TEMPLETON INSTITUTIONAL FUNDS INC, 497, 1999-10-29

TEMPLETON INSTITUTIONAL FUNDS INC
497, 1999-10-29

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Prospectus

Templeton Institutional
Funds, Inc.

INVESTMENT STRATEGY

GLOBAL GROWTH

FOREIGN EQUITY SERIES - PRIMARY SHARES
EMERGING MARKETS SERIES
EMERGING FIXED INCOME MARKETS SERIES

MAY 1, 1999
AS AMENDED NOVEMBER 1, 1999

[Insert Franklin Templeton Ben Head]

THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

CONTENTS

THE FUNDS

[Begin callout]
INFORMATION ABOUT EACH FUND YOU SHOULD KNOW BEFORE INVESTING
[End callout]

2 Foreign Equity Series

11 Emerging Markets Series

21 Emerging Fixed Income Markets Series

32 Distributions and Taxes;
Year 2000 Problem

YOUR ACCOUNT

[Begin callout]
INFORMATION ABOUT QUALIFIED INVESTORS, ACCOUNT TRANSACTIONS AND SERVICES
[End callout]

34 Qualified Investors

36 Buying Shares

39 Investor Services

41 Selling Shares

43 Account Policies

45 Questions

FOR MORE INFORMATION

[Begin callout]
WHERE TO LEARN MORE ABOUT EACH FUND
[End callout]

Back Cover

FOREIGN EQUITY SERIES

[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES

GOAL The fund's investment goal is long-term capital growth.

PRINCIPAL INVESTMENTS Under normal market conditions, the fund will invest
primarily in the equity securities of companies located outside the U.S.,
including emerging markets. The fund normally will invest at least 65% of total
assets in at least three different nations.

[Begin callout]
The fund invests primarily in an internationally diversified portfolio of equity
securities.
[End callout]

Equity securities generally entitle the holder to participate in a company's
general operating results. These include common stocks and preferred stocks. The
fund may invest a portion of its assets in smaller companies. For this fund,
smaller company stocks are generally those with market capitalizations of less
than $1 billion. The fund also invests in American, European and Global
Depositary Receipts, which are certificates typically issued by a bank or trust
company that give their holders the right to receive securities issued by a
foreign or domestic company. The fund may enter into forward foreign currency
contracts and may buy and sell (write) put and call options on foreign
currencies. For hedging purposes, the fund may buy and sell financial futures
contracts, stock index futures contracts and foreign currency futures contracts
and options on these futures contracts.

Depending upon current market conditions, the fund generally may invest up to
35% of its total assets in debt securities of companies and governments located
anywhere in the world. Debt securities represent an obligation of the issuer to
repay a loan of money to it, and generally provide for the payment of interest.
These include bonds, notes and debentures.

The Templeton investment philosophy is "bottom-up", value-oriented, and
long-term. In choosing equity investments, the fund's manager will focus on the
market price of a company's securities relative to its evaluation of the
company's long-term earnings, asset value and cash flow potential. A company's
historical value measures, including price/earnings ratio, profit margins and
liquidation value, will also be considered.

TEMPORARY INVESTMENTS The manager may take a temporary defensive position when
it believes the securities trading markets or the economy are experiencing
excessive volatility or a prolonged general decline, or other adverse conditions
exist. Under these circumstances, the fund may be unable to pursue its
investment goal, because it may not invest or may invest substantially less in
international equity securities.

[Insert graphic of chart with line going up and down] MAIN RISKS

STOCKS While stocks have historically outperformed other asset classes over the
long term, they tend to go up and down more dramatically over the short term.
These price movements may result from factors affecting individual companies,
industries or the securities markets as a whole. Value stock prices are
considered "cheap" relative to the company's perceived value. They may not
increase in value, as anticipated by the manager, if other investors fail to
recognize the company's value and bid up the price or in markets favoring
faster-growing companies.

[Begin callout]
Because the securities the fund holds fluctuate in price, the value of your
investment in the fund will go up and down. This means you could lose money over
short or even extended periods.
[End callout]

FOREIGN SECURITIES Securities of companies and governments located outside the
U.S. may involve risks that can increase the potential for losses in the fund.
Investments in depositary receipts also involve some or all of the following
risks.

COUNTRY. General securities market movements in any country where the fund has
investments are likely to affect the value of the securities the fund owns that
trade in that country. These movements will affect the fund's share price and
fund performance.

The political, economic and social structures of some countries the fund invests
in may be less stable and more volatile than those in the U.S. The risks of
investing in these countries include the possibility of the imposition of
exchange controls, currency devaluations, foreign ownership limitations,
expropriation, restrictions on removal of currency and other assets,
nationalization of assets, punitive taxes and certain custody and settlement
risks.

The fund's investments in developing or emerging markets are subject to all of
the risks of foreign investing generally, and have additional heightened risks
due to a lack of established legal, political, business and social frameworks to
support securities markets. Foreign securities markets, including emerging
markets, may have substantially lower trading volumes than U.S. markets,
resulting in less liquidity and more volatility than in the U.S. While
short-term volatility in these markets can be disconcerting, declines of more
than 50% are not unusual. The definition of developing or emerging markets or
countries as used by the fund's manager may differ from the definition of the
same terms as used in managing other Franklin Templeton funds.

COMPANY. Foreign companies are not subject to the same disclosure, accounting,
auditing and financial reporting standards and practices as U.S. companies and
their securities may not be as liquid as securities of similar U.S. companies.
Foreign stock exchanges, trading systems, brokers and companies generally have
less government supervision and regulation than in the U.S. The fund may have
greater difficulty voting proxies, exercising shareholder rights, pursuing legal
remedies and obtaining judgments with respect to foreign investments in foreign
courts than with respect to U.S. companies in U.S. courts.

CURRENCY Many of the fund's investments are denominated in foreign currencies.
Changes in foreign currency exchange rates will affect the value of what the
fund owns and the fund's share price. Generally, when the U.S. dollar rises in
value against a foreign currency, an investment in that country loses value
because that currency is worth fewer U.S. dollars. Devaluation of a currency by
a country's government or banking authority also will have a significant impact
on the value of any securities denominated in that currency. Currency markets
generally are not as regulated as securities markets.

EURO. On January 1, 1999, the European Monetary Union (EMU) introduced a new
single currency, the euro, which will replace the national currency for
participating member countries.

Because this change to a single currency is new and untested, it is not possible
to predict the impact of the euro on the business or financial condition of
European issuers which the fund may hold in its portfolio, and their impact on
fund performance. To the extent the fund holds non-U.S. dollar (euro or other)
denominated securities, it will still be exposed to currency risk due to
fluctuations in those currencies versus the U.S. dollar.

SMALLER COMPANIES 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, small 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.

ILLIQUID SECURITIES The fund may not invest more than 10% of its total assets in
securities which are not publicly traded or which cannot be readily resold
because of legal or contractual restrictions, or which are not otherwise readily
marketable (including repurchase agreements having more than seven days
remaining to maturity).

INTEREST RATE When interest rates rise, debt security prices fall. When interest
rates fall, debt security prices rise. Generally, interest rates rise during
times of inflation or a growing economy, and fall during an economic slowdown or
recession. Securities with longer maturities usually are more sensitive to
interest rate changes than securities with shorter maturities.

