O 189 P-1
SUPPLEMENT DATED OCTOBER 6, 1999
TO THE PROSPECTUS OF
FRANKLIN MICROCAP VALUE FUND
DATED MARCH 1, 1999, AS AMENDED SEPTEMBER 15, 1999
The prospectus is amended as follows:
I. The following is added to the Buying Shares table on page 19:
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[Insert graphic Call Shareholder Call Shareholder
of two arrows Services at the number Services at the number
pointing in below, or send signed below or our automated
opposite written instructions. TeleFACTS system, or
directions] The TeleFACTS system send signed written
cannot be used to open a instructions.
BY EXCHANGE new account.
(Please see page 21 for (Please see page 21 for
TeleFACTS(R) information on information on
1-800/247-1753 exchanges.) exchanges.)
(around-the-clock
access)
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II. The Exchange Privilege section on page 21 is replaced with the following:
EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton
Funds within the same class*, generally without paying any additional sales
charges. If you exchange shares held for less than six months, however, you
may be charged the difference between the initial sales charge of the two
funds if the difference is more than 0.25%. If you exchange shares from a
money fund, a sales charge may apply no matter how long you have held the
shares.
[Begin callout]
An EXCHANGE is really two transactions: a sale of one fund and the purchase
of another. In general, the same policies that apply to purchases and sales
apply to exchanges, including minimum investment amounts. Exchanges also have
the same tax consequences as ordinary sales and purchases.
[End callout]
Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee. Any CDSC
will continue to be calculated from the date of your initial investment and
will not be charged at the time of the exchange. The purchase price for
determining a CDSC on exchanged shares will be the price you paid for the
original shares. If you exchange shares subject to a CDSC into a Class A
money fund, the time your shares are held in the money fund will not count
towards the CDSC holding period.
Frequent exchanges can interfere with fund management or operations and drive
up costs for all shareholders. To protect shareholders, there are limits on
the number and amount of exchanges you may make (please see "Market Timers"
on page 26).
*Certain Class Z shareholders of Franklin Mutual Series Fund Inc. may
exchange into the fund without any sales charge. Advisor Class shareholders
of another Franklin Templeton Fund also may exchange into the fund without
any sales charge. Advisor Class shareholders who exchange their shares for
shares of the fund and later decide they would like to exchange into another
fund that offers Advisor Class may do so.
III. The first item found under Additional Policies on page 26 is replaced
with the following:
o The fund may refuse any order to buy shares, including any purchase
under the exchange privilege.
Please keep this supplement for future reference.
O 189 SA-2
SUPPLEMENT DATED OCTOBER 6, 1999
TO THE STATEMENT OF ADDITIONAL INFORMATION OF
FRANKLIN MICROCAP VALUE FUND
DATED MARCH 1, 1999
The Statement of Additional Information is amended as follows:
I. Under "Goal and Strategies":
(a) the first two paragraphs are replaced with the following to reflect that
the market capitalization of companies the fund primarily considers for
investment will increase to $200 million from $100 million:
The fund's principal investment goal is high total return, of which capital
appreciation and income are components. This goal is fundamental, which means
it may not be changed without shareholder approval. The fund also will seek
income when consistent with the fund's goal.
Under normal market conditions, the fund will invest at least 65% of its
total assets in securities of companies with market capitalization under $200
million at the time of purchase and which, in the manager's opinion, possess
the potential for significant capital appreciation due to intrinsic values in
excess of the current market price of such securities. The fund typically
will buy the securities of these companies at prices below the book value of
the company. The manager, however, also will take into account a variety of
other factors in order to determine whether to buy, and once purchased,
whether to hold or sell the securities. In addition to book value, the
manager may consider the following factors among others: valuable franchises
or other intangibles; ownership of valuable trademarks or trade names;
control of distribution networks or of market share for particular products;
ownership of real estate the value of which is understated; underutilized
liquidity and other factors that would identify the issuer as a potential
takeover target or turnaround candidate. The fund may invest the remainder of
its assets, up to 35%, in securities of companies with similar
characteristics but with market capitalization over $200 million.
(b) the last paragraph of the section "Investment restrictions" is replaced
with the following:
Generally, the policies and restrictions discussed in this SAI and in the
prospectus apply when the fund makes an investment. In most cases, the fund
is not required to sell a security because circumstances change and the
security no longer meets one or more of the fund's policies or restrictions.
