PROSPECTUS
TEMPLETON DEVELOPING MARKETS TRUST
CLASS A, B & C
INVESTMENT STRATEGY
GLOBAL GROWTH
May 1, 1999
[FRANKLIN TEMPLETON 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.
PAGE
CONTENTS
THE FUND
[BEGIN CALLOUT]
INFORMATION ABOUT THE 2 Goal and Strategies
FUND YOU SHOULD KNOW 4 Main Risks
BEFORE INVESTING 8 Performance
[END CALLOUT]
9 Fees and Expenses
11 Management
13 Distributions and Taxes
14 Financial Highlights
YOUR ACCOUNT
[BEGIN CALLOUT]
INFORMATION ABOUT 15 Choosing a Share Class
SALES CHARGES, ACCOUNT 21 Buying Shares
TRANSACTIONS AND 23 Investor Services
SERVICES 26 Selling Shares
[END CALLOUT]
28 Account Policies
31 Questions
FOR MORE INFORMATION
[BEGN CALLOUT]
WHERE TO LEARN MORE Back Cover
ABOUT THE FUND
[END CALLOUT]
PAGE
THE FUND
[INSERT GRAPHIC OF BULLSEYE AND ARROWS] GOAL AND STRATEGIES
GOAL The fund's investment goal is long-term capital appreciation.
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.
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.
[BEGIN CALLOUT]
The fund invests primarily in developing or emerging market companies' common
stocks.
[END CALLOUT]
In addition, developing or emerging market equity securities means those issued
by:
/bullet/ companies with their principal securities trading market within a
developing or emerging market country, as defined above; or
/bullet/ 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
/bullet/ companies organized under the laws of, and 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 market conditions, the fund generally invests a portion of its
total assets in rated and unrated debt securities such as bonds, notes and
debentures. Debt securities represent an obligation of the issuer to repay a
loan of money to it, and generally provide for the payment of interest.
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 LINES 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 shorter 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 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.
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:
/bullet/ Political and social uncertainty (for example, regional conflicts and
risk of war)
/bullet/ Currency exchange rate volatility
/bullet/ Pervasiveness of corruption and crime
/bullet/ Delays in settling portfolio transactions
/bullet/ Risk of loss arising out of systems of share registration and custody
/bullet/ Markets that are comparatively smaller and less liquid than developed
markets. While short-term volatility in these markets can be
disconcerting, declines of more than 50% are not unusual.
/bullet/ Less government supervision and regulation of business and industry
practices, stock exchanges, brokers and listed companies than in the
United States.
/bullet/ Currency and capital controls
ALL OF THESE FACTORS MAKE DEVELOPING MARKET EQUITY SECURITIES'
PRICES GENERALLY MORE VOLATILE THAN EQUITY SECURITIES
OF COMPANIES IN DEVELOPED MARKETS.
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.
[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]
ILLIQUID SECURITIES The fund may invest up to 10% of its total assets in
restricted securities and securities with a limited trading market. Such a
market can result from political or economic conditions affecting previously
established securities markets, particularly in emerging market countries.
INTEREST RATE When interest rates rise, debt security prices fall. The opposite
is also true; debt security prices go up when interest rates fall. 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 There is the possibility that an issuer will be unable to make interest
payments and repay principal. Changes in an issuer's financial strength or in a
security's credit rating may affect a security's value and, thus, impact fund
performance.
YEAR 2000 When evaluating current and potential portfolio positions, Year 2000
is one of the factors the fund's 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
12 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).
[INSERT GRAPHIC OF BULL AND A 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 seven calendar years. The
table shows how the fund's average annual total returns compare to those of two
broad-based securities market indices. Of course, past performance cannot
predict or guarantee future results.
CLASS A ANNUAL TOTAL RETURNS/1/
[INSERT BAR GRAPH]
- -9.75% 74.49% -8.58% 0.36% 22.51% -9.41% -18.72%
92 93 94 95 96 97 98
YEAR
[BEGIN CALLOUT]
BEST
QUARTER:
Q4 `98
24.03%
WORST
QUARTER:
Q4 '97
- -24.88%
[END CALLOUT]
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1997
<TABLE>
<CAPTION>
SINCE
INCEPTION
1 YEAR 5 YEARS (10/17/91)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Templeton Developing Markets Trust - Class A/2/ -23.39% -4.85% 2.95%
MSCI Emerging Markets Free Index/3/ -25.34% -9.27% 4.13%
IFC Investable Composite Index/4/ -22.01% -10.14% 3.07%
<CAPTION>
SINCE
INCEPTION
1 YEAR (5/1/95)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Templeton Developing Markets Trust - Class C/2/ -20.80% -3.14%
MSCI Emerging Markets Free Index/3/ -25.34% -8.41%
IFC Investable Composite Index/4/ -22.01% -7.57%
</TABLE>
1. Figures do not reflect sales charges. If they did, returns would be lower. As
of March 31, 1999, the fund's year-to-date return was 8.74% for Class A.
2. Figures reflect sales charges.
All fund performance assumes reinvestment of dividends and capital gains.