CREDIT This is the possibility that an issuer will be unable to make interest
payments or repay principal. Changes in an issuer's financial strength or in a
security's credit rating may affect its value and, thus, impact the value of
fund shares.

DERIVATIVE SECURITIES Forward foreign currency contracts, futures contracts,
options on these contracts and options on foreign currencies are considered
derivative investments, since their value depends on the value of the underlying
asset to be purchased or sold. The fund's investment in derivatives may involve
a small investment relative to the amount of risk assumed. To the extent the
fund enters into these transactions, their success will depend on the manager's
ability to predict market movements.

YEAR 2000 When evaluating current and potential portfolio positions, Year 2000
is one of the factors the manager considers.

The manager will rely upon public filings and other statements made by companies
about their Year 2000 readiness. Issuers in countries outside the U.S.,
particularly in emerging markets, may be more susceptible to Year 2000 risks and
may not be required to make the same level of disclosure about Year 2000
readiness as is required in the U.S. The manager, of course, cannot audit 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 securities also will 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 fund's performance. Please see page
33 for more information.

More detailed information about the fund, its policies, including temporary
investments, and risks can be found in the fund's Statement of Additional
Information (SAI).

[Begin callout]
Mutual fund shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency of the U.S.
government. Mutual fund shares involve investment risks, including the possible
loss of principal.
[End callout]

[Insert graphic of bull and bear] PERFORMANCE

This bar chart and table show the volatility of the fund's returns, which is one
indicator of the risks of investing in the fund. The bar chart shows changes in
the fund's returns from year to year over the past 8 calendar years. The table
shows how the fund's average annual total returns compare to those of a
broad-based securities market index. Of course, past performance cannot predict
or guarantee future results.

PRIMARY SHARES ANNUAL TOTAL RETURNS/1/

[Insert bar graph]

21.39% -1.33% 34.03% 0.24% 12.97% 21.58% 11.43% 10.16%
- -------------------------------------------------------------------------------
91 92 93 94 95 96 97 98
YEAR

[Begin callout]
BEST QUARTER:
Q1 '98 15.58%

WORST QUARTER:
Q3 '98 -15.88%
[End callout]

AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998

SINCE
INCEPTION
1 YEAR 5 YEARS (10/18/90)
- -------------------------------------------------------------------------------
Foreign Equity Series - Primary Shares 10.16% 11.07% 12.55%
MSCI - EAFE Index/2/ 20.33% 9.50% 9.57%

1. As of March 31, 1999, the fund's year-to-date return was 1.90%.

2. Source: Standard & Poor's(R) Micropal. The unmanaged MSCI Europe Australia
Far East (EAFE) Index tracks the performance of approximately 1000 securities in
20 countries. It includes reinvested dividends. One cannot invest directly in an
index, nor is an index representative of the fund's portfolio.

[Insert graphic of percentage sign] FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

Maximum sales charge (load) imposed on purchases None
Exchange fee/1/ $5.00

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)

Management fees/2/ 0.70%
Other expenses 0.13%
-----
Total annual fund operating expense/2/ 0.83%
=====

1. This fee is only for market timers (see page 44).

2. For the fiscal year ended December 31, 1998, the manager and administrator
had agreed in advance to reduce their respective fees in order to limit the
total expenses of the fund to an annual rate of 1.00% of average net assets. If
these fee reductions are insufficient to so limit the fund's expenses, the
administrator has agreed to assume as its own expense certain expenses otherwise
payable by the fund. These voluntary agreements did not result in any fee
reductions for the fund for the fiscal year ended December 31, 1998. After May
1, 2000, the manager and administrator may end this arrangement at any time.

EXAMPLE

This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds. It assumes:

o You invest $10,000 for the periods shown;

o Your investment has a 5% return each year;

o The fund's operating expenses remain the same; and

o You sell your shares at the end of the periods shown.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
$85 $265 $460 $1,025

[INSERT GRAPHIC OF BRIEFCASE] MANAGEMENT

Templeton Investment Counsel, Inc. (Investment Counsel), 500 East Broward Blvd.,
Ft. Lauderdale, Florida 33394-3091, is the fund's investment manager. Together,
Investment Counsel and its affiliates manage over $222 billion in assets.

The fund's lead portfolio manager is:

GARY P. MOTYL CFA, DIRECTOR AND EXECUTIVE VICE PRESIDENT OF INVESTMENT COUNSEL
Mr. Motyl has been a manager of the fund since 1996. He joined the Franklin
Templeton Group in 1981.

The following individuals have secondary portfolio management responsibilities:

MARK R. BEVERIDGE CFA, SENIOR VICE PRESIDENT OF INVESTMENT COUNSEL
Mr. Beveridge has been a manager of the fund since 1996. He joined the Franklin
Templeton Group in 1985.

SIMON RUDOLPH, SENIOR VICE PRESIDENT OF INVESTMENT COUNSEL
Mr. Rudolph has been a manager of the fund since 1998. He joined the Franklin
Templeton Group in 1997.

GUANG YANG, VICE PRESIDENT OF INVESTMENT COUNSEL
Mr. Yang has been a manager of the fund since 1998. He joined the Franklin
Templeton Group in 1995.

The fund pays Investment Counsel a fee for managing the fund's assets and making
its investment decisions. For the fiscal year ended December 31, 1998, the fund
paid 0.70% of its average daily net assets to the manager. The manager
voluntarily agreed to reduce its fees in order to limit total expenses of the
fund. This voluntary agreement did not result in any management fee reductions
for the fund. After May 1, 2000, the manager may end this arrangement at any
time upon notice to the fund's Board of Directors.

[Insert graphic of dollar bill] FINANCIAL HIGHLIGHTS

This table presents the fund's financial performance for the past five years.
This information has been audited by McGladrey & Pullen, LLP.

YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

PER SHARE DATA ($)
Net asset value, beginning of year 17.36 16.34 14.04 12.86 13.32
--------------------------------------------
Net investment income .42 .42 .45 .31 .20
Net realized and unrealized
gains (losses) 1.29 1.43 2.54 1.35 (.16)
--------------------------------------------
Total from investment operations 1.71 1.85 2.99 1.66 .04
--------------------------------------------
Dividends from net investment income (.40) (.43) (.45) (.31) (.19)
In excess of net investment income - - (.02) - -
Distributions from net realized gains (.91) (.40) (.14) (.17) (.31)
-------------------------------------------
In excess of net realized gains - - (.08) - -
--------------------------------------------
Total distributions (1.31) (.83) (.69) (.48) (.50)
--------------------------------------------
Net asset value, end of year 17.76 17.36 16.34 14.04 12.86
--------------------------------------------
Total return (%)/1/ 10.16 11.43 21.58 13.00 0.24

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 1 million) 4,552 3,706 2,858 1,818 1,093
Ratios to average net assets: (%)
Expenses .83 .84 .87 .88 .95
Net investment income 2.33 2.49 3.20 2.70 2.03
Portfolio turnover rate (%) 15.40 15.25 7.39 20.87 7.90
</TABLE>

1. Total return is not annualized.

EMERGING MARKETS SERIES

[INSERT GRAPHIC OF BULLSEYE AND ARROWS] GOAL AND STRATEGIES

GOAL The fund's investment goal is long-term capital growth.

PRINCIPAL INVESTMENTS Under normal market conditions, the fund will invest at
least 65% of its total assets in equity securities of developing or emerging
market issuers. The fund normally will invest in at least three developing or
emerging market countries.

