TEMPLETON GROWTH FUND INC, 485BPOS, 2000-12-28

TEMPLETON GROWTH FUND INC
485BPOS, 2000-12-28

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File Nos. 33-9981 and 811-4892

As filed with the Securities and Exchange Commission on December 28, 2000

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _______

Post-Effective Amendment No. 20 [X]
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 22 [X]

TEMPLETON GROWTH FUND, INC.
(Exact Name of Registrant as Specified in Charter)

500 EAST BROWARD BLVD., FT. LAUDERDALE, FLORIDA 33394
(Address of Principal Executive Offices) (Zip Code)

(954) 527-7500
(Registrant's Telephone Number, Including Area Code)

MURRAY L. SIMPSON, 777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Name and Address of Agent for Service of Process)

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b) of Rule 485

[X] on JANUARY 1, 2001 pursuant to paragraph (b) of Rule 485

[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485

[ ] on (date)pursuant to paragraph (a)(1) of Rule 485

[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485

[ ] on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.

PART A
TEMPLETON GROWTH FUND, INC.
CLASS A,B, & C PROSPECTUS

Prospectus

Templeton Growth Fund, Inc.

CLASS A, B & C

INVESTMENT STRATEGY
Global Growth

JANUARY 1, 2001

[Insert Franklin Templeton Ben Head]

The SEC has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.

CONTENTS

THE FUND

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

2 Goal and Strategies

4 Main Risks

7 Performance

9 Fees and Expenses

11 Management

12 Distributions and Taxes

13 Financial Highlights

YOUR ACCOUNT

[Begin callout]
INFORMATION ABOUT SALES CHARGES, ACCOUNT TRANSACTIONS AND SERVICES
[End callout]

15 Choosing a Share Class

19 Buying Shares

22 Investor Services

26 Selling Shares

28 Account Policies

31 Questions

FOR MORE INFORMATION

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

Back Cover

THE FUND

[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
mainly in the equity securities of companies located anywhere in the world,
including emerging markets.

An equity security or stock, represents a proportionate share of ownership of
a company; its value is based on the success of the company's business, any
income paid to shareholders, the value of its assets, and general market
conditions. Common stocks and preferred stocks are examples of equity
securities. The Fund also invests in depositary receipts. These 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.

[Begin callout]
The Fund invests primarily in a globally diversified portfolio of equity
securities.
[End callout]

In addition to the Fund's main investments, depending upon current market
conditions, the Fund may invest up to 25% of its total assets in debt
securities of companies and governments located anywhere in the world. Debt
securities represent the obligation of the issuer to repay a loan of money to
it, and generally pay interest to the holder. Bonds, notes and debentures
are examples of debt securities. In order to increase income to the Fund,
the Fund may lend certain of its portfolio securities to qualified banks and
broker-dealers.

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, price/cash flow 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 its assets in cash, cash equivalents or other high quality
short-term investments. Temporary defensive investments generally may
include U.S. government securities, bank time deposits denominated in the
currency of any major nation, commercial paper, 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
----------

[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]

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.

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
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
stringent 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 fair market prices.

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.

SECURITIES LENDING The Fund's loans of portfolio securities may not exceed
33 1/3% of the value of the Fund's total assets, measured at the time of the
most recent loan. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in collateral in the event of
default or insolvency of the borrower.

INTEREST RATE Prolonged or significant interest rate increases have
historically had an adverse impact on equity markets in countries affected by
such increases. 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 are more sensitive to these price
changes.

CREDIT An issuer of securities may 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.

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 a 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 10 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.

CLASS A ANNUAL TOTAL RETURNS/1

[Insert bar graph]

-9.06% 31.33% 4.21% 32.70% 0.82% 19.83% 20.55% 16.18% -2.48% 30.44%
90 91 92 93 94 95 96 97 98 99

YEAR

[Begin callout]
BEST
QUARTER:
Q1 '91
14.81%

WORST
QUARTER:
Q3 '90
-15.52%
[End callout]

1. Figures do not reflect sales charges. If they did, returns would be lower.
As of September 30, 2000, the Fund's year-to-date return was 4.41% for Class
A.

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

1 YEAR 5 YEARS 10 YEARS
----------------------------------------------------------------
Templeton Growth Fund - 22.93% 15.01% 12.85%
Class A/2
MSCI World Index/3 25.34% 20.25% 11.96%

SINCE
INCEPTION
1 YEAR (1/1/99)
----------------------------------------------------------------
Templeton Growth Fund - 25.45% 25.45%
Class B/2
MSCI World Index/3 25.34% 25.34%

SINCE
INCEPTION
1 YEAR (5/1/95)
----------------------------------------------------------------
Templeton Growth Fund - 27.18% 14.64%
Class C/2
MSCI World Index/3 25.34% 19.74%

2. Figures reflect sales charges.
All Fund performance assumes reinvestment of dividends and capital gains.
January 1, 1993, Class A implemented a Rule 12b-1 plan, which affects
subsequent performance.
3. Source: Standard & Poor's Micropal. The unmanaged MSCI World Index tracks
the performance of approximately 1,500 securities in 22 countries and is
designed to measure world stock market performance.
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)

CLASS A CLASS B CLASS 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 None/1 4.00%/2 0.99%/3
(load)

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)

CLASS A CLASS B CLASS C
--------------------------------------------------------------------
Management fees 0.61% 0.61% 0.61%
Distribution and service
(12b-1) fees 0.25% 1.00% 1.00%
Other expenses 0.25% 0.25% 0.24%
---------------------------
Total annual Fund operating expenses 1.11% 1.86% 1.85%
---------------------------

1. Except for investments of $1 million or more (see page 15)and purchases by
certain retirement plans without an initial sales charge.
2. Declines to zero after six years.
3. This is equivalent to a charge of 1% based on net asset value.

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; and
o 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:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------------------------------
If you sell your shares at
the end of the period:
CLASS A $682/1 $908 $1,151 $1,849
CLASS B $589 $885 $1,206 $1,984/2
CLASS C $385 $676 $1,091 $2,247
If you do not sell your
shares:
CLASS B $189 $585 $1,006 $1,984/2
CLASS C $286 $676 $1,091 $2,247

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.

[Insert graphic of briefcase] MANAGEMENT

Templeton Global Advisors Limited (Global Advisors), Lyford Cay, Nassau,
Bahamas, is the Fund's investment manager. Together, Global Advisors and its
affiliates manage over $229 billion in assets.

The Fund's lead portfolio manager is:

MURDO MURCHISON, CFA, PORTFOLIO MANAGER of global advisors
Mr. Murchison has been a manager of the Fund since January 2000. He joined
Franklin Templeton Investments in 1993.

The following individuals have secondary portfolio management
responsibilities:

JEFFREY A. EVERETT CFA, Executive Vice President of Global Advisors
Mr. Everett has been a manager of the Fund since January 2000. He joined
Franklin Templeton Investments in 1989.

DALE A. WINNER CFA, Portfolio Manager of Global Advisors
Mr. Winner has been a manager of the Fund since January 2000. He joined
Franklin Templeton Investments in 1995.

The Fund pays Global Advisors a fee for managing the Fund's assets. For the
fiscal year ended August 31, 2000, the Fund paid 0.61% of its average daily
net assets to the manager for its services.

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

INCOME AND CAPITAL GAIN DISTRIBUTIONS

The Fund intends to make a distribution at least annually from its net
investment income and any net realized capital gains. The amount of any
distribution will vary, and there is no guarantee the Fund will pay either
income dividends or capital gain distributions.

AVOID "BUYING A DIVIDEND" If you invest in the Fund shortly before it makes
a distribution, you may receive some of your investment back in the form of a
taxable distribution.

TAX CONSIDERATIONS In general, if you are a taxable investor, 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 as long-term capital gains no matter how long you have owned your
shares. Every January, you will receive a statement that shows the tax status
of distributions you received for the previous year.
[Begin callout]
BACKUP WITHHOLDING

By law, the Fund must withhold 31% of your taxable distributions and
redemption proceeds unless you:

o provide your correct social security or taxpayer identification number,
o certify that this number is correct, and
o certify that you are not subject to backup withholding.

The Fund must also withhold if the IRS instructs it to do so.
[End callout]

When you sell your shares of the Fund, you may realize 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 are subject to state and local taxes. 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 or estate tax, and are
subject to special U.S. tax certification requirements. You should consult
your tax advisor about the federal, state, local or foreign tax consequences
of your investment in the Fund.

[Insert graphic of a 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 years ended August 31, 1999 and 2000, and by other auditors for the
fiscal years before August 31, 1999.

CLASS A YEAR ENDED AUGUST 31,
---------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------
PER SHARE DATA ($)1
Net asset value,
beginning of year 19.56 16.87 22.47 18.75 18.96
-----------------------------------------
Net investment income .35 .46 .50 .54 .50
Net realized and
unrealized .99 4.76 (2.76) 4.48 1.34
gains (losses)
-----------------------------------------
Total from investment
operations 1.34 5.22 (2.26) 5.02 1.84
-----------------------------------------
Distributions from net
investment income (.54) (.41) (.55) (.49) (.44)
Distributions from net
realized gains (.69) (2.03) (2.88) (.81) (1.61)
-----------------------------------------
Total distributions (1.23) (2.44) (3.43) (1.30) (2.05)
-----------------------------------------
Net asset value, end of 19.67 19.56 16.78 22.47 18.75
year
-----------------------------------------

Total return (%)/2 7.58 34.72 (12.61) 28.28 10.85

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
($ x 1 million) 13,191 13,369 11,117 12,129 8,451
Ratios to average net
assets: (%)
Expenses 1.11 1.12 1.08 1.08 1.09
Net investment income 1.83 2.60 2.53 2.81 2.87
Portfolio turnover rate (%) 50.57 32.01 48.23 41.81 19.63

CLASS B/3
---------------------------------------------------------------------

PER SHARE DATA ($)1
Net asset value,
beginning of year 19.46 16.37
-----------------------------------------
Net investment income .22 .24
Net realized and
unrealized .97 2.85
gains
-----------------------------------------
Total from investment
operations 1.19 3.09
-----------------------------------------
Distributions
from net investment (.51)
income
Distributions from net
realized gains (.69)
-----------------------------------------
Total distributions (1.20)
-----------------------------------------
Net asset value, end of 19.45 19.46
year
-----------------------------------------

Total return (%)/2 6.81 18.88

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
($ x 1,000) 69,297 27,573
Ratios to average net
assets: (%)
Expenses 1.86 1.88/4
Net investment income 1.16 1.91/4
Portfolio turnover rate (%) 50.57 32.01

CLASS C
---------------------------------------------------------------------

PER SHARE DATA ($)/1
Net asset value,
beginning of year 19.15 16.49 22.18 18.57 18.90
-----------------------------------------
Net investment income .20 .32 .38 .42 .49
Net realized and
unrealized .98 4.68 (2.77) 4.39 1.19
gains (losses)
-----------------------------------------
Total from investment
operations 1.18 5.00 (2.39) 4.81 1.68
-----------------------------------------
Distributions from net
investment income (.36) (.31) (.42) (.39) (.40)
Distributions from net
realized gains (.69) (2.03) (2.88) (.81) (1.61)
-----------------------------------------
Total distributions (1.05) (2.34) (3.30) (1.20) (2.01)
-----------------------------------------
Net asset value, end of 19.28 19.15 16.49 22.18 18.57
year
-----------------------------------------

Total return (%)/2 6.79 33.77 (13.32) 27.30 9.99

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
($ x 1 million) 996 1,021 872 755 280
Ratios to average net
assets: (%)
Expenses 1.85 1.86 1.83 1.84 1.87
Net investment income 1.08 1.84 1.79 2.14 2.25
Portfolio turnover rate (%) 50.57 32.01 48.23 41.81 19.63

1. Based on average weighted shares outstanding effective year ended August
31, 1999.
2. Total return does not include sales charges.
3. Effective date of Class B shares was January 1, 1999.
4. 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.

CLASS A CLASS B CLASS C
---------------------------------------------------------------
o Initial sales o No initial o Initial
charge of 5.75% sales charge sales charge of
or less 1%

o Deferred sales o Deferred o Deferred
charge of 1% on sales charge of sales charge of
purchases of $1 4% on shares you 1% on shares
million or more sell within the you sell within
sold within 12 first year, 18 months
months declining to 1%
within six years
and eliminated
after that

o Lower annual o Higher annual o Higher
expenses than expenses than annual expenses
Class B or C due Class A (same as than Class A
to lower Class C) due to (same as Class
distribution fees higher B) due to
distribution higher
fees. Automatic distribution
conversion to fees. No
Class A shares conversion to
after eight Class A shares,
years, reducing so annual
future annual expenses do not
expenses. decrease.

SALES CHARGES - CLASS A

THE SALES CHARGE
MAKES UP THIS % WHICH EQUALS THIS
WHEN YOU INVEST THIS AMOUNT OF THE OFFERING % OF YOUR NET
PRICE INVESTMENT
--------------------------------------------------------------------
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 2.00 2.04
million

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 0.25% 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 MANY YEARS AFTER THIS % IS DEDUCTED
BUYING THEM FROM 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 available to certain retirement plans,
including IRAs (of any type), Franklin Templeton Bank & Trust 403(b) plans,
and Franklin Templeton Bank & Trust 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

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).

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.

[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]

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 23 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 Franklin Templeton funds to take advantage of the lower sales charges for
large purchases of Class A shares.

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

o CUMULATIVE QUANTITY DISCOUNT - lets you combine all of your shares in
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.

o 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.

SALES CHARGE WAIVERS Class A shares may be purchased without an initial
sales charge or CDSC by various individuals, institutions and retirement
plans or by investors who reinvest certain distributions and proceeds within
365 days. Certain investors also may buy Class C shares without an initial
sales charge. The CDSC for each class may be waived for certain redemptions
and distributions. If you would like information about available sales charge
waivers, call your investment representative or call Shareholder Services at
1-800/632-2301. For information about retirement plans, you may call
Retirement Services at 1-800/527-2020. A list of available sales charge
waivers also may be found in the Statement of Additional Information (SAI).

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
-------------

MINIMUM INVESTMENTS
------------------------------------------------------------------
INITIAL ADDITIONAL
------------------------------------------------------------------
Regular accounts $1,000 $50
------------------------------------------------------------------
Automatic investment plans $50 ($25 $50 ($25
for an for an
Education Education
IRA) IRA)

------------------------------------------------------------------
UGMA/UTMA accounts $100 $50
------------------------------------------------------------------
Retirement accounts no minimum no minimum
(other than IRAs, IRA rollovers,
Education IRAs or Roth IRAs)
------------------------------------------------------------------
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
------------------------------------------------------------------

PLEASE NOTE THAT YOU MAY ONLY BUY SHARES OF A FUND ELIGIBLE FOR SALE IN YOUR
STATE OR JURISDICTION.

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 "Investor Services" on page 22). For example, if you would
like to link one of your bank accounts to your Fund account so that you may
use electronic fund transfers to and from your bank account to buy and sell
shares, please complete the bank information section of the application. We
will keep your bank information on file for future purchases and redemptions.

BUYING SHARES
----------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
----------------------------------------------------------------------
[Insert graphic of
hands shaking]
Contact your Contact your
THROUGH YOUR investment investment
INVESTMENT representative representative
REPRESENTATIVE
----------------------------------------------------------------------
[Insert graphic of If you have another Before requesting a
phone and computer] Franklin Templeton telephone or online
fund account with purchase into an
BY PHONE/ONLINE your bank account existing account,
information on file, please make sure we
(Up to $100,000 per you may open a new have your bank account
shareholder per day) account by phone. At information on file.
this time, a new If we do not have this
1-800/632-2301 account may not be information, you will
opened online. need to send written
franklintempleton.com instructions with your
To make a same day bank's name and
NOTE: CERTAIN investment, your address, a voided
ACCOUNTS ARE NOT phone order must be check or savings
AVAILABLE FOR ONLINE received and accepted account deposit slip,
ACCOUNT ACCESS by us by 1:00 p.m. and a signature
Pacific time or the guarantee if the bank
close of the New York and Fund accounts do
Stock Exchange, not have at least one
whichever is earlier. common owner.

To make a same day
investment, your phone
or online order must
be received and
accepted by us by 1:00
p.m. Pacific time or
the close of the New
York Stock Exchange,
whichever is earlier.

----------------------------------------------------------------------
Make your check Make your check
[Insert graphic of payable to Templeton payable to Templeton
envelope] Growth Fund, Inc. Growth Fund, Inc.
Include your account
BY MAIL Mail the check and number on the check.
your signed
application to Fill out the deposit
Investor Services. slip 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 Call to receive a Call to receive a wire
three lightning bolts] wire control number control number and
and wire wire instructions.
instructions.
To make a same day
BY WIRE Wire the funds and wire investment,
mail your signed please call us by 1:00
1-800/632-2301 application to p.m. Pacific time and
(or 1-650/312-2000 Investor Services. make sure your wire
collect) Please include the arrives by 3:00 p.m.
wire control number
or 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 Call Shareholder Call Shareholder
arrows pointing in Services at the Services at the number
opposite directions] number below, or send below or our automated
signed written TeleFACTS system, or
BY EXCHANGE instructions. You send signed written
also may place an instructions. You also
TeleFACTS(R) online exchange may place an online
1-800/247-1753 order. The TeleFACTS exchange order.
(around-the-clock system cannot be used
access) to open a new account. (Please see page 24
for information on
Our Website (Please see page 24 exchanges.)
franklintempleton.com for information on
exchanges.)
----------------------------------------------------------------------

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)

[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. To sign up, complete the
appropriate section of your account application and mail it to Investor
Services. If you are opening a new account, please include the minimum
initial investment of $50 ($25 for an Education IRA)with your application.

AUTOMATIC PAYROLL DEDUCTION You may invest in the Fund automatically by
transferring money from your paycheck to the Fund by electronic funds
transfer. If you are interested, indicate on your application that you would
like to receive an Automatic Payroll Deduction Program kit.

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 Bank & Trust 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 Investments 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 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.

FRANKLIN TEMPLETON ONLINE You can visit us online at franklintempleton.com
for around-the-clock viewing of information about most Franklin Templeton
Funds or to register to view your accounts online. You may also register for
online transactions that will allow you to buy, sell, or exchange your shares
and make certain changes to your account. Some account types may not be able
to process any or all transactions online.

TELEPHONE/ONLINE PRIVILEGES You will automatically receive telephone/online
privileges when you open your account, allowing you to obtain or view your
account information, and conduct the following transactions by phone or
online: buy, sell, or exchange shares of most funds; change your address;
request a year-end statement; add or change account services (including
distribution options, systematic withdrawals, automatic investment plans,
money fund check orders).

To view your account information or request online transactions, you will
first need to register for these services at the shareholder section of our
website at FRANKLINTEMPLETON.COM. You will be asked to accept the terms of
an online agreement(s) and establish a password for online services. Using
our shareholder website means you are consenting to sending and receiving
personal financial information over the Internet so you should be sure you
are comfortable with the risks.

For accounts with more than one registered owner, telephone/online privileges
allow the Fund to accept online registration or telephone/online instructions
for transactions from only one owner. As long as you have telephone/online
exchange privileges on your account, you may exchange shares by phone or
online from a fund account requiring two or more signatures into an
identically registered money fund account requiring only one signature for
all transactions.

Additionally, if you have telephone privileges on an account with more than
one owner, the Fund will accept written instructions signed by only ONE OWNER
for transactions that could otherwise be made by phone. For all other
transactions and changes, all registered owners must sign the instructions.

As long as we follow reasonable security procedures and act on instructions
we reasonably believe are genuine, we will not be responsible for any losses
that may occur from unauthorized requests. We will request passwords or
other information, and may also record calls. To help safeguard your
account, keep your password confidential, and verify the accuracy of your
confirmation statements immediately after you receive them. Contact us
immediately if you believe someone has obtained unauthorized access to your
account or password. For transactions done over the Internet, we recommend
the use of an Internet browser with 128-bit encryption. Certain methods of
contacting us (such as by phone or by Internet) may be unavailable or delayed
during periods of unusual market activity. OF COURSE, YOU CAN DECLINE
TELEPHONE PRIVILEGES ON YOUR ACCOUNT APPLICATION, OR CHOOSE NOT TO REGISTER
FOR ONLINE PRIVILEGES. IF YOU HAVE TELEPHONE/ONLINE PRIVILEGES ON YOUR
ACCOUNT AND WANT TO DISCONTINUE THEM, PLEASE CONTACT US FOR INSTRUCTIONS.
You may reinstate these privileges at any time in writing, including online
registration with respect to online privileges.

NOTE: We discourage you from including confidential or sensitive
information in any Internet communication to us. If you do choose to send
email (encrypted or not) to us over the Internet, you are accepting the
associated risks of lack of confidentiality.

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.

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.

Because excessive trading can hurt fund performance, operations and
shareholders, the Fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges, reject any exchange, or
restrict or refuse purchases if (i) the Fund or its manager believes the Fund
would be harmed or unable to invest effectively, or (ii) the Fund receives or
anticipates simultaneous orders that may significantly affect the Fund
(please see "Market Timers" on page 28).

