TEMPLETON INSTITUTIONAL FUNDS INC, 497, 2000-05-02

TEMPLETON INSTITUTIONAL FUNDS INC
497, 2000-05-02

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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, 2000

[Insert Franklin Templeton Butterball logo]

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

YOUR ACCOUNT

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

33 Qualified Investors

35 Buying Shares

38 Investor Services

40 Selling Shares

42 Account Policies

44 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.

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

[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, from time to time, may have significant
investments in one or more countries or in particular sectors such as technology
(including computer hardware and software, electronics, and telecommunications)
and financial institutions.

Depending upon current market conditions, the fund generally may invest a
portion 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.

When choosing equity investments for this fund, the manager applies a
"bottom-up", value-oriented, long-term approach, focusing on the market price of
a company's securities relative to the manager's evaluation of the company's
long-term earnings, asset value and cash flow potential. The manager also
considers a company's price/earnings ratio, profit margins and liquidation
value.

TEMPORARY INVESTMENTS When the manager believes market or economic conditions
are unfavorable for investors, the manager may invest up to 100% of the fund's
assets in a temporary defensive manner or hold a substantial portion of the
fund's portfolio in cash. Temporary defensive investments generally may include
money market securities, short-term and medium-term U.S. and foreign government
securities, bank obligations and repurchase agreements. The manager also may
invest in these types of securities or hold cash while looking for suitable
investment opportunities or to maintain liquidity. In these circumstances, the
fund may be unable to achieve its investment goal.

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

STOCKS While this may not be the case in foreign markets, in the U.S., stocks
historically have outperformed other asset classes over the long term, (over the
short term they tend to go up and down more dramatically). 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. The
fund should be thought of as a long-term investment for the aggressive portion
of a well diversified portfolio.

[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 Investing in foreign securities, including securities of
foreign governments and depositary receipts, typically involves more risks than
investing in U.S. securities. Certain of these risks also may apply to
securities of U.S. companies with significant foreign operations. These risks
can increase the potential for losses in the fund and affect its share price.

CURRENCY EXCHANGE RATES. Foreign securities may be issued and traded in foreign
currencies. As a result, their values may be affected by changes in exchange
rates between foreign currencies and the U.S. dollar, as well as between
currencies of countries other than the U.S. For example, if the value of the
U.S. dollar goes up compared to a foreign currency, an investment traded in that
foreign currency will go down in value because it will be worth less U.S.
dollars. The impact of the euro, a relatively new currency adopted by certain
European countries to replace their national currencies, is unclear at this
time.

POLITICAL AND ECONOMIC DEVELOPMENTS. The political, economic and social
structures of some foreign countries may be less stable and more volatile than
those in the U.S. Investments in these countries may be subject to the risks of
internal and external conflicts, currency devaluations, foreign ownership
limitations and tax increases. It is possible that a government may take over
the assets or operations of a company or impose restrictions on the exchange or
export of currency or other assets. Some countries also may have different legal
systems that may make it difficult for the fund to vote proxies, exercise
shareholder rights, and pursue legal remedies with respect to its foreign
investments.

TRADING PRACTICES. Brokerage commissions and other fees generally are higher for
foreign securities. Government supervision and regulation of foreign stock
exchanges, currency markets, trading systems and brokers may be less than in the
U.S. The procedures and rules governing foreign transactions and custody
(holding of the fund's assets) also may involve delays in payment, delivery or
recovery of money or investments.

AVAILABILITY OF INFORMATION. Foreign companies may not be subject to the same
disclosure, accounting, auditing and financial reporting standards and practices
as U.S. companies. Thus, there may be less information publicly available about
foreign companies than about most U.S. companies.

LIMITED MARKETS. Certain foreign securities may be less liquid (harder to sell)
and more volatile than many U.S. securities. This means the fund may at times be
unable to sell foreign securities at favorable prices. In choosing investments,
the fund's manager strongly believes in onsite visits to issuers of prospective
investments to assess critical factors such as management strength and local
conditions.