3. Source: Standard & Poor's(R) Micropal. This unmanaged 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.
4. Source: Standard & Poor's(R) Micropal. This unmanaged index measures the
performance of emerging market stocks. The index tracks approximately 2000
stocks in countries such as Brazil, Mexico, China and South Korea. 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)
<TABLE>
<CAPTION>
CLASS A/1/ CLASS B/2/ CLASS C/1/
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) as a
percentage of offering price 5.75% 4.00% 1.99%
Load imposed on purchases 5.75% None 1.00%
Maximum Deferred Sales Charge (load) None/3/ 4.00% 0.99%/4/
Exchange fee None None None
</TABLE>
Please see "Choosing a Share Class" on page 15 for an explanation of how and
when these sales charges apply.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A/1/ CLASS B/2/ CLASS C/1/
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 1.25% 1.25% 1.25%
Distribution and service (12b-1) fees/5/ 0.33% 1.00% 1.00%
Other expenses 0.53% 0.53% 0.53%
----------------------------------------
Total annual fund operating expenses 2.11% 2.78% 2.78%
========================================
</TABLE>
1. Before January 1, 1999, Class A shares were designated Class I and Class C
shares were designated Class II.
2. The fund began offering Class B shares on January 1, 1999. Annual fund
operating expenses are based on the expenses for Class A and C for the fiscal
year ended December 31, 1998. The distribution and service (12b-1) fees are
based on the maximum fees allowed under Class B's Rule 12b-1 plan.
3. Except for investments of $1 million or more (see page 15) and purchases by
certain retirement plans without an initial sales
charge.
4. This is equivalent to a charge of 1% based on net asset value.
5. Because of the distribution and service (12b-1) fees, over the long term you
may indirectly pay more than the equivalent of the maximum permitted initial
sales charge.
EXAMPLE
This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
The example assumes you invest $10,000 for the periods shown and then sell all
of your shares at the end of those periods. The example also assumes your
investment has a 5% return each year and the fund's operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $777/1/ $1,198 $1,644 $2,876
Class B
Assuming you sold
your shares at the
end of the period $681 $1,162 $1,669 $2,960/2/
Assuming you stayed
in the fund $281 $862 $1,469 $2,960/2/
Class C $476/3/ $953 $1,555 $3,178
</TABLE>
1. Assumes a contingent deferred sales charge (CDSC) will not apply.
2. Assumes conversion of Class B shares to Class A shares after eight years,
lowering your annual expenses from that time on.
3. For the same Class C investment, your costs would be $378 if you did not sell
your shares at the end of the first year. Your costs for the remaining periods
would be the same.
[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 $211 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 1991. 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 1991. 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 1991. He joined the Franklin
Templeton Group in 1987.
The fund pays the manager 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.
YEAR 2000 PROBLEM The fund's business operations depend on a worldwide network
of computer systems that contain date fields, including securities trading
systems, securities transfer agent operations and stock market links. Many of
the systems currently use a two digit date field to represent the date, and
unless these systems are changed or modified, they may not be able to
distinguish the Year 1900 from the Year 2000 (commonly referred to as the Year
2000 problem). In addition, the fact that the Year 2000 is a leap year may
create difficulties for some systems.
When the Year 2000 arrives, the fund's operations could be adversely affected if
the computer systems used by the manager, its service providers and other third
parties it does business with are not Year 2000 ready. For example, the fund's
portfolio and operational areas could be impacted, including securities trade
processing, interest and dividend payments, securities pricing, shareholder
account services, reporting, custody functions and others. The fund could
experience difficulties in effecting transactions if any of its foreign
subcustodians, or if foreign broker-dealers or foreign markets are not ready for
Year 2000.
The fund's manager and its affiliated service providers are making a concerted
effort to take steps they believe are reasonably designed to address their Year
2000 problems. Of course, the fund's ability to reduce the effects of the Year
2000 problem is also very much dependent upon the efforts of third parties over
which the fund and its manager may have no control.
[INSERT GRAPHIC OF DOLLAR SIGNS AND STOCKS OF COINS] DISTRIBUTIONS AND TAXES
INCOME AND CAPITAL GAINS DISTRIBUTIONS The fund intends to pay a dividend at
least annually representing substantially all of its net investment income and
any net realized capital gains. The amount of this distribution will vary and
there is no guarantee the fund will pay dividends.
To receive a distribution, you must be a shareholder on the record date. The
record date for the fund's distributions will vary. Please keep in mind that if
you invest in the fund shortly before the record date of a distribution, any
distribution will lower the value of the fund's 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 fund's distributions, please call 1-800/DIAL BEN(R).
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 the 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, the fund must withhold 31% of your taxable distributions and proceeds if
you do not provide your correct taxpayer identification number (TIN) or certify
that your TIN is correct, 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 the 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 the 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 the fund.
[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.