*Class Z shareholders of Franklin Mutual Series Fund Inc. may exchange into
Class A without any sales charge.

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. Please keep in mind that a contingent
deferred sales charge (CDSC) may apply.

SELLING SHARES IN WRITING Generally, requests to sell $100,000 or less can be
made over the phone, online 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:

[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
Fund against potential claims based on the instructions received.

SELLING RECENTLY PURCHASED SHARES If you sell shares recently purchased, we
may delay sending you the proceeds until your check, draft, or
wire/electronic funds transfer 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 Bank & Trust retirement plan. For participants under age
591/2, tax penalties may apply. Call Retirement Services at 1-800/527-2020
for details.

SELLING SHARES
---------------------------------------------------------------
TO SELL SOME OR ALL OF YOUR SHARES
---------------------------------------------------------------
[Insert graphic of
hands shaking]
Contact your investment representative
THROUGH YOUR
INVESTMENT
REPRESENTATIVE
---------------------------------------------------------------
[Insert graphic of Send written instructions and endorsed
envelope] share certificates (if you hold share
certificates) to Investor Services.
BY MAIL Corporate, partnership or trust
accounts 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.

franklintempleton.com 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.

Please see page 23 for more
information.
---------------------------------------------------------------
[Insert graphic of You can call, write, or visit us online
three to have redemption proceeds sent to a
lightning bolts] bank account. See the policies above
for selling shares by mail, phone, or
BY ELECTRONIC FUNDS online.
TRANSFER (ACH)
Before requesting to have redemption
proceeds 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 bank and
Fund accounts do not have at least one
common owner.

BY EXCHANGE Call Shareholder Services at the number
below or our automated TeleFACTS
TeleFACTS(R) system, or send signed written
1-800/247-1753 instructions. You also may place an
(around-the-clock exchange order online. See the
access) policies above for selling shares by
mail, phone, or online.

If you hold share certificates, you
will need to return them to the Fund
before your exchange can be processed.
Please see page 24 for information on
exchanges.
---------------------------------------------------------------
[Insert graphic of You can call or write to have
three lightning redemption proceeds sent to a bank
bolts] account. See the policies above for
selling shares by mail or phone.

Before requesting to have redemption
proceeds sent to a bank account, please
BY ELECTRONIC FUNDS make sure we have your bank account
TRANSFER (ACH) 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 bank and
Fund accounts do not have at least one
common owner.

If we receive your request in proper
form by 1:00 p.m. Pacific time,
proceeds sent by ACH generally will be
available within two to three business
days.
---------------------------------------------------------------
[Insert graphic of Obtain a current prospectus for the
two arrows pointing fund you are considering.
in opposite
directions] Call Shareholder Services at the number
below or our automated TeleFACTS
BY EXCHANGE system, or send signed written
instructions. See the policies above
TeleFACTS(R) for selling shares by mail or phone.
1-800/247-1753
(around-the-clock If you hold share certificates, you
access) will need to return them to the Fund
before your exchange can be processed.
---------------------------------------------------------------

[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 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 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. You can also review these documents online at
franklintempleton.com.

INVESTMENT REPRESENTATIVE ACCOUNT ACCESS If there is a dealer or other
investment representative of record on your account, he or she will be able
to obtain your account information, conduct transactions for your account,
and will also receive copies of all notifications and 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 may restrict or refuse purchases or exchanges by
Market Timers. You may be considered a Market Timer if you have (i) requested
an exchange out of any of the Franklin Templeton funds within two weeks of an
earlier exchange request out of any fund, or (ii) exchanged shares out of any
of the Franklin Templeton funds more than twice within a rolling 90 day
period, or (iii) otherwise seem to follow a market timing pattern that may
adversely affect the Fund. Accounts under common ownership or control with an
account that is covered by (i), (ii), or (iii) are also subject to these
limits.

Anyone, including the shareholder or the shareholder's agent, who is
considered to be a Market Timer by the Fund, its manager or shareholder
services agent, will be issued a written notice of their status and the
Fund's policies. Identified Market Timers will be required to register with
the market timing desk of Franklin Templeton Investor Services, Inc., and to
place all purchase and exchange trade requests through the desk. Some funds
do not allow investments by Market Timers.

ADDITIONAL POLICIES Please note that the Fund maintains additional policies
and reserves certain rights, including:

o The Fund may restrict or refuse any order to buy shares, including any
purchase under the exchange privilege.
o The Fund may modify, suspend, or terminate telephone/online privileges
at any time.
o At any time, the Fund may change its investment minimums or waive or
lower its minimums for certain purchases.
o The Fund may modify or discontinue the exchange privilege on 60 days'
notice.
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 Fund reserves the right, in
the case of an emergency, to make payments in securities or other assets of
the Fund, if the payment of cash proceeds 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 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. (Distributors) from sales charges, distribution and
service (12b-1) fees and its other resources.

CLASS A CLASS B CLASS 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 1.60 --- ---
million
$1 million or more up to 1.001 --- ---
12B-1 FEE TO DEALER 0.25 0.25/2 1.00/3

A dealer commission of up to 1% may be paid on Class A NAV purchases by
certain retirement plans1 and on Class C NAV purchases. A dealer commission
of up to 0.25% may be paid 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.

MARKET TIMERS. Please note that for Class A NAV purchases by market timers,
including purchases of $1 million or more, dealers are not eligible to
receive the dealer commission. Dealers, however, may be eligible to receive
the 12b-1 fee from the date of purchase.

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 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)
-----------------------------------------------------------------
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 5:00 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.
Institutional 1-800/321-8563 6:00 a.m. to 5:00 p.m.
Services
TDD (hearing 1-800/851-0637 5:30 a.m. to 5:00 p.m.
impaired)
TeleFACTS(R) 1-800/247-1753 (around-the-clock
(automated) access)

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. You
can also view the current annual/semiannual report online at
franklintempleton.com.

FRANKLIN(R)TEMPLETON(R)
1-800/DIAL BEN(R) (1-800/342-5236)
TDD (Hearing Impaired) 1-800/851-0637
franklintempleton.com

You also can obtain information about the 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: [email protected].

Investment Company Act file #811-4892 101 P 01/01

PART A
TEMPLETON GROWTH FUND, INC.
ADVISOR CLASS PROSPECTUS

Prospectus

Templeton Growth Fund, Inc.

ADVISOR CLASS

INVESTMENT STRATEGY Global Growth

JANUARY 1, 2001

[Insert Franklin Templeton Ben Head]

The SEC has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.

CONTENTS

THE FUND

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

2 Goal and Strategies

4 Main Risks

7 Performance

8 Fees and Expenses

9 Management

10 Distributions and Taxes

11 Financial Highlights

YOUR ACCOUNT

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

12 Qualified Investors

14 Buying Shares

16 Investor Services

20 Selling Shares

22 Account Policies

24 Questions

FOR MORE INFORMATION

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

Back Cover

THE FUND

[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
mainly in the equity securities of companies located anywhere in the world,
including emerging markets.

An equity security or stock, represents a proportionate share of ownership of a
company; its value is based on the success of the company's business, any income
paid to shareholders, the value of its assets, and general market conditions.
Common stocks and preferred stocks are examples of equity securities. The Fund
also invests in depositary receipts. These 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.

[Begin callout]
The Fund invests primarily in a globally diversified portfolio of equity
securities.
[End callout]

In addition to the Fund's main investments, depending upon current market
conditions, the Fund may invest up to 25% of its total assets in debt securities
of companies and governments located anywhere in the world. Debt securities
represent the obligation of the issuer to repay a loan of money to it, and
generally pay interest to the holder. Bonds, notes and debentures are examples
of debt securities. In order to increase income to the Fund, the Fund may lend
certain of its portfolio securities to qualified banks and broker-dealers.

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 its
assets in cash, cash equivalents or other high quality short-term investments.
Temporary defensive investments generally may include U.S. government
securities, bank time deposits denominated in the currency of any major nation,
commercial paper, 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
----------
[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]

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.

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 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 stringent
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 fair market prices.

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.

SECURITIES LENDING The Fund's loans of portfolio securities may not exceed 33
1/3% of the value of the Fund's total assets, measured at the time of the most
recent loan. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in collateral in the event of default or
insolvency of the borrower.

INTEREST RATE Prolonged or significant interest rate increases have historically
had an adverse impact on equity markets in countries affected by such increases.
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 are more sensitive to these price changes.

CREDIT An issuer of securities may 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.

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 a 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 10 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.

ADVISOR CLASS ANNUAL TOTAL RETURNS/1,/2

[Insert bar graph]

-9.06% 31.33% 4.21% 32.70% 0.82% 19.83% 20.55% 16.42% -2.23% 30.85%
90 91 92 93 94 95 96 97 98 99

YEAR

[Begin callout]
BEST QUARTER:
Q1 '91 14.81%

WORST QUARTER:
Q3 '90 -15.52%
[End callout]

1. As of September 30, 2000, the Fund's year-to-date return was -4.26%.

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

1 YEAR 5 YEARS 10 YEARS
-------------------------------------------------------------------------------
Templeton Growth Fund - Advisor Class/2 30.85% 16.76% 13.71%
MSCI World Index/3 25.34% 20.25% 11.96%

2. Performance figures reflect a "blended" figure combining the following
methods of calculation: (a) For periods before January 1, 1997, a restated
figure is used based on the Fund's Class A performance, excluding the effect of
Class A's maximum initial sales charge and including the effect of the Class A
distribution and service (12b-1) fees; and (b) for periods after January 1,
1997, an actual Advisor Class figure is used reflecting a deduction of all
applicable charges and fees for that class. This blended figure assumes
reinvestment of dividends and capital gains.
3. Source: Standard & Poor's Micropal. The unmanaged MSCI World Index tracks the
performance of approximately 1,500 securities in 22 countries and is designed
to measure world stock market performance. 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)

ADVISOR CLASS
-------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases None

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)

ADVISOR CLASS
-------------------------------------------------------------------------------
Management fees 0.61%
Distribution and service (12b-1) fees None
Other expenses 0.25%
--------------------------
Total annual Fund operating expenses 0.86%
==========================

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
---------------- ---------------------------
$88 $274 $477 $1,061

[Insert graphic of briefcase] MANAGEMENT
----------
Templeton Global Advisors Limited (Global Advisors), Lyford Cay, Nassau,
Bahamas, is the Fund's investment manager. Together, Global Advisors and its
affiliates manage over $229 billion in assets.

The Fund's lead portfolio manager is:

MURDO MURCHISON CFA, PORTFOLIO MANAGER OF GLOBAL ADVISORS

Mr. Murchison has been a manager of the Fund since January 2000. He joined
Franklin Templeton Investments in 1993.

The following individuals have secondary portfolio management responsibilities:

JEFFREY A. EVERETT CFA, EXECUTIVE VICE PRESIDENT OF GLOBAL ADVISORS
Mr. Everett has been a manager of the Fund since January 2000. He joined
Franklin Templeton Investments in 1989.

DALE A. WINNER CFA, PORTFOLIO MANAGER OF GLOBAL ADVISORS
Mr. Winner has been a manager of the Fund since January 2000. He joined
Franklin Templeton Investments in 1995.

The Fund pays Global Advisors a fee for managing the Fund's assets. For the
fiscal year ended August 31, 2000, the Fund paid 0.61% of its average daily net
assets to the manager for its services.

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

INCOME AND CAPITAL GAIN DISTRIBUTIONS The Fund intends to make a distribution at
least annually from its net investment income and any net realized capital
gains. The amount of any distribution will vary, and there is no guarantee the
Fund will pay either income dividends or capital gain distributions.

AVOID "BUYING A DIVIDEND" If you invest in the Fund shortly before it makes a
distribution, you may receive some of your investment back in the form of a
taxable distribution.

TAX CONSIDERATIONS In general, if you are a taxable investor, 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 as long-term
capital gains no matter how long you have owned your shares. Every January, you
will receive a statement that shows the tax status of distributions you received
for the previous year.

[Begin callout]
BACKUP WITHHOLDING
By law, the Fund must withhold 31% of your taxable distributions and redemption
proceeds unless you:
o provide your correct social security or taxpayer identification number,
o certify that this number is correct, and
o certify that you are not subject to backup withholding.
The Fund must also withhold if the IRS instructs it to do so.
[End callout]

When you sell your shares of the Fund, you may realize 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
are subject to state and local taxes. 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 or estate tax, and are subject to
special U.S. tax certification requirements. You should consult your tax advisor
about the federal, state, local or foreign tax consequences of your investment
in the Fund.

[Insert graphic of a dollar bill] FINANCIAL HIGHLIGHTS
--------------------

This table presents the financial performance for Advisor Class since its
inception. This information has been audited by PricewaterhouseCoopers LLP for
the fiscal years ended August 31, 1999 and 2000, and by other auditors for the
fiscal years before August 31, 1999.

ADVISOR CLASS YEAR ENDED AUGUST 31,
-----------------------------------------------------------------------
2000 1999 1998 1997/4
-----------------------------------------------------------------------
PER SHARE DATA ($)/1
Net asset value,
beginning of year 19.61 16.80 22.49 19.37
--------------------------------------
Net investment income .40 .51 .56 .37
Net realized and unrealized
gains(losses) .99 4.77 (2.78) 2.75
--------------------------------------
Total from investment operations 1.39 5.28 (2.22) 3.12
--------------------------------------
Less distributions from net
investment income (.60) (.44) (.59) -
Less distributions from net
realized gains (.69) (2.03) (2.88) -
Total distributions (1.29) (2.47) (3.47) -
--------------------------------------
Net asset value, end of year 19.71 19.61 16.80 22.49
--------------------------------------
Total return (%)/2 7.87 35.16 (12.41) 16.11

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($ x
1,000) 118,679 50,751 36,301 29,531
Ratios to average net assets:(%)
Expenses .86 .87 .83 .83/3
Net investment income 2.10 2.85 2.81 3.68/3
Portfolio turnover rate (%) 50.57 32.01 48.23 41.81

1. Based on average weighted shares outstanding effective year ended
August 31, 1999.
2. Total return is not annualized.
3. Annualized.
4. For the period January 1, 1997 (effective date) to August 31, 1997.

YOUR ACCOUNT

[Insert graphic of pencil marking an "X"]QUALIFIED INVESTORS
-------------------

The following investors may qualify to buy Advisor Class shares of the Fund.

o Qualified registered investment advisors with clients invested in any series
of Franklin Mutual Series Fund Inc. on October 31, 1996, or who buy through
a broker-dealer or service agent who has an agreement with Franklin Templeton
Distributors, Inc. (Distributors). Minimum investments: $1,000 initial and
$50 additional.

o Broker-dealers, registered investment advisors or certified financial
planners who have an agreement with Distributors for clients participating in
comprehensive fee programs. Minimum investments: $250,000 initial ($100,000
initial for an individual client) and $50 additional.

o Officers, trustees, directors and full-time employees of Franklin Templeton
Investments and their immediate family members. Minimum investments: $100
initial ($50 for accounts with an automatic investment plan) and $50
additional.

o Each series of the Franklin Templeton Fund Allocator Series. Minimum
investments: $1,000 initial and $1,000 additional.

o 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 in Advisor Class or
Class Z shares of any Franklin Templeton fund and $50 additional.

o Accounts managed by Franklin Templeton Investments. Minimum investments:
No initial minimum and $50 additional.

o The Franklin Templeton Profit Sharing 401(k) Plan. Minimum investments:
No initial or additional minimums.

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 10,000 employees, or (ii) with retirement plan
assets of $100 million or more. Minimum investments: No initial or additional
minimums.

o Trust companies and bank trust departments initially investing in 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: No initial or additional minimums.

o Individual investors. Minimum investments: $5 million initial and $50
additional. You may combine all of your shares in Franklin Templeton funds
for purposes of determining whether you meet the $5 million minimum, as long
as $1 million is in Advisor Class or Class Z shares of any Franklin Templeton
fund.

o Any other investor, including a private investment vehicle such as a family
trust or foundation, who is a member of an established group of 11 or more
investors. Minimum investments: $5 million initial and $50 additional. For
minimum investment purposes, the group's investments are added together. The
group may combine all of its shares in Franklin Templeton funds for purposes
of determining whether it meets the $5 million minimum, as long as $1 million
is in Advisor Class or Class Z shares of any Franklin Templeton fund. There
are certain other requirements and the group must have a purpose other than
buying Fund shares without a sales charge.

Please note that Advisor Class shares of the Fund generally are not available to
retirement plans through Franklin Templeton's ValuSelect(R) program. Retirement
plans in the ValuSelect program before January 1, 1998, however, may invest in
the Fund's Advisor Class shares.

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

ACCOUNT APPLICATION If you are opening a new account, please complete and sign
the enclosed account application. 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 "Investor Services" on page 16). For example, if you would like
to link one of your bank accounts to your Fund account so that you may use
electronic fund transfers to and from your bank account to buy and sell shares,
please complete the bank information section of the application. We will keep
your bank information on file for future purchases and redemptions.

BUYING SHARES
--------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
--------------------------------------------------------------------------------
[Insert graphic of
hands shaking]

THROUGH YOUR CONTACT YOUR INVESTMENT CONTACT YOUR INVESTMENT
INVESTMENT REPRESENTATIVE REPRESENTATIVE
REPRESENTATIVE
--------------------------------------------------------------------------------
[Insert graphic of If you have another Franklin Before requesting a
phone] Templeton fund account with telephone or online purchase
your bank account information into an existing account,
BY PHONE/ONLINE on file, you may open a new please make sure we have
by phone. At this time a new your bank account
(Up to $100,000 account may not be opened information on file. If we
per shareholder online. do not have this nformation,
per day) you will need to send
To make a same day written instructions
1-800/632-2301 investment, your phone order with your bank's name and
must be received and address, a voided check or
franklintempleton.com accepted by us by 1:00 p.m. savings account deposit
Pacific time or the close of slip, and a signature
NOTE: certain the New York Stock Exchange, guarantee if the bank and
accounts are not whichever is earlier. Fund accounts do not have at
available for least one common owner.
online account
access To make a same day
investment, your phone or
online order must be
received and accepted by us
by 1:00 p.m. Pacific time
or the close of the New York
Stock Exchange, whichever is
earlier.
--------------------------------------------------------------------------------
Make your check payable to Make your check payable to
[Insert graphic of Templeton Growth Fund, Inc. Templeton Growth Fund, Inc.
envelope] Include your account number
Mail the check and your on the check.
BY MAIL signed application to
Investor Services. Fill out the deposit slip
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 Call to receive a wire Call to receive a wire
three lightning control number and wire control number and wire
bolts] instructions. instructions.

Wire the funds and mail your To make a same day wire
signed application to investment, please call us
BY WIRE Investor Services. Please by 1:00 p.m. Pacific time
include the wire control and make sure your wire
1-800/632-2301 number or your new account arrives by 3:00 p.m.
(or 1-650/312-2000 number on the application.
collect)
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 Call Shareholder Services at Call Shareholder Services at
two arrows the number below, or send the number below, or send
pointing in signed written instructions. signed written instructions.
opposite You also may place an online You also may place an online
directions] exchange order. (Please see exchange order.(Please see
page 18 for information on page 18 for information on
BY EXCHANGE exchanges.) exchanges.)

Our Website
franklintempleton.com
--------------------------------------------------------------------------------

[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. To sign up, complete the appropriate section
of your account application and mail it to Investor Services. If you are opening
a new account, please include your minimum initial investment with your
application.

AUTOMATIC PAYROLL DEDUCTION You may invest in the Fund automatically by
transferring money from your paycheck to the Fund by electronic funds transfer.
If you are interested, indicate on your application that you would like to
receive an Automatic Payroll Deduction Program kit.

DISTRIBUTION OPTIONS You may reinvest distributions you receive from the Fund in
an existing account in the same share class of the Fund or in Advisor Class or
Class A shares of another Franklin Templeton fund. To reinvest your
distributions in Advisor Class shares of another Franklin Templeton fund, you
must qualify to buy that fund's Advisor Class shares. For distributions
reinvested in Class A shares of another Franklin Templeton fund, initial sales
charges and contingent deferred sales charges (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 Bank & Trust 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.

RETIREMENT PLANS Franklin Templeton Investments 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 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.

FRANKLIN TEMPLETON ONLINE You can visit us online at franklintempleton.com for
around-the-clock viewing of information about most Franklin Templeton Funds or
to register to view your accounts online. You may also register for online
transactions that will allow you to buy, sell, or exchange your shares and make
certain changes to your account. Some account types may not be able to process
any or all transactions online.

TELEPHONE/ONLINE PRIVILEGES You will automatically receive telephone/online
privileges when you open your account, allowing you to obtain or view your
account information, and conduct the following transactions by phone or online:
buy, sell, or exchange shares of most funds; change your address; request a
year-end statement; add or change account services (including distribution
options, systematic withdrawals, automatic investment plans, money fund check
orders).

To view your account information or request online transactions, you will first
need to register for these services at the shareholder section of our website at
franklintempleton.com. You will be asked to accept the terms of an online
agreement(s) and establish a password for online services. Using our shareholder
website means you are consenting to sending and receiving personal financial
information over the Internet so you should be sure you are comfortable with the
risks.