[Begin callout]
The fund invests primarily in developing or emerging market companies' equity
securities.
[End callout]

For purposes of the fund's investments, developing or emerging market countries
include:

o countries that are generally considered low or middle income countries by the
International Bank of Reconstruction and Development (commonly known as the
World Bank) and the International Finance Corporation; or

o countries that are classified by the United Nations or otherwise regarded by
their authorities as developing; or

o countries with a stock market capitalization of less than 3% of the Morgan
Stanley Capital International World Index.

In addition, developing or emerging market equity securities means those issued
by:

o companies whose principal securities trading markets are in developing or
emerging market countries; or

o companies that derive a significant share of their total revenue from either
goods or services produced or sales made in developing or emerging market
countries; or

o companies that have a significant portion of their assets in developing or
emerging market countries; or

o companies that are linked to currencies of developing or emerging market
countries; or

o companies that are organized under the laws of or with principal offices in,
developing or emerging market countries.

Equity securities generally entitle the holder to participate in a company's
general operating results. These include common stocks and preferred stocks. The
fund also invests in American, Global, and European Depositary Receipts, which
are certificates typically issued by a bank or trust company that give their
holders the right to receive securities issued by a foreign or domestic
corporation.

Depending upon current market conditions, the fund generally invests a portion
of its total assets in rated and unrated debt securities. Debt securities
represent an obligation of the issuer to repay a loan of money to it, and
generally provide for the payment of interest. These include bonds, notes and
debentures.

The Templeton investment philosophy is "bottom-up", value-oriented, and
long-term. In choosing equity investments, the fund's manager will focus on the
market price of a company's securities relative to its evaluation of a company's
long-term earnings, asset value and cash flow potential. A company's historical
value measures, including price/earnings ratios, profit margins and liquidation
value, will also be considered.

TEMPORARY INVESTMENTS The manager may take a temporary defensive position when
it believes the securities trading markets or the economies of countries where
the fund invests are experiencing excessive volatility or a prolonged general
decline, or other adverse conditions exist. Under these circumstances, the fund
may be unable to pursue its investment goal because it may not invest or may
invest substantially less in developing market companies' equity securities.

[Insert graphic of chart with line going up and down] MAIN RISKS

STOCKS While stocks have historically outperformed other asset classes over the
long term, they tend to go up and down more dramatically over the short term.
These price movements may result from factors affecting individual companies,
industries or the securities market as a whole. Value stock prices are
considered "cheap" relative to the company's perceived value. They may not
increase in value, as anticipated by the manager, if other investors fail to
recognize the company's value and bid up the price or if they trade in markets
favoring faster-growing companies.

[Begin callout]
Because the securities the fund holds fluctuate in price, the value of your
investment in the fund will and down. This means you could lose money over short
or even extended periods.
[End callout]

FOREIGN SECURITIES Securities of companies and governments located outside the
U.S. may involve risks that can increase the potential for losses in the fund.
Investments in Depositary Receipts also involve some or all of the following
risks.

The political, economic and social structures of some countries the fund invests
in may be less stable and more volatile than those in the U.S. The risks of
investing in these countries include the possibility of the imposition of
exchange controls, currency devaluations, foreign ownership limitations,
expropriation, restrictions on removal of currency or other assets,
nationalization of assets, punitive taxes and certain custody and settlement
risks.

DEVELOPING OR EMERGING MARKETS. The fund's investments in developing or emerging
markets are subject to all of the risks of foreign investing generally, and have
additional heightened risks due to a lack of established legal, political,
business and social frameworks to support securities markets. Some of the
additional significant risks, include:

o Political and social uncertainty (for example, regional conflicts and risk
of war)

o Currency exchange rate volatility

o Pervasiveness of corruption and crime

o Delays in settling portfolio transactions

o Risk of loss arising out of systems of share registration and custody

o Involves markets that are comparatively smaller and less liquid than developed
markets. While short-term volatility in these markets can be disconcerting,
declines in excess of 50% are not unusual.

o Less government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the United States

o Currency and capital controls

ALL OF THESE FACTORS MAKE DEVELOPING MARKET EQUITY SECURITIES' PRICES GENERALLY
MORE VOLATILE THAN SECURITIES ISSUED IN DEVELOPED MARKETS.

The definition of developing or emerging markets or countries as used by the
fund's manager may differ from the definition of the same terms as used in
managing other Franklin Templeton funds.

EURO. On January 1, 1999, the European Monetary Union (EMU) introduced a new
single currency, the euro, which will replace the national currency for
participating member countries.

ILLIQUID SECURITIES The fund may not invest more than 15% of its total assets in
securities which are not publicly traded or which cannot be readily resold
because of legal or contractual restrictions, or which are not otherwise readily
marketable (including repurchase agreements having more than seven days
remaining to maturity).

INTEREST RATE When interest rates rise, debt security prices fall. When interest
rates fall, debt securities rise. Generally, interest rates rise during times of
inflation or a growing economy, and fall during an economic slowdown or
recession. Securities with longer maturities usually are more sensitive to
interest rate changes than securities with shorter maturities.

YEAR 2000 When evaluating current and potential portfolio positions, Year 2000
is one of the factors the manager considers.

More detailed information about the fund, its policies, including temporary
investments, and risks can be found in the fund's Statement of Additional
Information (SAI).

[Insert graphic of bull and bear] PERFORMANCE

This bar chart and table show the volatility of the fund's returns, which is one
indicator of the risks of investing in the fund. The bar chart shows changes in
the fund's returns from year to year over the past 5 calendar years. The table
shows how the fund's average annual total returns compare to those of a
broad-based securities market index. Of course, past performance cannot predict
or guarantee future results.

ANNUAL TOTAL RETURNS/1/

[Insert bar graph]

- -11.39% -1.23% 18.86% -11.32% -18.03%
- -------------------------------------------------------------------
94 95 96 97 98
YEAR

[Begin callout]
BEST QUARTER:
Q4 '98 23.62%

WORST QUARTER:

Q4 '97 -25.71%
[End callout]

AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998

SINCE
INCEPTION
1 YEAR 5 YEARS (5/3/93)
- ----------------------------------------------------------------------------
Emerging Markets Series -18.03% -5.44% 0.09%
IFC - Investable Composite Index/2/ -22.02% -10.14% -0.67%
MSCI - Emerging Markets Free Index/2/ -25.34% -9.27% -0.12%

1. As of March 31, 1999, the fund's year-to-date return was 8.49%.

2. Source: Standard & Poor's(R) Micropal. The unmanaged IFC-Investable Composite
Index tracks the performance of approximately 2,000 securities in emerging
market countries. It includes reinvested dividends. The unmanaged MSCI-Emerging
Markets Free Index measures the performance of securities located in 25 emerging
market countries such as Brazil, China, Korea and Poland. It includes reinvested
dividends. One cannot invest directly in an index, nor is an index
representative of the fund's portfolio.

