SUPPLEMENT DATED DECEMBER 15, 1998
TO THE PROSPECTUS DATED MAY 1, 1998
OF
FRANKLIN VALUEMARK(R) FUNDS
I. The section "Small Cap Fund" under "Portfolio Investment Objectives and
Policies" is amended as follows:
a) The first four sentences of the second paragraph are replaced with the
following:
PORTFOLIO INVESTMENTS. Under normal market conditions, the Portfolio will
invest at least 65% of its total assets in equity securities of small
capitalization growth companies ("small cap companies"). A small cap company
generally has a market capitalization of less than $1.5 billion at the time
of the Portfolio's investment and, in the opinion of the Portfolio's Manager,
is positioned for rapid growth in revenues, earnings or assets. Market
capitalization is the total market value of a company's outstanding common
stock. The securities of small capitalization companies are traded on U.S.
and foreign stock exchanges and in the over-the-counter market.
b) The third paragraph is deleted.
II. The section "Currency Risks and their Management" under "Highlighted Risk
Considerations - Foreign Transactions" is amended by replacing the second
paragraph with the following three paragraphs:
EURO. On January 1, 1999, the European Monetary Union (EMU) plans to
introduce a new single currency, the Euro, which will replace the national
currency for participating member countries. If a Portfolio holds investments
in countries with currencies replaced by the Euro, the investment process,
including trading, foreign exchange, payments, settlements, cash accounts,
custody and accounting will be impacted.
The process to establish the Euro may result in market volatility. It is not
possible to predict the impact of the Euro on the business or financial
condition of European issuers or on the Portfolios. To the extent a portfolio
holds non-U.S. dollar (Euro or other) denominated securities, it will still
be exposed to currency risk due to fluctuations in those currencies versus
the U.S. dollar.
Franklin Resources, Inc. ("Resources"), the parent company of the Portfolios'
Managers, has created an interdepartmental team to handle all Euro-related
changes to enable the Franklin Templeton Group of Funds to process
transactions accurately and completely with minimal disruption to business
activities. While the implementation of the Euro could have a negative effect
in the Portfolios, the Managers and their affiliated service providers are
taking steps that they believe are reasonably designed to address the Euro
issue.
III. The section "Year 2000" under "General Information" is replaced with the
following:
YEAR 2000 PROBLEM. The Portfolios' business operations depend upon a
worldwide network of computer systems that contain date fields, including
securities trading systems, securities transfer agent operations and stock
market links. Many of the systems currently use a two digit date field to
represent the date, and unless these systems are changed or modified, they
may not be able to distinguish the Year 1900 from the Year 2000 (commonly
referred to as the Year 2000 problem). In addition, the fact that the Year
2000 is a non-standard leap year may create difficulties for some systems.
When the Year 2000 arrives, the Portfolios' operations could be adversely
affected if the computer systems used by the Managers, their service providers
and other third parties they do business with are not Year 2000 ready. For
example, the portfolio and operational areas could be impacted, including
securities trade processing, interest and dividend payments, securities pricing,
shareholder account services, reporting, custody functions and others. The
Portfolios could experience difficulties in effecting transactions if any of
their foreign subcustodians, or if foreign broker/dealers or foreign markets,
are not ready for Year 2000.
In evaluating current and potential portfolio positions, Year 2000 is only
one of the factors that the Portfolios' Managers take into consideration. The
Managers will rely upon public filings and other statements made by companies
about their Year 2000 readiness. Issuers in countries outside of the U.S.,
and in particular in emerging markets, may not be required to make the same
level of disclosure regarding Year 2000 readiness as is required in the U.S.
The Managers, of course, cannot audit each company and their major suppliers
to verify their Year 2000 readiness. If a company in which a Portfolio is
invested is adversely affected by Year 2000 problems, it is likely that the
price of its security will also be adversely affected. A decrease in the
value of one or more of a Portfolio's portfolio holdings will have a similar
impact on the price of the Portfolio's shares.
The Managers and their affiliated service providers are making a concerted
effort to take steps they believe are reasonably designed to address their
Year 2000 problems. Of course, the Portfolios' ability to reduce the effects
of the Year 2000 problem is also very much dependent upon the efforts of
third parties over which the Portfolios and their Managers may have no
control.
IV. The section "Management" is amended by:
a) Under "Managers", adding the following sentence to the third paragraph:
Michael F. Price is Chairman of the Board of Directors of Franklin Mutual.
b) Under "Managers - Manager Services and Fees," restating certain
Portfolios' "1997 Management and Portfolio Administration Fees" as indicated
below. The Portfolio Administration Fees for these Portfolios were
inadvertently not included under "1997 Management and Portfolio
Administration Fees," but were reflected in "1997 Total Operating Expenses."
Accordingly, these portfolios' "1997 Total Operating Expenses" remain the
same as in the May 1, 1998 prospectus.