For accounts with more than one registered owner, telephone/online privileges
allow the Fund to accept online registration or telephone/online instructions
for transactions from only one owner. As long as you have telephone/online
exchange privileges on your account, you may exchange shares by phone or online
from a fund account requiring two or more signatures into an identically
registered money fund account requiring only one signature for all transactions.

Additionally, if you have telephone privileges on an account with more than one
owner, the Fund will accept written instructions signed by only ONE OWNER for
transactions that could otherwise be made by phone. For all other transactions
and changes, all registered owners must sign the instructions.

As long as we follow reasonable security procedures and act on instructions we
reasonably believe are genuine, we will not be responsible for any losses that
may occur from unauthorized requests. We will request passwords or other
information, and may also record calls. To help safeguard your account, keep
your password confidential, and verify the accuracy of your confirmation
statements immediately after you receive them. Contact us immediately if you
believe someone has obtained unauthorized access to your account or password.
For transactions done over the Internet, we recommend the use of an Internet
browser with 128-bit encryption. Certain methods of contacting us (such as by
phone or by Internet) may be unavailable or delayed during periods of unusual
market activity. OF COURSE, YOU CAN DECLINE TELEPHONE PRIVILEGES ON YOUR ACCOUNT
APPLICATION, OR CHOOSE NOT TO REGISTER FOR ONLINE PRIVILEGES. IF YOU HAVE
TELEPHONE/ONLINE PRIVILEGES ON YOUR ACCOUNT AND WANT TO DISCONTINUE THEM, PLEASE
CONTACT US FOR INSTRUCTIONS. You may reinstate these privileges at any time in
writing, including online registration with respect to online privileges.

NOTE: We discourage you from including confidential or sensitive information in
any Internet communication to us. If you do choose to send email (encrypted or
not) to us over the Internet, you are accepting the associated risks of lack of
confidentiality.

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

[Begin callout]
An EXCHANGE is really two transactions: a sale of one fund and the purchase of
another. In general, the same policies that apply to purchases and sales apply
to exchanges, including minimum investment amounts. Exchanges also have the same
tax consequences as ordinary sales and purchases.
[End callout]

If you do not qualify to buy Advisor Class shares of Templeton Developing
Markets Trust or Templeton Foreign Fund, you also may exchange your shares for
Class A shares of those funds (without any sales charge)* or for shares of
Templeton Institutional Funds, Inc.

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

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

SYSTEMATIC WITHDRAWAL PLAN This plan allows you to automatically sell your
shares and receive regular payments from your account. 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.

[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 Fund
against potential claims based on the instructions received.

SELLING RECENTLY PURCHASED SHARES If you sell shares recently purchased, we may
delay sending you the proceeds until your check, draft, or wire/electronic funds
transfer 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 Bank & Trust retirement plan. For participants under age
591/2, tax penalties may apply. Call Retirement Services at 1-800/527-2020 for
details.

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

Contact your investment representative
THROUGH YOUR
INVESTMENT
REPRESENTATIVE
-------------------------------------------------------------------
[Insert graphic Send written instructions and endorsed share
of envelope] certificates (if you hold share certificates)
to Investor Services. Corporate, partnership
BY MAIL or trust accounts may need to 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 As long as your transaction is for $100,000
phone] or less, you do not hold share certificates
and you have not changed your address by
BY PHONE/ONLINE phone or online within the last 15 days, you
can sell your shares by phone or online.
1-800/632-2301
A check will be mailed to the name(s) and
franklintempleton.com 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.

Please see page 17 for more information.
-------------------------------------------------------------------
[Insert graphic You can call, write, or visit us online to
of three lightning have redemption proceeds sent to a bank
bolts] account. See the policies above for selling
shares by mail, phone, or online.

Before requesting to have redemption proceeds
sent to a bank account, please make sure we
BY ELECTRONIC have your bank account information on file.
FUNDS TRANSFER If we do not have this information, you will
(ACH) 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
bank and Fund accounts do not have at least one common
owner.

[Insert graphic of Obtain a current prospectus for the fund you
two arrows are considering. Prospectuses are available
pointing in online at franklintempleton.com.
opposite
directions] Call Shareholder Services at the number
below, or send signed written instructions.
BY EXCHANGE You also may place an exchange order online.
See the policies above for selling shares by mail, phone,
or online.

If you hold share certificates, you will need to return
them to the Fund before your exchange can be processed.
Please see page number 18 for information on exchanges.
-------------------------------------------------------------------

[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). The NAV for Advisor Class is calculated by
dividing its net assets by the number of its shares outstanding.

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 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.

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 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. You can also access these documents online at franklintempleton.com.

INVESTMENT REPRESENTATIVE ACCOUNT ACCESS If there is a dealer or other
investment representative of record on your account, he or she will be able to
obtain your account information, conduct transactions for your account, and will
also receive copies of all notifications and 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 may restrict or refuse purchases or exchanges by Market
Timers. You may be considered a Market Timer if you have (i) requested an
exchange out of any of the Franklin Templeton funds within two weeks of an
earlier exchange request out of any fund, or (ii) exchanged shares out of any of
the Franklin Templeton funds more than twice within a rolling 90 day period, or
(iii) otherwise seem to follow a market timing pattern that may adversely affect
the Fund. Accounts under common ownership or control with an account that is
covered by (i), (ii), or (iii) are also subject to these limits.

Anyone, including the shareholder or the shareholder's agent, who is considered
to be a Market Timer by the Fund, its manager or shareholder services agent,
will be issued a written notice of their status and the Fund's policies.
Identified Market Timers will be required to register with the market timing
desk of Franklin Templeton Investor Services, Inc., and to place all purchase
and exchange trade requests through the desk. Some funds do not allow
investments by Market Timers.

ADDITIONAL POLICIES Please note that the Fund maintains additional policies and
reserves certain rights, including:

o The Fund may restrict or refuse any order to buy shares, including any
purchase under the exchange privilege.
o The Fund may modify, suspend, or terminate telephone/online privileges at
any time.
o At any time, the Fund may change its investment minimums or waive or lower
its minimums for certain purchases.
o The Fund 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 Fund reserves the right, in the
case of an emergency, to make payments in securities or other assets of the
Fund, if the payment of cash proceeds 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 Fund promptly.

DEALER COMPENSATION Qualifying dealers who sell Advisor Class 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 Fund or your account, you can write to us at
P.O. Box 33030, St. Petersburg, FL 33733-8030. 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, MONDAY
DEPARTMENT NAME TELEPHONE NUMBER THROUGH FRIDAY)
-------------------------------------------------------------------------------
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 5:00 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.
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.
TeleFACTS(R)(automated) 1-800/247-1753 (around-the-clock access)

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. You can
also view the current annual/semiannual report online at franklintempleton.com.

FRANKLIN(R)TEMPLETON(R)
1-800/DIAL BEN(R) (1-800/342-5236)
TDD (Hearing Impaired) 1-800/851-0637
franklintempleton.com

You also can obtain information about the 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: [email protected].

Investment Company Act file #811-4892 101 PA 01/00

PART B
TEMPLETON GROWTH FUND, INC.
CLASS A, B, C SAI

TEMPLETON GROWTH FUND, INC.

CLASS A, B & C

STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 2001

[Insert Franklin Templeton Ben Head]

[P.O. BOX 33030, ST. PETERSBURG, FL 33733-8030 1-800/DIAL BEN(R)]
------------------------------------------------------------------

This Statement of Additional Information (SAI) is not a prospectus. It
contains information in addition to the information in the Fund's prospectus.
The Fund's prospectus, dated January 1, 2001, which we may amend from time to
time, contains the basic information you should know before investing in the
Fund. You should read this SAI together with the Fund's prospectus.

The audited financial statements and auditor's report in the Fund's Annual
Report to Shareholders, for the fiscal year ended August 31, 2000, are
incorporated by reference (are legally a part of this SAI).

For a free copy of the current prospectus or annual report, contact your
investment representative or call 1-800/DIAL BEN (1-800/342-5236).

CONTENTS

Goal, Strategies and Risks 2
Officers and Directors 9
Management and Other Services 13
Portfolio Transactions 14
Distributions and Taxes 15
Organization, Voting Rights and Principal Holders 17
Buying and Selling Shares 18
Pricing Shares 24
The Underwriter 25
Performance 27
Miscellaneous Information 29
Description of Ratings 29

-------------------------------------------------------------------------------
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:

o ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;

o ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
BANK;

o ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
-------------------------------------------------------------------------------

GOAL, STRATEGIES AND RISKS
-------------------------------------------------------------------------------

Generally, the policies and restrictions discussed in this SAI and in the
prospectus apply when the Fund makes an investment. In most cases, the Fund
is not required to sell a security because circumstances change and the
security no longer meets one or more of the Fund's policies or restrictions.
If a percentage restriction or limitation is met at the time of investment, a
later increase or decrease in the percentage due to a change in the value or
liquidity of portfolio securities will not be considered a violation of the
restriction or limitation.

If a bankruptcy or other extraordinary event occurs concerning a particular
security the Fund owns, the Fund may receive stock, real estate, or other
investments that the Fund would not, or could not, buy. If this happens, the
Fund intends to sell such investments as soon as practicable while trying to
maximize the return to shareholders.

The Fund has adopted certain restrictions as fundamental and non-fundamental
policies. This means they may only be changed if the change is approved by
(i) more than 50% of the Fund's outstanding shares or (ii) 67% or more of the
Fund's shares present at a shareholder meeting if more than 50% of the Fund's
outstanding shares are represented at the meeting in person or by proxy,
whichever is less.

The Fund has also adopted certain restrictions as non-fundamental policies.
A non-fundamental policy may be changed by the Board of Directors without the
approval of shareholders.

FUNDAMENTAL INVESTMENT POLICIES

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

The Fund may not:

1. Invest in real estate or mortgages on real estate (although the Fund may
invest in marketable securities secured by real estate or interests therein
or issued by companies or investment trusts which invest in real estate or
interests therein); invest in interests (other than debentures or equity
stock interests) in oil, gas or other mineral exploration or development
programs; purchase or sell commodity contracts except stock index futures
contracts.

2. Invest in the securities of any other domestic or foreign investment
company or investment fund or other investment vehicle which is invested
according to the principle of risk-spreading irrespective of the legal
structure of such investment vehicle (collectively referred to as
"investment vehicles") except in connection with a plan of merger or
consolidation with or acquisition of substantially all of the assets of such
investment vehicle and with the further exception that up to 5% of the net
asset value of the Fund may be invested in an investment vehicle consisting
of securities provided it offers its units to the public without limitation
on the number of units and further provided the holders of these units have
the right to redeem their units.

3. Act as an underwriter except to the extent the Fund may be deemed to be
an underwriter when disposing of securities it owns or when selling its own
shares.

4. Issue senior securities; purchase on margin or sell short; write, buy or
sell puts, calls, straddles or spreads (but the Fund may make margin
payments in connection with, and purchase and sell, stock index futures
contracts and options on securities indices).

5. Make loans to other persons except (a) through the lending of its
portfolio securities, (b) through the purchase of debt securities, loan
participations and/or engaging in direct corporate loans in accordance with
its investment objectives and policies, and (c) to the extent the entry into
a repurchase agreement is deemed to be a loan. The Fund may also make loans
to affiliated investment companies to the extent the entry into a repurchase
agreement is deemed to be a loan. The Fund may also make loans to affiliated
investment companies to the extent permitted by the 1940 Act or any
exemptions therefrom which may be granted by the U.S. Securities and
Exchange Commission.

6. Borrow money, except that the Fund may borrow money from banks or
affiliated investment companies to the extent permitted by the 1940 Act, or
any exemptions therefrom which may be granted by the U.S. Securities and
Exchange Commission and then only for temporary purposes and in an amount
not exceeding 10% of the value of its total assets (including the amount
borrowed) and with the consent of the Fund's custodian to the terms of the
borrowing.

7. Pledge, mortgage, hypothecate, or otherwise encumber its assets except to
secure indebtedness permitted under its borrowing policy.

8. Concentrate (invest more than 25% of its net assets) in securities of
issuers in a particular industry (other than securities issued or guaranteed
by the U.S. government or any of its agencies or instrumentalities or
securities of other investment companies).

9. Invest in "letter stocks" or securities on which there are sales
restrictions under a purchase agreement.

NON-FUNDAMENTAL INVESTMENT POLICIES

Although the Fund generally invests in common stock, it may also invest in
preferred stocks and certain debt securities (which may include structured
investments, as described below), rated or unrated, such as convertible bonds
and bonds selling at a discount. The Fund may invest without percentage
limitation in domestic or foreign securities. It may invest up to 100% of its
total assets in emerging markets, including up to 5% of its total assets in
Russian securities. It may invest any amount of its assets in U.S.
government securities. It may invest in any industry, although it will not
concentrate (invest more than 25% of its total assets) in any one industry.

The Fund also may be subject to investment limitations imposed by foreign
jurisdictions in which the Fund sells its shares.

In addition, the Fund may not:

1. Purchase or retain securities of any company in which directors or
officers of the Fund or the manager, individually owning more than 1/2 of 1%
of the securities of such company, in the aggregate own more than 5% of the
securities of such company.

2. Purchase more than 10% of any class of securities of any one company,
including more than 10% of its outstanding voting securities, or invest in
any company for the purpose of exercising control or management.

3. Invest more than 5% of the value of the Fund's total assets in securities
of issuers which have been in continuous operation less than three years.

4. Invest more than 5% of the Fund's total assets in warrants, whether or
not listed on the New York Stock Exchange or the American Stock Exchange,
including no more than 2% of its total assets which may be invested in
warrants that are not listed on those exchanges. Warrants acquired by the
Fund in units or attached to securities are not included in this
restriction. This restriction does not apply to options on securities
indices.

5. Invest more than 15% of the Fund's total assets in securities of foreign
issuers that are not listed on a recognized U.S. or foreign securities
exchange, including no more than 10% of its total assets (including
warrants) which may be invested in securities with a limited trading market.
The Fund's position in the latter type of securities may be of such size as
to affect adversely their liquidity and marketability and the Fund may not
be able to dispose of its holdings in these securities at the current market
price.

None of the Fund's investment policies or restrictions (except fundamental
restriction 8 and non-fundamental restriction 5) prohibit the Fund from
buying securities pursuant to subscription rights distributed to the Fund by
any issuer of securities held at the time in its portfolio, as long as such
purchase is not contrary to the Fund's status as a diversified investment
company under the 1940 Act.

INVESTMENTS, TECHNIQUES, STRATEGIES AND THEIR RISKS

In trying to achieve its investment goal, the Fund may invest in various
types of securities or engage in various types of transactions. These
securities and transactions, and their associated risks, are described
below. The Fund's manager is under no obligation to invest in any or all of
these securities or engage in any or all of these types of transactions.

DEBT SECURITIES represent an obligation of the issuer to repay a loan of
money to it. A debt security typically has a fixed payment schedule that
obligates the issuer to pay interest to the lender and to return the lender's
money over a certain time period. A company typically meets its payment
obligations associated with its outstanding debt securities before it
declares and pays any dividend to holders of its equity securities. Bonds,
notes, debentures and commercial paper differ in the length of the issuer's
payment schedule, with bonds carrying the longest repayment schedule and
commercial paper the shortest.

The market value of debt securities generally varies in response to changes
in interest rates and the financial condition of each issuer. During periods
of declining interest rates, the value of debt securities generally
increases. Conversely, during periods of rising interest rates, the value of
debt securities generally declines. These changes in market value will be
reflected in the Fund's net asset value.

Independent rating organizations rate debt securities based upon their
assessment of the financial soundness of the issuer. Generally, a lower
rating indicates higher risk. The Fund may buy debt securities that are rated
Caa by Moody's Investors Service, Inc. (Moody's) or CCC by Standard & Poor's
Ratings Group(R) or better; or unrated debt that it determines to be of
comparable quality.

LOWER-RATED SECURITIES. The Fund may invest up to 35% of its assets in debt
securities, including those that are rated below investment grade. Although
they may offer higher yields than do higher rated securities, low rated and
unrated debt securities generally involve greater volatility of price and
risk to principal and income, including the possibility of default by, or
bankruptcy of, the issuers of the securities. The Fund may invest up to 10%
of its assets in defaulted debt, which involves risks such as the possibility
of complete loss of the investment in the event the issuer does not
restructure or reorganize to enable it to resume paying interest and
principal to holders.

Bonds rated Caa by Moody's or CCC by S&P(R) are of poor standing. These
securities may be in default or there may be a greater rate of non-payment of
principal or interest. Bonds rated CCC by S&P are regarded, on balance, as
speculative. These securities will have some quality and protective
characteristics, but these are outweighed by large uncertainties or major
risk exposures to adverse conditions.

The markets in which low rated, unrated and defaulted debt securities are
traded are more limited than those in which higher rated securities are
traded and this may reduce the Fund's ability to sell the securities at fair
value either to meet redemption requests or to respond to a specific economic
event such as a deterioration in the creditworthiness of the issuer.

Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Fund to
achieve its investment goal may, to the extent of investment in low rated
debt securities, be more dependent upon such creditworthiness analysis than
would be the case if the Fund were investing in higher rated securities.

Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be
less sensitive to interest rate changes than higher rated investments, but
more sensitive to adverse economic downturns or individual corporate
developments. A projection of an economic downturn or of a period of rising
interest rates, for example, could cause a decline in low rated debt
securities prices because the advent of a recession could lessen the ability
of a highly leveraged company to make principal and interest payments on its
debt securities. If the issuer of low rated debt securities defaults, the
Fund may incur additional expenses to seek recovery.

The Fund may accrue and report interest on high yield bonds structured as
zero coupon bonds or pay-in-kind securities as income even though it receives
no cash interest until the security's maturity or payment date. In order to
qualify for beneficial tax treatment afforded regulated investment companies,
the Fund must distribute substantially all of its income to shareholders.
Thus, the Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash in order to satisfy the
distribution requirement.

STRUCTURED INVESTMENTS. The Fund currently has no structured investments,
but included among the issuers of debt securities in which the Fund may
invest are entities organized and operated solely for the purpose of
restructuring the investment characteristics of various securities. These
entities are typically organized by investment banking firms, which receive
fees in connection with establishing each entity and arranging for the
placement of its securities. This type of restructuring involves the deposit
with or purchases by an entity, such as a corporation or trust, of specified
instruments and the issuance by that entity of one or more classes of
securities (structured investments) backed by, or representing interests in,
the underlying instruments. The cash flow on the underlying instruments may
be apportioned among the newly issued structured investments to create
securities with different investment characteristics such as varying
maturities, payment priorities or interest rate provisions. The extent of the
payments made with respect to structured investments is dependent on the
extent of the cash flow on the underlying instruments. Because structured
investments of the type in which the Fund anticipates investing typically
involve no credit enhancement, their credit risk will generally be equivalent
to that of the underlying instruments.

The Fund is permitted to invest in a class of structured investments that is
either subordinated or unsubordinated to the right of payment of another
class. Subordinated structured investments typically have higher yields and
present greater risks than unsubordinated structured investments. Although
the Fund's purchase of subordinated structured investments would have a
similar economic effect to that of borrowing against the underlying
securities, the purchase will not be deemed to be leverage for purposes of
the limitations placed on the extent of the Fund's assets that may be used
for borrowing activities.

Certain issuers of structured investments may be deemed to be "investment
companies" as defined in the Investment Company Act of 1940, as amended (1940
Act). As a result, the Fund's investment in these structured investments may
be limited by the restrictions contained in the 1940 Act. Structured
investments are typically sold in private placement transactions, and there
currently is no active trading market for structured investments. To the
extent such investments are illiquid, they will be subject to the Fund's
restrictions on investments in illiquid securities.

DERIVATIVE SECURITIES are those whose values are dependent upon the
performance of one or more other securities or investments or indices, in
contrast to common stock, for example, whose value is dependent upon the
operations of the issuer. Stock index futures contracts and options on
securities indices are considered derivative investments. To the extent the
Fund enters into these transactions, their success will depend upon the
manger's ability to predict pertinent market movements.

STOCK INDEX FUTURES CONTRACTS. Changes in interest rates, securities prices,
or foreign currency valuations may affect the value of the Fund's
investments. Although to reduce its exposure to these factors the Fund has
the authority to invest up to 20% of its total assets in stock index futures
contracts traded on a recognized stock exchange or board of trade, it does
not currently intend to enter into such transactions. The Fund may determine
to make these investments, however, without prior notice to shareholders.

