TEMPLETON CAPITAL ACCUMULATOR FUND INC, PRES14A, 2000-07-28

TEMPLETON CAPITAL ACCUMULATOR FUND INC
PRES14A, 2000-07-28

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

[X] Filed by the Registrant
Filed by a Party other than the Registrant

Check the appropriate box:

[X] Preliminary Proxy Statement

[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of filing fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and O-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials:

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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.

(1) Amount previously paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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PAGE

TEMPLETON CAPITAL ACCUMULATOR FUND, INC.

IMPORTANT SHAREHOLDER INFORMATION

These materials are for a special shareholders' meeting scheduled for [______],
2000 at 10:00 a.m. Eastern time. They discuss the proposals to be voted on at
the meeting, and contain your proxy statement and proxy card/voting instruction
card. A proxy/voting instruction card is, in essence, a ballot. When you vote
your proxy, it tells us how you wish to vote on important issues relating to
your Fund. If you complete and sign the proxy, we'll vote it exactly as you tell
us. If you simply sign the proxy, we'll vote it in accordance with the Board of
Directors' recommendations on page 1 of the proxy statement. Similarly, when you
complete your voting instruction card, it tells the Templeton Capital
Accumulation Plan ("TCA Plan") how to vote on these important issues relating to
the Fund. If you simply sign the voting instruction card, but don't specify a
vote for one or more Proposals, your shares will be voted in favor of each
Nominee, Proposal and Sub-Proposal. If you fail to return your voting
instruction card, your shares will be voted in the same proportion as shares for
which instructions have been received by the TCA Plan from the other TCA plan
holders.

WE URGE YOU TO SPEND A FEW MINUTES REVIEWING THE PROPOSALS IN THE PROXY
STATEMENT. THEN, FILL OUT THE PROXY/VOTING INSTRUCTION CARD AND RETURN IT TO US
SO THAT WE KNOW HOW YOU WOULD LIKE TO VOTE. WHEN SHAREHOLDERS RETURN THEIR
PROXIES PROMPTLY, THE FUND MAY BE ABLE TO SAVE MONEY BY NOT HAVING TO CONDUCT
ADDITIONAL MAILINGS.

WE WELCOME YOUR COMMENTS. IF YOU HAVE ANY QUESTIONS, CALL FUND INFORMATION AT
1-800/DIAL BEN(R) (1-800/342-5236).

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TELEPHONE AND INTERNET VOTING

FOR YOUR CONVENIENCE, YOU MAY BE ABLE TO VOTE BY TELEPHONE OR THROUGH THE
INTERNET, 24 HOURS A DAY. IF YOUR ACCOUNT IS ELIGIBLE, A CONTROL NUMBER AND
SEPARATE INSTRUCTIONS ARE ENCLOSED.
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TEMPLETON CAPITAL ACCUMULATOR FUND, INC.

500 EAST BROWARD BOULEVARD
FORT LAUDERDALE, FLORIDA 33394-3091

A LETTER FROM THE PRESIDENT

Dear Shareholders:

I am writing to request that you consider a number of important matters relating
to your investment in Templeton Capital Accumulator Fund, Inc. (the "Fund") in
connection with a Special Meeting of Shareholders to be held on [_______ __],
2000 at 10:00 a.m. Eastern time at the Fund's offices, 500 East Broward
Boulevard, Fort Lauderdale, Florida 33394. The materials that we have included
discuss the proposals to be voted on at the meeting that will affect the future
of the Fund.

The Board of Directors recommends that, among other items, you cast your vote in
favor of:

1. The election of a Board of Directors;

2. Ratifying the appointment by the Directors of PricewaterhouseCoopers LLP
as the independent auditors for the Fund for the fiscal year ended
August 31, 2001;

3. Amending certain of the Fund's fundamental investment restrictions;

4. Eliminating certain of the Fund's fundamental investment restrictions;

5. Adopting a Rule 12b-1 Distribution Plan; and

6. Reorganizing the Fund from a Maryland corporation to a Delaware business
trust.

PLEASE TAKE A MOMENT TO REVIEW THIS DOCUMENT AND FILL OUT, SIGN AND RETURN THE
ENCLOSED PROXY/INSTRUCTION CARD.

We ask you to confirm the Board's recommendation by re-electing the current
Directors of the Fund and electing the Board's nominees for three additional
Directors. We also ask that you ratify the Board's selection of
PricewaterhouseCoopers LLP as independent auditors of the Fund.

We propose amending or eliminating certain of the Fund's fundamental investment
restrictions. We believe that the recommended changes will provide additional
investment opportunities to the Fund, as further described in the attached proxy
statement. We urge you to approve these proposals, which are designed to benefit
all shareholders by providing the Fund with greater flexibility in pursuing its
investment objectives.

We also propose that a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 be adopted in an effort to ensure that the Fund
is properly positioned in the marketplace to compete with other mutual funds
and, in particular, other mutual funds offered through contractual plans.

Finally, we propose that the Fund be reorganized as a Delaware business trust
because Delaware law permits a less complicated structure and allows greater
flexibility in a mutual fund's business operations.

The proxy statement includes a question and answer format designed to provide
you with a simpler and more concise explanation of certain issues. Although much
of the information in the proxy statement is technical and is required by the
various regulations that govern the Fund, we hope that this format will be
helpful to you.

I am sure that you, like most people, lead a busy life and are tempted to put
this proxy aside for another day. Please don't. When shareholders do not return
their proxies, additional expenses are incurred to pay for follow-up mailings
and telephone calls.

Sincerely,

Gary P. Motyl
President

PAGE

TEMPLETON CAPITAL ACCUMULATOR FUND, INC.

500 EAST BROWARD BOULEVARD
FORT LAUDERDALE, FLORIDA 33394-3091

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [_________ __], 2000

NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders ("Meeting") of
TEMPLETON CAPITAL ACCUMULATOR FUND, INC. (the "Fund") will be held at the office
of the Fund, 500 East Broward Boulevard, Fort Lauderdale, Florida 33394, on
[________ __], 2000 at 10:00 a.m. Eastern time to vote on the following
Proposals and Sub-Proposals:

1. The election Directors of the Fund (Proposal 1).

2. The ratification or rejection of the selection of the independent
auditors (Proposal 2);

3. To approve the amendment of certain of the Fund's fundamental investment
restrictions (Sub-Proposals 3(a) - 3(g));

4. To approve the elimination of certain of the Fund's fundamental
investment restrictions (Proposal 4);

5. To adopt a Rule 12b-1 Distribution Plan (Proposal 5);

6. To approve the reorganization of the Fund from a Maryland corporation to
a Delaware business trust (Proposal 6); and

7. To grant the proxyholders authority to vote upon any other business that
may properly come before the Meeting or any adjournments thereof (Proposal
7).

The Board of Directors has fixed [_______ __], 2000 as the record date for
determination of the shareholders entitled to notice of, and to vote at, the
Meeting or any adjourned Meeting.

Please note that a separate vote is required for each Proposal or Sub-Proposal.

By Order of the Board of Directors,

Barbara J. Green
Secretary

Fort Lauderdale, Florida
[______ __], 2000

PAGE

TABLE OF CONTENTS

PAGE
PROXY STATEMENT
Questions and Answers....................................................
Proposal 1: The Election of Directors....................................
Proposal 2: The Ratification or Rejection of the Selection of
PricewaterhouseCoopers LLP as Independent Auditors
Introduction to Proposals 3 and 4........................................
Proposal 3: To Approve Amendments to Certain of the Fund's Fundamental
Investment Restrictions (Includes 7 Sub-Proposals)........
3(a) Borrowing.................................................
3(b) Underwriting..............................................
3(c) Lending...................................................
3(d) Industry concentration....................................
3(e) Real Estate and Commodities...............................
3(f) Senior Securities.........................................
3(g) Diversification...........................................
Proposal 4: To Approve the Elimination of Certain of the Fund's Fundamental
Investment Restrictions......................................
Proposal 5: To Adopt a Rule 12b-1 Distribution Plan......................
Proposal 6: To Approve the Reorganization of the Fund from a Maryland
Corporation to a Delaware Business Trust....................
Proposal 7: Other Business...............................................
Information about the Fund...............................................
Further Information about Voting and the Meeting.........................

EXHIBITS

Exhibit A: Fundamental Investment Restrictions Proposed to be Amended.... A-1
Exhibit B: Current Fundamental Investment Policies and Restrictions
Proposed to be Eliminated................................... B-1
Exhibit C: Rule 12b-1 Distribution Plan.................................. C-1
Exhibit D: Agreement and Plan of Reorganization ......................... D-1
Exhibit E: Comparison and Significant Differences between Delaware Business
Trusts and Maryland Corporations.......................... E-1

PAGE

TEMPLETON CAPITAL ACCUMULATOR FUND, INC.

PROXY STATEMENT

QUESTIONS AND ANSWERS

INFORMATION ABOUT VOTING

Q. WHO IS ASKING FOR MY VOTE?

A. The Board of Directors of Templeton Capital Accumulator Fund, Inc. (the
"Fund"), in connection with the Special Shareholders' Meeting to be
held at 10:00 a.m. Eastern Time [______ __], 2000 (the "Meeting") at
the offices of the Fund, 500 East Broward Boulevard, Fort Lauderdale,
Florida 33394, has requested your vote on several matters.

Q. WHO IS ELIGIBLE TO VOTE?

A. Shareholders of record of the Fund at the close of business on [____
__], 2000 are entitled to vote at the Meeting or any adjourned Meeting,
and will be entitled to one vote for each full share and a fractional
vote for each fractional share that they hold on each matter presented
at the Meeting. The Notice of Meeting, the proxy card, and the proxy
statement were mailed to shareholders of record on or about _______
___, and 2000.