1997 MANAGEMENT 1997 TOTAL
AND PORTFOLIO OPERATING
PORTFOLIO (EXCEPT NEW PORTFOLIOS) ADMINISTRATION FEES EXPENSES
- ----------------------------------------------------------------------------
Mutual Discovery Securities Fund .95%* 1.06%
Mutual Shares Securities Fund .75%* .80%
Templeton Global Asset Allocation Fund .80%* .94%
Templeton International Smaller Companies
Fund 1.00%* 1.06%
*Includes a .15% Administration Fee which is a direct expense of the
Portfolio.
c) Under "Managers - Management Services and Fees," adding the following
sentence:
For the Global Health Care Securities and Value Securities Funds, the
Managers and FT Services have agreed in advance to waive or limit their
Management and Portfolio Administration Fees and to assume as their own
expense certain expenses otherwise payable by these Portfolios as necessary
so that through at least December 31, 1998, the total expenses of each
Portfolio do not exceed 1.00% of its average net assets.
d) Under "Portfolio Operations," replacing the discussion for the Portfolios
listed below with the following:
GLOBAL HEALTH CARE
SECURITIES FUND
Kurt von Emster
Evan McCulloch
Rupert H. Johnson, Jr.
GLOBAL UTILITIES SECURITIES FUND
(FORMERLY UTILITY EQUITY FUND)
Sally Edwards-Haff
Ian Link
Growth and Income Fund
Frank Felicelli
Kent Shepherd
SMALL CAP FUND
Edward B. Jamieson
Michael McCarthy
Aidan O'Connell
TEMPLETON GLOBAL
INCOME SECURITIES FUND
Thomas J. Dickson
Neil S. Devlin
Thomas Latta
TEMPLETON INTERNATIONAL
SMALLER COMPANIES FUND
Simon Rudolph
Peter A. Nori
Juan J. Benito
MUTUAL DISCOVERY
SECURITIES FUND
Peter A. Langerman
Robert L. Friedman
David E. Marcus
MUTUAL SHARES
SECURITIES FUND
Peter A. Langerman
Robert L. Friedman
Lawrence N. Sondike
David E. Marcus
e) Under "Biographical Information," adding or revising the indicated
portfolio managers' information as follows:
Robert L. Friedman
Chief Investment Officer and Senior Vice President
Franklin Mutual Advisers, Inc.
Mr. Friedman has a Bachelor of Arts degree in Humanities from Johns Hopkins
University and a Masters in Business Administration from the Wharton School,
University of Pennsylvania. Before November 1996, Mr. Friedman was a research
analyst for Heine Securities Corporation, the predecessor of Franklin Mutual.
He has been with the Franklin Templeton Group since November 1996 and has
managed the Mutual Discovery and Mutual Shares Funds from inception.
Peter A. Langerman
Chief Executive Officer and Senior Vice President
Franklin Mutual Advisers, Inc.
Mr. Langerman has a Bachelor of Arts degree from Yale University, a Masters
in Science from New York University Graduate School of Business and a Juris
Doctor from Stanford University Law School. Before November 1996, he was a
research analyst for Heine Securities Corporation, the predecessor of
Franklin Mutual. He has been with the Franklin Templeton Group since November
1996 and has managed the Mutual Discovery and Mutual Shares Funds from
inception.
Thomas Latta
Vice President of Templeton Global Bond Managers
a division of Templeton Investment Counsel, Inc.
Mr. Latta received a Bachelor of Business Administration degree from the
University of Miami (Florida). Mr. Latta is a Chartered Financial Analyst,
and a member of the Association for Investment Management and Research and
the Institute of Chartered Financial Analysts. He joined the Franklin
Templeton organization in 1991, and has managed the Templeton Global Income
Securities Fund since May 1998.
David E. Marcus
Senior Vice President
Franklin Mutual Advisers, Inc.
Mr. Marcus holds a Bachelor of Science in Business Administration/Finance
from Northeastern University. Before November 1996, he was a research analyst
for Heine Securities Corporation, the predecessor of Franklin Mutual. He has
been with the Franklin Templeton Group since November 1996 and has managed
the Mutual Discovery and Mutual Shares Funds since March 1998.
Aidan O'Connell
Portfolio Manager
Franklin Advisers, Inc.
Mr. O'Connell holds a Master of Business Administration degree in Finance
from the University of Pennsylvania, a Master of Arts degree in International
Relations from Johns Hopkins University and a Bachelor of Arts degree from
Dartmouth College. Before joining the Franklin Templeton Group in May 1998,
Mr. O'Connell was at Hambrecht & Quist (1991-1997). Mr. O'Connell has managed
the Small Cap Fund since September 1998.
Kent P. Shepherd
Vice President
Franklin Advisers, Inc.
Mr. Shepherd holds undergraduate degrees in Economics and Political Science
from Northwestern University and an MBA in International Finance from UCLA.
In addition, Mr. Shepherd is a Chartered Financial Analyst and a Chartered
Investment Counselor. Mr. Shepherd has been with the Franklin Templeton Group
since 1991 and has managed the Growth and Income Fund since August 1998.
Lawrence N. Sondike
Senior Vice President
Franklin Mutual Advisers, Inc.
Mr. Sondike has a Bachelor of Arts degree from Cornell University and a
Masters in Business Administration from New York University Graduate School
of Business. Before November 1996, he was a research analyst for Heine
Securities Corporation, the predecessor of Franklin Mutual. He has been with
the Franklin Templeton Group since November 1996, and has managed the Mutual
Shares Fund from inception.
Please keep this supplement with your prospectus for future reference.