If a percentage restriction or limitation is met at the time of investment, a
later increase or decrease in the percentage due to a change in the value or
liquidity of portfolio securities will not be considered a violation of the
restriction or limitation.
II. Under "Buying and Selling Shares":
(a) the following paragraph is added after the first paragraph:
For investors outside the U.S., the offering of fund shares may be limited in
many jurisdictions. An investor who wishes to buy shares of the fund should
determine, or have a broker-dealer determine, the applicable laws and
regulations of the relevant jurisdiction. Investors are responsible for
compliance with tax, currency exchange or other regulations applicable to
redemption and purchase transactions in any jurisdiction to which they may be
subject. Investors should consult appropriate tax and legal advisors to
obtain information on the rules applicable to these transactions.
(b) the following sentence is added at the end of the second paragraph:
We may deduct any applicable banking charges imposed by the bank from your
account.
(c) the following items are added to the section "Waivers for investments
from certain payments":
o Redemption proceeds from a repurchase of shares of Franklin Floating Rate
Trust, if the shares were continuously held for at least 12 months.
If you immediately placed your redemption proceeds in a Franklin Bank CD or
a Franklin Templeton money fund, you may reinvest them as described above.
The proceeds must be reinvested within 365 days from the date the CD matures,
including any rollover, or the date you redeem your money fund shares.
o Redemption proceeds from the sale of Class A shares of any of the Templeton
Global Strategy Funds if you are a qualified investor.
If you paid a CDSC when you redeemed your Class A shares from a Templeton
Global Strategy Fund, a new CDSC will apply to your purchase of fund shares
and the CDSC holding period will begin again. We will, however, credit your
fund account with additional shares based on the CDSC you previously paid and
the amount of the redemption proceeds that you reinvest.
If you immediately placed your redemption proceeds in a Franklin Templeton
money fund, you may reinvest them as described above. The proceeds must be
reinvested within 365 days from the date they are redeemed from the money
fund.
o Distributions from an existing retirement plan invested in the Franklin
Templeton Funds
(d) the third, fourth and fifth paragraphs under "Dealer compensation" are
replaced with the following:
These breakpoints are reset every 12 months for purposes of additional
purchases.
Distributors or one of its affiliates may pay up to 1%, out of its own
resources, to securities dealers who initiate and are responsible for
purchases by certain retirement plans without an initial sales charge. These
payments may be made in the form of contingent advance payments, which may be
recovered from the securities dealer or set off against other payments due to
the dealer if shares are sold within 12 months of the calendar month of
purchase. Other conditions may apply. All terms and conditions may be imposed
by an agreement between Distributors, or one of its affiliates, and the
securities dealer.
In addition to the payments above, Distributors and/or its affiliates may
provide financial support to securities dealers that sell shares of the
Franklin Templeton Group of Funds. This support is based primarily on the
amount of sales of fund shares and/or total assets with the Franklin
Templeton Group of Funds. The amount of support may be affected by: total
sales; net sales; levels of redemptions; the proportion of a securities
dealer's sales and marketing efforts in the Franklin Templeton Group of
Funds; a securities dealer's support of, and participation in, Distributors'
marketing programs; a securities dealer's compensation programs for its
registered representatives; and the extent of a securities dealer's marketing
programs relating to the Franklin Templeton Group of Funds. Financial support
to securities dealers may be made by payments from Distributors' resources,
from Distributors' retention of underwriting concessions and, in the case of
funds that have Rule 12b-1 plans, from payments to Distributors under such
plans. In addition, certain securities dealers may receive brokerage
commissions generated by fund portfolio transactions in accordance with the
rules of the National Association of Securities Dealers, Inc.
(e) the third item under "CDSC waivers" is replaced with the following:
o Redemptions by investors who purchased $1 million or more without an
initial sales charge if the securities dealer of record waived its commission
in connection with the purchase
(f) the following is added at the end of the second paragraph in the section
"Exchange privilege":
On the other hand, increased use of the exchange privilege may result in
periodic large inflows of money. If this occurs, it is the fund's general
policy to initially invest this money in short-term, interest-bearing money
market instruments, unless it is believed that attractive investment
opportunities consistent with the fund's investment goal exist immediately.
This money will then be withdrawn from the short-term, interest-bearing money
market instruments and invested in portfolio securities in as orderly a
manner as is possible when attractive investment opportunities arise.
(g) the following sentence is added before the next to last sentence of the
paragraph under "Redemptions in kind":
Redemptions in kind are taxable transactions.
Please keep this supplement for future reference.