[Insert graphic of percentage sign] FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

Maximum sales charge (load) imposed on purchases None
Exchange fee/1/ $5.00

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)

Management fees/2/ 1.25%
Other expenses 0.26%
-----
Total annual fund operating expenses/2/ 1.51%
=====

1. This fee is only for market timers (see page 44).

2. For the fiscal year ended December 31, 1998, the manager and administrator
had agreed in advance to reduce their respective fees in order to limit the
total expenses of the fund to an annual rate of 1.60% of average net assets. If
these fee reductions are insufficient to so limit the fund's expenses, the
administrator has agreed to assume as its own expense certain expenses otherwise
payable by the fund. These voluntary agreements did not result in any fee
reductions for the fund for the fiscal year ended December 31, 1998. After May
1, 2000, the manager and administrator may end this arrangement at any time.

EXAMPLE

This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds. It assumes:

o You invest $10,000 for the periods shown;

o Your investment has a 5% return each year;

o The fund's operating expenses remain the same; and

o You sell your shares at the end of the periods shown.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
$154 $477 $824 $1,802

[Insert graphic of briefcase] MANAGEMENT

Templeton Asset Management Ltd. - Hong Kong Branch (Asset Management Hong Kong),
Two Exchange Square, Hong Kong, is the fund's investment manager. Together,
Asset Management Hong Kong and its affiliates manage over $222 billion in
assets.

The fund's lead portfolio manager is:

DR. J. MARK MOBIUS, Managing Director of Templeton Asset Management LTD.
Dr. Mobius has been a manager of the fund since inception. He joined the
Franklin Templeton Group in 1987.

The following individuals have secondary portfolio management responsibilities:

H. ALLAN LAM, PORTFOLIO MANAGER of Templeton ASSET Management LTD.
Mr. Lam has been a manager of the fund since inception. He joined the Franklin
Templeton Group in 1987.

TOM WU, Director of Templeton Asset Management LTD.
Mr. Wu has been a manager of the fund since inception. He joined the Franklin
Templeton Group in 1987.

The fund pays Asset Management Hong Kong a fee for managing the fund's assets
and making its investment decisions. For the fiscal year ended December 31,
1998, the fund paid 1.25% of its average daily net assets to the manager. The
manager voluntarily agreed to reduce its fees in order to limit total expenses
of the fund, however, this voluntary agreement did not result in any management
fee reductions for the fund. After May 1, 2000, the manager may end this
arrangement at any time upon notice to the fund's Board of Directors.

[Insert graphic of dollar bill] FINANCIAL HIGHLIGHTS

This table presents the fund's financial performance for the past five years.
This information has been audited by McGladrey & Pullen, LLP.

YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($)
Net asset value, beginning of year 10.37 12.45 10.75 11.21 13.22
--------------------------------------------------
Net investment income .18 .18 .15 .19 .17
Net realized and unrealized
gains (losses) (2.05) (1.60) 1.86 (.34) (1.65)
--------------------------------------------------
Total from investment operations (1.87) (1.42) 2.01 (.15) 1.48)
--------------------------------------------------
Distributions from net
investment income (.19) (.18) (.15) (.17) (.17)
--------------------------------------------------
Distributions from net
realized gains - (.48) (.16) (.14) (.36)
--------------------------------------------------
Total distributions (.19) (.66) (.31) (.31) (.53)
--------------------------------------------------
Net asset value, end of year 8.31 10.37 12.45 10.75 11.21
--------------------------------------------------
Total return (%)/1/ (18.03) (11.32) 18.86 (1.23) (11.39)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 1,000) 1,733,607 1,923,881 1,565,537 798,515 582,878
Ratios to average net assets: (%)
Expenses 1.51 1.57 1.56 1.52 1.60
Expenses excluding waiver and
payments by affiliate 1.51 1.57 1.56 1.52 1.66
Net investment income 2.03 1.42 1.56 2.00 1.59
Portfolio turnover rate (%) 38.11 24.72 7.92 13.47 12.51
</TABLE>

1. Total return is not annualized.

EMERGING FIXED INCOME MARKETS SERIES

[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES

GOAL The fund's investment goal is high total return, consisting of current
income and capital appreciation.

PRINCIPAL INVESTMENTS Under normal market conditions, the fund will invest at
least 65% of total assets in debt securities of emerging markets issuers, which
include companies, governments and government agencies located in emerging
market countries and entities organized for the purpose of restructuring
securities issued by these issuers. The fund may invest up to 35% of total
assets in securities issued or guaranteed by the U.S. government, its agencies
and instrumentalities. The fund normally will invest at least 65% of total
assets in at least three different nations.

[Begin callout]
The fund invests primarily in debt securities of emerging market issuers, which
include companies, governments and government agencies located in emerging
market countries.
[End callout]

For purposes of the fund's investments, developing or emerging market countries
include those considered such by the World Bank, the International Finance
Corporation, the United Nations, or the countries' authorities.

In addition, developing or emerging market equity securities means those issued
by:

o companies with their principal securities trading market within a developing
or emerging market country, as defined above; or

o companies that derive 50% or more of their total revenue from either goods or
services produced or sales made in developing or emerging market countries; or

o companies organized under the laws of, or with principal offices in,
developing or emerging market countries.

Debt securities represent an obligation of the issuer to repay a loan of money
to it, and generally provide for the payment of interest. These include bonds,
notes and debentures. Debt securities issued by emerging market companies and
governments are generally rated below "investment grade" debt securities, which
means they are not in the top four rating categories as determined by
independent rating agencies such as Standard & Poor's Corporation (S&P) or
Moody's Investors Services, Inc. (Moody's). The fund may buy securities rated in
any category and anticipates that a substantial percentage of its assets will be
invested in debt securities rated below investment grade or unrated securities
determined by the fund's manager to be comparable. As of December 31, 1998,
approximately 75.7% of the fund's net assets were invested in lower rated and
comparable quality unrated debt securities.

The fund may invest in various types of debt securities, such as Eurobonds,
Global Bonds, Yankee Bonds, bonds sold under SEC Rule 144A, and Brady Bonds. The
fund generally invests a substantial portion of its assets in Eurobonds and
Brady Bonds. Brady Bonds are public-issue bonds that are created through an
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with a debt restructuring plan introduced by former
U.S. Secretary of the Treasury, Nicholas F. Brady.

The fund may buy securities on a "when issued" or "delayed delivery" basis. This
means that the securities will be paid for and delivered to the fund at a future
date.

The fund's manager allocates its assets based upon its assessment of changing
market, political and economic conditions. It will consider various factors,
including evaluation of interest and currency exchange rate changes and credit
risks, in seeking to identify those markets and issuers which are anticipated to
provide the opportunity for high current income and capital appreciation.

[Insert graphic of chart with line going up and down] MAIN RISKS

Securities rated below investment grade, sometimes called "junk bonds" or "high
yield debt securities," generally have more risk than higher-rated securities.
The principal risks of investing in these securities include:

o SUBSTANTIAL CREDIT RISK. Companies and governments issuing high yield debt
securities are not as strong financially as those with higher credit ratings.
They are more likely to encounter financial difficulties and are more
vulnerable to changes in the economy, such as a recession or a sustained
period of rising interest rates, that could prevent them from making interest
and principal payments.

o DEFAULTED DEBT RISK. If an issuer is not paying or stops paying interest
and/or principal on its securities, payments on the securities may never
resume. These securities may be worthless and the fund could lose its entire
investment.

o VOLATILITY RISK. The prices of high yield debt securities fluctuate more than
higher-quality securities. The entire high yield securities market can
experience sudden and sharp price swings due to changes in economic
conditions, stock market activity, large sustained sales by major investors,
a high-profile default, or other factors. The price of a company's debt
securities is especially sensitive to developments affecting the company's
business and to changes in the ratings assigned by ratings organizations.
Prices are often closely linked with a company's stock prices and typically
rise and fall in response to factors that affect stock prices. High yield
securities are also generally less liquid than higher-quality bonds. Many of
these securities do not trade frequently, and when they do trade their prices
may be significantly higher or lower than expected. At times, it may be
difficult to sell these securities promptly at an acceptable price, which may
limit the fund's ability to sell securities in response to specific economic
events or to meet redemption requests.