Q. WHAT IS BEING VOTED ON AT THE MEETING?

A. The Board of Directors is asking shareholders to vote on following
proposals affecting the Fund:

1. The election of a Board of Directors of the Fund (Proposal 1);

2. The ratification or rejection of the selection of PricewaterhouseCoopers
LLP as the independent auditors for the Fund for the fiscal year ended
August 31, 2001 (Proposal 2);

3. To amend certain of the Fund's fundamental investment restrictions
(Sub-Proposals 3(a) - 3(g));

4. To eliminate certain of the Fund's fundamental investment restrictions
(Proposal 4);

5. To adopt a Rule 12b-1 Distribution Plan (Proposal 5);

6. To reorganize the Fund from a Maryland corporation to a Delaware
business trust (Proposal 6); and

7. To grant proxyholders authority to vote upon any other business that
may properly come before the Meeting or any adjournment thereof
(Proposal 7).

Q. HOW DO THE DIRECTORS RECOMMEND THAT I VOTE ON THESE PROPOSALS?

A. The Directors recommend that you vote:

1. FOR the election of all nominees as Directors;

2. FOR the ratification of the selection of PricewaterhouseCoopers LLP as
independent auditors for the Fund for the fiscal year ended August 31, 2001;

3. FOR the amendment of each of the Fund's fundamental investment
restrictions proposed to be _______ amended;

4. FOR the elimination of each of the Fund's fundamental investment
restrictions proposed to be _____ eliminated;

5. FOR the adoption of the proposed 12b-1 Distribution Plan;

6. FOR the reorganization of the Fund from a Maryland corporation to a
Delaware business trust; _____ and

7. FOR the proxyholders to vote, in their discretion, on any other business
that may properly come before the Meeting or any adjournment thereof.

Q. ARE THERE ANY PROPOSALS THAT WILL IMPACT THE FUND'S INVESTMENT POLICIES OR
LIMITATIONS?

A. Yes. Although no substantive changes to the Fund's investment program are
currently contemplated, it is proposed that all of the Fund's investment
restrictions that are "fundamental" (that is, those that cannot be changed
without shareholder approval) be amended or eliminated. If these proposals are
approved by shareholders, the Fund's Board of Directors will have greater
flexibility to respond to future developments by changing the Fund's investment
restrictions in a manner intended to achieve the Fund's investment objective of
long-term capital growth without obtaining shareholder approval. Shareholders,
of course, will be informed of any significant changes to the Fund's investment
restrictions. These proposals are intended only to eliminate the cost and delay
of seeking shareholder approval for changes in investment policies and
restrictions that would not otherwise require convening a shareholder meeting.
Shareholder approval of these proposals is not expected to affect the Fund's
current investment program or overall level of risk.

Q. WHY AM I BEING ASKED TO APPROVE AMENDMENTS TO CERTAIN OF THE FUND'S
FUNDAMENTAL INVESTMENT RESTRICTIONS?

A. Certain of the Fund's fundamental investment restrictions were adopted in
response to state laws that are no longer applicable, or to market conditions
that no longer exist, and thus may be overly restrictive. Approval of the
proposed amendment of these fundamental restrictions will provide the Fund with
greater investment flexibility within the boundaries imposed by applicable law.
The proposed changes are not expected to have any immediate effect on the manner
in which the Fund is managed.

Q. WHY AM I BEING ASKED TO APPROVE THE ELIMINATION OF CERTAIN OF THE FUND'S
FUNDAMENTAL INVESTMENT RESTRICTIONS?

A. Several of the Fund's current fundamental investment restrictions reflect
past regulatory, business or industry conditions, and practices or requirements
that are outdated, unnecessary and potentially burdensome in the future.
Approval of this proposal to eliminate certain restrictions initially will not
result in changes to the management of the Fund, but will provide the Fund with
greater flexibility to pursue its investment goal of long-term capital growth.

Q. WHY AM I BEING ASKED TO APPROVE A RULE 12B-1 DISTRIBUTION PLAN?

A. The Board believes that, by adopting a Rule 12b-1 Distribution Plan, your
Fund may be in a better competitive position in the marketplace, which could
potentially allow the Fund to increase net new sales. In addition, it is
expected that, if the Rule 12b-1 Distribution Plan is approved by shareholders,
all Templeton Capital Accumulation Plan ("TCA Plan") sales charges after the
first 12 payments will be eliminated, except for certain face changes, which
would allow all existing shareholders to have a greater percentage of their TCA
Plan payments actually invested in the Fund. Second, adopting the Distribution
Plan would allow the Fund to be competitively priced. Such competitive pricing
structure may result in increased Fund assets resulting from increased sales of
new TCA Plans, thereby potentially allowing efficiencies in portfolio
management. Finally, paying dealers continuing compensation should motivate them
to maintain and enhance the level of service provided to Fund shareholders.

Q. WHY AM I BEING ASKED TO APPROVE THE REORGANIZATION OF THE FUND FROM A
MARYLAND CORPORATION TO A DELAWARE BUSINESS TRUST?

A. Delaware law offers several advantages to mutual funds organized as a
Delaware business trust as compared to a Maryland corporation. The Delaware
business trust is a less complicated structure, allows greater flexibility in a
mutual fund's business operations, and may offer certain state tax and fee
savings.

Q. WHEN WILL THE PROPOSALS TAKE EFFECT IF THEY ARE APPROVED?

A. If approved, each of the Proposals and Sub-Proposals will become effective on
or about [_______ __], 2000.

Q. HOW DO I VOTE MY SHARES?

A. You may vote your shares in one of several ways. You can vote by mail, fax,
or in person at the Meeting. If you were a holder of a TCA Plan on the Record
Date, then you will be sent a voting instruction card for those shares of the
Fund attributable to your investment in the TCA Plan as of the record date for
the Meeting. A voting instruction card is, in essence, a ballot. The TCA Plan
will vote in accordance with your instructions. When you complete your voting
instruction card, it tells the TCA Plan how to vote its proxy on these important
issues relating to the Fund. If you hold Fund shares through a TCA Plan and
would like to vote in person, you should make a written request prior to the
Meeting to the TCA Plan Custodian, FTTrust Company, P.O. Box 33030, St.
Petersburg, Florida, 33733-8030, for a proxy that will permit the shares to be
voted in person. If you hold Fund shares directly (not through a TCA Plan), then
you will receive a proxy card by which you can vote your shares directly.

If you are eligible to vote by telephone or through the internet, a control
number and separate instructions are enclosed. To vote by mail, sign, date and
send us the enclosed proxy/voting instruction card in the envelope provided. You
can fax your vote by signing the proxy/voting instruction card and faxing both
sides of the card to XXX-XXX-XXXX.

Proxy/voting instruction cards that are properly signed, dated and received at
or prior to the Meeting will be voted exactly as you specify. If you specify a
vote for any of the Proposals 1 through 7, your proxy/voting instruction card
will be voted as you indicate. If you simply sign and date the proxy/voting
instruction card but don't specify a vote for any of the Proposals 1 through 7,
your shares will be voted IN FAVOR of the nominees for the Board of Directors
(Proposal 1), IN FAVOR of ratifying the selection of PricewaterhouseCoopers LLP
as independent auditors (Proposal 2), IN FAVOR of amending certain of the Fund's
fundamental investment restrictions (Sub-Proposals 3(a)-3(g)), IN FAVOR of
eliminating certain of the Fund's fundamental investment restrictions (Proposal
4), IN FAVOR of adopting a Rule 12b-1 Plan (Proposal 5), IN FAVOR of the
reorganization of the Fund from a Maryland corporation to a Delaware business
trust (Proposal 6), and/or IN FAVOR of granting the proxyholders named in the
proxy card the authority to vote in their discretion as to any other matters
that may properly come before the meeting or any adjournment (Proposal 7). If
you fail to return a voting instruction card, your shares will be voted in the
same proportion as shares for which instructions have been received by the TCA
Plan from other TCA Plan holders.

Q. IF I SEND MY PROXY/VOTING INSTRUCTION CARD IN NOW AS REQUESTED, CAN I CHANGE
MY VOTE LATER?

A. You may revoke your proxy/voting instruction at any time before it is voted
by: forwarding a written revocation or a later-dated proxy/voting instruction
card to the Fund that is received at or prior to the Meeting, or by attending
the Meeting and voting in person. Even if you plan to attend the Meeting, we ask
that you return the enclosed proxy/voting instruction. This will help us ensure
that an adequate number of shares are present for the Meeting to be held.

THE PROPOSALS

PROPOSAL 1: ELECTION OF DIRECTORS

HOW ARE NOMINEES SELECTED?

The Board of Directors of the Fund (the "Board") has a Nominating and
Compensation Committee (the "Committee") consisting of Andrew H. Hines, Jr. and
Gordon S. Macklin, both of whom are independent Directors. The Committee is
responsible for the selection and nomination of candidates to serve as Directors
of the Fund. The Committee reviews shareholders' nominations to fill vacancies
on the Board if these nominations are submitted in writing and addressed to the
Committee at the Fund's offices. However, the Committee expects to be able to
identify from its own resources an ample number of qualified candidates.

WHO ARE THE NOMINEES FOR THE BOARD OF DIRECTORS?

The Board currently consists of ten (10) directors. The Board has approved the
nomination of three (3) additional individuals to stand for election as
Directors in order to make the Board of the Fund consistent with the boards of
the other funds in Franklin Templeton Investments.

The nominees for election to the Board are: Harris J. Ashton, Nicholas F. Brady,
Frank J. Crothers, S. Joseph Fortunato, John Wm. Galbraith, Andrew H. Hines,
Jr., Edith E. Holiday, Charles B. Johnson, Charles E. Johnson, Betty P. Krahmer,
Gordon S. Macklin, Fred R. Millsaps, and Constantine D. Tseretopoulos (the
"Nominees"). With the exception of Ms. Holiday and Messrs. Crothers and
Tseretopoulos, all of the nominees currently are members of the Board. All of
the Nominees are also directors and/or trustees of other Franklin(R) funds
and/or Templeton(R) funds (collectively, the "Franklin Templeton funds").
Certain Directors of the Fund hold director and/or officer positions with
Franklin Resources, Inc. ("Resources") and its affiliates. Resources is a
publicly owned holding company. The principal shareholders are Charles B.
Johnson and Rupert H. Johnson, Jr., who own approximately 19% and 16%,
respectively, of Resources' outstanding shares. Resources, a global investment
organization operating as Franklin Templeton Investments, is primarily engaged,
through various subsidiaries, in providing investment management, share
distribution, transfer agent and administrative services to a family of
investment companies. Resources is a New York Stock Exchange, Inc. ("NYSE")
listed holding company (NYSE: BEN). Charles E. Johnson, a Director and Vice
President of the Fund, is the son and nephew, respectively, of brothers Charles
B. Johnson, the Chairman of the Board and a Vice President of the Fund, and
Rupert H. Johnson, Jr., a Vice President of the Fund. There are no other family
relationships among any of the Directors or Nominees.