EMERGING MARKETS. The risks of foreign investments typically are greater in less
developed countries, sometimes referred to as emerging markets. For example,
political and economic structures in these countries may be less established and
may change rapidly. These countries also are more likely to experience high
levels of inflation, deflation or currency devaluation, which can harm their
economies and securities markets and increase volatility. In fact, short-term
volatility in these markets, and declines of 50% or more, are not uncommon.

LIQUIDITY The fund may not invest more than 10% of its 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). Reduced liquidity affecting an individual security or an entire
market may have an adverse impact on market price and the fund's ability to sell
particular securities when necessary to meet the fund's liquidity needs or in
response to a specific economic event.

COUNTRY, SECTOR OR INDUSTRY FOCUS To the extent the fund invests a significant
portion of its assets in one or more countries, sectors or industries at any
time, the fund will face a greater risk of loss due to factors affecting a
single country, sector or industry than if the fund always maintained wide
diversity among the countries, sectors and industries in which it invests. For
example, technology companies involve risks due to factors such as the rapid
pace of product change, technological developments and new competition. Their
stocks historically have been volatile in price, especially over the short term,
often without regard to the merits of individual companies. Banks and financial
institutions are subject to potentially restrictive governmental controls and
regulations that may limit or adversely affect profitability and shares price.
In addition, securities in that sector may be very sensitive to interest rate
changes throughout the world.

More detailed information about the fund, its policies 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 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 9 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% 27.34%
- -------------------------------------------------------------------------------
91 92 93 94 95 96 97 98 99
YEAR

[Begin callout]
BEST
QUARTER:
Q4 '99
16.81%

WORST
QUARTER:
Q3 '99
- -1.98%
[End callout]

AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999

SINCE
INCEPTION
1 YEAR 5 YEARS (10/18/90)
- -----------------------------------------------------------------------------
Foreign Equity Series - Primary Shares 27.34% 16.51% 14.07%
MSCI - All Country World Free Index/2/ 30.91% 12.39% 11.20%
MSCI - EAFE Index/2/ 27.30% 13.15% 10.45%

1. As of March 31, 2000, the fund's year-to-date return was -1.63%.

2. Source: Standard & Poor's Micropal. The unmanaged MSCI All Country World Free
Index measures the performance of securities located in 48 countries, including
emerging markets in Latin America, Asia and Eastern Europe. It includes
reinvested dividends. One cannot invest directly in an index, nor is an index
representative of the fund's portfolio. 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 0.70%
Other expenses 0.14%
-----
Total annual fund operating expenses 0.84%
=====

1. This fee is only for market timers (see page 43).

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
- ------------------------------------------------------------------------------
$86 $268 $466 $1,037

[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 $229 billion in assets.

The fund's lead portfolio manager is:

GARY P. MOTYL CFA, DIRECTOR AND 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.

GARY CLEMONS, EXECUTIVE VICE PRESIDENT OF INVESTMENT COUNSEL
Mr. Clemons has been a manager of the fund since 1994. He joined the Franklin
Templeton Group in 1990.

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. For the
fiscal year ended December 31, 1999, the fund paid 0.70% of its average daily
net assets to the manager for its services.

[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 PricewaterhouseCoopers LLP for the fiscal
year ended December 31, 1999, and by other auditors for the fiscal years before
1999.

YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------
1999/1/ 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($)
Net asset value, beginning of year 17.76 17.36 16.34 14.04 12.86
------------------------------------------
Net investment income .37 .42 .42 .45 .31

Net realized and unrealized gains 4.42 1.29 1.43 2.54 1.35
-------------------------------------------
Total from investment operations 4.79 1.71 .85 2.99 1.66
------------------------------------------
Distributions from net investment income (.38) (.40) (.43) (.45) (.31)
In excess of net investment income - - - (.02) -
Distributions from net realized gains (.64) (.91) (.40) (.14) (.17)
In excess of net realized gains - - - (.08) -
Total distributions (1.02) (1.31) (.83) (.69) (.48)
--------------------------------------------
Net asset value, end of year 21.53 17.76 17.36 16.34 14.04
============================================
Total return (%) 27.34 10.16 11.43 21.58 13.00

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) 5,248 4,552 3,706 2,858 1,818
Ratios to average net assets: (%)
Expenses .84 .83 .84 .87 .88
Net investment income 1.88 2.33 2.49 3.20 2.70
Portfolio turnover rate (%) 10.56 15.40 15.25 7.39 20.87
</TABLE>

1. Based on average weighted shares outstanding.

EMERGING MARKETS SERIES

MAIN INVESTMENT STRATEGIES Under normal market conditions, the fund invests at
least 65% of its total assets in equity securities of developing market
companies.

