
                                            CORPORATE /ASSOCIATION SHAREHOLDER
- -----------------------------------------------------------------------------
INSTRUCTION:

It will  be  necessary  for  corporate/association  shareholders  to  provide  a
certified copy of a resolution or other certificate of authority  supporting the
authority of designated  officers of the  corporation/association  to issue oral
and  written  instruction  on  behalf  of the  corporation/association  for  the
purchase, sale (redemption), transfer and/or exchange of Franklin Templeton Fund
shares.  You may use the  following  form of resolution or you may prefer to use
your own.

CERTIFIED COPY OF RESOLUTION (Corporation or Association)

The  undersigned  hereby  certifies  and affirms that he/she is the duly elected
__________________   of    ______________________   a   Title   Corporate   Name
_________________  organized under the laws of the State of ____________________
and that the following is a true and correct Type of Organization  State copy of
a resolution  adopted by the Board of Directors by unanimous  written consent (a
copy of which is attached) or at a meeting

duly called and held on __________________, 19__ .

    "RESOLVED, that
                             Name of Corporation/Association

     (the "Company") is authorized to invest the Company's assets in one or more
     investment  companies  (mutual  funds)  whose  shares  are  distributed  by
     Franklin/Templeton   Distributors,   Inc.   ("Distributors").   Each   such
     investment  company,  or series  thereof,  is  referred  to as a  "Franklin
     Templeton Fund" or "Fund."

    FURTHER  RESOLVED,  that  any  (enter  number)  ____________________  of the
    following  officers  of  this  Company  (acting  alone,  if one,  or  acting
    together,  if more than one)  is/are  authorized  to issue  oral or  written
    instructions  (including the signing of drafts in the case of draft accessed
    money  fund  accounts)  on  behalf of the  Company  for the  purchase,  sale
    (redemption),  transfer  and/or  exchange  of Fund shares and to execute any
    Fund  application(s) and agreements  pertaining to Fund shares registered or
    to be  registered to the Company  (referred to as a "Company  Instruction");
    and, that this authority  shall continue until  Franklin/Templeton  Investor
    Services,  Inc. ("Investor  Services") receives written notice of revocation
    or amendment delivered by registered mail. The Company's officers authorized
    to act on behalf of the Company  under this  resolution  are (enter  officer
    titles only):


    (referred to as the "Authorized Officers").
<PAGE>

    FURTHER  RESOLVED,  that  Investor  Services  may rely on the most  recently
    provided  incumbency  certificate  delivered  by  the  Company  to  Investor
    Services to identify  those  individuals  who are the  incumbent  Authorized
    Officers  and that  Investor  Services  shall  have no  independent  duty to
    determine  if there  has been  any  change  in the  individuals  serving  as
    incumbent Authorized Officers.

    FURTHER RESOLVED,  that the Company ("Indemnitor")  undertakes and agrees to
    indemnify and hold harmless  Distributors,  each affiliate of  Distributors,
    each  Franklin  Templeton  Fund and their  officers,  employees  and  agents
    (referred to hereafter  collectively as the "Indemnitees")  from and against
    any and all liability,  loss, suits, claims,  costs, damages and expenses of
    whatever amount and whatever nature (including without limitation reasonable
    attorneys' fees,  whether for consultation and advice or  representation  in
    litigation at both the trial and appellate level) any indemnitee may sustain
    or incur by reason of, in  consequence  of, or arising from or in connection
    with any action taken or not taken by an Indemnitee  in good faith  reliance
    on a Company Instruction given as authorized under this resolution."

The undersigned further certifies that the below named persons, whose signatures
appear opposite their names, are the incumbent Authorized Officers (as that term
is defined  in the above  resolution)  who have been duly  elected to the office
identified beside their name(s) (attach additional list if necessary).

                                                  X
  Name/title (please print or type)               Signature

                                                  X
  Name/title (please print or type)               Signature

                                                  X
  Name/title (please print or type)               Signature

                                                  X
  Name/title (please print or type)               Signature


Certified from minutes
X

Signature

- --------------------------------------------------------------------------------
Name/title (please print or type)
CORPORATE SEAL (if appropriate)


<PAGE>






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FRANKLIN  TEMPLETON  GROUP OF  FUNDS

LITERATURE REQUEST - CALL  1-800/DIAL  BEN  (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,  charges and
expenses, and should be read carefully before investing or sending money.

GLOBAL GROWTH

Franklin Global Health Care Fund
Franklin Templeton Japan 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
Franklin Templeton German
 Government Bond Fund
Franklin Templeton
 Global Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and Income
 Fund

GLOBAL INCOME

Franklin Global Government
Income Fund
Franklin Templeton Hard
 Currency Fund
Franklin Templeton High
 Income 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 
Mutual Discovery 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  Strategic Income Fund 
Franklin Utilities Fund 
Franklin Value Fund
Mutual Beacon Fund 
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund 
Templeton American Trust, Inc.

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 Investment
Grade Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR CORPORATIONS
Franklin Corporate Qualified
Dividend Fund

FRANKLIN FUNDS SEEKING
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

FRANKLIN STATE-SPECIFIC FUNDS
SEEKING 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)
- ------------------------------------------------------------------------------

*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.

FGF09/97        [RECYCLE LOGO] Printed on recycled paper           03 PA 01/98
                                                                              
TL103 PA


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                                                                ---------------
TEMPLETON                                                        BULK RATE
GLOBAL SMALLER COMPANIES FUND, INC.                              U.S. POSTAGE
                                                                    PAID
P.O. Box 33031                                                  SACRAMENTO, CA
ST. PETERSBURG, FL 33733-8031                                   PERMIT NO. 333
                                                               ----------------
                                                                              
103 PA 01/98
TL103 PA           [RECYCLE LOGO] Printed on recycled paper




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