<TABLE>
<CAPTION>
CLASS A YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($)
Net asset value,beginning of year 12.94 15.40 13.01 13.42 15.27
--------------------------------------------------------------------------
Net investment income .17 .16 .16 .21 .14
Net realized and unrealized gains (losses) (2.57) (1.62) 2.75 (.18) (1.44)
--------------------------------------------------------------------------
Total from investment operations (2.40) (1.46) 2.91 .03 (1.30)
--------------------------------------------------------------------------
Dividends from net investment income (.19) (.16) (.17) (.20) (.12)
In excess of net investment income - -- (.01) -- --
Dividends from net realized gains (.05) (.53) (.34) (.24) (.43)
In excess of net realized gains -- (.31) -- -- --
--------------------------------------------------------------------------
Total distributions (.24) (1.00) (.52) (.44) (.55)
--------------------------------------------------------------------------
Net asset value, end of year 10.30 12.94 15.40 13.01 13.42
==========================================================================
Total return (%)/1/ (18.72) (9.41) 22.51 .36 (8.64)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 1,000) 2,172,954 3,444,029 3,308,753 2,147,664 2,009,154
Ratios to average net assets: (%)
Expenses 2.11 1.96 2.03 2.10 2.11
Expenses excluding payments by affiliate -- 1.96 2.03 2.10 2.11
Net investment income 1.40 0.99 1.16 1.66 1.08
Portfolio turnover rate (%) 37.51 30.06 12.47 9.76 18.57
</TABLE>
1. Total return does not include sales charges, and is not annualized.
<TABLE>
<CAPTION>
CLASS C 1998 1997 1996 1995/2/
- ---------------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
PER SHARE DATA ($)
Net asset value, beginning of year 12.81 15.27 12.95 13.10
---------- ------------- ------------- -------------
Net investment income .07 .09 .17 .02
Net realized and unrealized gains (losses) (2.51) (1.64) 2.60 .19
---------- ------------- ------------- -------------
Total from investment operations (2.44) (1.55) 2.77 .21
--------- ------------- ------------- --------------
Dividends from net investment income ( .11) ( .07) (.10) (.18)
In excess of net investment income -- -- (.01) --
Distributions from net realized gains ( .05) ( .53) (.34) (.18)
In excess of net realized gains -- (.31) -- --
---------- ------------- ------------- -------------
Total distributions (.16) (.91) (.45) (.36)
---------- ------------- ------------- -------------
Net asset value, end of year 10.21 12.81 15.27 12.95
========== ============= ============== ============
Total return (%)/1/ (19.20) (10.10) 21.58 1.70
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x 1,000) 294,588 402,542 226,629 41,012
Ratios to average net assets: (%)
Expenses 2.78 2.69 2.74 2.73/3/
Net investment income .76 0.21 0.33 0.19/3/
Portfolio turnover rate (%) 37.51 30.06 12.47 9.76
</TABLE>
1. Total return does not include sales charges, and is not annualized.
2. For the period May 1, 1995 (commencement of operations) through December 31,
1995.
3. Annualized.
YOUR ACCOUNT
[INSERT GRAPHIC OF PENCIL MARKING AN "X"] CHOOSING A SHARE CLASS
Each class has its own sales charge and expense structure, allowing you to
choose the class that best meets your situation. Your investment representative
can help you decide.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/bullet/ Initial sales charge of /bullet/ No initial sales charge /bullet/ Initial sales charge
5.75% or less of 1%
/bullet/ Deferred sales charge of /bullet/ Deferred sales charge of 4% /bullet/ Deferred sales charge
1% on purchases of $1 or less on shares you sell of 1% on shares you
million or more sold within six years sell within 18 months
within 12 months
/bullet/ Lower annual expenses than /bullet/ Higher annual expenses than /bullet/ Higher annual expenses than
Class B or C due to lower Class A (same as Class C) Class A (same as Class B)
distribution fees due to higher distribution due to higher distribution
fees. Automatic conversion fees. No conversion to Class
to Class A shares after A shares, so annual expenses
eight years, reducing future do not decrease.
annual expenses.
</TABLE>
BEFORE JANUARY 1, 1999, CLASS A SHARES WERE DESIGNATED CLASS I AND CLASS C
SHARES WERE DESIGNATED CLASS II. THE FUND BEGAN OFFERING CLASS B SHARES ON
JANUARY 1, 1999.
SALES CHARGES - CLASS A
<TABLE>
<CAPTION>
THE SALES CHARGE MAKES UP WHICH EQUALS THIS %
WHEN YOU INVEST THIS AMOUNT THIS % OF THE OFFERING PRICE OF YOUR NET INVESTMENT
<S> <C> <C>
Under $50,000 5.75 6.10
$50,000 but under $100,000 4.50 4.71
$100,000 but under $250,000 3.50 3.63
$250,000 but under $500,000 2.50 2.56
$500,000 but under $1 million 2.00 2.04
</TABLE>
INVESTMENTS OF $1 MILLION OR MORE If you invest $1 million or more, either as a
lump sum or through our cumulative quantity discount or letter of intent
programs (see page 18), you can buy Class A shares without an initial sales
charge. However, there is a 1% contingent deferred sales charge (CDSC) on any
shares you sell within 12 months of purchase. The way we calculate the CDSC is
the same for each class (please see page 17).
