o 189*P1
SHARE CLASS REDESIGNATION
EFFECTIVE JANUARY 1, 1999
Class A - Formerly Considered Class I
SUPPLEMENT DATED JANUARY 1, 1999
TO THE PROSPECTUS OF
FRANKLIN MICROCAP VALUE FUND
DATED MARCH 1, 1998, AS AMENDED AUGUST 3, 1998
The prospectus is amended as follows:
I. As of January 1, 1999, the fund's shares are considered Class A shares for
redemption, exchange and other purposes. Before January 1, 1999, the fund's
shares were considered Class I shares.
All references in the prospectus to Class I shares are replaced with Class A,
and all references to Class II shares are replaced with Class C.
II. The following paragraphs are added under "What Are the Risks of Investing in
the Fund?":
EURO RISK. 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 the fund holds investments in
countries with currencies replaced by the euro, the investment process,
including trading, foreign exchange, payments, settlements, cash accounts,
custody and accounting will be impacted.
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 fund. The transition and the elimination
of currency risk among EMU countries may change the economic environment and
behavior of investors, particularly in European markets. To the extent the fund
holds non-U.S. dollar (euro or other) denominated securities, it will still be
exposed to currency risk due to fluctuations in those currencies versus the U.S.
dollar.
Resources has created an interdepartmental team to handle all euro-related
changes to enable the Franklin Templeton Funds to process transactions
accurately and completely with minimal disruption to business activities.
While there can be no assurance that the fund will not be adversely
affected, Advisory Services and its affiliated service providers are taking
steps that they believe are reasonably designed to address the euro issue.
YEAR 2000. When evaluating current and potential portfolio positions, Year
2000 is one of the factors Advisory Services considers.
Advisory Services will rely upon public filings and other statements made by
companies about their Year 2000 readiness. Issuers in countries outside the
U.S., particularly in emerging markets, may not be required to make the same
level of disclosure about Year 2000 readiness as is required in the U.S.
Advisory Services, of course, cannot audit each company and its major
suppliers to verify their Year 2000 readiness.
If a company in which the fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its security will also be adversely
affected. A decrease in the value of one or more of the fund's portfolio
holdings will have a similar impact on the price of the fund's shares. Please
see "Year 2000 Problem" under "Who Manages the Fund?" for more information.
III. The following is added after the section "Administrative Services" under
"Who Manages the Fund?":
YEAR 2000 PROBLEM. The fund's business operations depend on a worldwide
network of computer systems that contain date fields, including securities
trading systems, securities transfer agent operations and stock market links.
Many of the systems currently use a two digit date field to represent the
date, and unless these systems are changed or modified, they may not be able
to distinguish the Year 1900 from the Year 2000 (commonly referred to as the
Year 2000 problem). In addition, the fact that the Year 2000 is a
non-standard leap year may create difficulties for some systems.
When the Year 2000 arrives, the fund's operations could be adversely affected
if the computer systems used by Advisory Services, its service providers and
other third parties it does business with are not Year 2000 ready. For
example, the fund's portfolio and operational areas could be impacted,
including securities trade processing, interest and dividend payments,
securities pricing, shareholder account services, reporting, custody
functions and others. The fund could experience difficulties in effecting
transactions if any of its foreign subcustodians, or if foreign
broker-dealers or foreign markets are not ready for Year 2000.
Advisory Services and its affiliated service providers are making a concerted
effort to take steps they believe are reasonably designed to address their
Year 2000 problems. Of course, the fund's ability to reduce the effects of
the Year 2000 problem is also very much dependent upon the efforts of third
parties over which the fund and Advisory Services may have no control.
IV. The section "How Do I Buy Shares in Connection with Retirement Plans?",
found under "How Do I Buy Shares?", is replaced with the following:
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. These plans require separate applications and their policies
and procedures may be different than those described in this prospectus. For
more information, including a free retirement plan brochure or application,
please call Retirement Plan Services.
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.
V. The third item in the section "Exchange Restrictions," found under "May I
Exchange Shares for Shares of Another Fund?", is replaced with the following:
o Generally exchanges may only be made between identically registered
accounts, unless you send written instructions with a signature guarantee.
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."
VI. In the "By Phone" section of the chart under "How Do I Sell Shares?",
(a) the first bulleted item is replaced with the following:
o If the request is $100,000 or less. Institutional accounts may exceed
$100,000 by completing a separate agreement. Call Institutional Services
to receive a copy.
(b) and the third bulleted item is deleted.
VII. Distribution option 3 in the section "What Distributions Might I Receive
From the Fund? - Distribution Options" is replaced with the following:
3. RECEIVE DISTRIBUTIONS IN CASH - You may receive dividends, or both
dividend and capital gain distributions in cash. If you have the money sent
to another person or to a checking or savings account, you may need a
signature guarantee. If you send the money to a checking or savings account,
please see "Electronic Fund Transfers" under "Services to Help You Manage
Your Account."
VIII. Under "Transaction Procedures and Special Requirements,"
(a) the section "Joint Accounts" is replaced with the following:
JOINT ACCOUNTS. For accounts with more than one registered owner, the fund
accepts written instructions signed by only one owner for transactions and
account changes that could otherwise be made by phone. For all other
transactions and changes, all registered owners must sign the instructions.