Each Nominee is currently available and has consented to serve if elected. If
elected, the Directors will hold office without limit in time until death,
resignation, retirement or removal, or until the next meeting of shareholders to
elect Directors and the election and qualification of their successors. Election
of a Director is by a plurality vote, which means that the thirteen (13)
individuals receiving the greatest number of votes at the meeting will be deemed
to be elected. If any of the Nominees should become unavailable, the persons
named in the proxy card will vote in their discretion for another person or
persons who may be nominated as Directors.

Listed below, for each Nominee, is a brief description of his or her recent
professional experience and ownership of shares of the Fund and shares of all
the Franklin Templeton funds.

SHARES BENEFICIALLY
OWNED IN THE
FUND SHARES FRANKLIN TEMPLETON
BENEFICIALLY OWNED FUNDS
AND % OF TOTAL (INCLUDING THE FUND)
NAME AND PRINCIPAL OCCUPATION OUTSTANDING SHARES AS AS OF
DURING PAST FIVE YEARS AND AGE OF [______ __,] 2000 JUNE 30, 2000
------------------------------------------- ----------------------- -----------------------
<S> <C> <C>

HARRIS J. ASHTON _____(**) 508,050
DIRECTOR SINCE 1992

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). Age 68.

NICHOLAS F. BRADY* _____(**) 60,602
DIRECTOR SINCE 1993

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 19 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). Age 70.

FRANK J. CROTHERS _____(**) 7,994

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 12 of the investment
companies in Franklin Templeton Investments. Age 56.

</TABLE>

S. JOSEPH FORTUNATO ________(**) 644,201
DIRECTOR SINCE 1992

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. Age 68.

JOHN WM. GALBRAITH _____(**) 3,198,310
DIRECTOR SINCE 1995

President, Galbraith Properties, Inc. (personal
investment company); Director Emeritus, Gulf
West Banks, Inc. (bank holding company) (1995-
present); director or trustee, as the case may be,
of 18 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Director,
Mercantile Bank (1991-1995), Vice Chairman,
Templeton, Galbraith & Hansberger Ltd. (1986-1992),
and Chairman, Templeton Funds Management, Inc.
(1974-1991). Age 79.

ANDREW H. HINES, JR. _____(**) 58,443
DIRECTOR SINCE 1992

Consultant, Triangle Consulting Group; Executive-
in-Residence, Eckerd College (1991-present);
director or trustee, as the case may be, of 20
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. Age 77.

</TABLE>

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED IN THE
FUND SHARES FRANKLIN TEMPLETON
BENEFICIALLY OWNED FUNDS
AND % OF TOTAL (INCLUDING THE FUND)
NAME AND PRINCIPAL OCCUPATION OUTSTANDING SHARES AS AS OF
DURING PAST FIVE YEARS AND AGE OF [______ __,] 2000 JUNE 30, 2000
------------------------------------------- ----------------------- -----------------------
<S> <C> <C>

EDITH E. HOLIDAY _____(**) 18,195

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) (July 1999-
present); director or trustee, as the case
may be, of 26 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). Age 48.

CHARLES B. JOHNSON* _____(**) 22,617,159
CHAIRMAN SINCE 1995 AND
VICE PRESIDENT SINCE 1992

Chairman of the Board, Chief Executive Officer,
Member-Office of the Chairman and Director,
Franklin Resources, Inc.; Chairman of the Board
and Director, Franklin Investment Advisory
Services, 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. Age 67.

</TABLE>

CHARLES E. JOHNSON* _____(**) 1,963
DIRECTOR SINCE 1992 AND
VICE PRESIDENT SINCE 1996

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.; 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. Age 44.

BETTY P. KRAHMER _____(**) 141,995
DIRECTOR SINCE 1991

Director or trustee of various civic
associations; director or trustee, as the case
may be, of 19 of the investment companies in
Franklin Templeton Investments; and FORMERLY,
Economic Analyst, U.S. government. Age 70.

GORDON S. MACKLIN _____(**) 301,534
DIRECTOR SINCE 1993

Director, Martek Biosciences Corporation,
WorldCom, Inc. (communication 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). Age 72.

</TABLE>

FRED R. MILLSAPS _____(**) 1,846,295
DIRECTOR SINCE 1991

Manager of personal investments (1978-
present); director of various business and
nonprofit organizations; director or
trustee, as the case may be, of 20 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).
Age 71.

CONSTANTINE D. TSERETOPOULOS _____(**) 68,645

Physician, Lyford Cay Hospital (1987-present);
director of various nonprofit organizations;
director or trustee, as the case may be, of
12 of the investment companies in Franklin
Templeton Investments; and FORMERLY,
Cardiology Fellow, University of Maryland
(1985-1987) and Internal Medicine Intern, Greater
Baltimore Medical Center (1982-1985). Age 46.

</TABLE>

* Nicholas F. Brady, Charles B. Johnson and Charles E. Johnson are "interested
persons" of the Fund as defined by the Investment Company Act of 1940, as
amended (the "1940 Act"). The 1940 Act limits the percentage of interested
persons that can comprise a fund's board of directors. Mr. Charles B. Johnson is
an interested person due to his ownership interest in Resources, his employment
affiliation with Resources and his position with the Fund. Mr. Charles E.
Johnson is an interested person due to his employment affiliation with Resources
and his position with the Fund. Mr. Brady's status as an interested person
results from his business affiliations with Resources and Templeton Global
Advisors Limited. Mr. Brady and Resources are both limited partners of Darby
Overseas Partners, L.P. ("Darby Overseas"). Mr. Brady is Chairman and
shareholder of Darby Emerging Markets Investments LDC, which is the corporate
general partner of Darby Overseas. The remaining nominees and Directors of the
Fund are not interested persons of the Fund (the "Independent Directors").

** Less than 1%.

HOW OFTEN DO THE DIRECTORS MEET AND WHAT ARE THEY PAID?

The role of the Directors is to provide general oversight of the Fund's
business, and to ensure that the Fund is operated for the benefit of
shareholders. The Directors anticipate meeting at least five (5) times during
the current fiscal year to review the operations of the Fund and the Fund's
investment performance. The Directors also oversee the services provided to the
Fund by Templeton Investment Counsel, Inc., the Fund's investment manager
("Investment Manager"), and various other service providers. The Fund currently
pays the Independent Directors and Mr. Brady an annual retainer of $1,000 and a
fee of $100 per Board meeting attended. Directors serving on the Audit Committee
of the Fund and other investment companies in Franklin Templeton Investments
receive a flat fee of $2,000 per Audit Committee meeting attended, a portion of
which is allocated to the Fund. Members of a committee are not compensated for
any committee meeting held on the day of a Board meeting.

During the fiscal year ended August 31, 1999, there were five meetings of the
Board, four meetings of the Audit Committee, and three meeting of the Nominating
and Compensation Committee. Each of the Directors attended at least [75]% of the
total number of meetings of the Board and the total number of meetings held by
all committees of the Board on which the Directors served. There was [100]%
attendance at the meetings of the Audit Committee and the Nominating and
Compensation Committee.

Certain Directors and Officers of the Fund are shareholders of Resources and may
receive indirect remuneration due to their participation in management fees and
other fees received from Franklin Templeton Investments by the Investment
Manager and its affiliates. The Investment Manager or its affiliates pay the
salaries and expenses of the Fund's Officers. No pension or retirement benefits
are accrued as part of Fund expenses.

<TABLE>
<CAPTION>
NUMBER OF BOARDS IN
TOTAL FEES RECEIVED FROM FRANKLIN TEMPLETON
TOTAL FEES RECEIVED THE FRANKLIN TEMPLETON INVESTMENTS WHICH EACH
NAME OF DIRECTOR FROM THE FUND ($)/1/ INVESTMENTS ($)/2/ DIRECTOR SERVES/3/
---------------------- ----------------------- ----------------------------- -------------------------
<S> <C> <C> <C>
Harris J. Ashton 1,500 363,165 48
Nicholas F. Brady 1,500 138,700 19
S. Joseph Fortunato 1,500 363,238 50
John Wm. Galbraith 1,544 144,200 18
Andrew H. Hines, Jr. 1,544 203,700 20
Betty P. Krahmer 1,500 138,700 19
Gordon S. Macklin 1,500 363,165 48
Fred R. Millsaps 1,542 201,700 20
</TABLE>

1. Compensation received for the fiscal year ended August 31, 1999.

2. For the calendar year ended December 31, 1999.

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 157 U.S. based funds or series.

The table above indicates the total fees paid to Directors by the Fund
individually and by all of the Franklin Templeton funds. These Directors also
serve as directors or trustees of other investment companies in Franklin
Templeton Investments, many of which hold meetings at different dates and times.
The Directors and the Fund's management believe that having the same individuals
serving on the boards of many of the Franklin Templeton funds enhances the
ability of each fund to obtain, at a relatively modest cost to each separate
fund, the services of high caliber, experienced and knowledgeable Independent
Directors who can more effectively oversee the management of the funds.

Board members historically have followed a policy of having substantial
investments in one or more of the funds in the Franklin Templeton funds, 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 to 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.

WHO ARE THE EXECUTIVE OFFICERS OF THE FUND?