DISTRIBUTION AND SERVICE (12B-1) FEES Class A has a distribution plan, sometimes
known as a Rule 12b-1 plan, that allows the fund to pay distribution fees of up
to 0.35% per year to those who sell and distribute Class A shares and provide
other services to shareholders. Because these fees are paid out of Class A's
assets on an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES - CLASS B
IF YOU SELL YOUR SHARES WITHIN THIS % IS DEDUCTED FROM
THIS MANY YEARS AFTER BUYING THEM YOUR PROCEEDS AS A CDSC
1 Year 4
2 Years 4
3 Years 3
4 Years 3
5 Years 2
6 Years 1
7 Years 0
With Class B shares, there is no initial sales charge. However, there is a CDSC
if you sell your shares within six years, as described in the table above. The
way we calculate the CDSC is the same for each class (please see page 17). After
8 years, your Class B shares automatically convert to Class A shares, lowering
your annual expenses from that time on.
MAXIMUM PURCHASE AMOUNT The maximum amount you may invest in Class B shares at
one time is $249,999. We place any investment of $250,000 or more in Class A
shares, since a reduced initial sales charge is available and Class A's annual
expenses are lower.
RETIREMENT PLANS Class B shares are not available to all retirement plans. Class
B shares are only available to IRAs (of any type), Franklin Templeton Trust
Company 403(b) plans, and Franklin Templeton Trust Company qualified plans with
participant or earmarked accounts.
DISTRIBUTION AND SERVICE (12B-1) FEES Class B has a distribution plan, sometimes
known as a Rule 12b-1 plan, that allows the fund to pay distribution and other
fees of up to 1% per year for the sale of Class B shares and for services
provided to shareholders. Because these fees are paid out of Class B's assets on
an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES - CLASS C
<TABLE>
<CAPTION>
THE SALES CHARGE MAKES UP WHICH EQUALS THIS %
WHEN YOU INVEST THIS AMOUNT THIS % OF THE OFFERING PRICE OF YOUR NET INVESTMENT
<S> <C> <C>
Under $1 million 1.00 1.01
</TABLE>
WE PLACE ANY INVESTMENT OF $1 MILLION OR MORE IN CLASS A SHARES, SINCE THERE IS
NO INITIAL SALES CHARGE AND CLASS A'S ANNUAL EXPENSES ARE LOWER.
CDSC There is a 1% contingent deferred sales charge (CDSC) on any Class C shares
you sell within 18 months of purchase. The way we calculate the CDSC is the same
for each class (please see below).
[BEGIN CALLOUT]
The HOLDING PERIOD FOR THE CDSC begins on the day you buy your shares. Your
shares will age one month on that same date the next month and each following
month.
For example, if you buy shares on the 18th of the month, they will age one month
on the 18th day of the next month and each following month.
[END CALLOUT]
DISTRIBUTION AND SERVICE (12B-1) FEES Class C has a distribution plan, sometimes
known as a Rule 12b-1 plan, that allows the fund to pay distribution and other
fees of up to 1% per year for the sale of Class C shares and for services
provided to shareholders. Because these fees are paid out of Class C's assets on
an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
CONTINGENT DEFERRED SALES CHARGE (CDSC) - CLASS A, B & C The CDSC for each class
is based on the current value of the shares being sold or their net asset value
when purchased, whichever is less. There is no CDSC on shares you acquire by
reinvesting your dividends or capital gains distributions.
To keep your CDSC as low as possible, each time you place a request to sell
shares we will first sell any shares in your account that are not subject to a
CDSC. If there are not enough of these to meet your request, we will sell the
shares in the order they were purchased. We will use this same method if you
exchange your shares into another Franklin Templeton Fund (please see page 25
for exchange information).
SALES CHARGE REDUCTIONS AND WAIVERS
If you qualify for any of the sales charge reductions or waivers below, please
let us know at the time you make your investment to help ensure you receive the
lower sales charge.
QUANTITY DISCOUNTS We offer several ways for you to combine your purchases in
the Franklin Templeton Funds to take advantage of the lower sales charges for
large purchases of Class A shares.
[BEGIN CALLOUT]
The Franklin Templeton Funds include all of the Franklin Templeton U.S.
registered mutual funds, except Franklin Valuemark Funds, Templeton Capital
Accumulator Fund, Inc., and Templeton Variable Products Series Fund.
[END CALLOUT]
/bullet/ CUMULATIVE QUANTITY DISCOUNT - lets you combine all of your shares in
the Franklin Templeton Funds for purposes of calculating the sales
charge. You also may combine the shares of your spouse, and your
children or grandchildren, if they are under the age of 21. Certain
company and retirement plan accounts also may be included.
/bullet/ LETTER OF INTENT (LOI) - expresses your intent to buy a stated dollar
amount of shares over a 13-month period and lets you receive the same
sales charge as if all shares had been purchased at one time. We will
reserve a portion of your shares to cover any additional sales charge
that may apply if you do not buy the amount stated in your LOI.
TO SIGN UP FOR THESE PROGRAMS, COMPLETE THE APPROPRIATE SECTION OF
YOUR ACCOUNT APPLICATION.
REINSTATEMENT PRIVILEGE If you sell shares of a Franklin Templeton Fund, you may
reinvest some or all of the proceeds within 365 days without an initial sales
charge. The proceeds must be reinvested within the same share class, except
proceeds from the sale of Class B shares will be reinvested in Class A shares.