A stock index futures contract is a contract to buy or sell units of a stock
index at a specified future date at a price agreed upon when the contract is
made. The value of a unit is the current value of the stock index. For
example, the S&P 500 Stock Index (S&P 500 Index) is composed of 500 selected
common stocks, most of which are listed on the New York Stock Exchange. The
S&P 500 Index assigns relative weightings to the value of one share of each
of these 500 common stocks included in the index, and the index fluctuates
with changes in the market values of the shares of those common stocks. In
the case of the S&P 500 Index, contracts are to buy or sell 500 units. Thus,
if the value of the S&P 500 Index were $150, one contract would be worth
$75,000 (500 units x $150). The stock index futures contract specifies that
no delivery of the actual stocks making up the index will take place.
Instead, settlement in cash must occur upon the termination of the contract,
with the settlement being the difference between the contract price and the
actual level of the stock index at the expiration of the contract. For
example, if the Fund enters into a futures contract to buy 500 units of the
S&P 500 Index at a specified future date at a contract price of $150 and the
S&P 500 Index is at $154 on that future date, the Fund will gain $2,000 (500
units x gain of $4). If the Fund enters into a futures contract to sell 500
units of the stock index at a specified future date at a contract price of
$150 and the S&P 500 Index is at $154 on that future date, the Fund will lose
$2,000 (500 units x loss of $4).

There are additional risks involved in stock index futures transactions.
These relate to the Fund's ability to reduce or eliminate its futures
positions, which will depend upon the liquidity of the secondary markets for
such futures. The Fund intends to purchase or sell futures only on exchanges
or boards of trade where there appears to be an active secondary market, but
there is no assurance that a liquid secondary market will exist for any
particular contract or at any particular time. Use of stock index futures for
hedging may involve risks because of imperfect correlations between movements
in the prices of the stock index futures on the one hand and movements in the
prices of the securities being hedged or of the underlying stock index on the
other. Successful use of stock index futures by the Fund for hedging purposes
also depends upon the manager's ability to predict correctly movements in the
direction of the market, as to which no assurance can be given.

SECURITIES INDEX OPTIONS. Although the Fund has the authority to buy and sell
put and call options on securities indices in standardized contracts traded
on national securities exchanges, boards of trade, or similar entities or
quoted on NASDAQ, in order to earn additional income and/or to help protect
its portfolio against market and/or exchange rate movement it does not
currently intend to enter into such transactions. An option on a securities
index is a contract that allows the buyer of the option the right to receive
from the seller cash, in an amount equal to the difference between the
index's closing price and the option's exercise price. The Fund may only buy
options if the total premiums it paid for such options are 5% or less of its
total assets.

Parties to an index futures contract must make initial margin deposits to
secure performance of the contract, which currently range from 1 1/2% to 5%
of the contract amount. Initial margin requirements are determined by the
respective exchanges on which the futures contracts are traded. There also
are requirements to make variation margin deposits as the value of the
futures contract fluctuates.

At the time the Fund purchases a futures contract, an amount of cash, U.S.
government securities, or other highly liquid debt securities equal to the
market value of the futures contract will be deposited in a segregated
account with the Fund's custodian. When writing a futures contract, the Fund
will maintain with its custodian liquid assets that, when added to the
amounts deposited with a futures commission merchant or broker as margin, are
equal to the market value of the instruments underlying the contract.
Alternatively, the Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an index futures contract, a
portfolio with a volatility substantially similar to that of the index on
which the futures contract is based), or holding a call option permitting the
Fund to purchase the same futures contract at a price no higher than the
price of the contract written by the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).

The Fund may write call options and put options only if they are "covered." A
call option on an index is covered if the Fund maintains with its custodian
cash or cash equivalents equal to the contract value. A call option is also
covered if the Fund holds a call on the same index as the call written where
the exercise price of the call held is (i) equal to or less than the exercise
price of the call written, or (ii) greater than the exercise price of the
call written, provided the difference is maintained by the Fund in cash or
cash equivalents in a segregated account with its custodian. A put option on
an index is covered if the Fund maintains cash or cash equivalents equal to
the exercise price in a segregated account with its custodian. A put option
is also covered if the Fund holds a put on the same index as the put written
where the exercise price of the put held is (i) equal to or greater than the
exercise price of the put written, or (ii) less than the exercise price of
the put written, provided the difference is maintained by the Fund in cash or
cash equivalents in a segregated account with its custodian.

If an option written by the Fund expires, the Fund will realize a capital
gain equal to the premium received at the time the option was written. If an
option purchased by the Fund expires unexercised, the Fund will realize a
capital loss equal to the premium paid.

Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, index, exercise price and expiration). There can be no assurance,
however, that a closing purchase or sale transaction can be effected when the
Fund desires.

There are several risks associated with transactions in options on securities
indices. For example, there are significant differences between the
securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use options involves
the exercise of skill and judgment, and even a well-conceived transaction may
be unsuccessful to some degree because of market behavior or unexpected
events. There can be no assurance that a liquid market will exist when the
Fund seeks to close out an option position. If the Fund were unable to close
out an option that it has purchased on a securities index, it would have to
exercise the option in order to realize any profit or the option might expire
worthless. If trading were suspended in an option purchased by the Fund, the
Fund will not be able to close out the option. If restrictions on exercise
are imposed, the Fund may be unable to exercise an option it has purchased.
Except to the extent that a call option on an index written by the Fund is
covered by an option on the same index purchased by the Fund, movements in
the index may result in a loss to the Fund, however, such losses may be
mitigated by changes in the value of the Fund's securities during the period
the option was outstanding.

EQUITY SECURITIES The purchaser of an equity security typically receives an
ownership interest in the company as well as certain voting rights. The owner
of an equity security may participate in a company's success through the
receipt of dividends, which are distributions of earnings by the company to
its owners. Equity security owners may also participate in a company's
success or lack of success through increases or decreases in the value of the
company's shares as traded in the public trading market for such shares.
Equity securities generally take the form of common stock or preferred stock.
Preferred stockholders typically receive greater dividends but may receive
less appreciation than common stockholders and may have greater voting rights
as well. Equity securities may also include convertible securities, warrants
or rights. Convertible securities typically are debt securities or preferred
stocks that are convertible into common stock after certain time periods or
under certain circumstances. Warrants or rights give the holder the right to
purchase a common stock at a given time for a specified price.

FOREIGN SECURITIES The Fund has an unlimited right to purchase securities in
any foreign country, developed or developing, if they are listed on a stock
exchange, as well as a limited right to buy such securities if they are
unlisted. Investors should consider carefully the substantial risks involved
in securities of companies and governments of foreign nations, which are in
addition to the usual risks inherent in domestic investments.

There may be less publicly available information about foreign companies
comparable to the reports and ratings published about companies in the U.S.
Foreign companies are not generally subject to uniform accounting or
financial reporting standards, and auditing practices and requirements may
not be comparable to those applicable to U.S. companies. Foreign markets have
substantially less volume than the New York Stock Exchange and securities of
some foreign companies are less liquid and more volatile than securities of
comparable U.S. companies. Investments in unlisted foreign securities raise
liquidity concerns, and the Board of Directors of the Fund (or the manager
under the supervision of the Board) will monitor, on a continuing basis, the
status of the Fund's positions (and any anticipated positions) in these
securities in light of the Fund's restriction against investments in illiquid
securities exceeding 10% of its net assets. Commission rates in foreign
countries, which are generally fixed rather than subject to negotiation as in
the U.S., are likely to be higher. In many foreign countries there is less
government supervision and regulation of stock exchanges, brokers, and listed
companies than in the U.S.

EMERGING MARKETS. Investments in companies domiciled in emerging countries
may be subject to potentially higher risks than investments in developed
countries. These risks include (i) less social, political and economic
stability; (ii) the small current size of the markets for such securities and
the currently low or nonexistent volume of trading, which result in a lack of
liquidity and in greater price volatility; (iii) certain national policies
that may restrict the Fund's investment opportunities, including restrictions
on investment in issuers or industries deemed sensitive to national
interests; (iv) foreign taxation; (v) the absence of developed legal
structures governing private or foreign investment or allowing for judicial
redress for injury to private property; (vi) the absence, until recently in
many developing countries, of a capital market structure or market-oriented
economy; and (vii) the possibility that recent favorable economic
developments in some developing countries may be slowed or reversed by
unanticipated political or social events in such countries.

In addition, many countries in which the Fund may invest have experienced
substantial, and in some periods extremely high, rates of inflation for many
years. Inflation and rapid fluctuations in inflation rates have had and may
continue to have negative effects on the economies and securities markets of
certain countries. Moreover, the economies of some developing countries may
differ from the U.S. economy in such respects as growth of gross domestic
product, rate of inflation, currency depreciation, capital reinvestment,
resource self-sufficiency and balance of payments position.

Investments in emerging countries may involve risks of nationalization,
expropriation and confiscatory taxation. In the event of expropriation, the
Fund could lose a substantial portion of any investments it has made in the
affected countries. Further, no accounting standards exist in certain
developing countries. Even though the currencies of some developing
countries, such as certain Eastern European countries, may be convertible
into U.S. dollars, the conversion rates may be artificial to the actual
market values and may be adverse to the Fund's shareholders.

Certain emerging countries require governmental approval prior to investments
by foreign persons, or limit the amount of investment by foreign persons in a
particular company, or limit the investment of foreign persons to only a
specific class of securities of a company that may have less advantageous
terms than securities of the company available for purchase by nationals.
Foreign exchange restrictions may limit the ability of foreign investors to
repatriate their profits. Further, accounting standards that exist in
developing countries may differ from U.S. standards.

Governments in certain emerging countries may require that a governmental or
quasi-governmental authority act as a custodian of the Fund's assets invested
in such country. To the extent such governmental or quasi-governmental
authorities do not satisfy the requirements of the 1940 Act to act as foreign
custodians of the Fund's cash and securities, the Fund's investment in such
countries may be limited or may be required to be effected through
intermediaries. The risk of loss through governmental confiscation may be
increased in such countries.

RUSSIAN SECURITIES. Investing in Russian companies involves a high degree of
risk and special considerations not typically associated with investing in
the U.S. securities markets, and should be considered highly speculative.
Such risks include, together with Russia's continuing political and economic
instability and the slow-paced development of its market economy, the
following: (i) delays in settling portfolio transactions and risk of loss
arising out of Russia's system of share registration and custody; (ii) the
risk that it may be impossible or more difficult than in other countries to
obtain and/or enforce a judgment; (iii) pervasiveness of corruption, insider
trading, and crime in the Russian economic system; (iv) currency exchange
rate volatility and the lack of available currency hedging instruments; (v)
higher rates of inflation (including the risk of social unrest associated
with periods of hyper-inflation); (vi) controls on foreign investment and
local practices disfavoring foreign investors and limitations on repatriation
of invested capital, profits and dividends, and on the Fund's ability to
exchange local currencies for U.S. dollars; (vii) the risk that the
government of Russia or other executive or legislative bodies may decide not
to continue to support the economic reform programs implemented since the
dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, a return to the centrally planned
economy that existed before the dissolution of the Soviet Union, or the
nationalization of privatized enterprises; (viii) the risks of investing in
securities with substantially less liquidity and in issuers having
significantly smaller market capitalizations, when compared to securities and
issuers in more developed markets; (ix) the difficulties associated in
obtaining accurate market valuations of many Russian securities, based partly
on the limited amount of publicly available information; (x) the financial
condition of Russian companies, including large amounts of inter-company debt
that may create a payments crisis on a national scale; (xi) dependency on
exports and the corresponding importance of international trade; (xii) the
risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation or, in the alternative,
the risk that a reformed tax system may result in the inconsistent and
unpredictable enforcement of the new tax laws; (xiii) possible difficulty in
identifying a purchaser of securities held by the Fund due to the
underdeveloped nature of the securities markets; (xiv) the possibility that
pending legislation could restrict the levels of foreign investment in
certain industries, thereby limiting the number of investment opportunities
in Russia; (xv) the risk that pending legislation would confer to Russian
courts the exclusive jurisdiction to resolve disputes between foreign
investors and the Russian government, instead of bringing such disputes
before an internationally-accepted third-country arbitrator; and (xvi) the
difficulty in obtaining information about the financial condition of Russian
issuers, in light of the different disclosure and accounting standards
applicable to Russian companies.

There is little long-term historical data on Russian securities markets
because they are relatively new and a substantial proportion of securities
transactions in Russia are privately negotiated outside of stock exchanges.
Because of the recent formation of the securities markets as well as the
underdeveloped state of the banking and telecommunications systems,
settlement, clearing and registration of securities transactions are subject
to significant risks. Ownership of shares (except where shares are held
through depositories that meet the requirements of the 1940 Act) is defined
according to entries in the company's share register and normally evidenced
by extracts from the register or by formal share certificates. However, there
is no central registration system for shareholders and these services are
carried out by the companies themselves or by registrars located throughout
Russia. These registrars are not necessarily subject to effective state
supervision nor are they licensed with any governmental entity and it is
possible for the Fund to lose its registration through fraud, negligence or
even mere oversight. While the Fund will endeavor to ensure that its
interests continue to be appropriately recorded either itself or through a
custodian or other agent inspecting the share register and by obtaining
extracts of share registers through regular confirmations, these extracts
have no legal enforceability and it is possible that subsequent illegal
amendment or other fraudulent act may deprive the Fund of its ownership
rights or improperly dilute its interests. In addition, while applicable
Russian regulations impose liability on registrars for losses resulting from
their errors, it may be difficult for the Fund to enforce any rights it may
have against the registrar or issuer of the securities in the event of loss
of share registration. Furthermore, although a Russian public enterprise with
more than 500 shareholders is required by law to contract out the maintenance
of its shareholder register to an independent entity that meets certain
criteria, in practice this regulation has not always been strictly enforced.
Because of this lack of independence, management of a company may be able to
exert considerable influence over who can purchase and sell the company's
shares by illegally instructing the registrar to refuse to record
transactions in the share register. In addition, so-called
"financial-industrial groups" have emerged in recent years that seek to deter
outside investors from interfering in the management of companies they
control. These practices may prevent the Fund from investing in the
securities of certain Russian companies deemed suitable by the manager.
Further, this also could cause a delay in the sale of Russian company
securities by the Fund if a potential purchaser is deemed unsuitable, which
may expose the Fund to potential loss on the investment.

DEPOSITARY RECEIPTS. Depositary receipts are certificates that give their
holders the right to receive securities (i) of a foreign issuer deposited in
a U.S. bank or trust company (American Depositary Receipts, "ADRs"); or (ii)
of a foreign or U.S. issuer deposited in a foreign bank or trust company
(Global Depositary Receipts, "GDRs" or European Depositary Receipts, "EDRs").

EURO. On January 1, 1999, the European Economic and Monetary Union (EMU)
introduced a new single currency called the euro. By July 1, 2002, the euro,
which will be implemented in stages, will have replaced the national
currencies of the following member countries: Austria, Belgium, Finland,
France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and
Spain.

Currently, the exchange rate of the currencies of each of these countries is
fixed to the euro. The euro trades on currency exchanges and is available
for non-cash transactions. The participating countries currently issue
sovereign debt exclusively in euro. By July 1, 2002, euro-denominated bills
and coins will replace the bills and coins of the above countries.

The new European Central Bank has control over each country's monetary
policies. Therefore, the participating countries no longer control their own
monetary policies by directing independent interest rates for their
currencies. The national governments of the participating countries, however,
have retained the authority to set tax and spending policies and public debt
levels.

The change to the euro as a single currency is new and untested. It is not
possible to predict the impact of the euro on currency values or on the
business or financial condition of European countries and issuers, and
issuers in other regions, whose securities the Fund may hold, or the impact,
if any, on Fund performance. In the first two years of the euro's existence,
the exchange rates of the euro versus many of the world's major currencies
steadily declined. In this environment, U.S. and other foreign investors
experienced erosion of their investment returns on their euro-denominated
securities. The transition and the elimination of currency risk among EMU
countries may change the economic environment and behavior of investors,
particularly in European markets, but the impact of those changes cannot be
assessed at this time.

ILLIQUID SECURITIES Generally, an illiquid security is any security that
cannot be disposed of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued it.

The Fund does not consider securities that it acquires outside of the U.S.
and that are publicly traded in the U.S. or on a foreign securities market to
be illiquid assets if: (a) the Fund reasonably believes it can readily
dispose of the securities for cash in the U.S. or foreign market, or (b)
current market quotations are readily available. The Fund will not acquire
the securities of foreign issuers outside of the U.S. if, at the time of
acquisition, the Fund has reason to believe that it could not resell the
securities in a public trading market. The risk to the Fund in holding
illiquid securities is that they may be more difficult to sell if the Fund
wants to dispose of the security in response to adverse developments or in
order to raise money for redemptions, or other investment opportunities.
Illiquid trading conditions may also make it more difficult for the Fund to
realize a security's fair value.

LOANS OF PORTFOLIO SECURITIES To generate additional income, the Fund may
lend certain of its portfolio securities to qualified banks and
broker-dealers. These loans may not exceed 33 1/3% of the value of the Fund's
total assets, measured at the time of the most recent loan. For each loan,
the borrower must maintain with the Fund's custodian collateral (consisting
of any combination of cash, securities issued by the U.S. government and its
agencies and instrumentalities, or irrevocable letters of credit) with a
value at least equal to 102% (for loaned securities issued in the U.S.) or
105% (for loaned securities issued outside the U.S.) of the current market
value of the loaned securities. The Fund retains all or a portion of the
interest received on investment of the cash collateral or receives a fee from
the borrower. The Fund also continues to receive any distributions paid on
the loaned securities. The Fund may terminate a loan at any time and obtain
the return of the securities loaned within the normal settlement period for
the security involved.

Where voting rights with respect to the loaned securities pass with the
lending of the securities, the manager intends to call the loaned securities
to vote proxies, or to use other practicable and legally enforceable means to
obtain voting rights, when the manager has knowledge that, in its opinion, a
material event affecting the loaned securities will occur or the manager
otherwise believes it necessary to vote. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in collateral in
the event of default or insolvency of the borrower. The Fund will loan its
securities only to parties who meet creditworthiness standards approved by
the Fund's Board of Directors, i.e., banks or broker-dealers that the manager
has determined present no serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the loan.

REPURCHASE AGREEMENTS The Fund generally will have a portion of its assets
in cash or cash equivalents for a variety of reasons, including waiting for a
suitable investment opportunity or taking a defensive position. To earn
income on this portion of its assets, the Fund may enter into repurchase
agreements. Under a repurchase agreement, the Fund agrees to buy securities
guaranteed as to payment of principal and interest by the U.S. government or
its agencies from a qualified bank or broker-dealer and then to sell the
securities back to the bank or broker-dealer after a short period of time
(generally, less than seven days) at a higher price. The bank or
broker-dealer must transfer to the Fund's custodian securities with an
initial market value of at least 102% of the dollar amount invested by the
Fund in each repurchase agreement. The manager will monitor the value of such
securities daily to determine that the value equals or exceeds the repurchase
price.

Repurchase agreements may involve risks in the event of default or insolvency
of the bank or broker-dealer, including possible delays or restrictions upon
the Fund's ability to sell the underlying securities. The Fund will enter
into repurchase agreements only with parties who meet certain
creditworthiness standards, i.e., banks or broker-dealers that the manager
has determined present no serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the repurchase transaction.

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 its assets in cash, cash equivalents or other high quality
short-term investments. Unfavorable market or economic conditions may
include excessive volatility or a prolonged general decline in the securities
markets, the securities in which the Fund normally invests, or the economies
of the countries where the Fund invests.

Temporary defensive investments generally may include: (i) U.S. government
securities; (ii) bank time deposits denominated in the currency of any major
nation; (iii) commercial paper rated A-1 by S&P or Prime-1 by Moody's or, if
unrated, issued by a company which, at the date of investment, had an
outstanding debt issue rated AAA or AA by S&P or Aaa or Aa by Moody's; and
(iv) repurchase agreements with banks and broker-dealers.
The manager also may invest in these types of securities or hold cash while
looking for suitable investment opportunities.

OFFICERS AND DIRECTORS
-------------------------------------------------------------------------------

The Fund has a board of directors. The board is responsible for the overall
management of the Fund, including general supervision and review of the
Fund's investment activities. The board, in turn, elects the officers of the
Fund who are responsible for administering the Fund's day-to-day operations.
The board also monitors the Fund to ensure no material conflicts exist among
share classes. While none is expected, the board will act appropriately to
resolve any material conflict that may arise.

The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Fund, and principal occupations during
the past five years are shown below.

Harris J. Ashton (68)
191 Clapboard Ridge Road, Greenwich, CT 06830
DIRECTOR

Director, RBC Holdings, Inc. (bank holding company) and Bar-S Foods (meat
packing company); director or trustee, as the case may be, of 48 of the
investment companies in Franklin Templeton Investments; and FORMERLY,
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers) (until 1998).

*Nicholas F. Brady (70)
16 North Washington Street, Easton, MD 21601
DIRECTOR

Chairman, Templeton Emerging Markets Investment Trust PLC, Templeton Latin
America Investment Trust PLC, Darby Overseas Investments, Ltd. and Darby
Emerging Markets Investments LDC (investment firms) (1994-present); Director,
Templeton Global Strategy Funds, Amerada Hess Corporation (exploration and
refining of oil and gas), C2, Inc. (operating and investment business), and
H.J. Heinz Company (processed foods and allied products); director or
trustee, as the case may be, of 18 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Secretary of the United States
Department of the Treasury (1988-1993), Chairman of the Board, Dillon, Read &
Co., Inc. (investment banking) (until 1988) and U.S. Senator, New Jersey
(April 1982-December 1982).