Officers of the Fund are appointed by the Directors and serve at the pleasure of
the Board. Listed below, for each Executive Officer, is a brief description of
recent professional experience:

NAME AND OFFICES PRINCIPAL OCCUPATION
WITH THE FUND DURING PAST FIVE YEARS AND AGE
-----------------------------------------------------------------------------------------
<S> <C>

GARY P. MOTYL President and Portfolio Manager, Templeton
PRESIDENT SINCE 1994_ Investment Counsel, Inc.; officer of other
subsidiaries of Franklin Resources, Inc.;
and FORMERLY, Research Analyst and Portfolio
Manager, Landmark First National Bank (1979-
1981) and Security Analyst, Standard & Poor's
Corporation (1974-1979). Age 48.

CHARLES B. JOHNSON See Proposal 1, "Election of Directors."
CHAIRMAN SINCE 1995 AND
VICE PRESIDENT SINCE 1992

MARK G. HOLOWESKO President, Templeton Global Advisors Limited;
VICE PRESIDENT SINCE 1991 Chief Investment Officer, Global Equity Group;
Executive Vice President and Director, Templeton
Worldwide, Inc.; officer of 19 of the
investment companies in Franklin
Templeton Investments; and FORMERLY,
Investment Administrator, RoyWest Trust
Corporation (Bahamas) Limited
(1984-1985). Age 40.

RUPERT H. JOHNSON, JR. Vice Chairman, Member-Office of the Chairman
VICE PRESIDENT SINCE 1996 and Director, Franklin Resources, Inc.; Executive
Vice President and Director, Franklin
Templeton Distributors, Inc.; Director,
Franklin dvisers, 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. Age 60.

HARMON E. BURNS Vice Chairman, Member-Office of the Chairman
VICE PRESIDENT SINCE 1996 and Director, Franklin Resources, Inc.; Executive
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 the Franklin
Templeton Investments. Age 55.

See Proposal 1, "Election of Directors."
CHARLES E. JOHNSON
DIRECTOR 1992 AND
VICE PRESIDENT SINCE 1996

MARTIN L. FLANAGAN President, Member-Office of the President,
VICE PRESIDENT SINCE 1991 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. Age 40.

JOHN R. KAY Vice President, Templeton Worldwide, Inc.; Assistant
VICE PRESIDENT SINCE 1994 Vice President, Franklin Templeton Distributors, Inc.;
officer of 24 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Vice President
and Controller, Keystone Group, Inc. Age 60.

MURRAY L. SIMPSON Executive Vice President and General Counsel,
VICE PRESIDENT AND Franklin Resources, Inc.; officer and/or director of
ASSISTANT SECRETARY some of the subsidiaries of Franklin Resources,
SINCE FEBRUARY 2000 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). Age 63.

BARBARA J. GREEN Vice President and Deputy General
VICE PRESIDENT SINCE Counsel, Franklin Resources, Inc.; Senior
FEBRUARY 2000 AND Vice President, Templeton Worldwide, Inc.
SECRETARY SINCE 1996 and Templeton Global Investors, 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). Age 52.

DAVID P. GOSS Associate General Counsel, Franklin Resources,
VICE PRESIDENT AND Inc.; President, Chief Executive Officer and
ASSISTANT SECRETARY Director, Franklin Select Realty Trust, Property
SINCE FEBRUARY 2000 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). Age 53.

ELIZABETH M. KNOBLOCK General Counsel, Secretary and Senior Vice
VICE PRESIDENT - COMPLIANCE SINCE President, Templeton Investment Counsel, Inc.;
1996 Senior Vice President, Templeton Global Investors,
Inc.; officer of other subsidiaries of Franklin
Resources, Inc. and of 23 of the investment
companies in Franklin Templeton Investments;
and FORMERLY, Vice President and Associate
General Counsel, Kidder Peabody & Co. Inc.
(1989-1990), Assistant General Counsel, Gruntal
& Co., Inc. (1988), Vice President and Associate
General Counsel, Shearson Lehman Hutton Inc. (1988),
Vice President and Assistant General Counsel,
E.F. Hutton & Co. Inc. (1986-1988), and Special
Counsel, Division of Investment Management, U.S.
Securities and Exchange Commission (1984-1986). Age 45.

JAMES R. BAIO Certified Public Accountant; Senior Vice President,
TREASURER SINCE 1994 Templeton Worldwide, Inc., Templeton Global Investors,
Inc. and FTTrust Company; officer of 20 of the
investment companies in Franklin Templeton Investments;
and FORMERLY, Senior Tax Manager, Ernst & Young
(certified public accountants)(1977-1989). Age 46.
</TABLE>

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU APPROVE PROPOSAL 1

PROPOSAL 2: RATIFICATION OR REJECTION OF PRICEWATERHOUSE COOPERS LLP
AS THE INDEPENDENT AUDITORS

HOW ARE INDEPENDENT AUDITORS SELECTED?

The Board has a standing Audit Committee consisting of Messrs. Galbraith, Hines
and Millsaps, all of whom are Independent Directors. The Audit Committee reviews
the maintenance of the Fund's records and the safekeeping arrangements of the
Fund's custodian, reviews both the audit and non-audit work of the Fund's
independent auditors, and submits a recommendation to the Board as to the
selection of independent auditors.

WHICH INDEPENDENT AUDITORS DID THE BOARD SELECT?

Upon the recommendation of the Audit Committee, the Board selected the firm of
PricewaterhouseCoopers LLP, 333 Market Street, San Francisco, CA 94105, as
auditors of the Fund. PricewaterhouseCoopers LLP has examined and reported on
the fiscal year-end financial statements, dated August 31, 1999, and certain
related U.S. Securities and Exchange Commission filings. You are being asked to
ratify the Board's selection of PricewaterhouseCoopers LLP as auditors of the
Fund. Services to be performed by the auditors include examining and reporting
on the fiscal year-end financial statements of the Fund and certain related
filings with the U.S. Securities and Exchange Commission.

McGladrey & Pullen, LLP resigned as independent auditors of the Fund on August
13, 1999. McGladrey & Pullen, LLP served as the Fund's auditors since its
inception March 1, 1991 through the fiscal year ended August 31, 1998. There
have not been any disputes or disagreements with McGladrey & Pullen, LLP on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedures. H&R Block, a public company, acquired certain
assets of McGladrey & Pullen, LLP on August 2, 1999. Following the acquisition
by a public company, McGladrey & Pullen, LLP elected not to continue servicing
clients in the mutual fund business. As a result, the partners and professional
staff who were previously responsible for auditing the Fund's financial
statements became associated with PricewaterhouseCoopers LLP.

Neither the firm of PricewaterhouseCoopers LLP nor any of its members have any
material direct or indirect financial interest in the Fund. Representatives of
PricewaterhouseCoopers LLP are not expected to be present at the Meeting, but
will have the opportunity to make a statement if they wish, and will be
available should any matter arise requiring their presence.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU APPROVE PROPOSAL 2

INTRODUCTION TO PROPOSALS 3 AND 4.

WHY IS THE FUND AMENDING OR ELIMINATING CERTAIN OF ITS FUNDAMENTAL INVESTMENT
RESTRICTIONS?

The Fund's investment activities are governed by its investment policies and
investment restrictions. Under the 1940 Act, certain investment restrictions are
required to be "fundamental," which means that they can only be changed by a
shareholder vote. An investment company may designate additional investment
policies and restrictions as fundamental, and it may also adopt
"non-fundamental" policies and restrictions, which may be changed by the
Directors without shareholder approval.

After the Fund was formed, certain legal and regulatory requirements applicable
to mutual funds changed. For example, certain restrictions imposed by state laws
and regulations were eliminated by the National Securities Markets Improvement
Act of 1996 ("NSMIA") and therefore are no longer applicable to funds. The Fund
currently is subject to fundamental investment restrictions that, as a result of
NSMIA, are either more restrictive than required or no longer required at all
under current law. Accordingly, the Directors recommend that the Fund's
shareholders approve the amendment or elimination of certain of the Fund's
current fundamental investment restrictions. The proposed restrictions satisfy
current federal regulatory requirements and are written to provide flexibility
to respond to future legal, regulatory, market or technical changes.

By reducing the total number of investment restrictions that can be changed only
by a shareholder vote, the Directors believe that the Fund may be able to
minimize the costs and delays associated with holding future shareholder
meetings to revise fundamental restrictions that become outdated or
inappropriate. Directors also believe that the Investment Manager's ability to
manage the Fund's assets in a changing investment environment will be enhanced,
and that investment management opportunities may increase as a result of these
changes.

The proposed changes will not affect the Fund's investment objective of
long-term capital growth. Although the proposed changes in fundamental
investment restrictions will provide the Fund greater flexibility to respond to
future investment opportunities, the Investment Manager does not anticipate that
the changes, individually or in the aggregate, will result in a material change
in the level of investment risk associated with investment in the Fund or
materially affect the manner in which the Fund is managed.

The fundamental investment restrictions proposed for amendment, together with
the recommended changes to these restrictions, are detailed in Exhibit A.
Shareholders are requested to vote separately on each Sub-Proposal in Proposal
3.

PROPOSAL 3: AMENDMENT OF CERTAIN OF THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTIONS (THIS PROPOSAL INVOLVES SEPARATE VOTES ON SUB-PROPOSALS
3(A) - 3(G))

SUB-PROPOSAL 3(A): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING BORROWING.

The 1940 Act requires investment companies to impose certain limitations on
borrowing activities. The limitations on borrowing are generally designed to
protect shareholders and their investment by restricting a fund's ability to
subject its assets to the claims of creditors who might have a claim to the
fund's assets that would take precedence over the claims of shareholders. A
fund's borrowing restriction must be fundamental.

Under the 1940 Act, a fund may borrow from banks up to one-third of its total
assets (including the amount borrowed). In addition, a fund may borrow up to 5%
of its total assets for temporary purposes from any person, provided that such
borrowing is privately arranged. Funds typically borrow money to meet
redemptions in order to avoid forced, unplanned sales of portfolio securities.
This technique allows a fund greater flexibility to buy and sell portfolio
securities for investment or tax considerations, rather than for cash flow
considerations.

WHAT IS THE FUND'S CURRENT BORROWING RESTRICTION?

The Fund's current borrowing restriction states that the Fund may not:

BORROW MONEY FOR ANY PURPOSE OTHER THAN REDEEMING ITS SHARES OR PURCHASING
ITS SHARES FOR CANCELLATION, AND THEN ONLY AS A TEMPORARY MEASURE UP TO AN
AMOUNT NOT EXCEEDING 5% OF THE VALUE OF ITS TOTAL ASSETS; OR PLEDGE,
MORTGAGE, OR HYPOTHECATE ITS ASSETS FOR ANY PURPOSE OTHER THAN TO SECURE
SUCH BORROWINGS, AND THEN ONLY UP TO SUCH EXTENT NOT EXCEEDING 10% OF THE
VALUE OF ITS TOTAL ASSETS AS THE BOARD MAY BY RESOLUTION APPROVE. FOR THE
PURPOSES OF THIS INVESTMENT RESTRICTION, COLLATERAL ARRANGEMENTS WITH
RESPECT TO MARGIN FOR A FUTURES CONTRACT OR A FORWARD CONTRACT ARE NOT
DEEMED TO BE A PLEDGE OF ASSETS.

WHAT EFFECT WILL AMENDING THE CURRENT BORROWING RESTRICTION HAVE ON THE FUND?

As described in the Fund's current investment restriction number 7, the Fund is
presently limited to borrowing up to 5% of assets, rather than the 33 1/3%
allowed under current law. The proposed revision would increase this borrowing
limit to the legally permissible limit of 33 1/3%. The proposed restriction
would also clarify that the Fund may borrow: (1) from banks to the extent
permitted by the 1940 Act or any exemptions therefrom, and (2) from any person
in a private transaction not intended for public distribution for temporary or
emergency purposes, but (3) in any event all borrowings must not exceed 33 1/3%
of total assets. The Fund's current restriction also states that the Fund may
not borrow for any purpose other than redeeming its shares or purchasing its
shares for cancellation. The proposed restriction would permit the Fund to
borrow for investment purposes.

The proposed restriction also permits the Fund to borrow cash from other
investment companies. The SEC recently granted an exemptive order to the Fund,
together with other funds in Franklin Templeton Investments, permitting the Fund
to borrow money from other funds in Franklin Templeton Investments. The proposed
borrowing restriction would permit the Fund, under certain circumstances and in
accordance with the exemptive order, to borrow money from other Franklin and
Templeton funds at rates that are more favorable than those the Fund would
receive if it borrowed from banks or other lenders.

Current investment restriction number 7 also addresses limitations on the Fund's
ability to mortgage, pledge or hypothecate its securities, except to secure
borrowings. The actual limitation on pledging, mortgaging or hypothecating the
Fund's securities is proposed to be eliminated (See Proposal 4) as it is no
longer necessary for a Fund to have a specific policy in this regard. Since
pledging, mortgaging or hypothecating the Fund's securities in connection with
borrowings could be deemed to involve the issuance of senior securities, an
appropriate carve-out in the senior securities restriction is being proposed
(See Sub-Proposal 3(f)). Thus, approval of Sub-Proposal (a) would have the
effect of isolating the Fund's borrowing restriction from other limitations
currently contained in the restriction, which, in connection with borrowing
activities, may raise senior security issues.

Since the proposed borrowing restriction would provide the Fund with greater
borrowing flexibility, the Fund may be subject to additional costs, as well as
the risks inherent to borrowing, such as reduced total return.

WHAT IS THE FUND'S PROPOSED BORROWING RESTRICTION?

If approved by shareholders, the borrowing restriction will be revised to state
that the Fund may not:

BORROW MONEY, EXCEPT THAT THE FUND MAY BORROW MONEY FROM BANKS OR OTHER
INVESTMENT COMPANIES TO THE EXTENT PERMITTED BY THE 1940 ACT, OR ANY
EXEMPTIONS THEREFROM WHICH MAY BE GRANTED BY THE SEC, OR FROM ANY PERSON IN
A PRIVATE TRANSACTION NOT INTENDED FOR PUBLIC DISTRIBUTION FOR TEMPORARY OR
EMERGENCY PURPOSES AND THEN IN AN AMOUNT NOT EXCEEDING 33 1/3% OF THE VALUE
OF THE FUND'S TOTAL ASSETS (INCLUDING THE AMOUNT BORROWED).

SUB-PROPOSAL 3(B): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING UNDERWRITING.

Under the 1940 Act, the Fund's policy concerning underwriting is required to be
fundamental. Under U.S. Federal securities laws, a person or company generally
is considered an underwriter if it participates in the public distribution of
securities of other issuers, usually by purchasing the securities from the
issuer with the intention of reselling the securities to the public. From time
to time, a mutual fund may purchase a security for investment purposes that it
later sells or redistributes to institutional investors or others under
circumstances where the Fund could possibly be considered to be an underwriter
under the technical definition of underwriter contained in U.S. Federal
securities laws. For example, funds often purchase securities in private
securities transactions where a resale could raise a question relating to
whether or not the fund is technically acting as an underwriter. However,
relatively recent SEC interpretations clarify that resales of privately placed
securities by institutional investors do not make the institutional investor an
underwriter in these circumstances. The proposed restriction encompasses these
SEC positions.

The Fund's current restriction relating to underwriting is combined with
restrictions relating to other issues in investment restriction 5. The adoption
of this Sub-Proposal would result in the separation of the Fund's underwriting
restriction from the others currently contained in the Fund's fundamental
investment restriction 5. These restrictions relate to (i) the issuance of
senior securities; (ii) the purchase of securities on margin or selling short;
and (iii) the writing, buying and selling of puts, calls, straddles, or spreads,
which are proposed to be amended or eliminated in other Proposals of this proxy
statement (namely, Sub-Proposal 3(f) and Proposal 4).

WHAT IS THE FUND'S CURRENT UNDERWRITING RESTRICTION?

The Fund's current restriction relating to underwriting states, in relevant
part, that the Fund may not "Act as an underwriter."

WHAT EFFECT WILL AMENDING THE CURRENT UNDERWRITING RESTRICTION HAVE ON THE FUND?

The proposed restriction relating to underwriting is substantially similar to
the current restriction. However, the proposed underwriting restriction
clarifies that the Fund may sell its own shares without being deemed an
underwriter. Under the 1940 Act, a mutual fund will not be considered an
underwriter if it sells its own shares pursuant to a written distribution plan
that complies with certain provisions of the 1940 Act.

The proposed restriction also specifically permits the Fund to resell restricted
securities in those instances where there may be a question as to whether the
Fund is technically acting as an underwriter. By separating the proposed
underwriting restriction from several other issues, the Fund's investment
restrictions would be clarified. It is not anticipated that adoption of the
proposed restriction would involve any additional risk as the proposed
restriction would not affect the way the Fund is currently managed.

WHAT IS THE FUND'S PROPOSED UNDERWRITING RESTRICTION?

If approved by shareholders, the Fund's underwriting restriction will be revised
to state that the Fund may not:

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.

SUB-PROPOSAL 3(C): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING LENDING.

Under the 1940 Act, a fund's policy regarding lending must be fundamental.
Certain investment techniques could, under certain circumstances, be considered
to be loans. For example, if the Fund invests in debt securities, such
investments might be considered to be loans from the Fund to the issuer of the
debt securities. In order to ensure that the Fund may invest in certain debt
securities or repurchase agreements, which could technically be characterized as
the making of loans, the Fund's current fundamental investment restriction
specifically carves out such policies from its prohibitions.

In addition, the Fund's current fundamental investment restriction explicitly
permits the Fund to lend its portfolio securities. Securities lending is a
practice that has become common in the mutual fund industry and involves the
temporary loan of portfolio securities to parties who use the securities for the
settlement of securities transactions. The collateral delivered to the Fund in
connection with such a transaction is then invested to provide the Fund with
additional income it might not otherwise have. Securities lending involves
certain risks if the borrower fails to return the securities.

WHAT IS THE FUND'S CURRENT LENDING RESTRICTION?

The Fund's lending restriction currently states that the Fund may not:

LOAN MONEY, APART FROM THE PURCHASE OF A PORTION OF AN ISSUE OF PUBLICLY
DISTRIBUTED BONDS, DEBENTURES, NOTES AND OTHER EVIDENCES OF INDEBTEDNESS,
ALTHOUGH THE FUND MAY ENTER INTO REPURCHASE AGREEMENTS AND LEND ITS
PORTFOLIO SECURITIES.

WHAT EFFECT WILL AMENDING THE CURRENT LENDING RESTRICTION HAVE ON THE FUND?

The proposed restriction would provide the Fund with greater lending
flexibility. While the proposed restriction retains the carve-outs in the
existing restriction, it also would permit the Fund to invest in loan
participations and direct corporate loans that recently have become more common
as investments for investment companies. The proposed restriction also would
provide the Fund additional flexibility to make loans to affiliated investment
companies. The investment companies in Franklin Templeton Investments, including
the Fund, recently received an exemptive order from the SEC that permits the
Fund to lend cash to other Franklin and Templeton funds. The proposed
restriction permits the Fund, under certain conditions, to lend cash to other
Franklin or Templeton funds at more favorable rates than those the Fund would
receive if the Fund loaned cash to banks through short-term lendings such as
repurchase agreements. The Board anticipates that this additional flexibility to
lend cash to affiliated investment companies would provide additional investment
opportunities, and would enhance the Fund's ability to respond to changes in
market, industry or regulatory conditions.

It is not anticipated that adoption of the proposed restriction would involve
any additional risk as the proposed restriction would not affect the way the
Fund is currently managed.

WHAT IS THE FUND'S PROPOSED LENDING RESTRICTION?

If approved by shareholders, the Fund's lending restriction will be revised to
state that the Fund may not:

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 PERMITTED BY THE
1940 ACT OR ANY EXEMPTIONS THEREFROM WHICH MAY BE GRANTED BY THE SEC.

SUB-PROPOSAL 3(D): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING CONCENTRATION OF THE FUND'S INVESTMENTS IN THE SAME INDUSTRY.

Under the 1940 Act, a fund's policy of concentrating its investments in
securities of companies in the same industry must be fundamental. Under U.S.
Federal securities laws, a mutual fund "concentrates" its investments if it
invests more than 25% of its "net" assets (exclusive of certain items such as
cash, U.S. government securities, securities of other investment companies, and
tax-exempt securities) in a particular industry or group of industries. A fund
is not permitted to concentrate its investments in a particular industry unless
it so states. The Fund's current concentration policy does not include the
carve-outs contained in the 1940 Act and also relates to the Fund's "total"
assets rather than "net" assets.

WHAT IS THE FUND'S CURRENT RESTRICTION REGARDING INDUSTRY CONCENTRATION?

The Fund's current restriction regarding concentration states that the Fund may
not "INVEST MORE THAN 25% OF THE FUND'S TOTAL ASSETS IN A SINGLE INDUSTRY."

WHAT EFFECT WILL AMENDING THE CURRENT RESTRICTION REGARDING INDUSTRY
CONCENTRATION HAVE ON THE FUND?

The proposed restriction provides the Fund with added flexibility because,
consistent with the 1940 Act, it exempts from the 25% limitation (i) securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, and (ii) the securities of other investment companies. It
also recites the current U.S. Federal securities law requirement with respect to
concentration that limits investments to "net" assets as opposed to "total"
assets. This investment flexibility may help the Fund respond to future legal,
regulatory, market or technical changes. However, adoption of the proposed
restriction is not expected to change materially the way in which the Fund is
currently managed as the Fund does not intend to begin concentrating in shares
of the U.S. government or any of its agencies or instrumentalities or of other
investment companies.

WHAT IS THE FUND'S PROPOSED RESTRICTION REGARDING INDUSTRY CONCENTRATION?

If approved by shareholders, the Fund's restriction relating to concentration
will be revised to state that the Fund may not:

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).

SUB-PROPOSAL 3(E): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
REGARDING INVESTMENTS IN REAL ESTATE AND COMMODITIES.

Under the 1940 Act, a fund's restrictions regarding investments in real estate
and commodities must be fundamental. The Fund's current investment restrictions
relating to real estate and commodities are included in investment restriction
1. This restriction also includes restrictions relating to investment in other
open-end investment companies and investment in oil, gas or other mineral
exploration or development programs. Adoption of this Sub-Proposal would result
in the creation of an investment restriction relating only to real estate and
commodities investments. The restrictions relating to the other activities
contained in current restriction 1 are proposed to be eliminated in another
Proposal in this proxy statement (namely, Proposal 4).

WHAT ARE THE FUND'S CURRENT RESTRICTIONS REGARDING INVESTMENTS IN REAL ESTATE
AND COMMODITIES?

The Fund's current restriction regarding investments in real estate and
commodities states, in relevant part, that the Fund may not:

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); ... PURCHASE OR SEll COMMODITY CONTRACTS (EXCEPT
FORWARD CONTRACTS AND FUTURES CONTRACTS AS DESCRIBED IN THE FUND'S
PROSPECTUS).

WHAT EFFECT WILL AMENDING THE REAL ESTATE AND COMMODITIES RESTRICTIONS HAVE ON
THE FUND?

REAL ESTATE: The proposed restriction specifically would reference the Fund's
ability to purchase securities of real estate investment trusts ("REITS") to the
extent that an investment in REITS would otherwise meet the Fund's investment
criteria. Investing in REITS has gained in popularity since the early 1990s, and
the number of REITS available for investment also has increased dramatically.
The proposed restriction also would eliminate the current prohibition on the
Fund's investing in mortgages. The Fund's existing restriction would permit an
investment in REITS as well because REITS are "marketable securities secured by
real estate or interests therein" as recited in existing restriction l. However,
the Fund will continue to be prohibited from directly purchasing or selling real
estate. It is not anticipated that this modification will involve any additional
risk to the Fund as the Fund does not currently invest, and has not in the past
invested, in real estate or real estate-related securities.

COMMODITIES: Generally, commodities are considered to be physical commodities
such as wheat, cotton, rice and corn. However, futures contracts, including
financial futures contracts such as those related to currencies, stock indices
or interest rates, are also considered to be commodities. Funds typically invest
in such contracts and options on contracts for hedging or other investment
purposes.

The proposed restriction clarifies that the Fund has the flexibility to invest
in financial futures contracts and related options. This authority has been
disclosed in the Fund's statement of additional information and has been
referenced in the current carve-out to investment restriction 1, as well as in
investment restriction 5. Therefore, it is not anticipated that the proposed
restriction would involve any additional risk to the Fund.

WHAT IS THE FUND'S PROPOSED RESTRICTION REGARDING INVESTMENTS IN REAL ESTATE AND
COMMODITIES?

If approved by shareholders, the Fund's proposed restriction regarding
investments in real estate and commodities will state that the Fund may not:

PURCHASE OR SELL REAL ESTATE AND COMMODITIES, EXCEPT THAT THE FUND MAY
PURCHASE OR SELL SECURITIES OF REAL ESTATE INVESTMENT TRUSTS, MAY PURCHASE
OR SELL CURRENCIES, MAY ENTER INTO FUTURES CONTRACTS ON SECURITIES,
CURRENCIES, AND OTHER INDICES OR ANY OTHER FINANCIAL INSTRUMENTS, AND MAY
PURCHASE AND SELL OPTIONS ON SUCH FUTURES CONTRACTS.

SUB-PROPOSAL 3(F): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION
REGARDING SHORT SALES AND ISSUING SENIOR SECURITIES.

Under the 1940 Act, the Fund must have an investment policy describing its
position with respect to senior securities. A "senior security" is an obligation
of a fund with respect to its earnings or assets that takes precedence over the
claims of the fund's shareholders with respect to the same earnings or assets.
The 1940 Act generally prohibits an open-end fund from issuing senior securities
in order to limit the use of leverage. In general, a fund uses leverage when it
borrows money to enter into securities transactions, or acquires an asset
without being required to make payment until a later time.

SEC staff interpretations allow a fund to engage in a number of types of
transactions that might otherwise be considered to create "senior securities" or
"leverage," so long as the fund meets certain collateral requirements designed
to protect shareholders. For example, some transactions that may create senior
security concerns include short sales, certain options and futures transactions,
reverse repurchase agreements and securities transactions that obligate the fund
to pay money at a future date (such as when-issued, forward commitment or
delayed delivery transactions). When engaging in such transactions, a fund must
mark on its or its custodian bank's books, or set aside money or securities with
its custodian bank to meet the SEC staff's collateralization requirements. This
procedure effectively eliminates a fund's ability to engage in leverage for
these types of transactions.

The Fund's current investment restriction relating to senior securities
specifically carves-out certain types of leveraging transactions, and also is
combined with restrictions relating to other issues. The adoption of this
Sub-Proposal would result in the separation of the Fund's senior securities
restriction from the underwriting restriction, which is currently contained in
fundamental investment restriction 5, as is set forth in its entirety in Exhibit
B, and which is proposed to be amended in another Sub-Proposal in this proxy
statement (namely, Sub-Proposal 3(b)). Current restriction 5 also contains a
restriction prohibiting the purchase of securities on margin and short sales.
The restriction relating to the purchase of securities on margin is proposed to
be eliminated as part of another proposal in this proxy statement (namely,
Proposal 4). The restriction on short sales, included in current investment
restriction 5, would be carved out of the new senior securities restriction, as
further described below.

WHAT IS THE FUND'S CURRENT RESTRICTION CONCERNING ISSUING SENIOR SECURITIES AND
SHORT SALES?

The Fund's current restriction concerning issuing senior securities is
fundamental and states that the Fund may not:

...[I]SSUE SENIOR SECURITIES;... SELL SHORT;...WRITE BUY OR SELL PUTS,
CALLS, STRADDLES OR SPREADS (BUT THE FUND MAY MAKE MARGIN PAYMEnts in
CONNECTION WITH FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON
SECURITIES INDICES AND FOREIGN CURRENCIES).

WHAT EFFECT WILL AMENDING THE RESTRICTION REGARDING SHORT SALES AND ISSUING
SENIOR SECURITIES HAVE ON THE FUND?

The proposed restriction, like current restriction 5, would permit the Fund to
engage in permissible types of leveraging transactions and would expand the
types of permissible leveraging transactions beyond those currently permitted.
Essentially, the proposed restriction clarifies the Fund's ability to engage in
those investment transactions (such as options and futures contracts, repurchase
transactions and short sales) that, while appearing to raise senior security
concerns, have been interpreted over the years as not constituting the issuance
of senior securities under the federal securities laws provided that certain
regulatory conditions are met.

By separating the proposed senior securities restriction from several other
issues, the restrictions on the Fund will also be clarified. The Board does not
anticipate that any additional risk to the Fund will occur as a result of
amending the current restriction and making it fundamental because the Fund has
no present intention of changing its current investment policies or engaging in
transactions that may be interpreted as issuing senior securities that it
previously was not permitted to do.

WHAT IS THE FUND'S PROPOSED RESTRICTION REGARDING ISSUING SENIOR SECURITIES?

If approved by shareholders, the Fund's senior securities restriction will be a
fundamental restriction, and will state that the Fund may not:

ISSUE SECURITIES SENIOR TO THE FUND'S PRESENTLY AUTHORIZED SHARES OF COMMON
STOCK. EXCEPT THAT THIS RESTRICTION SHALL NOT BE DEEMED TO PROHIBIT THE
FUND FROM (A) MAKING ANY PERMITTED BORROWINGS, LOANS, MORTGAGES, OR
PLEDGES, (B) ENTERING INTO OPTIONS, FUTURES CONTRACTS, FORWARD CONTRACTS,
REPURCHASE TRANSACTIONS, OR REVERSE REPURCHASE TRANSACTIONS, OR (C) MAKING
SHORT SALES OF SECURITIES TO THE EXTENT PERMITTED BY THE 1940 ACT AND ANY
RULE OR ORDER THEREUNDER, OR SEC STAFF INTERPRETATIONS THEREOF.

If shareholders approve Proposal 6, then the phrase "authorized shares of
beneficial interest" will be used instead of "authorized shares of common
stock," because Delaware business trusts issue shares of beneficial interest and
Maryland corporations issue common stock.