If you paid a CDSC when you sold your Class A or C shares, we will credit your
account with the amount of the CDSC paid but a new CDSC will apply. For Class B
shares reinvested in Class A, a new CDSC will not apply, although your account
will not be credited with the amount of any CDSC paid when you sold your Class B
shares.
Proceeds immediately placed in a Franklin Bank Certificate of Deposit (CD) also
may be reinvested without an initial sales charge if you reinvest them within
365 days from the date the CD matures, including any rollover.
This privilege does not apply to shares you buy and sell under our exchange
program. Shares purchased with the proceeds from a money fund may be subject to
a sales charge.
WAIVERS FOR INVESTMENTS FROM CERTAIN PAYMENTS Class A shares may be purchased
without an initial sales charge or CDSC by investors who reinvest within 365
days:
/bullet/ certain payments received under an annuity contract that offers a
Franklin Templeton insurance fund option
/bullet/ distributions from an existing retirement plan invested in the
Franklin Templeton Funds
/bullet/ dividend or capital gain distributions from real estate investment
trust sponsored or advised by Franklin Properties, Inc.
/bullet/ redemption proceeds from a repurchase of Franklin Floating Rate Trust
shares held continuously for at least 12 months
/bullet/ redemption proceeds from Class A of any Templeton Global Strategy
Fund, if you are a qualified investor. If you paid a CDSC when you
sold your shares, we will credit your account with the amount of the
CDSC paid but a new CDSC will apply.
WAIVERS FOR CERTAIN INVESTORS Class A shares also may be purchased without an
initial sales charge or CDSC by various individuals and institutions, including:
/bullet/ certain trust companies and bank trust departments investing $1
million or more in assets over which they have full or shared
investment discretion
/bullet/ government entities that are prohibited from paying mutual fund sales
charges
/bullet/ certain unit investment trusts and their holders reinvesting trust
distributions
/bullet/ group annuity separate accounts offered to retirement plans
/bullet/ employees and other associated persons or entities of Franklin
Templeton or of certain dealers
/bullet/ Chilean retirement plans that meet the requirements for retirement
plans described below
ADDITIONAL SALES CHARGE WAIVERS MAY APPLY.
IF YOU THINK YOU MAY BE ELIGIBLE FOR A SALES CHARGE WAIVER,
CALL YOUR INVESTMENT REPRESENTATIVE OR CALL SHAREHOLDER SERVICES
AT 1-800/632-2301 FOR MORE INFORMATION.
CDSC WAIVERS The CDSC for each class generally will be waived:
/bullet/ to pay account fees
/bullet/ to make payments through systematic withdrawal plans, up to 1%
monthly, 3% quarterly, 6% semiannually or 12% annually depending
on the frequency of your plan
/bullet/ for redemptions by Franklin Templeton Trust Company employee benefit
plans or employee benefit plans serviced by ValuSelect(R) (not
applicable to Class B)
/bullet/ for IRA distributions due to death or disability or upon periodic
distributions based on life expectancy (for Class B, this applies to
all retirement plan accounts, not only IRAs)
/bullet/ to return excess contributions (and earnings, if applicable) from
retirement plan accounts
/bullet/ for redemptions following the death of the shareholder or beneficial
owner
/bullet/ for participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee
benefit plans (not applicable to Class B)
RETIREMENT PLANS Certain retirement plans may buy Class A shares without an
initial sales charge. To qualify, the plan must be sponsored by an employer:
/bullet/ with at least 100 employees, or
/bullet/ with retirement plan assets of $1 million or more, or
/bullet/ that agrees to invest at least $500,000 in the Franklin Templeton
Funds over a 13-month period
A CDSC may apply. Retirement plans other than SIMPLEs, SEPs, or plans that
qualify under section 401 of the Internal Revenue Code also must qualify under
our group investment program to buy Class A shares without an initial sales
charge. Any retirement plan that does not qualify to buy Class A shares without
an initial sales charge and that was a shareholder of the fund on or before
February 1, 1995, may buy Class A shares with a maximum initial sales charge of
4% (as a percentage of the offering price).
FOR MORE INFORMATION, CALL YOUR INVESTMENT REPRESENTATIVE OR
RETIREMENT PLAN SERVICES AT 1-800/527-2020.
GROUP INVESTMENT PROGRAM Allows established groups of 11 or more investors to
invest as a group. For sales charge purposes, the group's investments are added
together. There are certain other requirements and the group must have a purpose
other than buying fund shares at a discount.