Frank J. Crothers (56)
P.O. Box N-3238, Lyford Cay, Nassau, Bahamas
DIRECTOR

Chairman, Caribbean Electric Utility Services Corporation and Atlantic
Equipment & Power Ltd.; Vice Chairman, Caribbean Utilities Co., Ltd.;
President, Provo Power Corporation; director of various other business and
non-profit organizations; and director or trustee, as the case may be, of 13
of the investment companies in Franklin Templeton Investments.

S. Joseph Fortunato (68)
Park Avenue at Morris County, P.O. Box 1945
Morristown, NJ 07962-1945
DIRECTOR

Member of the law firm of Pitney, Hardin, Kipp & Szuch; and director or
trustee, as the case may be, of 50 of the investment companies in Franklin
Templeton Investments.

Andrew H. Hines, Jr. (77)
One Progress Plaza, Suite 290, St. Petersburg, FL 33701
DIRECTOR

Consultant, Triangle Consulting Group; Executive-in-Residence, Eckerd College
(1991-present); director or trustee, as the case may be, of 19 of the
investment companies in Franklin Templeton Investments; and FORMERLY,
Chairman and Director, Precise Power Corporation (1990-1997), Director,
Checkers Drive-In Restaurant, Inc. (1994-1997), and Chairman of the Board and
Chief Executive Officer, Florida Progress Corporation (holding company in the
energy area) (1982-1990) and director of various of its subsidiaries.

Edith E. Holiday (48)
3239 38th Street, N.W., Washington, DC 20016
DIRECTOR

Director, Amerada Hess Corporation (exploration and refining of oil and gas)
(1993-present), Hercules Incorporated (chemicals, fibers and resins)
(1993-present), Beverly Enterprises, Inc. (health care) (1995-present), H.J.
Heinz Company (processed foods and allied products) (1994-present) and RTI
International Metals, Inc. (manufacture and distribution of titanium)
(1999-present); director or trustee, as the case may be, of 27 of the
investment companies in Franklin Templeton Investments; and FORMERLY,
Assistant to the President of the United States and Secretary of the Cabinet
(1990-1993), General Counsel to the United States Treasury Department
(1989-1990), and Counselor to the Secretary and Assistant Secretary for Public
Affairs and Public Liaison-United States Treasury Department (1988-1989).

*Charles B. Johnson (67)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND DIRECTOR

Chairman of the Board, Chief Executive Officer, Member - Office of the
Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin
Templeton Distributors, Inc.; Director, Franklin/Templeton Investor Services,
Inc. and Franklin Templeton Services, Inc.; officer and/or director or
trustee, as the case may be, of most of the other subsidiaries of Franklin
Resources, Inc. and of 49 of the investment companies in Franklin Templeton
Investments.

Betty P. Krahmer (71)
2201 Kentmere Parkway, Wilmington, DE 19806
DIRECTOR

Director or trustee of various civic associations; director or trustee, as
the case may be, of 18 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Economic Analyst, U.S. government.

Gordon S. Macklin (72)
8212 Burning Tree Road, Bethesda, MD 20817
DIRECTOR

Director, Martek Biosciences Corporation, WorldCom, Inc. (communications
services), MedImmune, Inc. (biotechnology), Overstock.com (internet
services), White Mountains Insurance Group, Ltd. (holding company) and
Spacehab, Inc. (aerospace services); director or trustee, as the case may be,
of 48 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Chairman, White River Corporation (financial services) (until 1998)
and Hambrecht & Quist Group (investment banking) (until 1992), and President,
National Association of Securities Dealers, Inc. (until 1987).

Fred R. Millsaps (71)
2665 NE 37th Drive, Fort Lauderdale, FL 33308
DIRECTOR

Manager of personal investments (1978-present); director of various business
and nonprofit organizations; director or trustee, as the case may be, of 19
of the investment companies in Franklin Templeton Investments; and FORMERLY,
Chairman and Chief Executive Officer, Landmark Banking Corporation
(1969-1978), Financial Vice President, Florida Power and Light (1965-1969),
and Vice President, Federal Reserve Bank of Atlanta (1958-1965).

Constantine Dean Tseretopoulos (46)
P.O. Box N-7776, Lyford Cay, Nassau Bahamas
DIRECTOR

Physician, Lyford Cay Hospital (1987-present); director of various nonprofit
organizations; director or trustee, as the case may be, of 13 of the
investment companies in Franklin Templeton Investments; and FORMERLY,
Cardiology Fellow, University of Maryland (1985-1987) and Internal Medicine
Resident, Greater Baltimore Medical Center (1982-1985).

Harmon E. Burns (55)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

Vice Chairman, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Vice President and Director, Franklin Templeton
Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.;
Director, Franklin Investment Advisory Services, Inc., Franklin/Templeton
Investor Services, Inc. and Franklin Templeton Services, Inc.; and officer
and/or director or trustee, as the case may be, of most of the other
subsidiaries of Franklin Resources, Inc. and of 52 of the investment
companies in Franklin Templeton Investments.

Jeffrey A. Everett (36)
P.O. Box N-7759, Lyford Cay, Nassau, Bahamas
PRESIDENT

Executive Vice President, Portfolio Management, Templeton Global Advisors
Limited; officer of some of the other investment companies in Franklin
Templeton Investments; and FORMERLY, Investment Officer, First Pennsylvania
Investment Research (until 1989).

Martin L. Flanagan (40)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

President, Member - Office of the President, Chief Financial Officer and
Chief Operating Officer, Franklin Resources, Inc.; Executive Vice President
and Director, Franklin/Templeton Investor Services, Inc.; President and Chief
Financial Officer, Franklin Mutual Advisers, LLC; Executive Vice President,
Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive
Vice President, Chief Operating Officer and Director, Templeton Investment
Counsel, Inc.; Executive Vice President, Franklin Advisers, Inc. and Franklin
Investment Advisory Services, Inc.; Chief Financial Officer, Franklin
Advisory Services, LLC; Chairman and Director, Franklin Templeton Services,
Inc.; officer and/or director of some of the other subsidiaries of Franklin
Resources, Inc.; and officer and/or director or trustee, as the case may be,
of 52 of the investment companies in Franklin Templeton Investments.

David P. Goss (53)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

Associate General Counsel, Franklin Templeton Investments; President, Chief
Executive Officer and Director, Franklin Select Realty Trust, Property
Resources, Inc., Property Resources Equity Trust, Franklin Real Estate
Management, Inc. and Franklin Properties, Inc.; officer and director of some
of the other subsidiaries of Franklin Resources, Inc.; officer of 53 of the
investment companies in Franklin Templeton Investments; and FORMERLY,
President, Chief Executive Officer and Director, Franklin Real Estate Income
Fund and Franklin Advantage Real Estate Income Fund (until 1996).

Barbara J. Green (53)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND SECRETARY

Vice President and Deputy General Counsel, Franklin Resources, Inc.; Senior
Vice President, Templeton Worldwide, Inc.; officer of 53 of the investment
companies in Franklin Templeton Investments; and FORMERLY, Deputy Director,
Division of Investment Management, Executive Assistant and Senior Advisor to
the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow,
U.S. Securities and Exchange Commission (1986-1995), Attorney, Rogers & Wells
(until 1986), and Judicial Clerk, U.S. District Court (District of
Massachusetts) (until 1979).

Charles E. Johnson (44)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

President, Member - Office of the President and Director, Franklin Resources,
Inc.; Senior Vice President, Franklin Templeton Distributors, Inc.; President
and Director, Templeton Worldwide, Inc. and Franklin Advisers, Inc.;
Director, Templeton Investment Counsel, Inc.; Chairman of the Board and
President, Franklin Investment Advisory Services, Inc.; officer and/or
director of some of the other subsidiaries of Franklin Resources, Inc.; and
officer and/or director or trustee, as the case may be, of 33 of the
investment companies in Franklin Templeton Investments.

Rupert H. Johnson, Jr. (60)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

Vice Chairman, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Vice President and Director, Franklin Templeton
Distributors, Inc.; Director, Franklin Advisers, Inc., Franklin Investment
Advisory Services, Inc. and Franklin/Templeton Investor Services, Inc.;
Senior Vice President, Franklin Advisory Services, LLC; and officer and/or
director or trustee, as the case may be, of most of the other subsidiaries of
Franklin Resources, Inc. and of 52 of the investment companies in Franklin
Templeton Investments.

John R. Kay (60)
500 East Broward Blvd., Fort Lauderdale, FL 33394-3091
VICE PRESIDENT

Vice President, Templeton Worldwide, Inc.; Assistant Vice President, Franklin
Templeton Distributors, Inc.; Senior Vice President, Franklin Templeton
Services, Inc.; officer of 23 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Vice President and Controller, Keystone
Group, Inc.

Bruce S. Rosenberg (39)
500 East Broward Blvd., Fort Lauderdale, FL 33394-3091
TREASURER

Vice President, Franklin Templeton Services, Inc., and officer of 19 of the
investment companies in Franklin Templeton Investments, and FORMERLY, Senior
Manager-Fund Accounting, Templeton Global Investors, Inc.(1995-1996).

Murray L. Simpson (63)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

Executive Vice President and General Counsel, Franklin Resources, Inc.;
officer and/or director of some of the subsidiaries of Franklin Resources,
Inc.; officer of 53 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Chief Executive Officer and Managing Director,
Templeton Franklin Investment Services (Asia) Limited (until January 2000)
and Director, Templeton Asset Management Ltd. (until 1999).

*This board member is considered an "interested person" under federal
securities laws. Mr. Brady's status as an interested person results from his
business affiliations with Franklin Resources, Inc. and Templeton Global
Advisors Limited. Mr. Brady and Franklin Resources, Inc. are both limited
partners of Darby Overseas Partners, L.P. (Darby Overseas). In addition,
Darby Overseas and Templeton Global Advisors Limited are limited partners of
Darby Emerging Markets Fund, L.P.

Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Charles E. Johnson.

TOTAL FEES TOTAL FEES NUMBER OF BOARDS
RECEIVED RECEIVED FROM IN FRANKLIN
FROM THE FRANKLIN TEMPLETON
NAME FUND1 ($) TEMPLETON INVESTMENTS ON
INVESTMENTS/2 ($) WHICH EACH
Serves/3
-----------------------------------------------------------------------
Harris J. Ashton 16,500 16,500 48
Nicholas F. Brady 16,500 16,500 18
Frank J. Crothers 3,300 9,900 13
S. Joseph Fortunato 16,500 16,500 50
John Wm. Galbraith4 18,558 18,585 0
Andrew H. Hines,Jr. 18,441 18,104 19
Edith E. Holiday 3,300 9,900 28
Betty P. Krahmer 16,500 16,500 18
Gordon S. Macklin 16,500 16,500 48
Fred R. Millsaps 18,107 18,104 19
Constantine Dean
Tseretopoulos 3,300 9,900 13

1. For the fiscal year ended August 31, 2000.
2. For the calendar year ended December 31, 2000.
3. We base the number of boards on the number of registered investment
companies in Franklin Templeton Investments. This number does not include the
total number of series or funds within each investment company for which the
board members are responsible. Franklin Templeton Investments currently
includes 52 registered investment companies, with approximately 156 U.S.
based funds or series.
4. Resigned 12/31/00.

Noninterested board members and Mr. Brady are reimbursed for expenses
incurred in connection with attending board meetings, paid pro rata by each
fund in Franklin Templeton Investments for which they serve as director or
trustee. No officer or board member received any other compensation,
including pension or retirement benefits, directly or indirectly from the
Fund or other funds in Franklin Templeton Investments. Certain officers or
board members who are shareholders of Franklin Resources, Inc. may be deemed
to receive indirect remuneration by virtue of their participation, if any, in
the fees paid to its subsidiaries.

Board members historically have followed a policy of having substantial
investments in one or more of the funds in Franklin Templeton Investments, as
is consistent with their individual financial goals. In February 1998, this
policy was formalized through adoption of a requirement that each board
member invest one-third of fees received for serving as a director or trustee
of a Templeton fund in shares of one or more Templeton funds and one-third of
fees received for serving as a director or trustee of a Franklin fund in
shares of one or more Franklin funds until the value of such investments
equals or exceeds five times the annual fees paid such board member.
Investments in the name of family members or entities controlled by a board
member constitute fund holdings of such board member for purposes of this
policy, and a three year phase-in period applies to such investment
requirements for newly elected board members. In implementing such policy, a
board member's fund holdings existing on February 27, 1998, are valued as of
such date with subsequent investments valued at cost.

MANAGEMENT AND OTHER SERVICES
-------------------------------------------------------------------------------

MANAGER AND SERVICES PROVIDED The Fund's manager is Templeton Global
Advisors Limited. The manager is a wholly owned subsidiary of Franklin
Resources, Inc. (Resources), a publicly owned company engaged in the
financial services industry through its subsidiaries. Charles B. Johnson and
Rupert H. Johnson, Jr. are the principal shareholders of Resources.

The manager provides investment research and portfolio management services,
and selects the securities for the Fund to buy, hold or sell. The manager
also selects the brokers who execute the Fund's portfolio transactions. The
manager provides periodic reports to the board, which reviews and supervises
the manager's investment activities. To protect the Fund, the manager and its
officers, directors and employees are covered by fidelity insurance. The
manager renders its services to the Fund from outside the U.S.

The Templeton organization has been investing globally since 1940. The
manager and its affiliates have offices in Argentina, Australia, Bahamas,
Belgium, Bermuda, Brazil, Canada, China, Cyprus, France, Germany, Hong Kong,
Hungary, India, Ireland, Italy, Japan, Korea, Luxembourg, Mauritius,
Netherlands, Poland, Russia, Singapore, South Africa, Spain, Sweden,
Switzerland, Taiwan, Turkey, United Kingdom, United States and Venezuela.

The manager and its affiliates manage numerous other investment companies and
accounts. The manager may give advice and take action with respect to any of
the other funds it manages, or for its own account, that may differ from
action taken by the manager on behalf of the Fund. Similarly, with respect to
the Fund, the manager is not obligated to recommend, buy or sell, or to
refrain from recommending, buying or selling any security that the manager
and access persons, as defined by applicable federal securities laws, may buy
or sell for its or their own account or for the accounts of any other fund.
The manager is not obligated to refrain from investing in securities held by
the Fund or other funds it manages.

The Fund, its manager and principal underwriter have each adopted a code of
ethics, as required by federal securities laws. Under the code of ethics,
employees who are designated as access persons may engage in personal
securities transactions, including transactions involving securities that are
being considered for the Fund or that are currently held by the Fund, subject
to certain general restrictions and procedures. The personal securities
transactions of access persons of the Fund, its manager and principal
underwriter will be governed by the code of ethics. The code of ethics is on
file with, and available from, the U.S. Securities and Exchange Commission
(SEC).

MANAGEMENT FEES The Fund pays the manager a fee equal to an annual rate of:

o 0.75% of the value of average daily net assets up to and including $200
million;
o 0.675% of the value of average daily net assets over $200 million and up
to and not including $1.3 billion; and
o 0.60% of the value of average net assets over $1.3 billion.

The fee is computed monthly, based on the Fund's average daily net assets
during the month preceding each payment, according to the terms of the
management agreement. Each class of the Fund's shares pays its proportionate
share of the fee.

For the last three fiscal years ended August 31, the Fund paid the following
management fees:

MANAGEMENT FEES PAID ($)
-------------------------------------------
2000 88,361,829
1999 82,894,582
1998 86,332,815

ADMINISTRATOR AND SERVICES PROVIDED Franklin Templeton Services, Inc. (FT
Services) has an agreement with the Fund to provide certain administrative
services and facilities for the Fund. FT Services is wholly owned by
Resources and is an affiliate of the Fund's manager and principal
underwriter.

The administrative services FT Services provides include preparing and
maintaining books, records, and tax and financial reports, and monitoring
compliance with regulatory requirements.

ADMINISTRATION FEES The Fund pays FT Services a monthly fee equal to an
annual rate of:

o 0.15% of the Fund's average daily net assets up to $200 million;
o 0.135% of average daily net assets over $200 million up to $700 million;
o 0.10% of average daily net assets over $700 million up to $1.2 billion;
and
o 0.075% of average daily net assets over $1.2 billion.

During the last three fiscal years ended August 31, the Fund paid the
following administration fees:

ADMINISTRATION FEES PAID ($)
------------------------------------------
2000 11,479,604
1999 10,796,198
1998 11,225,977

SHAREHOLDER SERVICING AND TRANSFER AGENT Franklin/Templeton Investor
Services, Inc. (Investor Services) is the Fund's shareholder servicing agent
and acts as the Fund's transfer agent and dividend-paying agent. Investor
Services is located at 100 Fountain Parkway, St. Petersburg, FL 33716-1205.
Please send all correspondence to Investor Services to P.O. Box 33030, St.
Petersburg, FL 33733-8030.

For its services, Investor Services receives a fixed fee per account. The
Fund also will reimburse Investor Services for certain out-of-pocket
expenses, which may include payments by Investor Services to entities,
including affiliated entities, that provide sub-shareholder services,
recordkeeping and/or transfer agency services to beneficial owners of the
Fund. The amount of reimbursements for these services per benefit plan
participant Fund account per year will not exceed the per account fee payable
by the Fund to Investor Services in connection with maintaining shareholder
accounts.

CUSTODIAN The Chase Manhattan Bank, at its principal office at MetroTech
Center, Brooklyn, NY 11245, and at the offices of its branches and agencies
throughout the world, acts as custodian of the Fund's assets. As foreign
custody manager, the bank selects and monitors foreign sub-custodian banks,
selects and evaluates non-compulsory foreign depositories, and furnishes
information relevant to the selection of compulsory depositories.

AUDITOR PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, NY
10036, is the Fund's independent auditor. The auditor gives an opinion on the
financial statements included in the Fund's Annual Report to Shareholders and
reviews the Fund's registration statement filed with the SEC.

PORTFOLIO TRANSACTIONS
-------------------------------------------------------------------------------

The manager selects brokers and dealers to execute the Fund's portfolio
transactions in accordance with criteria set forth in the management
agreement and any directions that the board may give.

When placing a portfolio transaction, the manager seeks to obtain prompt
execution of orders at the most favorable net price. For portfolio
transactions on a securities exchange, the amount of commission paid is
negotiated between the manager and the broker executing the transaction. The
determination and evaluation of the reasonableness of the brokerage
commissions paid are based to a large degree on the professional opinions of
the persons responsible for placement and review of the transactions. These
opinions are based on the experience of these individuals in the securities
industry and information available to them about the level of commissions
being paid by other institutional investors of comparable size. The manager
will ordinarily place orders to buy and sell over-the-counter securities on a
principal rather than agency basis with a principal market maker unless, in
the opinion of the manager, a better price and execution can otherwise be
obtained. Purchases of portfolio securities from underwriters will include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers will include a spread between the bid and ask price.

The manager may pay certain brokers commissions that are higher than those
another broker may charge, if the manager determines in good faith that the
amount paid is reasonable in relation to the value of the brokerage and
research services it receives. This may be viewed in terms of either the
particular transaction or the manager's overall responsibilities to client
accounts over which it exercises investment discretion. The services that
brokers may provide to the manager include, among others, supplying
information about particular companies, markets, countries, or local,
regional, national or transnational economies, statistical data, quotations
and other securities pricing information, and other information that provides
lawful and appropriate assistance to the manager in carrying out its
investment advisory responsibilities. These services may not always directly
benefit the Fund. They must, however, be of value to the manager in carrying
out its overall responsibilities to its clients.

It is not possible to place a dollar value on the special executions or on
the research services the manager receives from dealers effecting
transactions in portfolio securities. The allocation of transactions to
obtain additional research services allows the manager to supplement its own
research and analysis activities and to receive the views and information of
individuals and research staffs of other securities firms. As long as it is
lawful and appropriate to do so, the manager and its affiliates may use this
research and data in their investment advisory capacities with other clients.
If the Fund's officers are satisfied that the best execution is obtained, the
sale of Fund shares, as well as shares of other funds in Franklin Templeton
Investments, also may be considered a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions.

Because Franklin Templeton Distributors, Inc. (Distributors) is a member of
the National Association of Securities Dealers, Inc., it may sometimes
receive certain fees when the Fund tenders portfolio securities pursuant to a
tender-offer solicitation. To recapture brokerage for the benefit of the
Fund, any portfolio securities tendered by the Fund will be tendered through
Distributors if it is legally permissible to do so. In turn, the next
management fee payable to the manager will be reduced by the amount of any
fees received by Distributors in cash, less any costs and expenses incurred
in connection with the tender.

If purchases or sales of securities of the Fund and one or more other
investment companies or clients supervised by the manager are considered at
or about the same time, transactions in these securities will be allocated
among the several investment companies and clients in a manner deemed
equitable to all by the manager, taking into account the respective sizes of
the funds and the amount of securities to be purchased or sold. In some cases
this procedure could have a detrimental effect on the price or volume of the
security so far as the Fund is concerned. In other cases it is possible that
the ability to participate in volume transactions may improve execution and
reduce transaction costs to the Fund.