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.
(b) the reference to $50,000 in the section "Signature Guarantees" is
replaced with $100,000.
(c) and the section "Trust Company Retirement Plan Accounts," found under
"Telephone Transactions," is deleted.
IX. Under "Services to Help You Manage Your Account,"
(a) the second sentence in the section "Automatic Investment Plan" is
replaced with the following:
Under the plan, you can have money transferred automatically from your
checking or savings account to the fund each month to buy additional shares.
(b) the second paragraph under "Systematic Withdrawal Plan" is replaced with
the following:
If you would like to establish a systematic withdrawal plan, please complete
the systematic withdrawal plan section of the account 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 or savings account. If you choose to
have the money sent to a checking or savings account, please see "Electronic
Fund Transfers" below. Once your plan is established, any distributions paid
by the fund will be automatically reinvested in your account.
(c) the section "Electronic Fund Transfers" is replaced with the following:
ELECTRONIC FUND TRANSFERS
You may choose to have dividend and capital gain distributions or payments
under a systematic withdrawal plan sent directly to a checking or savings
account. If the account is with a bank that is a member of the Automated
Clearing House, the payments may be made automatically by electronic funds
transfer. If you choose this option, please allow at least fifteen days for
initial processing. We will send any payments made during that time to the
address of record on your account.
(d) and the third bulleted item in the section "TeleFACTS(R)" is replaced with
the following:
o exchange shares (within the same class) between identically
registered Franklin Templeton Class A, B or C accounts; and
X. In the "Useful Terms and Definitions" section,
(a) the definition of "Class I and Class II" is replaced with the following:
CLASS A, CLASS B AND CLASS C - Certain funds in the Franklin Templeton Funds
offer multiple classes of shares. The different classes have proportionate
interests in the same portfolio of investment securities. They differ,
however, primarily in their sales charge structures and Rule 12b-1 plans.
Because the fund's sales charge structure and Rule 12b-1 plan are similar to
those of Class A shares, shares of the fund are considered Class A shares for
redemption, exchange and other purposes.
(b) and the following definition is revised:
CONTINGENCY PERIOD - The 12 month period during which a Contingent Deferred
Sales Charge may apply. The holding period begins on the day you buy your
shares. For example, if you buy shares on the 18th of the month, they will
age one month on the 18th day of the next month and each following month.
Please keep this supplement for future reference.
o 189*SA
SHARE CLASS REDESIGNATION
EFFECTIVE JANUARY 1, 1999
Class A - Formerly Considered Class I
SUPPLEMENT DATED JANUARY 1, 1999
TO THE STATEMENT OF ADDITIONAL INFORMATION OF
FRANKLIN MICROCAP VALUE FUND
DATED MARCH 1, 1998
The Statement of Additional Information is amended as follows:
I. As of January 1, 1999, the Fund's shares are considered Class A shares for
redemption, exchange and other purposes. Before January 1, 1999, the Fund's
shares were considered Class I shares.
All references in the Statement of Additional Information to Class I shares
are replaced with Class A.
II. The first sentence in the section "Additional Information on Exchanging
Shares," found under "How Do I Buy, Sell and Exchange Shares?", is replaced
with the following:
If you request the exchange of the total value of your account, declared
but unpaid income dividends and capital gain distributions will be
reinvested in the Fund and exchanged into the new fund at Net Asset Value
when paid.
III. The following replaces the performance figures under "How Does the Fund
Measure Performance? - Total Return." The figures below have been restated
to reflect the Fund's current, maximum 5.75% initial sales charge.
The Fund's average annual total return for the one-year period ended
October 31, 1997, and for the period from inception (December 12, 1995)
through October 31, 1997, was 27.32% and 27.20%, respectively.
The Fund's cumulative total return for the one-year period ended October
31, 1997, and for the period from inception (December 12, 1995) through
October 31, 1997, was 27.32% and 57.42%, respectively.
IV. The following paragraph is added under "Miscellaneous Information":
The Information Services & Technology division of Resources established a
Year 2000 Project Team in 1996. This team has already begun making
necessary software changes to help the computer systems that service the
Fund and its shareholders to be Year 2000 compliant. After completing these
modifications, comprehensive tests are conducted in one of Resources' U.S.
test labs to verify their effectiveness. Resources continues to seek
reasonable assurances from all major hardware, software or data-services
suppliers that they will be Year 2000 compliant on a timely basis.
Resources is also beginning to develop a contingency plan, including
identification of those mission critical systems for which it is practical
to develop a contingency plan. However, in an operation as complex and
geographically distributed as Resources' business, the alternatives to use
of normal systems, especially mission critical systems, or supplies of
electricity or long distance voice and data lines are limited.
V. The following replaces the definition of "Offering Price" under the
section "Useful Terms and Definitions":
OFFERING PRICE - The public offering price is based on the Net Asset Value
per share and includes the front-end sales charge. The maximum front-end
sales charge is 5.75%.
Please keep this supplement for future reference.