[INSERT GRAPHIC OF A PAPER WITH LINES AND SOMEONE WRITING] BUYING SHARES
<TABLE>
<CAPTION>
MINIMUM INVESTMENTS
- -----------------------------------------------------------------------------------------------------
INITIAL ADDITIONAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Regular accounts $1,000 $50
- -----------------------------------------------------------------------------------------------------
UGMA/UTMA accounts $100 $50
- -----------------------------------------------------------------------------------------------------
Retirement accounts
(other than IRAs, IRA rollovers, Education IRAs or Roth IRAs) no minimum no minimum
- -----------------------------------------------------------------------------------------------------
IRAs, IRA rollovers, Education IRAs or Roth IRAs $250 $50
- -----------------------------------------------------------------------------------------------------
Broker-dealer sponsored wrap account programs $250 $50
- -----------------------------------------------------------------------------------------------------
Full-time employees, officers, trustees and directors of
Franklin Templeton entities, and their immediate family members $100 $50
- -----------------------------------------------------------------------------------------------------
</TABLE>
ACCOUNT APPLICATION If you are opening a new account, please complete and sign
the enclosed account application. Make sure you indicate the share class you
have chosen. If you do not indicate a class, we will place your purchase in
Class A shares. To save time, you can sign up now for services you may want on
your account by completing the appropriate sections of the application (see the
next page).
<TABLE>
<CAPTION>
BUYING SHARES
--------------------------------- -------------------------------- ----------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C> <C> <C>
- ----------------------------------- --------------------------------- -------------------------------- ----------------------------
[INSERT GRAPHIC OF HANDSHAKE] THROUGH YOUR INVESTMENT Contact your investment Contact your investment
REPRESENTATIVE representative representative
- ----------------------------------- --------------------------------- -------------------------------- ----------------------------
[INSERT GRAPHIC OF ENVELOPE] BY MAIL Make your check payable to Make your check payable to
Templeton Developing Markets Templeton Developing Markets
Trust. Trust. Include your account
number on the check.
Mail the check and your signed
application to Investor Fill out the deposit slip
Services. from your account statement.
If you do not have a slip,
include a note with your
name, the fund name, and your
account number.
Mail the check and deposit
slip or note to Investor
Services.
- ----------------------------------- --------------------------------- -------------------------------- ----------------------------
[INSERT GRAPHIC OF THREE BY WIRE Call to receive a wire control Call to receive a wire
LIGHTNING BOLTS] 1-800/632-2301 number and wire instructions. control number and wire
(or 1-650/312-2000 instructions.
collect) Mail your signed application To make a same day wire
to Investor Services. Please investment, please call us
include the wire control by 1:00 p.m. pacific time
number or your new account and make sure your wire
number on the application. arrives by 3:00 p.m.
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 BY EXCHANGE Call Shareholder Services at Call Shareholder Services at
ARROWS POINTING IN the number below, or send the number below or our
OPPOSITE DIRECTIONS] TeleFACTS(R) signed written instructions. automated TeleFACTS system,
1-800/247-1753 The TeleFACTS system cannot be or send signed written
(around-the-clock access) used to open a new account. instructions.
(Please see page 24 for (Please see page 24 for
information on exchanges.) information on exchanges.)
- ----------------------------------- --------------------------------- -------------------------------- ----------------------------
</TABLE>
FRANKLIN TEMPLETON INVESTOR SERVICES, P.O. BOX 33030,
ST. PETERSBURG, FL 33733-8030
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
PAGE
[INSERT GRAPHIC OF PERSON WITH A HEADSET] INVESTOR SERVICES
AUTOMATIC INVESTMENT PLAN This plan offers a convenient way for you to invest in
the fund by automatically transferring money from your checking or savings
account each month to buy shares. The minimum investment to open an account with
an automatic investment plan is $50 ($25 for an Education IRA). To sign up,
complete the appropriate section of your account application.
DISTRIBUTION OPTIONS You may reinvest distributions you receive from the fund in
an existing account in the same share class* of the fund or another Franklin
Templeton Fund. Initial sales charges and CDSCs will not apply if you reinvest
your distributions within 365 days. You can also have your distributions
deposited in a bank account, or mailed by check. Deposits to a bank account may
be made by electronic funds transfer.
[BEGIN CALLOUT]
For Franklin Templeton Trust Company retirement plans, special forms may be
needed to receive distributions in cash. Please call 1-800/527-2020 for
information.
[END CALLOUT]
Please indicate on your application the distribution option you have chosen,
otherwise we will reinvest your distributions in the same share class of the
fund.
*Class B and C shareholders may reinvest their distributions in Class A shares
of any Franklin Templeton money fund.
RETIREMENT PLANS Franklin Templeton offers a variety of retirement plans for
individuals and businesses. These plans require separate applications and their
policies and procedures may be different than those described in this
prospectus. For more information, including a free retirement plan brochure or
application, please call Retirement Plan Services at 1-800/527-2020.
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 will automatically receive telephone privileges when
you open your account, allowing you and your investment representative to sell
or exchange your shares and make certain other changes to your account by phone.
For accounts with more than one registered owner, telephone privileges also
allow the 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*, generally without paying any additional sales charges.
If you exchange shares held for less than six months, however, you may be
charged the difference between the initial sales charge of the two funds if the
difference is more than 0.25%. If you exchange shares from a money fund, a sales
charge may apply no matter how long you have held the shares.
[BEGIN CALLOUT]
An EXCHANGE is really two transactions: a sale of one fund and the purchase of
another. In general, the same policies that apply to purchases and sales apply
to exchanges, including minimum investment amounts. Exchanges also have the same
tax consequences as ordinary sales and purchases.