During the last three fiscal years ended August 31, the Fund paid the
following brokerage commissions:

BROKERAGE COMMISSIONS ($)
------------------------------------------
2000 27,045,508
1999 16,615,322
1998 26,366,655

For the fiscal year ended August 31, 2000, the Fund paid brokerage
commissions of $22,686,122 from aggregate portfolio transactions of
$11,541,615,556 to brokers who provided research services.

As of August 31, 2000, the Fund owned securities issued by HSBC Holding PLC,
Merrill Lynch & Co., and Deutsche Bank, valued in the aggregate of
$295,281,000, $200,144,000 and $133,425,000 respectively. Except as noted,
the Fund did not own any securities issued by its regular broker-dealer as of
the end of the fiscal year.

DISTRIBUTIONS AND TAXES
-------------------------------------------------------------------------------

The Fund calculates income dividends and capital gain distributions the same
way for each class. The amount of any income dividends per share will differ,
however, generally due to the difference in the distribution and service
(Rule 12b-1) fees applicable to each class.

DISTRIBUTIONS OF NET INVESTMENT INCOME The Fund receives income generally in
the form of dividends and interest on its investments. This income, less
expenses incurred in the operation of the Fund, constitutes the Fund's net
investment income from which dividends may be paid to you. If you are a
taxable investor, any income dividends the Fund pays are taxable to you as
ordinary income.

DISTRIBUTIONS OF CAPITAL GAINS The Fund may realize capital gains and losses
on the sale or other disposition of its portfolio securities. Distributions
from net short-term capital gains are taxable to you as ordinary income.
Distributions from net long-term capital gains are taxable to you as
long-term capital gains, regardless of how long you have owned your shares in
the Fund. Any net capital gains realized by the Fund generally are
distributed once each year, and may be distributed more frequently, if
necessary, to reduce or eliminate excise or income taxes on the Fund.

DISTRIBUTIONS OF FIVE YEAR GAINS Beginning in the year 2001 for
shareholders in the 15% federal income tax bracket (or in the year 2006 for
shareholders in the 28% or higher bracket), capital gain distributions from
the Fund's sale of securities held for more than five years are subject to a
maximum rate of tax of 8% (or 18% for shareholders in the 28% or higher
bracket).

PASS-THROUGH OF FOREIGN TAX CREDITS The Fund may be subject to foreign
withholding taxes on income from certain foreign securities. This, in turn,
could reduce the Fund's income dividends paid to you. If more than 50% of the
Fund's total assets at the end of a fiscal year is invested in foreign
securities, the Fund may elect to pass through to you your pro rata share of
foreign taxes paid by the Fund. If this election is made, the Fund may report
more taxable income to you than it actually distributes. You will then be
entitled either to deduct your share of these taxes in computing your taxable
income, or to claim a foreign tax credit for these taxes against your U.S.
federal income tax (subject to limitations for certain shareholders). The
Fund will provide you with the information necessary to complete your
personal income tax return if it makes this election.

EFFECT OF FOREIGN DEBT INVESTMENTS AND HEDGING ON DISTRIBUTIONS Most foreign
exchange gains realized on the sale of debt securities are treated as
ordinary income by the Fund. Similarly, foreign exchange losses realized on
the sale of debt securities generally are treated as ordinary losses. These
gains when distributed are taxable to you as ordinary income, and any losses
reduce the Fund's ordinary income otherwise available for distribution to
you. This treatment could increase or decrease the Fund's ordinary income
distributions to you, and may cause some or all of the Fund's previously
distributed income to be classified as a return of capital. A return of
capital generally is not taxable to you, but reduces the tax basis of your
shares in the Fund. Any return of capital in excess of your basis, however,
is taxable as a capital gain.

INFORMATION ON THE AMOUNT AND TAX CHARACTER OF DISTRIBUTIONS The Fund will
inform you of the amount of your income dividends and capital gain
distributions at the time they are paid, and will advise you of their tax
status for federal income tax purposes shortly after the close of each
calendar year. If you have not owned your Fund shares for a full year, the
Fund may designate and distribute to you, as ordinary income or capital
gains, a percentage of income that may not be equal to the actual amount of
each type of income earned during the period of your investment in the Fund.
Distributions declared in December but paid in January are taxable to you as
if paid in December.

ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY The Fund has elected
to be treated as a regulated investment company under Subchapter M of the
Internal Revenue Code (Code). It has qualified as a regulated investment
company for its most recent fiscal year, and intends to continue to qualify
during the current fiscal year. As a regulated investment company, the Fund
generally pays no federal income tax on the income and gains it distributes
to you. The board reserves the right not to maintain the qualification of the
Fund as a regulated investment company if it determines this course of action
to be beneficial to shareholders. In that case, the Fund would be subject to
federal, and possibly state, corporate taxes on its taxable income and gains,
and distributions to you would be taxed as ordinary income dividends to the
extent of the Fund's earnings and profits.

The Fund intends to declare and pay these distributions in December (or to
pay them in January, in which case you must treat them as received in
December), but can give no assurances that its distributions will be
sufficient to eliminate all taxes.

REDEMPTION OF FUND SHARES Redemptions (including redemptions in kind) and
exchanges of Fund shares are taxable transactions for federal and state
income tax purposes. If you redeem your Fund shares, or exchange them for
shares of a different Franklin Templeton fund, the IRS requires you to report
any gain or loss on your redemption or exchange. If you hold your shares as a
capital asset, any gain or loss that you realize is a capital gain or loss
and is long-term or short-term, generally depending on how long you have
owned your shares.

REDEMPTIONS AND FIVE YEAR GAINS Beginning in the year 2001 for shareholders
in the 15% federal income tax bracket (or in the year 2006 for shareholders
in the 28% or higher bracket), gain from the redemption of Fund shares held
for more than five years may be subject to a maximum rate of tax of 8% (or
18% for shareholders in the 28% or higher bracket). If you are in the 28% or
higher tax bracket, you may elect to mark your Fund shares to market on
January 2, 2001. If you make this election, any Fund shares that you
acquired before this date will be eligible for the 18% maximum rate of tax,
beginning in 2006. However, in making the election, you are required to pay
a tax on any appreciation in the value of your Fund shares on January 2,
2001, and to restart your holding period in the shares on this date.

REDEMPTIONS AT A LOSS WITHIN SIX MONTHS OF PURCHASE Any loss incurred on the
redemption or exchange of shares held for six months or less is treated as a
long-term capital loss to the extent of any long-term capital gains
distributed to you by the Fund on those shares.

WASH SALES All or a portion of any loss that you realize on the redemption
of your Fund shares is disallowed to the extent that you buy other shares in
the Fund (through reinvestment of dividends or otherwise) within 30 days
before or after your share redemption. Any loss disallowed under these rules
is added to your tax basis in the new shares.

DEFERRAL OF BASIS If you redeem some or all of your shares in the Fund, and
then reinvest the redemption proceeds in the Fund or in another Franklin
Templeton fund within 90 days of buying the original shares, the sales charge
that would otherwise apply to your reinvestment may be reduced or eliminated.
In reporting any gain or loss on your redemption, all or a portion of the
sales charge that you paid for your original shares in the Fund is excluded
from your tax basis in the shares sold and added to your tax basis in the new
shares.

U.S. GOVERNMENT SECURITIES The income earned on certain U.S. government
securities is exempt from state and local personal income taxes if earned
directly by you. States also grant tax-free status to mutual fund dividends
paid to you from interest earned on these securities, subject in some states
to minimum investment or reporting requirements that must be met by a fund.
The income on Fund investments in certain securities, such as repurchase
agreements, commercial paper and federal agency-backed obligations (e.g.,
Government National Mortgage Association (GNMA) or Federal National Mortgage
Association (FNMA) securities), generally does not qualify for tax-free
treatment. The rules on exclusion of this income are different for
corporations.

DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS For corporate shareholders, it
is anticipated that a portion of the dividends paid by the Fund will qualify
for the dividends-received deduction. You may be allowed to deduct these
qualified dividends, thereby reducing the tax that you would otherwise be
required to pay. The dividends-received deduction is available only with
respect to dividends designated by the Fund as qualifying for this treatment.
Qualifying dividends generally are limited to dividends of domestic
corporations. All dividends (including the deducted portion) are included in
your calculation of alternative minimum taxable income.

INVESTMENT IN COMPLEX SECURITIES The Fund may invest in complex securities
that could affect whether gains and losses it recognizes are treated as
ordinary income or capital gains, or could affect the amount and timing of
income distributed to you. For example, if the Fund is allowed to invest in
option or futures contracts, it could be required to mark-to-market these
contracts at its fiscal year end. Under these rules, gains or losses on these
contracts would be treated as 60% long-term and 40% short-term capital gains
or losses.

The Fund may also invest in securities issued or purchased at a discount,
such as zero coupon, step-up or payment-in-kind (PIK) bonds, that may require
it to accrue and distribute income not yet received. In order to generate
sufficient cash to make these distributions, the Fund may be required to sell
securities in its portfolio that it otherwise might have continued to hold.
These rules could affect the amount, timing and tax character of income
distributed to you by the Fund.

PFIC SECURITIES The Fund may invest in securities of foreign entities that
could be deemed for tax purposes to be passive foreign investment companies
(PFICs). The Fund intends to mark-to-market these securities, and recognize
any gains at the end of its fiscal year. Deductions for losses are allowable
only to the extent of any current or previously recognized gains. These gains
(reduced by allowable losses) are treated as ordinary income that the Fund is
required to distribute, even though it has not sold the securities.

ORGANIZATION, VOTING RIGHTS AND PRINCIPAL HOLDERS
-------------------------------------------------------------------------------

The Fund is a diversified open-end management investment company, commonly
called a mutual fund. The Fund was organized as a Maryland corporation on
November 10, 1986, from its predecessor entity, which commenced operations on
November 29, 1954, and is registered with the SEC.

The Fund currently offers four classes of shares, Class A, Class B, Class C
and Advisor Class. The Fund began offering Class B shares on January 1, 1999.
The Fund may offer additional classes of shares in the future. The full title
of each class is:

o Templeton Growth Fund, Inc. - Class A
o Templeton Growth Fund, Inc. - Class B
o Templeton Growth Fund, Inc. - Class C
o Templeton Growth Fund, Inc. - Advisor Class

Shares of each class represent proportionate interests in the Fund's assets.
On matters that affect the Fund as a whole, each class has the same voting
and other rights and preferences as any other class. On matters that affect
only one class, only shareholders of that class may vote. Each class votes
separately on matters affecting only that class, or expressly required to be
voted on separately by state or federal law.

The Fund has noncumulative voting rights. For board member elections, this
gives holders of more than 50% of the shares voting the ability to elect all
of the members of the board. If this happens, holders of the remaining shares
voting will not be able to elect anyone to the board.

The Fund does not intend to hold annual shareholder meetings. The Fund may
hold special meetings, however, for matters requiring shareholder approval. A
meeting may be called by the board to consider the removal of a board member
if requested in writing by shareholders holding at least 10% of the
outstanding shares. In certain circumstances, we are required to help you
communicate with other shareholders about the removal of a board member. A
special meeting also may be called by the board in its discretion.

As of December 1, 2000, the principal shareholders of the Fund, beneficial or
of record, were:

NAME AND ADDRESS SHARE CLASS PERCENTAGE
(%)
-------------------------------------------------------
Mercury & Co. Advisor 5.02
c/o Investors Bank & Trust
Co
PO BOX 9130 FPG90
Boston, MA 02117-9130

Peter Norton TTEE Advisor 22.07
Norton Family Cru Trust
225 Arizona Ave., 2nd Fl. W
Santa Monica, CA 90401-1210

Peter Norton TTEE Advisor 7.64
Norton Family Foundation
Trust
225 Arizona Ave., 2nd Fl. W
Santa Monica, CA 90401-1210

John Templeton Foundation Advisor 5.67
5 Radnor Corporate Center
Ste 100
Radnor, PA 19087

FTB&T TTEE for ValuSelect Advisor 14.04
Franklin Templeton 401K
P.O. Box 2438
Rancho Cordova, CA
95741-2438

FTB&T TTEE for ValuSelect Advisor 6.48
Franklin Resources PSP
P.O. Box 2438
Rancho Cordova, CA
95741-2438

Note: Charles B. Johnson and Rupert H. Johnson, Jr., who are officers and/or
directors of the Fund, serve on the administrative committee of the Franklin
Templeton profit sharing 401(k) Plan, which owns shares of the Fund. In that
capacity, they participate in voting of such shares. Charles B. Johnson and
Rupert H. Johnson, Jr. disclaim beneficial ownership of any share of the Fund
owned by the Franklin Templeton profit sharing 401(k)Plan.

From time to time, the number of Fund shares held in the "street name"
accounts of various securities dealers for the benefit of their clients or in
centralized securities depositories may exceed 5% of the total shares
outstanding.

As of December 1, 2000, the officers and board members, as a group, owned of
record and beneficially 9.32% of the Fund's Advisor Class shares and less
than 1% of the outstanding shares of the Fund's other classes. The board
members may own shares in other funds in Franklin Templeton Investments.

BUYING AND SELLING SHARES
-------------------------------------------------------------------------------

The Fund continuously offers its shares through securities dealers who have
an agreement with Franklin Templeton Distributors, Inc. (Distributors). A
securities dealer includes any financial institution that, either directly or
through affiliates, has an agreement with Distributors to handle customer
orders and accounts with the Fund. This reference is for convenience only and
does not indicate a legal conclusion of capacity. Banks and financial
institutions that sell shares of the Fund may be required by state law to
register as securities dealers.

For investors outside the U.S., the offering of Fund shares may be limited in
many jurisdictions. An investor who wishes to buy shares of the Fund should
determine, or have a broker-dealer determine, the applicable laws and
regulations of the relevant jurisdiction. Investors are responsible for
compliance with tax, currency exchange or other regulations applicable to
redemption and purchase transactions in any jurisdiction to which they may be
subject. Investors should consult appropriate tax and legal advisors to
obtain information on the rules applicable to these transactions.

All checks, drafts, wires and other payment mediums used to buy or sell
shares of the Fund must be denominated in U.S. dollars. We may, in our sole
discretion, either (a) reject any order to buy or sell shares denominated in
any other currency or (b) honor the transaction or make adjustments to your
account for the transaction as of a date and with a foreign currency exchange
factor determined by the drawee bank. We may deduct any applicable banking
charges imposed by the bank from your account.

When you buy shares, if you submit a check or a draft that is returned unpaid
to the Fund we may impose a $10 charge against your account for each returned
item.

If you buy shares through the reinvestment of dividends, the shares will be
purchased at the net asset value determined on the business day following the
dividend record date (sometimes known as the "ex-dividend date"). The
processing date for the reinvestment of dividends may vary and does not
affect the amount or value of the shares acquired.

INITIAL SALES CHARGES The maximum initial sales charge is 5.75% for Class A
and 1% for Class C. There is no initial sales charge for Class B.

The initial sales charge for Class A shares may be reduced for certain large
purchases, as described in the prospectus. We offer several ways for you to
combine your purchases in Franklin Templeton funds to take advantage of the
lower sales charges for large purchases. Franklin Templeton funds include the
U.S. registered mutual funds in Franklin Templeton Investments except
Franklin Templeton Variable Insurance Products Trust and Templeton Capital
Accumulator Fund, Inc.

CUMULATIVE QUANTITY DISCOUNT. For purposes of calculating the sales charge on
Class A shares, you may combine the amount of your current purchase with the
cost or current value, whichever is higher, of your existing shares in
Franklin Templeton funds. You also may combine the shares of your spouse,
children under the age of 21 or grandchildren under the age of 21. If you are
the sole owner of a company, you also may add any company accounts, including
retirement plan accounts. Companies with one or more retirement plans may add
together the total plan assets invested in Franklin Templeton funds to
determine the sales charge that applies.

LETTER OF INTENT (LOI). You may buy Class A shares at a reduced sales charge
by completing the letter of intent section of your account application. A
letter of intent is a commitment by you to invest a specified dollar amount
during a 13 month period. The amount you agree to invest determines the sales
charge you pay. By completing the letter of intent section of the
application, you acknowledge and agree to the following:

o You authorize Distributors to reserve 5% of your total intended purchase
in Class A shares registered in your name until you fulfill your LOI. Your
periodic statements will include the reserved shares in the total shares
you own, and we will pay or reinvest dividend and capital gain
distributions on the reserved shares according to the distribution option
you have chosen.

o You give Distributors a security interest in the reserved shares and
appoint Distributors as attorney-in-fact.

o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the LOI.

o Although you may exchange your shares, you may not sell reserved shares
until you complete the LOI or pay the higher sales charge.

After you file your LOI with the Fund, you may buy Class A shares at the
sales charge applicable to the amount specified in your LOI. Sales charge
reductions based on purchases in more than one Franklin Templeton fund will
be effective only after notification to Distributors that the investment
qualifies for a discount. Any Class A purchases you made within 90 days
before you filed your LOI also may qualify for a retroactive reduction in the
sales charge. If you file your LOI with the Fund before a change in the
Fund's sales charge, you may complete the LOI at the lower of the new sales
charge or the sales charge in effect when the LOI was filed.

Your holdings in Franklin Templeton funds acquired more than 90 days before
you filed your LOI will be counted towards the completion of the LOI, but
they will not be entitled to a retroactive reduction in the sales charge. Any
redemptions you make during the 13 month period, except in the case of
certain retirement plans, will be subtracted from the amount of the purchases
for purposes of determining whether the terms of the LOI have been completed.

If the terms of your LOI are met, the reserved shares will be deposited to an
account in your name or delivered to you or as you direct. If the amount of
your total purchases, less redemptions, is more than the amount specified in
your LOI and is an amount that would qualify for a further sales charge
reduction, a retroactive price adjustment will be made by Distributors and
the securities dealer through whom purchases were made. The price adjustment
will be made on purchases made within 90 days before and on those made after
you filed your LOI and will be applied towards the purchase of additional
shares at the offering price applicable to a single purchase or the dollar
amount of the total purchases.

If the amount of your total purchases, less redemptions, is less than the
amount specified in your LOI, the sales charge will be adjusted upward,
depending on the actual amount purchased (less redemptions) during the
period. You will need to send Distributors an amount equal to the difference
in the actual dollar amount of sales charge paid and the amount of sales
charge that would have applied to the total purchases if the total of the
purchases had been made at one time. Upon payment of this amount, the
reserved shares held for your account will be deposited to an account in your
name or delivered to you or as you direct. If within 20 days after written
request the difference in sales charge is not paid, we will redeem an
appropriate number of reserved shares to realize the difference. If you
redeem the total amount in your account before you fulfill your LOI, we will
deduct the additional sales charge due from the sale proceeds and forward the
balance to you.

For LOIs filed on behalf of certain retirement plans, the level and any
reduction in sales charge for these plans will be based on actual plan
participation and the projected investments in Franklin Templeton funds under
the LOI. These plans are not subject to the requirement to reserve 5% of the
total intended purchase or to the policy on upward adjustments in sales
charges described above, or to any penalty as a result of the early
termination of a plan, nor are these plans entitled to receive retroactive
adjustments in price for investments made before executing the LOI.

GROUP PURCHASES. If you are a member of a qualified group, you may buy Class
A shares at a reduced sales charge that applies to the group as a whole. The
sales charge is based on the combined dollar value of the group members'
existing investments, plus the amount of the current purchase.

A qualified group is one that:

o Was formed at least six months ago,

o Has a purpose other than buying Fund shares at a discount,

o Has more than 10 members,

o Can arrange for meetings between our representatives and group members,

o Agrees to include Franklin Templeton fund sales and other materials in
publications and mailings to its members at reduced or no cost to
Distributors,

o Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and

o Meets other uniform criteria that allow Distributors to achieve cost
savings in distributing shares.

A qualified group generally does not include a 403(b) plan that only allows
salary deferral contributions, although any such plan that purchased the
Fund's Class A shares at a reduced sales charge under the group purchase
privilege before February 1, 1998, may continue to do so.

WAIVERS FOR INVESTMENTS FROM CERTAIN PAYMENTS. Class A shares may be
purchased without an initial sales charge or contingent deferred sales charge
(CDSC) by investors who reinvest within 365 days:

o Dividend and capital gain distributions from any Franklin Templeton
fund. The distributions generally must be reinvested in the same share
class. Certain exceptions apply, however, to Class C shareholders who chose
to reinvest their distributions in Class A shares of the Fund before
November 17, 1997, and to Advisor Class or Class Z shareholders of a
Franklin Templeton fund who may reinvest their distributions in the Fund's
Class A shares. This waiver category also applies to Class B and C shares.

o Annuity payments received under either an annuity option or from death
benefit proceeds, if the annuity contract offers as an investment option
the Franklin Templeton Variable Insurance Products Trust. You should
contact your tax advisor for information on any tax consequences that may
apply.

o Redemption proceeds from a repurchase of shares of Franklin Floating
Rate Trust, if the shares were continuously held for at least 12 months.

If you immediately placed your redemption proceeds in a Franklin Bank CD or
a Franklin Templeton money fund, you may reinvest them as described above.
The proceeds must be reinvested within 365 days from the date the CD
matures, including any rollover, or the date you redeem your money fund
shares.

o Redemption proceeds from the sale of Class A shares of any of the
Templeton Global Strategy Funds if you are a qualified investor.