INTEREST RATE When interest rates rise, fixed-income security prices fall. When
interest rates fall, fixed-income security prices rise. Generally, interest
rates rise during times of inflation or a growing economy, and will fall during
an economic slowdown or recession. Securities with longer maturities usually are
more sensitive to interest rate changes than securities with shorter maturities.

[Begin callout]
If a security's credit rating is downgraded or an issuer's financial condition
deteriorates, the price of the security will fall and so too will the fund's
share price. If interest rates rise, the value of the fund's debt securities
will also fall. Because the value of the fund's holdings fluctuate in price, the
value of your investment in the fund will go up and down. This means you could
lose money over short or even extended periods.
[End callout]

BRADY BONDS. Brady Bonds may be collateralized or uncollateralized and issued in
various currencies (although most are dollar-denominated). Brady Bonds have been
issued relatively recently, and, accordingly, do not have a long payment
history. Because of the history of defaults with respect to commercial bank
loans by public and private entities of countries issuing Brady Bonds,
investments in Brady Bonds are considered speculative. The fund may also invest
in restructured external debt that has not undergone a Brady-style debt
exchange, or other types of instruments structured or denominated as bonds.

The political, economic and social structures of some countries the fund invests
in may be less stable and more volatile than those in the U.S. The risks of
investing in these countries include the possibility of the imposition of
exchange controls, currency devaluations, foreign ownership limitations,
expropriation, restrictions on removal of currency or other assets,
nationalization of assets, punitive taxes and certain custody and settlement
risks.

o Political and social uncertainty (for example, regional conflicts and risk
of war)

o Currency exchange rate volatility

o Pervasiveness of corruption and crime

o Delays in settling portfolio transactions

o Risk of loss arising out of systems of share registration and custody

o Markets that are comparatively smaller and less liquid than developed markets.
While short-term volatility in these markets can be disconcerting, declines in
excess of 50% are not unusual.

o Less government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the United States

o Currency and capital controls

ALL OF THESE FACTORS MAKE DEVELOPING MARKET DEBT SECURITIES' PRICES GENERALLY
MORE VOLATILE THAN SECURITIES ISSUED IN DEVELOPED MARKETS.

The definition of developing or emerging markets or countries as used by the
fund's manager may differ from the definition of the same terms as used in
managing other Franklin Templeton funds.

EURO. On January 1, 1999, the European Monetary Union (EMU) introduced a new
single currency, the euro, which will replace the national currency for
participating member countries.

DIVERSIFICATION The fund is non-diversified under federal securities laws. It
may invest a greater portion of its assets in the securities of one issuer and,
therefore in a smaller number of individual issuers, than diversified funds.
Therefore, it may be more sensitive to economic, business, political or other
changes affecting similar issuers or securities. The fund intends, however, to
meet certain tax diversification requirements.

YEAR 2000 When evaluating current and potential portfolio positions, Year 2000
is one of the factors the manager considers.

The manager will rely upon public filings and other statements made by issuers
about their Year 2000 readiness. Issuers in countries outside the U.S.,
particularly in emerging markets, may be more susceptible to Year 2000 risk and
may not be required to make the same level of disclosure about Year 2000
readiness as is required in the U.S. The manager, of course, cannot audit any
company and its major suppliers to verify their Year 2000 readiness.

If a company in which the fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its securities also will be adversely
affected. A decrease in the value of one or more of the fund's portfolio
holdings will have a similar impact on the price of the fund's shares. Please
see page 33 for more information.

PORTFOLIO TURNOVER The manager's attempt to seek high total return may cause the
fund's portfolio turnover rate to be high. High turnover will increase the
fund's transaction costs and may increase your tax liability.

More detailed information about the fund, its policies, including temporary
investments, risks and the ratings of debt securities can be found in the fund's
Statement of Additional Information (SAI).

[Insert graphic of bull and bear] PERFORMANCE

This information gives some indication of the risks of investing in the fund by
comparing the fund's performance with a broad-based securities market index. Of
course, past performance cannot predict or guarantee future results.

ANNUAL TOTAL RETURNS/1/

[Insert bar graph]

-3.87%
--------
98

YEAR

[Begin callout]
BEST QUARTER:
Q4 '98 12.69%

WORST QUARTER:
Q3 '98 -14.45%
[End callout]

AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998

SINCE
INCEPTION
1 YEAR (6/4/97)
- -------------------------------------------------------------------------------
Emerging Fixed Income Markets Series -3.87% 5.05%
J.P. Morgan Emerging Markets Bond Index Plus/2/ -14.35% -6.79%

1. As of March 31, 1999, the fund's year-to-date return was 2.56%.

2. Source: Standard & Poor's(R) Micropal. The unmanaged J. P. Morgan Emerging
Markets Bond Index Plus tracks the total returns of broker-traded external debt
instruments that are issued by governments and corporations in the emerging
markets and have at least $500 million outstanding. It includes reinvested
interest. One cannot invest directly in an index, nor is an index representative
of the fund's portfolio.

[Insert graphic of percentage sign] FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

Maximum sales charge (load) imposed on purchases None
Exchange fee/1/ $5.00

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)

Management fees/2/ 0.70%
Other expenses 3.04%
-----
Total annual fund operating expenses/2/ 3.74%
=====

1. This fee is only for market timers (see page 44).

2. For the fiscal year ended December 31, 1998, the manager and administrator
had agreed in advance to limit their respective fees and to assume as their own
expense certain expenses otherwise payable by the fund. With this reduction, the
fund paid no management fees and total annual fund operating expenses were
1.25%. After May 1, 2000, the manager and administrator may end this arrangement
at any time.

EXAMPLE

This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds. It assumes:

o You invest $10,000 for the periods shown;

o Your investment has a 5% return each year;

o The fund's operating expenses remain the same; and

o You sell your shares at the end of the periods shown.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
$376 $1,143 $1,930 $3,984

[Insert graphic of briefcase] MANAGEMENT

Templeton Investment Counsel, Inc. (Investment Counsel), 500 East Broward Blvd.,
Ft. Lauderdale, Florida 33394-3091, through its Templeton Global Bond Managers
division (Global Bond Managers), is the fund's investment manager. Together,
Investment Counsel and its affiliates manage over $222 billion in assets. A team
from Global Bond Managers is responsible for the day-to-day management of the
fund.

The fund pays Investment Counsel a fee for managing the fund's assets and making
its investment decisions. For the fiscal year ended December 31, 1998,
management fees, before any advance waiver, were 0.70% of the fund's average
daily net assets. Under an agreement by the manager to waive its fees, the fund
did not pay any management fees. After May 1, 2000, the manager may end this
arrangement at any time upon notice to the fund's Board of Directors.

[Insert graphic of dollar bill] FINANCIAL HIGHLIGHTS

This table presents the fund's financial performance for the past two years.
This information has been audited by McGladrey & Pullen, LLP.

YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------------------
1998 1997/1/
- -----------------------------------------------------------------------------
PER SHARE DATA ($)
Net asset value, beginning of year 10.47 10.00
-----------------------
Net investment income .84 .44
Net realized and unrealized gains (losses) (1.27) .79
-----------------------
Total from investment operations (.43) 1.23
-----------------------
Distributions from net investment income (.86) (.44)
Distributions from net realized gains (.56) (.32)
-----------------------
Tax return of capital (.03) -
-----------------------
Total distributions (1.45) (.76)
-----------------------
Net asset value, end of year 8.59 10.47
-----------------------
Total return (%)/2/ (3.98) 12.42

RATIOS/SUPPLEMENTAL DATA

Net assets, end of year ($ x 1,000) 1,881 2,249
Ratios to average net assets: (%)
Expenses 1.25 1.25/3/
Expenses excluding waiver and payments
by affiliate 3.74 6.40/3/
Net investment income 8.55 7.26/3/
Portfolio turnover rate (%) 525.94 172.62

1. For the period June 4, 1997 (commencement of operations) to December 31,
1997.
2. Total return is not annualized.
3. Annualized

[Insert graphic of dollar signs and stacks of coins]DISTRIBUTIONS AND TAXES;
YEAR 2000 PROBLEM

INCOME AND CAPITAL GAINS DISTRIBUTIONS The funds intend to pay a dividend at
least annually representing substantially all of their net investment income and
any net realized capital gains. The amount of these distributions will vary and
there is no guarantee the funds will pay dividends.

To receive a distribution, you must be a shareholder on the record date. The
record date for the funds' distributions will vary. Please keep in mind that if
you invest in the funds shortly before the record date of a distribution, any
distribution will lower the value of the funds' shares by the amount of the
distribution and you will receive some of your investment back in the form of a
taxable distribution. If you would like information on upcoming record dates for
the funds' distributions, please call Institutional Services at 1-800/321-8563.

TAX CONSIDERATIONS In general, fund distributions are taxable to you as either
ordinary income or capital gains. This is true whether you reinvest your
distributions in additional fund shares or receive them in cash. Any capital
gains a fund distributes are taxable to you as long-term capital gains no matter
how long you have owned your shares.

[Begin callout]
BACKUP WITHHOLDING
By law, a fund must withhold 31% of your taxable distributions and proceeds if
you do not provide your correct social security or taxpayer identification
number, or if the IRS instructs the fund to do so.
[End callout]

Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.

When you sell your shares of a fund, you may have a capital gain or loss. For
tax purposes, an exchange of your fund shares for shares of a different Franklin
Templeton Fund is the same as a sale. The individual tax rate on any gain from
the sale or exchange of your shares depends on how long you have held your
shares.

Fund distributions and gains from the sale or exchange of your shares generally
will be subject to state and local income tax. Any foreign taxes paid by a fund
that invests more than 50% of its assets in foreign securities may be passed
through to you as a foreign tax credit. Non-U.S. investors may be subject to
U.S. withholding and estate tax. You should consult your tax advisor about the
federal, state, local or foreign tax consequences of your investment in a fund.

YEAR 2000 PROBLEM The funds' 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 leap year may
create difficulties for some systems.

When the Year 2000 arrives, the funds' operations could be adversely affected if
the computer systems used by the manager, its service providers and other third
parties it does business with are not Year 2000 ready. For example, the funds'
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 funds 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.

The funds' 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 funds' ability to reduce the effects of
the Year 2000 problem is also very much dependent upon the efforts of third
parties over which the funds and their managers may have no control.

YOUR ACCOUNT

[Insert graphic of pencil marking an X] QUALIFIED INVESTORS

The following investors may qualify to buy shares of the funds.

o Defined contribution plans such as employer stock, bonus, pension or profit
sharing plans that meet the requirements for qualification under section 401
of the Internal Revenue Code, including salary reduction plans qualified under
section 401(k) of the Internal Revenue Code, and that are sponsored by an
employer (i) with at least 1,000 employees (10,000 for the Foreign Equity
Series), or (ii) with retirement plan assets of $10 million or more ($100
million or more for the Foreign Equity Series). Minimum investments: No
initial or additional minimums. Minimum investments for plans with less
than 1,000 employees or $10 million in plan assets (excluding Foreign Equity
Series): $1 million initial investment or an investment of $1 million over
the subsequent 13-month period in the funds or any of the Franklin Templeton
Funds and no additional minimum.

[Begin callout]
The FRANKLIN TEMPLETON FUNDS include all of the Franklin Templeton U.S.
registered mutual funds, except Franklin Templeton Variable Insurance Products
Trust, Templeton Capital Accumulator Fund, Inc., and Templeton Variable Products
Series Fund.
[End callout]

o 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.
Minimum investments: $1 million initial investment or an investment of $1
million over the subsequent 13-month period in the funds or any of the
Franklin Templeton Funds and no additional minimum.

o Defined benefit plans or governments, municipalities, and tax-exempt entities
that meet the requirements for qualification under section 501 of the Internal
Revenue Code. Minimum investments: $1 million initial investment.

o Service agents and broker-dealers who have entered into an agreement with
Franklin Templeton Distributors, Inc. (Distributors) may purchase shares of
the funds for clients of associated registered investment advisors
participating in fee-based programs until May 31, 1997. After this date,
additional purchases of a fund may be made only for clients who already own
or hold shares of that fund.

o An investor who executes a Letter of Intent (Letter) which expresses the
investor's intention to invest at least $5 million within a 13-month period in
the Franklin Templeton Funds, including at least $1 million in the funds. See
the Institutional Application. Minimum investments: $1 million. If the
investor does not invest at least $5 million in shares of the funds or other
Franklin Templeton Funds within the 13-month period, the shares actually
purchased will be involuntarily redeemed and the proceeds sent to the investor
at the address of record. Any redemptions made by the shareholder during the
13-month period will be subtracted from the amount of purchases for purposes
of determining whether the terms of the Letter have been completed.

o Any investor, including a private investment vehicle such as a family trust or
foundation, who is a member of a qualified group. Minimum investments: $5
million initial investment. For minimum investment purposes, the group's
investments are added together. The group may combine all of its shares in the
Franklin Templeton Funds for purposes of determining whether it meets the $5
million minimum, as long as $1 million is invested or to be invested in the
funds. There are certain other requirements and the group must have a purpose
other than buying fund shares.

o Other investors. Minimum investments: $5 million initial investment.

Shares of the funds may be purchased at net asset value without a sales charge
through any broker that has a dealer agreement with Distributors, the principal
underwriter of the shares of the funds, or directly from Distributors, upon
receipt by Distributors of an Institutional Account Application Form and
payment. Distributors may establish minimum requirements with respect to amount
of purchase.

Certain Franklin Templeton Funds offer multiple share classes not offered by the
funds. Please note that for selling or exchanging your shares, or for other
purposes, the funds' shares are considered Advisor Class shares.

[Insert graphic of paper with lines and someone writing] BUYING SHARES

For defined contribution plans that meet the requirements for qualification
under section 401 of the Internal Revenue Code and that are sponsored by an
employer with at least 1,000 employees or with retirement plan assets of $10
million or more, you may continue to add to your Foreign Equity Series account
or buy additional shares through the reinvestment of dividend or capital gains
distributions if you were a shareholder of record of Foreign Equity Series as of
May 1, 1999.

ACCOUNT APPLICATION If you are opening a new account, please complete and sign
an Institutional Account Application Form.

BUYING SHARES

- -------------------------------- ------------------------------- ---------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- -------------------------------- ------------------------------- ---------------------------------------------
<S> <C> <C>
[Insert graphic of hands
shaking]
Contact your investment Contact your investment
representative representative
THROUGH YOUR INVESTMENT
REPRESENTATIVE
- -------------------------------- ------------------------------- ---------------------------------------------
Make your check, Federal Make your check, Federal Reserve draft
negotiable bank draft or Reserve draft or negotiable bank draft
payable to the fund. payable to the fund. Include your account
number.

[Insert graphic of envelope] Mail the check, Federal Fill out the deposit slip from your account
Reserve draft or negotiable statement. If you do not have a slip, include a
bank draft and your signed note with your name, the fund name, and your
Institutional Account account number.
Application Form to
Institutional Services.

BY MAIL Mail the check, Federal Reserve draft or
negotiable bank draft and deposit slip or
note to Institutional Services.
- -------------------------------- ------------------------------- ---------------------------------------------------
[Insert graphic of three Call to receive a wire Call to receive a wire control number and wire
lightning bolts] control number and wire instructions.
instructions.

BY WIRE Wire the funds and mail your To make a same day wire investment, please call
signed Institutional Account us by 1:00 p.m. pacific time and make sure your
Application Form to wire arrives by 3:00 p.m.
Institutional Services.
Please include the wire
control number or your new
account number on the
application.

1-800/321-8563
or 1-650/312-3600

To make a same day wire
investment, please call
us by 1:00 p.m. pacific time
and make sure your wire
arrives by 3:00 p.m.
- -------------------------------- ------------------------------- ---------------------------------------------------
[Insert graphic of two arrows Call Institutional Services Call Institutional Services at the number below,
pointing in opposite at the number below, or send or send signed written instructions. (Please see
directions] signed written instructions. page 39 for information on exchanges.)
(Please see page 39 for
information on exchanges.)

BY EXCHANGE

</TABLE>

FRANKLIN TEMPLETON INSTITUTIONAL SERVICES 777 MARINERS ISLAND BLVD.,
P.O. BOX 7777, SAN MATEO, CA 94403-7777
CALL TOLL-FREE: 1-800/321-8563
(MONDAY THROUGH FRIDAY 6:00 A.M. TO 5:00 P.M., PACIFIC TIME)

Orders mailed to Franklin Templeton Distributors, Inc. (Distributors) by dealers
or individual investors do not require advance notice. Checks or negotiable bank
drafts must be in U.S. currency drawn on a commercial bank in the U.S. and, if
over $100,000, may not be deemed to have been received until the proceeds have
been collected, unless the check is certified or issued by such bank. Any
subscription may be rejected by Distributors or by Templeton Institutional
Funds, Inc. (Company).

Shares of the funds may be purchased with "in-kind" securities, if approved in
advance by the Company. Securities used to purchase fund shares must be
appropriate investments for that fund, consistent with its investment objective,
policies and limitations, as determined by the Company, and must have readily
available market quotations. The securities will be valued in accordance with
the Company's policy for calculating net asset value, determined as of the close
of the day on which the securities are received by the Company in salable form.
A prospective shareholder will receive shares of the applicable fund next
computed after such receipt. To obtain the approval of the Company, call
Institutional Services. Investors who are affiliated persons of the Company (as
defined in the Investment Company Act of 1940) may not purchase shares in this
manner in the absence of SEC approval.

[Insert graphic of person with handset] INVESTOR SERVICES

TELEFACTS(R) Our TeleFACTS system offers around-the-clock access to information
about your account or any Franklin Templeton Fund. This service is available
from touch-tone phones at 1-800/247-1753. For a free TeleFACTS brochure, call
1-800/DIAL BEN.

TELEPHONE PRIVILEGES You may initiate many transactions and make certain other
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
Institutional Services.

For accounts with more than one registered owner, telephone privileges also
allow a fund to accept written instructions signed by only one owner for
transactions and account changes that could otherwise be made by phone. For all
other transactions and changes, all registered owners must sign the
instructions.

As long as we take certain measures to verify telephone requests, we will not be
responsible for any losses that may occur from unauthorized requests.

EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton Funds
within the same class and between funds in Templeton Institutional Funds, Inc.
You also may exchange your shares for Class A shares of a fund that does not
currently offer an Advisor Class (without any sales charge)* or for Class Z
shares of Franklin Mutual Series Fund Inc.

[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]

If you do not qualify to buy Advisor Class shares of a Franklin Templeton Fund,
you also may exchange your shares for Class A shares of the fund (without any
sales charge).*

*If you exchange into Class A shares and you later decide you would like to
exchange into a fund that offers an Advisor Class or Class Z, you may exchange
your Class A shares for Advisor Class or Class Z shares if you otherwise qualify
to buy the fund's Advisor Class or Class Z shares.

Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee.

Frequent exchanges can interfere with fund management or operations and drive up
costs for all shareholders. To protect shareholders, there are limits on the
number and amount of exchanges you may make (please see "Market Timers" on page
44).

[Insert graphic of certificate] SELLING SHARES

You can sell your shares at any time.

SELLING SHARES IN WRITING Generally, requests to sell $100,000 or less can be
made over the phone or with a simple letter. If you have completed and returned
the Institutional Telephone Privileges Agreement, amounts over $100,000 may also
be redeemed. Sometimes, however, to protect you and the funds we will need
written instructions signed by all registered owners, with a signature guarantee
for each owner, if:

[Begin callout]
A SIGNATURE GUARANTEE helps protect your account against fraud. You can obtain a
signature guarantee at most banks and securities dealers.

A notary public CANNOT provide a signature guarantee.
[End callout]

o you are selling more than $100,000 worth of shares

o you want your proceeds paid to someone who is not a registered owner

o you want to send your proceeds somewhere other than the address of record, or
preauthorized bank or brokerage firm account

We also may require a signature guarantee on instructions we receive from an
agent, not the registered owners, or when we believe it would protect the funds
against potential claims based on the instructions received.

SELLING RECENTLY PURCHASED SHARES If you sell shares recently purchased with a
check or draft, we may delay sending you the proceeds until your check or draft
has cleared, which may take seven business days or more. A certified or
cashier's check may clear in less time.

REDEMPTION PROCEEDS Your redemption check will be sent within seven days after
we receive your request in proper form. We are not able to receive or pay out
cash in the form of currency. Redemption proceeds may be delayed if we have not
yet received your signed account application.

RETIREMENT PLANS You may need to complete additional forms to sell shares in a
Franklin Templeton Trust Company retirement plan. For participants under age
59 1/2, tax penalties may apply. Call Retirement Plan Services at 1-800/527-2020
for details.

SELLING SHARES
- ---------------------------------- --------------------------------------------
TO SELL SOME OR ALL OF YOUR SHARES
- ---------------------------------- --------------------------------------------
[Insert graphic of hands shaking] Contact your investment representative

THROUGH YOUR INVESTMENT
REPRESENTATIVE
- ---------------------------------- --------------------------------------------
[Insert graphic of envelope] Send written instructions and endorsed share
certificates (if you hold share certificates)
to Institutional Services. Corporate,
partnership or trust accounts may need to
send additional documents.
BY MAIL
Specify the fund, the account number and the
dollar value or number of shares you wish to
sell. Be sure to include all necessary
signatures and any additional documents, as
well as signature guarantees if required.

A check will be mailed to the name(s) and
address on the account, or otherwise
according to your written instructions.
- --------------------------------- ---------------------------------------------
[Insert graphic of phone] As long as your transaction is for $100,000
or less, you do not hold share certificates
and you have not changed your address by
phone within the last 15 days, you can sell
your shares by phone.
BY PHONE
1-800/321-8563 A check will be mailed to the name(s) and
address on the account. Written instructions,
with a signature guarantee, are required to
send the check to another address or to
(Only available if you have make it payable to another person.
completed and sent the
Institutional Telephone
Privileges Agreement)
- --------------------------------- --------------------------------------------
[Insert graphic of three You can call or write to have redemption
lightning bolts] proceeds of $1,000 or more wired to a bank
or escrow account. See the policies above
for selling shares by mail or phone.
BY WIRE
Before requesting a wire, please make sure
we have your wiring instructions (bank
information) on file. If we do not have this
information, you will need to send written
instructions with your bank's name and
address, your bank account number, the ABA
routing number, and a signature guarantee.

Requests received in proper form by 1:00 p.m.
pacific time will be wired the next business
day.
- --------------------------------- ---------------------------------------------
[Insert graphic of two arrows Obtain a current prospectus for the fund you
pointing in opposite directions] are considering.

BY EXCHANGE Call Institutional Services at the number
below, or send signed written instructions.
See the policies above for selling shares
by mail or phone.

If you hold share certificates, you will
need to return them to the fund before your
exchange can be processed.

- --------------------------------- ---------------------------------------------
FRANKLIN TEMPLETON INSTITUTIONAL SERVICES 777 MARINERS ISLAND BLVD.,
P.O. BOX 7777, SAN MATEO, CA 94403-7777
CALL TOLL-FREE: 1-800/321-8563
(MONDAY THROUGH FRIDAY 6:00 A.M. TO 5:00 P.M., PACIFIC TIME)

[Insert graphic of paper and pen] ACCOUNT POLICIES

CALCULATING SHARE PRICE Each fund calculates the net asset value per share (NAV)
each business day at the close of trading on the New York Stock Exchange
(normally 1:00 p.m. pacific time). Each fund's NAV is calculated by dividing its
net assets by the number of its shares outstanding.

Each fund's assets are generally valued at their market value. If market prices
are unavailable, or if an event occurs after the close of the trading market
that materially affects the values, assets may be valued at their fair value. If
a fund holds securities listed primarily on a foreign exchange that trades on
days when the funds are not open for business, the value of your shares may
change on days that you cannot buy or sell shares.

Requests to buy and sell shares are processed at the NAV next calculated after
we receive your request in proper form.

ACCOUNTS WITH LOW BALANCES If the value of your account falls below $1,000
because you sell some of your shares, we may mail you a notice asking you to
bring the account back up to $1,000. If you choose not to do so within 30 days,
we may close your account and mail the proceeds to the address of record.

STATEMENTS AND REPORTS You will receive statements that show your account
transactions. You also will receive the funds' financial reports every six
months. To reduce fund expenses, we try to identify related shareholders in a
household and send only one copy of the financial reports. If you need
additional copies, please call 1-800/DIAL BEN.

If there is a dealer or other investment representative of record on your
account, he or she also will receive statements and other information about your
account directly from a fund.

STREET OR NOMINEE ACCOUNTS You may transfer your shares from the street or
nominee name account of one dealer to another, as long as both dealers have an
agreement with Franklin Templeton Distributors, Inc. We will process the
transfer after we receive authorization in proper form from your delivering
securities dealer.

JOINT ACCOUNTS Unless you specify a different registration, accounts with two or
more owners are registered as "joint tenants with rights of survivorship" (shown
as "Jt Ten" on your account statement). To make any ownership changes to a joint
account, all owners must agree in writing, regardless of the law in your state.

MARKET TIMERS The funds may restrict or refuse exchanges by market timers. If
accepted, each exchange by a market timer will be charged $5 by
Franklin/Templeton Investor Services, Inc., the funds' transfer agent. You will
be considered a market timer if you have (i) requested an exchange out of a fund
within two weeks of an earlier exchange request, or (ii) exchanged shares out of
a fund more than twice in a calendar quarter, or (iii) exchanged shares equal to
at least $5 million, or more than 1% of a fund's net assets, or (iv) otherwise
seem to follow a timing pattern. Shares under common ownership or control are
combined for these limits.

ADDITIONAL POLICIES Please note that the funds maintain additional policies and
reserves certain rights, including:

o The funds may refuse any order to buy shares, including any purchase under the
exchange privilege.

o At any time, the funds may change its investment minimums or waive or lower
its minimums for certain purchases.

o The funds may modify or discontinue the exchange privilege on 60 days' notice.

o You may only buy shares of a fund eligible for sale in your state or
jurisdiction.

o In unusual circumstances, we may temporarily suspend redemptions, or postpone
the payment of proceeds, as allowed by federal securities laws.

o For redemptions over a certain amount, the funds reserve the right to make
payments in securities or other assets of the funds, in the case of an
emergency or if the payment by check, wire or electronic funds transfer would
be harmful to existing shareholders.

o To permit investors to obtain the current price, dealers are responsible for
transmitting all orders to the funds promptly.

DEALER COMPENSATION Qualifying dealers who sell shares may receive up to 0.25%
of the amount invested. This amount is paid by Franklin Templeton Distributors,
Inc. from its own resources.

[Insert graphic of question mark] QUESTIONS

If you have any questions about the funds or your account, you can write to us
at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, CA 94403-7777. You can
also call us at one of the following numbers. For your protection and to help
ensure we provide you with quality service, all calls may be monitored or
recorded.

HOURS (PACIFIC TIME,
DEPARTMENT NAME TELEPHONE NUMBER MONDAY THROUGH FRIDAY)
- ------------------------------------------ ------------------------------- ------------------------------------
<S> <C> <C>
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
6:30 a.m. to 2:30 p.m. (Saturday)
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/342-5236) 6:30 a.m. to 2:30 p.m. (Saturday)
Retirement Plan Services 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.

</TABLE>

FOR MORE INFORMATION

You can learn more about each fund in the following documents:

ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS

Includes a discussion of recent market conditions and fund strategies, financial
statements, detailed performance information, portfolio holdings, and the
auditor's report.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

Contains more information about each fund, its investments and policies. It is
incorporated by reference (is legally a part of this prospectus).

For a free copy of the current annual/semiannual report or the SAI, please
contact your investment representative or call us at the number below.

FRANKLIN(R)TEMPLETON(R)
INSTITUTIONAL SERVICES 1-800/321-8563
TDD (Hearing Impaired) 1-800/851-0637
www.franklintempleton.com

You can also obtain information about each fund by visiting the SEC's Public
Reference Room in Washington, D.C. (phone 1-800/SEC-0330) or by sending your
request and a duplicating fee to the SEC's Public Reference Section, Washington,
D.C. 20549-6009.

You can also visit the SEC's Internet site at http://www.sec.gov.

Investment Company Act file #811-6135 ZTIFI P 11/99