[END CALLOUT]
Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee. Any CDSC will
continue to be calculated from the date of your initial investment and will not
be charged at the time of the exchange. The purchase price for determining a
CDSC on exchanged shares will be the price you paid for the original shares. If
you exchange shares subject to a CDSC into a Class A money fund, the time your
shares are held in the money fund will not count towards the CDSC holding
period.
*Certain Class Z shareholders of Franklin Mutual Series Fund Inc. may exchange
into Class A without any sales charge. Advisor Class shareholders of another
Franklin Templeton Fund who do not qualify to buy the fund's Advisor Class also
may exchange into Class A without any sales charge. Advisor Class shareholders
who exchange their shares for Class A shares and later decide they would like to
exchange into another fund that offers Advisor Class may do so.
If you exchange your Class B shares for the same class of shares of another
Franklin Templeton Fund, the time your shares are held in that fund will count
towards the eight year period for automatic conversion to Class A shares.
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
29).
SYSTEMATIC WITHDRAWAL PLAN This plan allows you to automatically sell your
shares and receive regular payments from your account. A CDSC may apply to
withdrawals that exceed certain amounts. Certain terms and minimums apply. To
sign up, complete the appropriate section of your application.
[INSERT GRAPHIC OF A CERTIFICATE] SELLING SHARES
You can sell your shares at any time.
SELLING SHARES IN WRITING Requests to sell $100,000 or less can generally be
made over the phone or with a simple letter. Sometimes, however, to protect you
and the fund we will need written instructions signed by all registered owners,
with a signature guarantee for each owner, if:
/bullet/ you are selling more than $100,000 worth of shares
/bullet/ you want your proceeds paid to someone who is not a registered owner
/bullet/ 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 fund
against potential claims based on the instructions received.
[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]
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
591/2, tax penalties may apply. Call Retirement Plan Services at 1-800/527-2020
for details.
<TABLE>
<CAPTION>
- ----------------------------------- --------------------------------------------
TO SELL SOME OR ALL OF YOUR SHARES
- ----------------------------------- --------------------------------------------
<S> <C>
[Insert graphic of hands shaking]
THROUGH YOUR INVESTMENT Contact your investment representative
REPRESENTATIVE
- ----------------------------------- --------------------------------------------
[Insert graphic of envelope] Send written instructions and endorsed shar
certificates (if you hold share
certificates) to Investor Services.
Corporate, partnership or trust accounts
BY MAIL may need to send additional documents.
Specify the fund, the account number and the
dollar value or number of shares you wish to
sell. If you own both Class A and B shares,
also specify the class of shares, otherwise
we will sell your Class A shares first. 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
your shares by phone.
1-800/632-2301 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 make
it payable to another person.
- ----------------------------------- -------------------------------------------
[Insert graphic of three You can call or write to have redemption
lightning bolts] proceeds of $1,000 or morewired to a bank or
escrow account. See the policies above for
selling shares by mail or phone.
Before requesting a bank wire, 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
BY WIRE 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.
Call Shareholder Services at the number below
or our automated TeleFACTS system, or send
BY EXCHANGE signed written instructions. See the policies
above for selling shares by mail or phone.
TeleFACTS(R) 1-800/247-1753
(around-the-clock access) If you hold share certificates, you will need
to return them to the fund before your
exchange can be processed.
- ----------------------------------- -------------------------------------------
</TABLE>
FRANKLIN TEMPLETON INVESTOR SERVICES, P.O. BOX 33030,
ST. PETERSBURG, FL 33733-8030
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
PAGE
[INSERT GRAPHIC OF PAPER AND PEN] ACCOUNT POLICIES
CALCULATING SHARE PRICE The 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 class's NAV is calculated by dividing
its net assets by the number of its shares outstanding.
[BEGIN CALLOUT]
When you buy shares, you pay the offering price. The offering price is the NAV
plus any applicable sales charge.
When you sell shares, you receive the NAV minus any applicable contingent
deferred sales charge (CDSC).
[END CALLOUT]
The 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
the fund holds securities listed primarily on a foreign exchange that trades on
days when the fund is 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 $250 ($50
for employee and UGMA/UTMA accounts) because you sell some of your shares, we
may mail you a notice asking you to bring the account back up to its applicable
minimum investment amount. If you choose not to do so within 30 days, we may
close your account and mail the proceeds to the address of record. You will not
be charged a CDSC if your account is closed for this reason.
STATEMENTS AND REPORTS You will receive confirmations and account statements
that show your account transactions. You also will receive the fund's 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 confirmations, account statements and other
information about your account directly from the 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 fund does not allow investments by market timers. You will be
considered a market timer if you have (i) requested an exchange out of the fund
within two weeks of an earlier exchange request, or (ii) exchanged shares out of
the fund more than twice in a calendar quarter, or (iii) exchanged shares equal
to at least $5 million, or more than 1% of the 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 fund maintains additional policies and
reserves certain rights, including:
/bullet/ The fund may refuse any order to buy shares, including any purchase
under the exchange privilege.
/bullet/ At any time, the fund may change its investment minimums or waive or
lower its minimums for certain purchases.
/bullet/ The fund may modify or discontinue the exchange privilege on 60 days'
notice.
/bullet/ You may only buy shares of a fund eligible for sale in your state or
jurisdiction.