If you paid a CDSC when you redeemed your Class A shares from a Templeton
Global Strategy Fund, a new CDSC will apply to your purchase of Fund shares
and the CDSC holding period will begin again. We will, however, credit your
Fund account with additional shares based on the CDSC you previously paid
and the amount of the redemption proceeds that you reinvest.

If you immediately placed your redemption proceeds in a Franklin Templeton
money fund, you may reinvest them as described above. The proceeds must be
reinvested within 365 days from the date they are redeemed from the money
fund.

o Distributions from an existing retirement plan invested in Franklin
Templeton funds

WAIVERS FOR CERTAIN INVESTORS. Class A shares also may be purchased without
an initial sales charge or CDSC by various individuals and institutions due
to anticipated economies in sales efforts and expenses, including:

o Trust companies and bank trust departments investing 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. We may accept orders for these accounts by telephone
or other means of electronic data transfer directly from the bank or trust
company, with payment by federal funds received by the close of business on
the next business day following the order.

o Any state or local government or any instrumentality, department,
authority or agency thereof that has determined the Fund is a legally
permissible investment and that can only buy Fund shares without paying
sales charges. Please consult your legal and investment advisors to
determine if an investment in the Fund is permissible and suitable for you
and the effect, if any, of payments by the Fund on arbitrage rebate
calculations.

o Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for clients
participating in comprehensive fee programs

o Qualified registered investment advisors who buy through a broker-dealer
or service agent who has entered into an agreement with Distributors

o Registered securities dealers and their affiliates, for their investment
accounts only

o Current employees of securities dealers and their affiliates and their
family members, as allowed by the internal policies of their employer

o Officers, trustees, directors and full-time employees of Franklin
Templeton Investments, and their family members, consistent with our
then-current policies

o Any investor who is currently a Class Z shareholder of Franklin Mutual
Series Fund Inc. (Mutual Series), or who is a former Mutual Series Class Z
shareholder who had an account in any Mutual Series fund on October 31,
1996, or who sold his or her shares of Mutual Series Class Z within the
past 365 days

o Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer

o Accounts managed by Franklin Templeton Investments

o Certain unit investment trusts and their holders reinvesting
distributions from the trusts

o Group annuity separate accounts offered to retirement plans

o Chilean retirement plans that meet the requirements described under
"Retirement plans" below

o German insurance companies that publicly offer variable annuities or
unit linked life policies in Germany and that have entered into an
agreement with Templeton Global Strategic Services (Deutschland) GmbH

In addition, Class C shares may be purchased without an initial sales charge
by any investor who buys Class C shares through an omnibus account with
Merrill Lynch Pierce Fenner & Smith, Inc. A CDSC may apply, however, if the
shares are sold within 18 months of purchase.

RETIREMENT PLANS. Retirement plans sponsored by an employer (i) with at least
100 employees, or (ii) with retirement plan assets of $1 million or more, or
(iii) that agrees to invest at least $500,000 in Franklin Templeton funds
over a 13 month period may buy Class A shares without an initial sales
charge. Retirement plans that are not qualified retirement plans (employer
sponsored pension or profit-sharing plans that qualify under section 401 of
the Internal Revenue Code, including 401(k), money purchase pension, profit
sharing and defined benefit plans), SIMPLEs (savings incentive match plans
for employees) or SEPs (employer sponsored simplified employee pension plans
established under section 408(k) of the Internal Revenue Code) must also meet
the group purchase requirements described above to be able to buy Class A
shares without an initial sales charge. We may enter into a special
arrangement with a securities dealer, based on criteria established by the
Fund, to add together certain small qualified retirement plan accounts for
the purpose of meeting these requirements.

For retirement plan accounts opened on or after May 1, 1997, a CDSC may apply
if the retirement plan is transferred out of Franklin Templeton funds or
terminated within 365 days of the retirement plan account's initial purchase
in Franklin Templeton funds.

Any retirement plan that does not meet the requirements 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 shares of the Fund subject to a maximum
initial sales charge of 4% of the offering price, 3.2% of which will be
retained by securities dealers.

SALES IN TAIWAN. Under agreements with certain banks in Taiwan, Republic of
China, the Fund's shares are available to these banks' trust accounts without
a sales charge. The banks may charge service fees to their customers who
participate in the trusts. A portion of these service fees may be paid to
Distributors or one of its affiliates to help defray expenses of maintaining
a service office in Taiwan, including expenses related to local literature
fulfillment and communication facilities.

The Fund's Class A shares may be offered to investors in Taiwan through
securities advisory firms known locally as Securities Investment Consulting
Enterprises. In conformity with local business practices in Taiwan, Class A
shares may be offered with the following schedule of sales charges:

SIZE OF PURCHASE - U.S. DOLLARS SALES CHARGE (%)
------------------------------------------------------------
Under $30,000 3.0
$30,000 but less than $50,000 2.5
$50,000 but less than $100,000 2.0
$100,000 but less than $200,000 1.5
$200,000 but less than $400,000 1.0
$400,000 or more 0

DEALER COMPENSATION Securities dealers may at times receive the entire sales
charge. A securities dealer who receives 90% or more of the sales charge may
be deemed an underwriter under the Securities Act of 1933, as amended.
Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages indicated in the dealer compensation table
in the Fund's prospectus.

Distributors may pay the following commissions, out of its own resources, to
securities dealers who initiate and are responsible for purchases of Class A
shares of $1 million or more: 1% on sales of $1 million to $2 million, plus
0.80% on sales over $2 million to $3 million, plus 0.50% on sales over $3
million to $50 million, plus 0.25% on sales over $50 million to $100 million,
plus 0.15% on sales over $100 million.

These breakpoints are reset every 12 months for purposes of additional
purchases.

Distributors or one of its affiliates may pay up to 1%, out of its own
resources, to securities dealers who initiate and are responsible for
purchases of Class A shares by certain retirement plans without an initial
sales charge. These payments may be made in the form of contingent advance
payments, which may be recovered from the securities dealer or set off
against other payments due to the dealer if shares are sold within 12 months
of the calendar month of purchase. Other conditions may apply. All terms and
conditions may be imposed by an agreement between Distributors, or one of its
affiliates, and the securities dealer.

In addition to the payments above, Distributors and/or its affiliates may
provide financial support to securities dealers that sell shares of Franklin
Templeton Investments. This support is based primarily on the amount of sales
of fund shares and/or total assets with Franklin Templeton Investments. The
amount of support may be affected by: total sales; net sales; levels of
redemptions; the proportion of a securities dealer's sales and marketing
efforts in Franklin Templeton Investments; a securities dealer's support of,
and participation in, Distributors' marketing programs; a securities dealer's
compensation programs for its registered representatives; and the extent of a
securities dealer's marketing programs relating to Franklin Templeton
Investments. Financial support to securities dealers may be made by payments
from Distributors' resources, from Distributors' retention of underwriting
concessions and, in the case of funds that have Rule 12b-1 plans, from
payments to Distributors under such plans. In addition, certain securities
dealers may receive brokerage commissions generated by fund portfolio
transactions in accordance with the rules of the National Association of
Securities Dealers, Inc.

Distributors routinely sponsors due diligence meetings for registered
representatives during which they receive updates on various Franklin
Templeton funds and are afforded the opportunity to speak with portfolio
managers. Invitation to these meetings is not conditioned on selling a
specific number of shares. Those who have shown an interest in Franklin
Templeton funds, however, are more likely to be considered. To the extent
permitted by their firm's policies and procedures, registered
representatives' expenses in attending these meetings may be covered by
Distributors.

CONTINGENT DEFERRED SALES CHARGE (CDSC) If you invest $1 million or more in
Class A shares, either as a lump sum or through our cumulative quantity
discount or letter of intent programs, a CDSC may apply on any shares you
sell within 12 months of purchase. For Class C shares, a CDSC may apply if
you sell your shares within 18 months of purchase. The CDSC is 1% of the
value of the shares sold or the net asset value at the time of purchase,
whichever is less.

Certain retirement plan accounts opened on or after May 1, 1997, and that
qualify to buy Class A shares without an initial sales charge also may be
subject to a CDSC if the retirement plan is transferred out of Franklin
Templeton funds or terminated within 365 days of the account's initial
purchase in Franklin Templeton funds.

For Class B shares, there is a CDSC if you sell your shares within six years,
as described in the table below. The charge is based on the value of the
shares sold or the net asset value at the time of purchase, whichever is less.

IF YOU SELL YOUR CLASS B
SHARES WITHIN THIS MANY YEARS THIS % IS DEDUCTED
AFTER BUYING THEM FROM 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

CDSC WAIVERS. The CDSC for any share class generally will be waived for:

o Account fees

o Sales of Class A shares purchased without an initial sales charge by
certain retirement plan accounts if (i) the account was opened before May
1, 1997, or (ii) the securities dealer of record received a payment from
Distributors of 0.25% or less, or (iii) Distributors did not make any
payment in connection with the purchase, or (iv) the securities dealer of
record has entered into a supplemental agreement with Distributors

o Redemptions of Class A shares by investors who purchased $1 million or
more without an initial sales charge if the securities dealer of record
waived its commission in connection with the purchase

o Redemptions by the Fund when an account falls below the minimum required
account size

o Redemptions following the death of the shareholder or beneficial owner

o Redemptions through a systematic withdrawal plan set up before February
1, 1995

o Redemptions through a systematic withdrawal plan set up on or after
February 1, 1995, up to 1% monthly, 3% quarterly, 6% semiannually or 12%
annually of your account's net asset value depending on the frequency of
your plan

o Redemptions by an employee benefit plan: (i) that is a customer of
Franklin Templeton Defined Contribution Services; and/or (ii) whose assets
are held by Franklin Templeton Bank & Trust as trustee or custodian (not
applicable to Class B)

o Distributions from individual retirement accounts (IRAs) 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)

o Returns of excess contributions (and earnings, if applicable) from
retirement plan accounts

o Participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee
benefit plans (not applicable to Class B)

EXCHANGE PRIVILEGE If you request the exchange of the total value of your
account, declared but unpaid income dividends and capital gain distributions
will be reinvested in the Fund and exchanged into the new fund at net asset
value when paid. Backup withholding and information reporting may apply.

If a substantial number of shareholders should, within a short period, sell
their Fund shares under the exchange privilege, the Fund might have to sell
portfolio securities it might otherwise hold and incur the additional costs
related to such transactions. On the other hand, increased use of the
exchange privilege may result in periodic large inflows of money. If this
occurs, it is the Fund's general policy to initially invest this money in
short-term, interest-bearing money market instruments, unless it is believed
that attractive investment opportunities consistent with the Fund's
investment goal exist immediately. This money will then be withdrawn from the
short-term, interest-bearing money market instruments and invested in
portfolio securities in as orderly a manner as is possible when attractive
investment opportunities arise.

The proceeds from the sale of shares of an investment company generally are
not available until the seventh day following the sale. The funds you are
seeking to exchange into may delay issuing shares pursuant to an exchange
until that seventh day. The sale of Fund shares to complete an exchange will
be effected at net asset value at the close of business on the day the
request for exchange is received in proper form.

SYSTEMATIC WITHDRAWAL PLAN Our systematic withdrawal plan allows you to sell
your shares and receive regular payments from your account on a monthly,
quarterly, semiannual or annual basis. The value of your account must be at
least $5,000 and the minimum payment amount for each withdrawal must be at
least $50. For retirement plans subject to mandatory distribution
requirements, the $50 minimum will not apply. There are no service charges
for establishing or maintaining a systematic withdrawal plan.

Each month in which a payment is scheduled, we will redeem an equivalent
amount of shares in your account on the day of the month you have indicated
on your account application or, if no day is indicated, on the 20th day of
the month. If that day falls on a weekend or holiday, we will process the
redemption on the next business day. For plans set up before June 1, 2000, we
will continue to process redemptions on the 25th day of the month (or the
next business day) unless you instruct us to change the processing date.
Available processing dates currently are the 1st, 5th, 10th, 15th, 20th and
25th days of the month. When you sell your shares under a systematic
withdrawal plan, it is a taxable transaction.

To avoid paying sales charges on money you plan to withdraw within a short
period of time, you may not want to set up a systematic withdrawal plan if
you plan to buy shares on a regular basis. Shares sold under the plan also
may be subject to a CDSC.

Redeeming shares through a systematic withdrawal plan may reduce or exhaust
the shares in your account if payments exceed distributions received from the
Fund. This is especially likely to occur if there is a market decline. If a
withdrawal amount exceeds the value of your account, your account will be
closed and the remaining balance in your account will be sent to you. Because
the amount withdrawn under the plan may be more than your actual yield or
income, part of the payment may be a return of your investment.

To discontinue a systematic withdrawal plan, change the amount and schedule
of withdrawal payments, or suspend one payment, we must receive instructions
from you at least three business days before a scheduled payment. The Fund
may discontinue a systematic withdrawal plan by notifying you in writing and
will discontinue a systematic withdrawal plan automatically if all shares in
your account are withdrawn or if the Fund receives notification of the
shareholder's death or incapacity.

REDEMPTIONS IN KIND The Fund has committed itself to pay in cash (by check)
all requests for redemption by any shareholder of record, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the
value of the Fund's net assets at the beginning of the 90-day period. This
commitment is irrevocable without the prior approval of the U.S. Securities
and Exchange Commission (SEC). In the case of redemption requests in excess
of these amounts, the board reserves the right to make payments in whole or
in part in securities or other assets of the Fund, in case of an emergency,
or if the payment of such a redemption in cash would be detrimental to the
existing shareholders of the Fund. In these circumstances, the securities
distributed would be valued at the price used to compute the Fund's net
assets and you may incur brokerage fees in converting the securities to cash.
The Fund does not intend to redeem illiquid securities in kind. If this
happens, however, you may not be able to recover your investment in a timely
manner.

SHARE CERTIFICATES We will credit your shares to your Fund account. We do
not issue share certificates unless you specifically request them. This
eliminates the costly problem of replacing lost, stolen or destroyed
certificates. If a certificate is lost, stolen or destroyed, you may have to
pay an insurance premium of up to 2% of the value of the certificate to
replace it.

Any outstanding share certificates must be returned to the Fund if you want
to sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do
this either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form and to send the certificate and assignment form in separate
envelopes.

GENERAL INFORMATION If dividend checks are returned to the Fund marked
"unable to forward" by the postal service, we will consider this a request by
you to change your dividend option to reinvest all distributions. The
proceeds will be reinvested in additional shares at net asset value until we
receive new instructions.

Distribution or redemption checks sent to you do not earn interest or any
other income during the time the checks remain uncashed. Neither the Fund nor
its affiliates will be liable for any loss caused by your failure to cash
such checks. The Fund is not responsible for tracking down uncashed checks,
unless a check is returned as undeliverable.

In most cases, if mail is returned as undeliverable we are required to take
certain steps to try to find you free of charge. If these attempts are
unsuccessful, however, we may deduct the costs of any additional efforts to
find you from your account. These costs may include a percentage of the
account when a search company charges a percentage fee in exchange for its
location services.

Sending redemption proceeds by wire or electronic funds transfer (ACH) is a
special service that we make available whenever possible. By offering this
service to you, the Fund is not bound to meet any redemption request in less
than the seven day period prescribed by law. Neither the Fund nor its agents
shall be liable to you or any other person if, for any reason, a redemption
request by wire or ACH is not processed as described in the prospectus.

Franklin Templeton Investor Services, Inc. (Investor Services) may pay
certain financial institutions that maintain omnibus accounts with the Fund
on behalf of numerous beneficial owners for recordkeeping operations
performed with respect to such owners. For each beneficial owner in the
omnibus account, the Fund may reimburse Investor Services an amount not to
exceed the per account fee that the Fund normally pays Investor Services.
These financial institutions also may charge a fee for their services
directly to their clients.

There are special procedures for banks and other institutions that wish to
open multiple accounts. An institution may open a single master account by
filing one application form with the Fund, signed by personnel authorized to
act for the institution. Individual sub-accounts may be opened when the
master account is opened by listing them on the application, or by providing
instructions to the Fund at a later date. These sub-accounts may be
registered either by name or number. The Fund's investment minimums apply to
each sub-account. The Fund will send confirmation and account statements for
the sub-accounts to the institution.

If you buy or sell shares through your securities dealer, we use the net
asset value next calculated after your securities dealer receives your
request, which is promptly transmitted to the Fund. If you sell shares
through your securities dealer, it is your dealer's responsibility to
transmit the order to the Fund in a timely fashion. Your redemption proceeds
will not earn interest between the time we receive the order from your dealer
and the time we receive any required documents. Any loss to you resulting
from your dealer's failure to transmit your redemption order to the Fund in a
timely fashion must be settled between you and your securities dealer.

Certain shareholder servicing agents may be authorized to accept your
transaction request.

For institutional accounts, there may be additional methods of buying or
selling Fund shares than those described in this SAI or in the prospectus.

In the event of disputes involving multiple claims of ownership or authority
to control your account, the Fund has the right (but has no obligation) to:
(a) freeze the account and require the written agreement of all persons
deemed by the Fund to have a potential property interest in the account,
before executing instructions regarding the account; (b) interplead disputed
funds or accounts with a court of competent jurisdiction; or (c) surrender
ownership of all or a portion of the account to the IRS in response to a
notice of levy.

PRICING SHARES
-------------------------------------------------------------------------------

When you buy shares, you pay the offering price. The offering price is the
net asset value (NAV) per share plus any applicable sales charge, calculated
to two decimal places using standard rounding criteria. When you sell shares,
you receive the NAV minus any applicable CDSC.

The value of a mutual fund is determined by deducting the fund's liabilities
from the total assets of the portfolio. The net asset value per share is
determined by dividing the net asset value of the fund by the number of
shares outstanding.

The Fund calculates the NAV per share of each class each business day at the
close of trading on the New York Stock Exchange (normally 1:00 p.m. Pacific
time). The Fund does not calculate the NAV on days the New York Stock
Exchange (NYSE) is closed for trading, which include New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.

When determining its NAV, the Fund values cash and receivables at their
realizable amounts, and records interest as accrued and dividends on the
ex-dividend date. If market quotations are readily available for portfolio
securities listed on a securities exchange or on the Nasdaq National Market
System, the Fund values those securities at the last quoted sale price of the
day or, if there is no reported sale, within the range of the most recent
quoted bid and ask prices. The Fund values over-the-counter portfolio
securities within the range of the most recent quoted bid and ask prices. If
portfolio securities trade both in the over-the-counter market and on a stock
exchange, the Fund values them according to the broadest and most
representative market as determined by the manager.

The Fund values portfolio securities underlying actively traded call options
at their market price as determined above. The current market value of any
option the Fund holds is its last sale price on the relevant exchange before
the Fund values its assets. If there are no sales that day or if the last
sale price is outside the bid and ask prices, the Fund values options within
the range of the current closing bid and ask prices if the Fund believes the
valuation fairly reflects the contract's market value.

Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of
business of the NYSE on each day that the NYSE is open. Trading in European
or Far Eastern securities generally, or in a particular country or countries,
may not take place on every NYSE business day. Furthermore, trading takes
place in various foreign markets on days that are not business days for the
NYSE and on which the Fund's NAV is not calculated. Thus, the calculation of
the Fund's NAV does not take place contemporaneously with the determination
of the prices of many of the portfolio securities used in the calculation
and, if events materially affecting the values of these foreign securities
occur, the securities will be valued at fair value as determined by
management and approved in good faith by the board.

Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times
before the close of the NYSE. The value of these securities used in computing
the NAV is determined as of such times. Occasionally, events affecting the
values of these securities may occur between the times at which they are
determined and the close of the NYSE that will not be reflected in the
computation of the NAV. If events materially affecting the values of these
securities occur during this period, the securities will be valued at their
fair value as determined in good faith by the board.

Other securities for which market quotations are readily available are valued
at the current market price, which may be obtained from a pricing service,
based on a variety of factors including recent trades, institutional size
trading in similar types of securities (considering yield, risk and maturity)
and/or developments related to specific issues. Securities and other assets
for which market prices are not readily available are valued at fair value as
determined following procedures approved by the board. With the approval of
the board, the Fund may use a pricing service, bank or securities dealer to
perform any of the above described functions.

THE UNDERWRITER
-------------------------------------------------------------------------------

Franklin Templeton Distributors, Inc. (Distributors) acts as the principal
underwriter in the continuous public offering of the Fund's shares throughout
the world, except in Europe, Hong Kong and other parts of Asia. Templeton
Global Strategic Services (DEUTSCHLAND) GMbH (Templeton Strategic Services)
acts as the principal underwriter in Europe, and Templeton Franklin
Investment Services (Asia) Limited (Templeton Investment Services) acts as
the principal underwriter in Hong Kong and other parts of Asia. The terms of
the underwriting agreements between the Fund and each of the foreign
underwriters are substantially similar to those of the agreement with
Distributors. In addition to the compensation listed in the following tables,
each of the underwriters may be entitled to reimbursement under the Rule
12b-1 plans, as discussed below.