SUB-PROPOSAL 3(G): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
REGARDING DIVERSIFICATION.

The 1940 Act prohibits a "diversified" investment company, like the Fund, from
purchasing securities of any one issuer if, at the time of purchase, as to 75%
of the fund's total assets more than 5% of the fund's total assets would be
invested in securities of that issuer, or the fund would own or hold more than
10% of the outstanding voting securities of that issuer, except that up to 25%
of the fund's total assets may be invested without regard to these limitations.
Under the 1940 Act, these 5% and 10% limitations do not apply to securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
or to the securities of other investment companies.

WHAT ARE THE FUND'S CURRENT DIVERSIFICATION REQUIREMENTS?

The Fund's diversification restrictions currently state that the Fund may not:

3. INVEST MORE THAN 5% OF ITS TOTAL ASSETS IN THE SECURITIES OF ANY ONE
ISSUER (EXCLUSIVE OF U.S. GOVERNMENT SECURITIES).

4. 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.

WHAT EFFECT WILL STANDARDIZATION OF THE CURRENT INVESTMENT DIVERSIFICATION
RESTRICTION HAVE ON THE FUND?

The current restriction applies the 5% limitation and a more narrow version of
the 10% limitation to 100% of the Fund's total assets rather than the lower
statutorily imposed 75% limit. Further, although the 1940 Act excludes the
securities of other investment companies as well as those of the U.S. government
and its agencies and instrumentalities, the current restrictions do not include
such carve-outs for the securities of other investment companies. Investment
restriction 4 is proposed to be eliminated as part of another proposal in this
proxy statement (namely Proposal 4). Current restriction 4 is broader than what
is required under the 1940 Act definition of diversification, as it imposes the
10% limitation on all classes of securities of a company not just outstanding
voting securities. The proposed restriction tracks more closely the 1940 Act
definition.

Amending the Fund's diversification policy would make it consistent with the
definition of a diversified investment company under the 1940 Act, and would
provide the Fund with greater investment flexibility. The proposed restriction
is similar to a combination of the current restrictions, but would help the Fund
achieve the goal of standardizing the language of the investment restrictions
among Franklin Templeton Investments.

The proposed investment restriction clarifies that the 5% and 10% limitations do
not apply to 25% of the Fund's total assets and that the 10% requirement is
limited to outstanding voting securities. However, it is not currently
anticipated that adoption of the proposed restriction would materially change
the way the Fund is managed.

The proposed restriction excludes from the 5% and 10% limitations the purchase
by the Fund of the securities of other investment companies. With this
exclusion, the Fund would be able to invest cash held at the end of the day in
money market funds or other short-term investments without regard to the 5% and
10% investment limitations. The Fund, together with the other funds in Franklin
Templeton Investments, has obtained an exemptive order from the SEC (the "Cash
Sweep Order") to permit the Franklin and Templeton funds to invest their
uninvested cash in one or more Franklin or Templeton money market funds.
Amending the Fund's current restriction would permit the Fund to take advantage
of the investment opportunities presented by the Cash Sweep Order since the Cash
Sweep Order contemplates relief from the 1940 Act restrictions relating to the
permissible percentage investments in other investment companies.

WHAT IS THE FUND'S PROPOSED INVESTMENT DIVERSIFICATION RESTRICTION?

If approved by shareholders, the Fund's diversification restriction will be
revised to state that the Fund may not:

PURCHASE THE SECURITIES OF ANY ONE ISSUER (OTHER THAN THE U.S. GOVERNMENT
OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES OR SECURITIES OF OTHER
INVESTMENT COMPANIES) IF IMMEDIATELY AFTER SUCH INVESTMENT (A) MORE THAN 5%
OF THE VALUE OF THE FUND'S TOTAL ASSETS WOULD BE INVESTED IN SUCH ISSUER OR
(B) MORE THAN 10% OF THE OUTSTANDING VOTING SECURITIES OF SUCH ISSUER WOULD
BE OWNED BY THE FUND, EXCEPT THAT UP TO 25% OF THE VALUE OF THE FUND'S
TOTAL ASSETS MAY BE INVESTED WITHOUT REGARD TO SUCH 5% AND 10% LIMITATIONS.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU APPROVE EACH SUB- PROPOSAL 3(A)-3(G)

PROPOSAL 4: ELIMINATION OF CERTAIN OF THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTIONS

WHICH TWELVE FUNDAMENTAL INVESTMENT RESTRICTIONS IS THE BOARD RECOMMENDING THAT
THE FUND ELIMINATE?

Twelve of the Fund's fundamental investment restrictions were originally drafted
in response to state laws and regulations, which, due to NSMIA, are no longer
required to be included in the Fund's restrictions. Further, many of the
restrictions are not consistent with SEC staff positions since the positions
have either changed or are no longer relevant to the Fund. Since NSMIA
eliminated the states' ability to substantively regulate investment companies,
the Fund is no longer legally required to include all or certain portions of
current restrictions 1, 2, 4, 5, 7, 8, 9, 10, 12, 13 and 14 among its
fundamental investment restrictions. Templeton Investment Counsel, Inc., the
Fund's Investment Manager, has recommended, and the Board has determined, that
certain of these current fundamental investment restrictions should be
eliminated.

The exact wording of the restrictions proposed to be eliminated (referred to in
this Proposal 4 as the "Restrictions"), has been compiled in Exhibit B, which is
entitled, "Current Fundamental Investment Restrictions Proposed to be
Eliminated," for ease of reference.

OIL, GAS OR OTHER MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS

The Fund's current fundamental investment restriction number 1, which limits the
Fund's ability to buy or sell interests in oil, gas or mineral exploration or
development programs, is no longer required to be fundamental. These
restrictions were originally enacted in response to various state law
requirements, but under NSMIA, the Fund is no longer legally required to retain
such policies as fundamental restrictions. As a general matter, elimination of
these fundamental restrictions should not have an impact on the day-to-day
management of the Fund as the Fund has not previously, nor does it currently
intend to engage in these types of investment activities.

INVESTMENT IN OTHER INVESTMENT COMPANIES

The Fund's current restriction 1 limits the Fund's ability to invest in the
securities of other open-end investment companies. This restriction 1, which is
inconsistent with the 1940 Act provisions in this regard, was originally
included in the Fund's fundamental investment restrictions in response to
various state law requirements. Under NSMIA, however, the Fund is no longer
legally required to retain such a policy as a fundamental restriction.

Upon elimination of this restriction, the Fund would remain subject to the 1940
Act restrictions (or any exemption from such restrictions) on a fund's ability
to invest in other open-end funds. The 1940 Act restrictions state that a fund
may not purchase more than 3% of another fund's total outstanding voting stock,
commit more than 5% of its assets to the purchase of another fund's securities,
or have more than 10% of its total assets invested in securities of all other
funds. Eliminating the present restriction would permit the Fund to invest cash
held at the end of the day in money market funds and to take advantage of the
investment opportunities presented by the Cash Sweep Order (as described in
Sub-Proposal 3(a)) since the Cash Sweep Order contemplates relief from the 1940
Act restrictions relating to the permissible percentage investments in other
investment companies in certain limited circumstances.

Elimination of this restriction should not have an impact on the day-to-day
management of the Fund as the Fund does not intend to begin pursuing its
investment objective through the purchase of other open-end investment company
securities except to the extent of cash management through the Cash Sweep Order
described above.

MANAGEMENT OWNERSHIP OF SECURITIES

The Fund's current restriction number 2 limits the Fund's ability to invest in
securities issued by companies whose securities are owned in certain amounts by
Directors and officers of the Fund, or its Investment Manager. This policy
originated many years ago with a now obsolete state securities law. As a general
matter, elimination of this fundamental restriction should not have an impact on
the day-to-day management of the Fund because the 1940 Act restrictions relating
to diversification will still apply to the Fund and the Fund has no present
intention to accumulate ownership of securities currently held by Fund
management.

CONTROL OR MANAGEMENT

The Fund's current fundamental investment restriction number 4 limits the Fund's
ability to invest for purposes of exercising control or management. This
restriction was enacted in response to various state securities laws and is no
longer required under NSMIA. Typically, if a fund acquires a large percentage of
the securities of a single issuer, it will be deemed to have invested in such
issuer for the purposes of exercising control or management. This restriction
was intended to ensure that a mutual fund would not be engaged in the business
of managing another company. Eliminating this restriction will not have any
impact on the day-to-day management of the Fund because the Fund has no present
intention to invest in an issuer for the purposes of exercising control or
management. Further, the goal of this restriction, namely to limit a fund's
ability to control another issuer, is embodied in the 1940 Act diversification
rule, which is proposed to be incorporated in the proposed investment
restriction relating to diversification (described in Sub-Proposal 3(g)). The
diversification restriction limits the Fund's ability to own more than a certain
percentage of the outstanding voting securities of any one issuer, which acts to
limit its ability to exercise control or management over another company.

SECURITIES ON MARGIN OR SHORT SALES

The Fund's current fundamental investment restriction number 5 limits the Fund's
ability to purchase securities on margin or sell securities short. This
restriction was originally included in response to the various state law
requirements to which mutual funds used to be subject. Under NSMIA, the Fund is
no longer required to retain a fundamental policy regarding both of these types
of investment activities.

As a general matter, elimination of this fundamental restriction relating to
purchasing securities on margin or selling securities short should not have an
impact on the day-to-day management of the Fund because the 1940 Act
prohibitions on these types of transactions would continue to apply to the Fund.
The Fund's ability to sell securities short, while no longer required to be
fundamental, raises senior security issues. Accordingly, the Fund's ability to
sell securities short is addressed in the proposed restriction relating to
issuing senior securities (described in Sub-Proposal 3(f)). Under the proposed
restriction, the Fund would be permitted to sell securities short to the extent
permitted by the 1940 Act, and any rule or exemptive order granted by the
Securities and Exchange Commission ("SEC"). The Fund's ability to purchase
securities on margin also raises senior security issues and is similarly
prohibited under the 1940 Act. Elimination of the restriction, therefore, would
not affect the Fund's ability to purchase on margin. Finally, the Fund has not
previously engaged, nor does it currently intend to engage, in these investment
activities.