/bullet/ In unusual circumstances, we may temporarily suspend redemptions, or
postpone the payment of proceeds, as allowed by federal securities
laws.
/bullet/ For redemptions over a certain amount, the fund reserves the right to
make payments in securities or other assets of the fund, in the case
of an emergency or if the payment by check or wire would be harmful to
existing shareholders.
/bullet/ To permit investors to obtain the current price, dealers are
responsible for transmitting all orders to the fund promptly.
DEALER COMPENSATION Qualifying dealers who sell fund shares may receive sales
commissions and other payments. These are paid by Franklin Templeton
Distributors, Inc. from sales charges, distribution and service (12b-1) fees and
its other resources.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commission (%) -- 4.00 2.00
Investment under $50,000 5.00 -- --
$50,000 but under $100,000 3.75 -- --
$100,000 but under $250,000 2.80 -- --
$250,000 but under $500,000 2.00 -- --
$500,000 but under $1 million 1.60 -- --
$1 million or more up to 1.00/1/ -- --
12b-1 fee to dealer 0.35 0.25/2/ 1.00/3/
</TABLE>
A dealer commission of up to 1% may be paid on Class A NAV purchases by certain
retirement plans1 and up to 0.25% on Class A NAV purchases by certain trust
companies and bank trust departments, eligible governmental authorities, and
broker-dealers or others on behalf of clients participating in comprehensive fee
programs. For certain retirement plans that do not qualify to buy Class A shares
at NAV but that qualify to buy Class A shares with a maximum initial sales
charge of 4%, a dealer commission of 3.2% may be paid.
1. During the first year after purchase, dealers may not be eligible to receive
the 12b-1 fee.
2. Dealers may be eligible to receive up to 0.25% from the date of purchase.
After 8 years, Class B shares convert to Class A shares and dealers may then
receive the 12b-1 fee applicable to Class A.
3. Dealers may be eligible to receive up to 0.25% during the first year after
purchase and may be eligible to receive the full 12b-1 fee starting in the 13th
month.
[INSERT GRAPHIC OF QUESTION MARK] QUESTIONS
If you have any questions about the fund or your account, you can write to us at
P.O. Box 33030, St. Petersburg, FL 33733-8030. 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.
<TABLE>
<CAPTION>
HOURS (PACIFIC TIME,
DEPARTMENT NAME TELEPHONE NUMBER MONDAY THROUGH FRIDAY)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
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.
Institutional Services 1-800/ 321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/ 851-0637 5:30 a.m. to 5:00 p.m.
</TABLE>
PAGE
This page intentionally left blank.
PAGE
FRANKLIN TEMPLETON FUNDS
LITERATURE REQUEST CALL 1-800/DIAL BEN(R) (1-800/342-5236) today for a free
descriptive brochure and prospectus on any of the funds listed below. The
prospectus contains more complete information, including fees, sales charges and
expenses, and should be read carefully before investing or sending money.
GLOBAL GROWTH
Franklin Global Health Care Fund
Mutual Discovery Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Mutual European Fund
Templeton Global Bond Fund
GLOBAL INCOME
Franklin Global Government Income Fund
Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Templeton Americas Government Securities Fund
GROWTH
Franklin Biotechnology Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet Investment Fund/1/
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund/1/
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
FUND ALLOCATOR SERIES
Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund
Franklin's AGE High Income Fund
Franklin Bond Fund
Franklin Floating Rate Trust
Franklin Short-Intermediate U.S. Government Securities Fund
Franklin Strategic Income Fund
Franklin U.S. Government Securities Fund
Franklin Federal Money Fund/2/
Franklin Money Fund/2/
TAX-FREE INCOME
Federal Intermediate-Term Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund/2/
STATE-SPECIFIC TAX-FREE INCOME
Alabama
Arizona/3/
California/3/
Colorado
Connecticut
Florida/3/
Georgia
Kentucky
Louisiana
Maryland
Massachusetts/4/
Michigan/4/
Minnesota/4/
Missouri
New Jersey
New York/3/
North Carolina
Ohio/4/
Oregon
Pennsylvania
Tennessee/5/
Texas
Virginia
VARIABLE ANNUITIES/6/
Franklin Valuemark(R)
Franklin Templeton Valuemark Income Plus
(an immediate annuity)
1. These funds are now closed to new accounts, with the exception of retirement
plan accounts.
2. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
3. Two or more fund options available: long-term portfolio; portfolio of insured
securities; high yield portfolio (CA); intermediate-term and money market
portfolios (CA and NY).
4. Portfolio of insured municipal securities.
5. The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
6. Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC. The Franklin Valuemark Funds are managed by Franklin
Advisers, Inc. and its Templeton and Franklin affiliates.
04/99
PAGE
FOR MORE INFORMATION
You can learn more about the 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 the 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)
1-800/DIAL BEN(R) (1-800/342-5236)
TDD (Hearing Impaired) 1-800/851-0637
www.franklin-templeton.com
You can also obtain information about the 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,
DC 20549-6009.
You can also visit the SEC's Internet site at http://www.sec.gov.
Investment Company Act file #811-6378 711 P 05/99