For purposes of the fund's investments, developing market companies are those:

o whose securities trade in developing markets or that have a significant
portion of their assets in developing market countries;

o that derive a significant share of their total revenue from goods or services
produced or sold in developing market countries;

o linked to currencies of developing market countries; or

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

Developing market countries include those considered to be developing by the
World Bank, the International Finance Corporation, the United Nations, or the
countries' authorities, or countries with a stock market capitalization of less
than 3% of the Morgan Stanley Capital International World Index. These countries
typically are located in the Asia-Pacific region, Eastern Europe, Central and
South America, and Africa. Developing market countries are described more fully
in the fund's Statement of Additional Information (SAI).

An equity security, or stock, represents a proportionate share of the ownership
of a company. Its value is based on the success of the company's business, any
income paid to stockholders, the value of the company's assets, and general
market conditions. Common stocks and preferred stocks are examples of equity
securities. 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. The fund, from time to time, may have significant
investments in one or more countries or in particular sectors such as technology
(including computer hardware and software, electronics, and telecommunications)
and financial institutions.

[Begin callout]
The fund invests primarily in the common stocks of developing market companies.
[End callout]

In addition to its main investments, the fund may invest a portion of its assets
in the equity securities of issuers in developed market countries. 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).

When choosing equity investments for this fund, the manager applies a "bottom
up", value-oriented, long-term approach, focusing 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. The manager also considers a
company's price/earnings ratio, profit margins and liquidation value. In
choosing investments, the fund's manager strongly believes in onsite visits to
issuers of prospective investments to assess critical factors such as management
strength and local conditions.

TEMPORARY INVESTMENTS When the manager believes market or economic conditions
are unfavorable for investors, the manager may invest up to 100% of the fund's
assets in a temporary defensive manner or hold a substantial portion of the
fund's portfolio in cash. Temporary defensive investments generally may include
money market securities, short-term and medium-term U.S. and foreign government
securities, short-term corporate obligations, bank obligations, and repurchase
agreements denominated in the currency of any nation. The manager also may
invest in these types of securities or hold cash while looking for suitable
investment opportunities or to maintain liquidity. In these circumstances, the
fund may be unable to achieve its investment goal.

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

STOCKS While this may not be the case in foreign markets, in the U.S., stocks
historically have outperformed other asset classes over the long term (over the
short term they tend to go up and down more dramatically). 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 in markets favoring faster-growing companies. The fund should be
thought of as a long-term investment for the aggressive portion of a well
diversified portfolio.

LIMITED MARKETS. Certain foreign securities may be less liquid (harder to sell)
and more volatile than many U.S. securities. This means the fund may at times be
unable to sell foreign securities at favorable prices. In developing markets, a
previously established liquid securities market may become illiquid (temporarily
or for longer periods of time) due to economic or political conditions.

DEVELOPING MARKETS. The fund's investments in developing 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 Markets that are comparatively smaller and less liquid than developed markets.
Short-term volatility in these markets and declines of more than 50% are
not unusual. Markets which are generally considered to be liquid may become
illiquid for short or extended periods.

o Less government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the U.S.

o Currency and capital controls

o Greater sensitivity to interest rate changes

ALL OF THESE FACTORS MAKE DEVELOPING MARKET EQUITY SECURITIES' PRICES GENERALLY
MORE VOLATILE THAN EQUITY SECURITIES OF COMPANIES IN DEVELOPED MARKETS, AND
INCREASE THE RISK OF LOSS TO THE FUND.

The definition of developing markets or countries as used in this prospectus may
differ from the definition of the same terms as used in other Franklin Templeton
fund prospectuses.

COUNTRY, SECTOR OR INDUSTRY FOCUS To the extent the fund invests a significant
portion of its assets in one or more countries, sectors or industries at any
time, the fund will face a greater risk of loss due to factors affecting a
single country, sector or industry than if the fund always maintained wide
diversity among the countries, sectors and industries in which it invests. For
example, technology companies involve risks due to factors such as the rapid
pace of product change, technological developments and new competition. Their
stocks historically have been volatile in price, especially over the short term,
often without regard to the merits of individual companies. Banks and financial
institutions are subject to potentially restrictive governmental controls and
regulations that may limit or adversely affect profitability and share price. In
addition, securities in that sector may be very sensitive to interest rate
changes throughout the world.

LIQUIDITY Reduced liquidity affecting an individual security or an entire market
may have an adverse impact on market price and the fund's ability to sell
particular securities when necessary to meet the fund's liquidity needs or in
response to a specific economic event.

More detailed information about the fund, its policies and risks can be found in
the fund's 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 6 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% 56.58%
- -------------------------------------------------------------------------------
94 95 96 97 98 99
YEAR

[Begin callout]
BEST
QUARTER:
Q4 '99
28.37%

WORST
QUARTER:
Q3 '99
- -11.91%
[End callout]

AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999

SINCE
INCEPTION
1 YEAR 5 YEARS (5/3/93)
- -------------------------------------------------------------------------------
Emerging Markets Series 56.58% 5.97% 7.05%
IFC - Investable Composite Index/2/ 67.17% 2.16% 7.45%
MSCI - Emerging Markets Free Index/2/ 66.41% 2.00% 8.03%

1. As of March 31, 2000, the fund's year-to-date return was -6.70%.

2. Source: Standard & Poor's 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 1.25%
Other expenses 0.18%
-----
Total annual fund operating expenses 1.43%
=====
1. This fee is only for market timers (see page 43).

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
- -------------------------------------------------------------------------------
$146 $452 $782 $1,713

[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 $229 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:

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.

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.

EDDIE CHOW, INVESTMENT ANALYST OF TEMPLETON ASSET MANAGEMENT LTD.
Mr. Chow has been a manager of the fund since 1994. He joined the Franklin
Templeton Group in 1994.

The fund pays Asset Management Hong Kong a fee for managing the fund's assets.
For the fiscal year ended December 31, 1999, the fund paid 1.25% of its average
daily net assets to the manager for its services.

[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 PricewaterhouseCoopers LLP for the fiscal
year ended December 31, 1999, and by other auditors for the fiscal years before
1999.

YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------------------
1999/1/ 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($)
Net asset value, beginning of year 8.31 10.37 12.45 10.75 11.21
-----------------------------------------
Net investment income .10 .18 .18 .15 .19
Net realized and unrealized
gains (losses) 4.59 (2.05) (1.60) 1.86 (.34)
-----------------------------------------
Total from investment operations 4.69 (1.87) (1.42) 2.01 (.15)
-----------------------------------------
Distributions from net investment income (.10) (.19) (.18) (.15) (.17)
Distributions from net realized gains - - (.48) (.16) (.14)
-----------------------------------------
Total distributions (.10) (.19) (.66) (.31) (.31)
------------------------------------------
Net asset value, end of year 12.90 8.31 10.37 12.45 10.75
===========================================
Total return (%) 56.58 (18.03) (11.32) 18.86 (1.23)

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) 2,608 1,733 1,923 1,565 798
Ratios to average net assets: (%)
Expenses 1.43 1.51 1.57 1.56 1.52
Net investment income 1.02 2.03 1.42 1.56 2.00
Portfolio turnover rate (%) 49.35 38.11 24.72 7.92 13.47
</TABLE>

1. Based on average weighted shares outstanding.

EMERGING FIXED INCOME MARKETS SERIES

MAIN INVESTMENT STRATEGIES Under normal market conditions, the fund invests 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. The fund focuses on securities
issued by governments and government agencies.