DISTRIBUTORS is located at 777 Mariners Island Blvd., San Mateo, CA 94404.
Distributors pays the expenses of the distribution of Fund shares, including
advertising expenses and the costs of printing sales material and
prospectuses used to offer shares to the public. The Fund pays the expenses
of preparing and printing amendments to its registration statements and
prospectuses (other than those necessitated by the activities of
Distributors) and of sending prospectuses to existing shareholders.

The table below shows the aggregate underwriting commissions Distributors
received in connection with the offering of the Fund's shares, the net
underwriting discounts and commissions Distributors retained after allowances
to dealers, and the amounts Distributors received in connection with
redemptions or repurchases of shares for the last three fiscal years ended
August 31:

AMOUNT RECEIVED IN
CONNECTION WITH
TOTAL AMOUNT RETAINED BY REDEMPTIONS AND
MMISSIONS RECEIVED ($) DISTRIBUTORS ($) REPURCHASES ($)
--------------------------------------------------------------------
2000 10,528,644 2,061,385 364,296
1999 13,817,892 1,973,958 587,876
1998 40,309,300 4,661,855 474,453

Distributors may be entitled to payments from the Fund under the Rule 12b-1
plans, as discussed below. Except as noted, Distributors received no other
compensation from the Fund for acting as underwriter.

TEMPLETON STRATEGIC SERVICES is located at Taunusanlage 11, D-60329,
Frankfurt. The table below shows the aggregate underwriting commissions
Templeton Strategic Services received in connection with the offering of the
Fund's shares, the net underwriting discounts and commissions Templeton
Strategic Services retained after allowances to dealers, and the amounts
Templeton Strategic Services received in connection with redemptions or
repurchases of shares for the last three fiscal years ended August 31:

AMOUNT RECEIVED IN
AMOUNT RETAINED BY CONNECTION WITH
TOTAL TEMPLETON REDEMPTIONS AND
COMMISSIONS STRATEGIC SERVICES REPURCHASES ($)
RECEIVED ($) ($)
--------------------------------------------------------------------
2000 29,894,879 4,701,205 0
1999 32,539,511 5,541,486 0
1998 42,148,728 7,711,253 0

Except as noted, Templeton Strategic Services received no other compensation
from the Fund for acting as underwriter.

TEMPLETON INVESTMENT SERVICES is located at 2701 Shui On Centre, Hong Kong.
The table below shows the aggregate underwriting commissions Templeton
Investment Services received in connection with the offering of the Fund's
shares, the net underwriting discounts and commissions Templeton Investment
Services retained after allowances to dealers, and the amounts Templeton
Investment Services received in connection with redemptions or repurchases of
shares for the last three fiscal years ended August 31:

AMOUNT RETAINED BY AMOUNT RECEIVED IN
TOTAL TEMPLETON CONNECTION WITH
COMMISSIONS INVESTMENT REDEMPTIONS AND
RECEIVED ($) SERVICES ($) REPURCHASES ($)
--------------------------------------------------------------------
2000 610 2 0
1999 1,186 155 0
1998 17,152 3,163 0

Except as noted, Templeton Investment Services received no other compensation
from the Fund for acting as underwriter.

DISTRIBUTION AND SERVICE (12B-1) FEES The board has adopted a separate plan
pursuant to Rule 12b-1 for each class. Although the plans differ in some ways
for each class, each plan is designed to benefit the Fund and its
shareholders. The plans are expected to, among other things, increase
advertising of the Fund, encourage sales of the Fund and service to its
shareholders, and increase or maintain assets of the Fund so that certain
fixed expenses may be spread over a broader asset base, resulting in lower
per share expense ratios. In addition, a positive cash flow into the Fund is
useful in managing the Fund because the manager has more flexibility in
taking advantage of new investment opportunities and handling shareholder
redemptions.

Under each plan, the Fund pays Distributors or others for the expenses of
activities that are primarily intended to sell shares of the class. These
expenses also may include service fees paid to securities dealers or others
who have executed a servicing agreement with the Fund, Distributors or its
affiliates and who provide service or account maintenance to shareholders
(service fees); the expenses of printing prospectuses and reports used for
sales purposes, and of preparing and distributing sales literature and
advertisements; and a prorated portion of Distributors' overhead expenses
related to these activities. Together, these expenses, including the service
fees, are "eligible expenses." The 12b-1 fees charged to each class are based
only on the fees attributable to that particular class.

THE CLASS A PLAN. The Fund may pay up to 0.25% per year of Class A's average
daily net assets. The Class A plan is a reimbursement plan. It allows the
Fund to reimburse Distributors for eligible expenses that Distributors has
shown it has incurred. The Fund will not reimburse more than the maximum
amount allowed under the plan. Any unreimbursed expenses from one quarter,
however, may be reimbursed in future quarters or years. This includes
expenses not reimbursed because they had exceeded the applicable limit under
the plan. As of August 31, 2000, expenses under the plan that may be
reimbursable in future quarters or years totaled $4,285,833 or .03249% of
Class A's net assets.

For the fiscal year ended August 31, 2000, the amounts paid by the Fund
pursuant to the plan were:

($)
-----------------------------------------------
Advertising 1,244,040
Printing and mailing
prospectuses 607,102
other than to current
shareholders
Payments to underwriters 295,058
Payments to broker-dealers 29,488,935
Other 1,837,731
-------------
Total 33,472,866
=============

THE CLASS B AND C PLANS. The Fund pays Distributors up to 1% per year of the
class's average daily net assets, out of which 0.25% may be paid for services
to the shareholders (service fees). The Class B and C plans also may be used
to pay Distributors for advancing commissions to securities dealers with
respect to the initial sale of Class B and C shares. Class B plan fees
payable to Distributors are used by Distributors to pay third party financing
entities that have provided financing to Distributors in connection with
advancing commissions to securities dealers. Franklin Resources owns a
minority interest in one of the third party financing entities.

The Class B and C plans are compensation plans. They allow the Fund to pay a
fee to Distributors that may be more than the eligible expenses Distributors
has incurred at the time of the payment. Distributors must, however,
demonstrate to the board that it has spent or has near-term plans to spend
the amount received on eligible expenses. The Fund will not pay more than the
maximum amount allowed under the plans.

In addition to the payments that Distributors or others are entitled to under
each plan, each plan also provides that to the extent the Fund, the manager
or Distributors or other parties on behalf of the Fund, the manager or
Distributors make payments that are deemed to be for the financing of any
activity primarily intended to result in the sale of Fund shares within the
context of Rule 12b-1 under the Investment Company Act of 1940, as amended,
then such payments shall be deemed to have been made pursuant to the plan.

Under the Class B plan, the amounts paid by the Fund pursuant to the plan for
the fiscal year ended August 31, 2000, were:

($)
----------------------------------------------
Advertising 9,024
Printing and mailing
prospectuses 686
other than to current
shareholders
Payments to underwriters 6,352
Payments to broker-dealers 451,335
Other 9,800
------------
Total 477,197
============

Under the Class C plan, the amounts paid by the Fund pursuant to the plan for
the fiscal year ended August 31, 2000, were:

($)
-----------------------------------------------
Advertising 153,056
Printing and mailing
prospectuses 46,395
other than to current
shareholders
Payments to underwriters 58,587
Payments to broker-dealers 9,790,833
Other 184,993
-------------
Total 10,233,864
-------------

THE CLASS A, B AND C PLANS. To the extent fees are for distribution or
marketing functions, as distinguished from administrative servicing or agency
transactions, certain banks may not participate in the plans because of
applicable federal law prohibiting certain banks from engaging in the
distribution of mutual fund shares. These banks, however, are allowed to
receive fees under the plans for administrative servicing or for agency
transactions.

Distributors must provide written reports to the board at least quarterly on
the amounts and purpose of any payment made under the plans and any related
agreements, and furnish the board with such other information as the board
may reasonably request to enable it to make an informed determination of
whether the plans should be continued.

Each plan has been approved according to the provisions of Rule 12b-1. The
terms and provisions of each plan also are consistent with Rule 12b-1.

PERFORMANCE
-------------------------------------------------------------------------------

Performance quotations are subject to SEC rules. These rules require the use
of standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the Fund be accompanied
by certain standardized performance information computed as required by the
SEC. Average annual total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the SEC.
Performance figures reflect Rule 12b-1 fees from the date of the plan's
implementation. An explanation of these and other methods used by the Fund to
compute or express performance follows. Regardless of the method used, past
performance does not guarantee future results, and is an indication of the
return to shareholders only for the limited historical period used.

AVERAGE ANNUAL TOTAL RETURN Average annual total return is determined by
finding the average annual rates of return over the periods indicated below
that would equate an initial hypothetical $1,000 investment to its ending
redeemable value. The calculation assumes the maximum initial sales charge is
deducted from the initial $1,000 purchase, and income dividends and capital
gain distributions are reinvested at net asset value. The quotation assumes
the account was completely redeemed at the end of each period and the
deduction of all applicable charges and fees. If a change is made to the
sales charge structure, historical performance information will be restated
to reflect the maximum initial sales charge currently in effect.

When considering the average annual total return quotations for Class A and C
shares, you should keep in mind that the maximum initial sales charge
reflected in each quotation is a one time fee charged on all direct
purchases, which will have its greatest impact during the early stages of
your investment. This charge will affect actual performance less the longer
you retain your investment in the Fund. The average annual total returns for
the indicated periods ended August 31, 2000, were:

1 YEAR (%) 5 YEARS (%) 10 YEARS (%)
---------------------------------------------------------------
Class A 1.46 11.17 13.08

SINCE INCEPTION
1 YEAR (%) (1/1/99) (%)
------------------------------------------------------------------
Class B 2.81 13.22

SINCE INCEPTION
(5/1/95) (%)
1 YEAR (%) 5 YEARS (%)
------------------------------------------------------------------
Class C 4.75 11.41 12.29

The following SEC formula was used to calculate these figures:

n
P(1+T) = ERV

where:

P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of each period at the end of
each period

CUMULATIVE TOTAL RETURN Like average annual total return, cumulative total
return assumes the maximum initial sales charge is deducted from the initial
$1,000 purchase, income dividends and capital gain distributions are
reinvested at net asset value, the account was completely redeemed at the end
of each period and the deduction of all applicable charges and fees.
Cumulative total return, however, is based on the actual return for a
specified period rather than on the average return over the periods indicated
above. The cumulative total returns for the indicated periods ended August
31, 2000, were:

1 YEAR (%) 5 YEARS (%) 10 YEARS (%)
------------------------------------------------------------------
Class A 1.46 69.80 241.84

SINCE
INCEPTION
1 YEAR (%) (1/1/99) (%)
-------------------------------------------------------------------
Class B 2.81 22.97

SINCE
INCEPTION
1 YEAR (%) 5 YEARS (%) (5/1/95) (%)
------------------------------------------------------------------
Class C 4.75 71.66 85.66

VOLATILITY Occasionally statistics may be used to show the Fund's volatility
or risk. Measures of volatility or risk are generally used to compare the
Fund's net asset value or performance to a market index. One measure of
volatility is beta. Beta is the volatility of a fund relative to the total
market, as represented by an index considered representative of the types of
securities in which the fund invests. A beta of more than 1.00 indicates
volatility greater than the market and a beta of less than 1.00 indicates
volatility less than the market. Another measure of volatility or risk is
standard deviation. Standard deviation is used to measure variability of net
asset value or total return around an average over a specified period of
time. The idea is that greater volatility means greater risk undertaken in
achieving performance.

OTHER PERFORMANCE QUOTATIONS The Fund also may quote the performance of
shares without a sales charge. Sales literature and advertising may quote a
cumulative total return, average annual total return and other measures of
performance with the substitution of net asset value for the public offering
price.

Sales literature referring to the use of the Fund as a potential investment
for IRAs, business retirement plans, and other tax-advantaged retirement
plans may quote a total return based upon compounding of dividends on which
it is presumed no federal income tax applies.

The Fund may include in its advertising or sales material information
relating to investment goals and performance results of funds belonging to
Franklin Templeton Investments. Franklin Resources, Inc. is the parent
company of the advisors and underwriter of Franklin Templeton funds.

COMPARISONS To help you better evaluate how an investment in the Fund may
satisfy your investment goal, advertisements and other materials about the
Fund may discuss certain measures of Fund performance as reported by various
financial publications. Materials also may compare performance (as calculated
above) to performance as reported by other investments, indices, and
averages. These comparisons may include, but are not limited to, the
following examples:

(i) unmanaged indices so that you may compare the Fund's results with those
of a group of unmanaged securities widely regarded by investors as
representative of the securities market in general; (ii) other groups of
mutual funds tracked by Lipper(R) Inc., a widely used independent research firm
that ranks mutual funds by overall performance, investment goals and assets,
or tracked by other services, companies, publications, or persons who rank
mutual funds on overall performance or other criteria; and (iii) the Consumer
Price Index (measure for inflation) to assess the real rate of return from an
investment in the Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses.

From time to time, the Fund and the manager also may refer to the following
information:

o The manager's and its affiliates' market share of international equities
managed in mutual funds prepared or published by Strategic Insight or a
similar statistical organization.

o The performance of U.S. equity and debt markets relative to foreign
markets prepared or published by Morgan Stanley Capital International or a
similar financial organization.

o The capitalization of U.S. and foreign stock markets as prepared or
published by the International Finance Corporation, Morgan Stanley Capital
International or a similar financial organization.

o The geographic and industry distribution of the Fund's portfolio and the
Fund's top ten holdings.

o The gross national product and populations, including age
characteristics, literacy rates, foreign investment improvements due to a
liberalization of securities laws and a reduction of foreign exchange
controls, and improving communication technology, of various countries as
published by various statistical organizations.

o To assist investors in understanding the different returns and risk
characteristics of various investments, the Fund may show historical
returns of various investments and published indices (e.g., Ibbotson
Associates, Inc. Charts and Morgan Stanley Capital International World
Index).

o The major industries located in various jurisdictions as published by
the Morgan Stanley Index.

o Rankings by DALBAR Surveys, Inc. with respect to mutual fund shareholder
services.

o Allegorical stories illustrating the importance of persistent long-term
investing.

o The Fund's portfolio turnover rate and its ranking relative to industry
standards as published by Lipper(R)Inc. or Morningstar, Inc.

o A description of the Templeton organization's investment management
philosophy and approach, including its worldwide search for undervalued or
"bargain" securities and its diversification by industry, nation and type
of stocks or other securities.

o Comparison of the characteristics of various emerging markets, including
population, financial and economic conditions.

o Quotations from the Templeton organization's founder, Sir John
Templeton,* advocating the virtues of diversification and long-term
investing.

From time to time, advertisements or information for the Fund may include a
discussion of certain attributes or benefits to be derived from an investment
in the Fund. The advertisements or information may include symbols,
headlines, or other material that highlights or summarizes the information
discussed in more detail in the communication.

Advertisements or information also may compare the Fund's performance to the
return on certificates of deposit (CDs) or other investments. You should be
aware, however, that an investment in the Fund involves the risk of
fluctuation of principal value, a risk generally not present in an investment
in a CD issued by a bank. CDs are frequently insured by an agency of the U.S.
government. An investment in the Fund is not insured by any federal, state or
private entity.

In assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to the Fund's portfolio, the indices and averages are generally
unmanaged, and the items included in the calculations of the averages may not
be identical to the formula used by the Fund to calculate its figures. In
addition, there can be no assurance that the Fund will continue its
performance as compared to these other averages.

MISCELLANEOUS INFORMATION
-------------------------------------------------------------------------------

The Fund may help you achieve various investment goals such as accumulating
money for retirement, saving for a down payment on a home, college costs and
other long-term goals. The Franklin College Costs Planner may help you in
determining how much money must be invested on a monthly basis to have a
projected amount available in the future to fund a child's college education.
(Projected college cost estimates are based upon current costs published by
the College Board.) The Franklin Retirement Planning Guide leads you through
the steps to start a retirement savings program. Of course, an investment in
the Fund cannot guarantee that these goals will be met.

The Fund is a member of Franklin Templeton Investments, one of the largest
mutual fund organizations in the U.S., and may be considered in a program for
diversification of assets. Founded in 1947, Franklin is one of the oldest
mutual fund organizations and now services approximately 3 million
shareholder accounts. In 1992, Franklin, a leader in managing fixed-income
mutual funds and an innovator in creating domestic equity funds, joined
forces with Templeton, a pioneer in international investing. The Mutual
Series team, known for its value-driven approach to domestic equity
investing, became part of the organization four years later. Together,
Franklin Templeton Investments has over $229 billion in assets under
management for more than 5 million U.S. based mutual fund shareholder and
other accounts. Franklin Templeton Investments offers 107 U.S. based open-end
investment companies to the public. The Fund may identify itself by its
Nasdaq symbol or CUSIP number.

Currently, there are more mutual funds than there are stocks listed on the
New York Stock Exchange. While many of them have similar investment goals, no
two are exactly alike. Shares of the Fund are generally sold through
securities dealers, whose investment representatives are experienced
professionals who can offer advice on the type of investments suitable to
your unique goals and needs, as well as the risks associated with such
investments.

You will receive the Fund's financial reports every six months. If you would
like to receive an interim report of the Fund's portfolio holdings, please
call 1-800/DIAL BEN(R).

DESCRIPTION OF RATINGS
-------------------------------------------------------------------------------

CORPORATE BOND RATINGS

MOODY'S INVESTORS SERVICE, INC. (MOODY'S)

INVESTMENT GRADE

Aaa: Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa: Bonds rated Aa are judged to be high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large, fluctuation of protective elements may be of greater
amplitude, or there may be other elements present that make the long-term
risks appear somewhat larger.

A: Bonds rated A possess many favorable investment attributes and are
considered upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.

Baa: Bonds rated Baa are considered medium-grade obligations. They are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. These bonds lack outstanding investment characteristics and, in fact,
have speculative characteristics as well.

BELOW INVESTMENT GRADE

Ba: Bonds rated Ba are judged to have predominantly speculative elements and
their future cannot be considered well assured. Often the protection of
interest and principal payments is very moderate and, thereby, not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B: Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small.

Caa: Bonds rated Caa are of poor standing. These issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca: Bonds rated Ca represent obligations that are speculative to a high
degree. These issues are often in default or have other marked shortcomings.

C: Bonds rated C are the lowest rated class of bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond ratings. The modifier
1 indicates that the security ranks in the higher end of its generic rating
category; modifier 2 indicates a mid-range ranking; and modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.

STANDARD & POOR'S RATINGS GROUP (S&P(R))

INVESTMENT GRADE

AAA: This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.

AA: Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and, in the majority of instances,
differ from AAA issues only in a small degree.

A: Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.

BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay principal and interest for bonds in this
category than for bonds in the A category.

BELOW INVESTMENT GRADE

BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligations.
BB indicates the lowest degree of speculation and CC the highest degree of
speculation. While these bonds will likely have some quality and protective
characteristics, they are outweighed by large uncertainties or major risk
exposures to adverse conditions.

C: Bonds rated C are typically subordinated debt to senior debt that is
assigned an actual or implied CCC- rating. The C rating also may reflect the
filing of a bankruptcy petition under circumstances where debt service
payments are continuing. The C1 rating is reserved for income bonds on which
no interest is being paid.

D: Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.

Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

SHORT-TERM DEBT & COMMERCIAL PAPER RATINGS

MOODY'S

Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year, unless explicitly noted. Moody's commercial
paper ratings are opinions of the ability of issuers to repay punctually
their promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following designations for both short-term
debt and commercial paper, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers:

P-1 (Prime-1): Superior capacity for repayment.

P-2 (Prime-2): Strong capacity for repayment.

S&P

S&P's ratings are a current assessment of the likelihood of timely payment of
debt having an original maturity of no more than 365 days. Ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues within the "A" category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety, as follows:

A-1: This designation indicates the degree of safety regarding timely payment
is very strong. A "plus" (+) designation indicates an even stronger
likelihood of timely payment.

A-2: Capacity for timely payment on issues with this designation is strong.
The relative degree of safety, however, is not as overwhelming as for issues
designated A-1.

A-3: Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher designations.

--------
* Sir John Templeton sold the Templeton organization to Franklin
Resources, Inc. in October 1992 and resigned from the board on April 16,
1995. He is no longer involved with the investment management process.

PART B
TEMPLETON GROWTH FUND, INC.
ADVISOR CLASS SAI

TEMPLETON GROWTH FUND, INC.

ADVISOR CLASS

STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 2001

[Insert Franklin Templeton Ben Head]

[P.O. BOX 33030, ST. PETERSBURG, FL 33733-8030 1-800/DIAL BEN(R)]
-----------------------------------------------------------------

For a free copy of the current prospectus or annual report, contact your
investment representative or call 1-800/DIAL BEN (1-800/342-5236).

CONTENTS

Goal, Strategies and Risks 2
Officers and Directors 9
Management and Other Services 13
Portfolio Transactions 14
Distributions and Taxes 15
Organization, Voting Rights and Principal Holders 17
Buying and Selling Shares 17
Pricing Shares 20
The Underwriter 21
Performance 21
Miscellaneous Information 23
Description of Ratings 23

------------------------------------------------------------------------------
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS: