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SUPPLEMENT DATED OCTOBER 1, 1998
TO THE PROSPECTUS OF
FRANKLIN SMALL CAP GROWTH FUND - ADVISOR CLASS
DATED SEPTEMBER 1, 1998
The prospectus is amended as follows:
I. The first paragraph under "How Does the Fund Invest Its Assets? - What
Kinds of Securities Does the Fund Buy? - Small Companies" is replaced with
the following:
SMALL COMPANIES. Under normal market conditions, the fund will invest at least
65% of its total assets in equity securities of small capitalization growth
companies. In general, companies in which the fund will invest have a market
capitalization of less than $1.5 billion at the time of the fund's investment.
Market capitalization is the total market value of a company's outstanding
common stock. The securities of small capitalization companies are traded on
the NYSE and American Stock Exchange and in the over-the-counter market.
II. The third paragraph under "How Does the Fund Invest Its Assets? - What Kinds
of Securities Does the Fund Buy? - Small Companies" is deleted.
III. The section "Who Manages the Fund? - Management Team" is amended by adding
Aidan O'Connell to the management team, effective September 1998, and by adding
the following to the end of the section:
Aidan O'Connell
Portfolio Manager of Advisers
Mr. O'Connell holds a Master of Business Administration degree in Finance from
the University of Pennsylvania, a Master of Arts degree in International
Relations from Johns Hopkins University and a Bachelor of Arts degree from
Dartmouth College. Before joining the Franklin Templeton Group in May 1998, Mr.
O'Connell was a Research Associate (1991-1993) and a Corporate Finance
Associate (1996-1997) at Hambrecht & Quist.
IV. Distribution option 3 in the section "What Distributions Might I Receive
From the Fund? - Distribution Options" is replaced with the following:
3. RECEIVE DISTRIBUTIONS IN CASH - You may receive dividends, or both dividend
and capital gain distributions in cash. If you have the money sent to
another person or to a checking or savings account, you may need a
signature guarantee. If you send the money to a checking or savings
account, please see "Electronic Fund Transfers" under "Services to Help You
Manage Your Account."
V. The second sentence in the section "Services to Help You Manage Your Account
- - Automatic Investment Plan" is replaced with the following:
Under the plan, you can have money transferred automatically from your checking
or savings account to the fund each month to buy additional shares.
VI. The second paragraph under "Services to Help You Manage Your Account
Systematic Withdrawal Plan" is replaced with the following:
If you would like to establish a systematic withdrawal plan, please complete
the systematic withdrawal plan section of the shareholder application included
with this prospectus and indicate how you would like to receive your payments.
You may choose to direct your payments to buy the same class of shares of
another Franklin Templeton Fund or have the money sent directly to you, to
another person, or to a checking or savings account. If you choose to have the
money sent to a checking or savings account, please see "Electronic Fund
Transfers" below. Once your plan is established, any distributions paid by the
fund will be automatically reinvested in your account.
VII. The following new section is added after the section "Services to Help You
Manage Your Account - Systematic Withdrawal Plan":
ELECTRONIC FUND TRANSFERS
You may choose to have dividend and capital gain distributions or payments
under a systematic withdrawal plan sent directly to a checking or savings
account. If the account is with a bank that is a member of the Automated
Clearing House, the payments may be made automatically by electronic funds
transfer. If you choose this option, please allow at least fifteen days for
initial processing. We will send any payments made during that time to the
address of record on your account.
VIII. The following paragraphs are added to the end of the section "What Are the
Risks of Investing in the Fund?":
EURO. On January 1, 1999, the European Monetary Union (EMU) plans to introduce
a new single currency, the Euro, which will replace the national currency for
participating member countries. If the fund holds investments in countries with
currencies replaced by the Euro, the investment process, including trading,
foreign exchange, payments, settlements, cash accounts, custody and accounting
will be impacted.
The process to establish the Euro may result in market volatility. It is not
possible to predict the impact of the Euro on the business or financial
condition of European issuers or on the fund. The transition and the
elimination of currency risk among EMU countries may change the economic
environment and behavior of investors, particularly in European markets. To the
extent the fund holds non-U.S. dollar (Euro or other) denominated securities,
it will still be exposed to currency risk due to fluctuations in those
currencies versus the U.S. dollar.
Resources has created an interdepartmental team to handle all Euro-related
changes to enable the Franklin Templeton Funds to process transactions
accurately and completely with minimal disruption to business activities. While
there can be no assurance that the fund will not be adversely affected,
Advisers and its affiliated service providers are taking steps that they
believe are reasonably designed to address the Euro issue.
Please keep this supplement for future reference.