[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, 1999,
approximately 71.3% 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
and duration risks, in seeking to identify those markets and issuers which are
anticipated to provide the opportunity for high current income and capital
appreciation. The fund, from time to time, may have significant investments in
one or more countries.

[Insert graphic of chart with line going up and down] MAIN RISKS
- -------------------------------------------------------------------------------
CREDIT An issuer may 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.

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, debt security prices fall. The opposite
is also true: debt security prices rise when interest rates fall. In general,
securities with longer maturities usually are more sensitive to these price
changes.

[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.

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
significant, additional 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 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 EQUITY SECURITIES OF COMPANIES IN DEVELOPED MARKETS, AND
INCREASE THE RISK OF LOSS TO THE FUND.

The definition of developing and emerging markets or countries may differ from
the definition of the same term as used in managing other Franklin Templeton
Funds.

LIQUIDITY 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). Reduced liquidity may have an adverse impact on market
price and the fund's ability to sell particular securities when necessary to
meet the fund's liquidity needs or in response to a specific economic event such
as the deterioration in the creditworthiness of an issuer.

DIVERSIFICATION The fund is a non-diversified fund. It may invest a greater
portion of its assets in the securities of one issuer than a diversified fund.
The fund may be more sensitive to economic, business, political or other changes
affecting similar issuers or securities, which may result in greater fluctuation
in the value of the fund's shares. The fund, however, intends to meet certain
tax diversification requirements.

COUNTRY FOCUS To the extent the fund invests a significant portion of its assets
in one or more countries, the fund will face a greater risk of loss due to
factors affecting a single country than if the fund always maintained wide
diversity among the countries in which it invests.

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 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 2 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]

- -3.90% 11.77%
- --------------------------
98 99
YEAR

[Begin callout]
BEST
QUARTER:
Q4 '99
7.15%

WORST
QUARTER:
Q3 '99
- -1.32%
[End callout]

AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999

SINCE
INCEPTION
1 YEAR (6/4/97)
- ---------------------------------------------------------------------------
Emerging Fixed Income Markets Series 11.77% 7.57%
J.P. Morgan Emerging Markets Bond Index Plus/2/ 25.97% 4.60%

1. As of March 31, 2000, the fund's year-to-date return was 4.9%.

2. Source: Standard & Poor's 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 1.92%
-----
Total annual fund operating expenses/2/ 2.62%
=====

1. This fee is only for market timers (see page 43).

2. For the fiscal year ended December 31, 1999, 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 April 30, 2001, the transfer agent, 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
- -------------------------------------------------------------------------------
$265 $814 $1,390 $2,954

[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 $229 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, 1999,
management fees, before any advance waiver, were 0.70% of the fund's average
daily net assets for its services. Under an agreement by the manager to waive
its fees, the fund did not pay any management fees. After April 30, 2001, 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 three years.
This information has been audited by PricewaterhouseCoopers LLP for the fiscal
year ended December 31, 1999, and by other auditors for the fiscal years before
1999.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------------
1999/1/ 1998 1997/2/
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA ($)
Net asset value, beginning of year 8.59 10.47 10.00
-------------------------------------
Net investment income .77 .84 .44
Net realized and unrealized gains (losses) .22 (1.27) .79
-------------------------------------
Total from investment operations .99 (.43) .23
-------------------------------------
Distributions from net investment income (.76) (.86) (.44)
Distributions from net realized gains - (.56) (.32)
Tax return of capital - (.03) -
-------------------------------------
Total distributions (.76) (1.45) (.76)
-------------------------------------
Net asset value, end of year 8.82 8.59 10.47
========================================
Total return (%)/3/ 11.77 (3.98) 12.42

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 000) 2,103 1,881 2,249
Ratios to average net assets: (%)
Expenses 1.25 1.25 1.25/4/
Expenses excluding waiver and payments by
affiliate 2.62 3.74 6.40/4/
Net investment income 8.57 8.55 7.26/4/
Portfolio turnover rate (%) 297.46 525.94 172.62
</TABLE>

1. Based on average weighted shares outstanding.

2. For the period June 4, 1997 (commencement of operations) to December 31,
1997.

3. Total return is not annualized.

4. Annualized

[Insert graphic of dollar signs and stacks of coins] DISTRIBUTIONS AND TAXES
- -------------------------------------------------------------------------------

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 redemption
proceeds if you do not provide your correct social security or taxpayer
identification number and certify that you are not subject to backup
withholdings, 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.

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 a fund pays on
its investments 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.

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 and Templeton Capital Accumulator Fund, Inc.
[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.

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

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

BY WIRE Wire the funds and mail your signed To make a same day wire investment,
1-800/321-8563 Institutional Account Application to please call us by 1:00 p.m. Pacific
(or 1-650/312-3600 collect) Institutional Services. Please time and make sure your wire arrives
include the wire control number or by 3:00 p.m.
your new account number on the
application.

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 at the Call Institutional Services at the
pointing in opposite directions] number below, or send signed written number below, or send signed written
instructions. (Please see page 38 instructions. (Please see page 38
BY EXCHANGE for information on exchanges.) for information on exchanges.)
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>

FRANKLIN TEMPLETON INSTITUTIONAL SERVICES 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 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 purchase order may be rejected by
Distributors or by Templeton Institutional Funds, Inc. (Company).

Shares of the funds may be purchased with 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 for an in-kind
purchase, 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 absence 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. Of course,
you can decline telephone exchange or redemption privileges on your account
application.

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. 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%.

[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
43).

[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 Services at 1-800/527-2020 for
details.

SELLING SHARES
- ----------------------------------- --------------------------------------------
TO SELL SOME OR ALL OF YOUR SHARES
- ----------------------------------- --------------------------------------------
<S> <C>
[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
BY MAIL send additional documents.

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
BY PHONE phone within the last 15 days, you can sell
1-800/321-8563 your shares by phone.

(Only available if you have A check will be mailed to the name(s) and
completed and sent the address on the account. Written instructions,
Institutional Telephone with a signature guarantee, are required to
Privileges Agreement) send the check toanother address or to make
it payable to another person.
- ----------------------------------- ---------------------------------------------

[Insert graphic of three You can call or write to have redemption
lightning bolts] proceeds sent to a bank account. See the
policies above for selling shares by mail or
phone.

BY ELECTRONIC FUNDS Before requesting to have redemption proceeds
TRANSFER (ACH) sent to a bank account, please make sure we
have your bank account information on file. If
we do not have this information, you will need
to send written instructions with your
bank's name and address, a voided check or
savings account deposit slip, and a
signature guarantee if the ownership of the
bank and fund accounts is different.

If we receive your request in proper form by
1:00 p.m. Pacific, proceeds sent by ACH
generally will be available within two to
three business days.

- ----------------------------------- -----------------------------------------------
[Insert graphic of two arrows Obtain a current prospectus for the fund you
pointing in opposite directions] are considering.

Call Institutional Services at the number below,
BY EXCHANGE 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.
- ----------------------------------- ------------------------------------------------
</TABLE>

FRANKLIN TEMPLETON INSTITUTIONAL SERVICES 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 quarterly account statements that show
all your account transactions during the quarter. You also will receive written
notification after each transaction affecting your account (except for
distributions and transactions made through automatic investment or withdrawal
programs, which will be reported on your quarterly statement). 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 copies of all notifications and 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 purchases or 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 a redemption or exchange
out of a fund within two weeks of an earlier redemption or exchange request, or
(ii) purchased and redeemed shares (directly or by exchange) out of a fund more
than twice in a calendar quarter, or (iii) purchased or 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 P.O. Box 7777, San Mateo, CA 94403-7777. You also can 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)
- -------------------------------------------------------------------------------
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 Services 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Advisor 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.

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, their 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 also can obtain information about each fund by visiting the SEC's Public
Reference Room in Washington, D.C. (phone 1-202/942-8090) or the EDGAR Database
on the SEC's Internet site at http://www.sec.gov. You can obtain copies of this
information, after paying a duplicating fee, by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102 or by electronic request at the
following E-mail address: publicinfo(R)sec.gov.

Investment Company Act file #811-6135 ZTIFI P 05/00