The Fund's current investment restriction relating to the purchase of securities
on margin and short sales is combined with restrictions relating to other
issues. The adoption of Proposal 4 would result in the elimination of the Fund's
prohibition against the purchase of securities on margin and short sales
presently contained in this restriction. The other issues covered by this
restriction, namely, the restrictions relating to underwriting, are proposed to
be amended in Sub-Proposal 3(a), and the restriction relating to senior
securities and short sales are proposed to be amended in Sub-Proposal 3(f).

PLEDGE, MORTGAGE OR HYPOTHECATE ASSETS:

The Fund's current fundamental investment restriction 7 limits the Fund's
ability to pledge, mortgage or hypothecate its assets in many instances which
are otherwise permitted under SEC staff interpretations. This broad restriction
was originally included in response to state law requirements, but under NSMIA,
the Fund is no longer legally required to retain such policies as fundamental
restrictions. The activities addressed in this restriction arguably raise senior
security issues. Under SEC interpretations, however, it is now accepted that
many activities relating to pledging, mortgaging or hypothecating securities do
not create senior security issues for a fund. The proposed senior security
restriction (see Sub-Proposal 3(f)) would specifically address the fact that
activities permitted by SEC interpretation in this area would not be prohibited.

As a general matter, elimination of this fundamental restriction should not have
an impact on the day-to-day management of the Fund as the Fund does not
currently intend to pledge, mortgage or hypothecate its assets beyond what it
would be permitted to do under its present restrictions, and did not previously
engage in these investment activities.

UNSEASONED ISSUERS

The Fund's current fundamental investment restriction 8 limits the Fund's
ability to invest in "unseasoned issuers," issuers that have not been in
continuous operation for three years or more. This restriction was originally
included in response to state law requirements, but under NSMIA, the Fund is no
longer legally required to retain such policies as fundamental restrictions.
Elimination of this fundamental restriction should not have an impact on the
day-to-day management of the Fund as the Fund does not currently intend to
invest in unseasoned issuers beyond what it would be permitted to do under its
present restrictions.

WARRANTS

The Fund's current fundamental investment restriction 9 limits the Fund's
ability to invest in certain listed and unlisted warrants. This restriction was
originally included in response to state law requirements, but under NSMIA, the
Fund is no longer legally required to retain such policies as fundamental
restrictions. As a general matter, elimination of this fundamental restriction
should not have an impact on the day-to-day management of the Fund as the Fund
has not previously invested and does not currently intend to invest in warrants
beyond what it would be permitted to do under its present restrictions.

UNLISTED, RESTRICTED AND ILLIQUID SECURITIES AND OVER-THE-COUNTER OPTIONS

The Fund's current fundamental investment restriction number 10 limits the
Fund's ability to invest more than 15% of its total assets in certain unlisted
securities, including no more than 10% in restricted securities, securities that
are not readily marketable, repurchase agreements having more than seven days to
maturity, and over-the-counter options (assets used as cover for
over-the-counter options written by the Fund are considered not readily
marketable). These types of securities generally have the potential to be
considered "illiquid" under the SEC definition of "illiquidity." That definition
states that a security is illiquid if it cannot be sold at approximately the
price at which it is carried on the Fund's books within seven days.

This restriction arose out of a SEC staff position that is not required to be
fundamental. Under NSMIA, the Fund is no longer required to retain a fundamental
policy regarding investments in such securities and the SEC has recently amended
its position to permit funds to invest up to 15% of their assets in illiquid
securities. Elimination of this fundamental restriction would permit the Fund to
take advantage of the current SEC position, which the Fund cannot presently do
because its policy relating to investments in illiquid securities is
fundamental. Elimination of the Fund's policy relating to illiquid securities as
a fundamental policy should not have an impact on the day-to-day management of
the Fund because the Fund will still be subject to the SEC rules and regulations
in this area.

LETTER STOCKS

The Fund's current fundamental investment restriction number 12, like investment
restriction number 10, limits the Fund's ability to invest in "letter stocks" or
securities on which there are any sales restrictions under a purchase agreement.
The restriction is no longer required to be fundamental for the reasons
described above with respect to current restriction number 10. As a general
matter, elimination of this fundamental restriction should not have an impact on
the day-to-day management of the Fund because the Fund has not previously
engaged and does not currently intend to engage in this type of investment
activity.

JOINT AND JOINT AND SEVERAL TRADING ACCOUNTS:

The Fund's current fundamental investment restriction 13 limits the Fund's
ability to participate on a joint or a joint and several basis in any trading
account in securities. This restriction was originally included in response to
the various state law requirements to which mutual funds were subject, but under
NSMIA, the Fund is no longer legally required to retain such a policy as a
fundamental restriction. As a general matter, elimination of this fundamental
restriction relating to participating in a securities trading account should not
have an impact on the day-to-day management of the Fund, since the 1940 Act
prohibitions on these types of transactions would continue to apply to the Fund.
Joint transactions are generally prohibited under the 1940 Act, and the Fund
would continue to remain subject to the conditions imposed on joint transactions
by the 1940 Act and any exemptions granted by the SEC. The SEC recently granted
an exemptive order to the Fund, together with other funds in Franklin Templeton
Investments, permitting the Fund to enter into joint repurchase agreements for
cash management purposes that could be considered to be a joint trading account.
The proposed elimination of the restriction would permit the Fund, under
circumstances prescribed by the SEC order, to engage in joint repurchase
agreements with other funds in Franklin Templeton Investments at rates that are
more favorable than those the Fund would receive if it were to enter into
repurchase agreements on its own.

DEFAULTED DEBT SECURITIES

The Fund's current fundamental investment restriction 14 limits the Fund's
ability to invest in defaulted debt securities. This restriction was originally
included in response to state law requirements, but under NSMIA, the Fund is no
longer legally required to retain such policies as fundamental restrictions.
Elimination of this fundamental restriction should not have an impact on the
day-to-day management of the Fund as the Fund has not invested and does not
currently intend to invest in defaulted debt securities.

WHY IS THE BOARD RECOMMENDING THAT THE RESTRICTIONS BE ELIMINATED, AND WHAT
EFFECT WILL SUCH ELIMINATION HAVE ON THE FUND?

Eliminating the Restrictions, as described above, is consistent with the federal
securities laws. Further, by reducing the total number of investment
restrictions that can be changed only by a shareholder vote, the management of
the Fund believes that the Fund will be able to minimize the costs and delays
associated with holding future shareholder meetings to revise fundamental
policies that become outdated or inappropriate. Management of the Fund also
believes that eliminating the Restrictions is in the best interest of the Fund's
shareholders as it will provide the Fund with increased flexibility to pursue
its investment goals.

WHAT ARE THE RISKS, IF ANY, IN ELIMINATING THE RESTRICTIONS?

It is not anticipated that eliminating the Restrictions will result in any
additional risk to the Fund. Although many of the Fund's current Restrictions,
as drafted, are no longer legally required, the Fund's ability to invest in
these areas will continue to be subject to the limitations of the 1940 Act and
any exemptive orders granted under the 1940 Act. Further, the Fund has no
current intention of changing its present investment practices as a result of
the elimination of these Restrictions.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU APPROVE PROPOSAL 4

PROPOSAL 5: ADOPTION OF A RULE 12B-1 DISTRIBUTION PLAN

WHAT IS A RULE 12B-1 DISTRIBUTION PLAN?

Rule 12b-1 under the 1940 Act permits a fund, as a registered open-end
investment company, only to bear expenses relating to the distribution of its
shares pursuant to a written plan that has been approved by the fund's directors
and shareholders. The Investment Manager and Franklin Templeton Distributors,
Inc. ("Distributors") are proposing that the Fund adopt a Plan of Distribution
pursuant to Rule 12b-1 ("Distribution Plan").

WHY IS THE DISTRIBUTION PLAN BEING PROPOSED FOR THE FUND?

The Distribution Plan is being proposed to ensure that the Fund is in a position
to compete effectively with other mutual funds, which like the Fund, are offered
through contractual plans, in light of the changing trends in pricing structures
for funds offered through contractual plans. In addition to the Distribution
Plan, such restructuring is anticipated to include the elimination of all sales
charges imposed on payments after the first 12 payments of a TCA Plan, except
for face changes.

In proposing the adoption of the Distribution Plan to the Fund's Board of
Directors, Distributors reported that the broker-dealer community primarily
responsible for sales of the TCA Plan units and ultimately Fund shares, has
expressed a general reluctance to continue to sell shares of funds associated
with contractual plans, that are not priced in such a way as to provide on-going
compensation to dealers for distribution services as well as servicing of
shareholders. Distributors explained that many of the Fund's competitors
recently had adjusted their distribution charges in an attempt to accommodate
the broker-dealer community and provide continuing compensation. As a result,
when dealers select funds for their clients from a menu of choices, most of
which have 12b-1 plans incorporated into their pricing structures, other
considerations being equal, dealers may be more likely to select funds with
12b-1 charges than those without. Distributors also stated that, if dealers
receive continuing compensation, then they may be more motivated to maintain and
enhance the level of service provided to Fund shareholders, which may enable all
shareholders to have the opportunity to have their accounts serviced by
responsive dealers.

Distributors and the Investment Manager informed the Board that failure to
revise the distribution methods to include a Distribution Plan will make it
increasingly difficult to increase sales of new contractual plans and therefore,
Fund shares as well. Distributors informed the Board that, in its opinion, the
adoption of the proposed Distribution Plan would enhance selling efforts with
respect to the TCA Plan and Fund shares by providing an incentive to dealers to
continue to sell TCA Plans and to maintain investments in the TCA Plans and the
Fund.

In May and July 2000, the Board of Directors, including the directors who are
not "interested persons" of the Fund as defined in the 1940 Act and who have no
direct or indirect financial interest in the operation of the Distribution Plan
or any related agreements (the "Independent Directors"), reviewed the proposal
to implement the Distribution Plan described below with the assistance of
independent legal counsel. After carefully evaluating the potential benefits of
the Distribution Plan to the Fund and its shareholders, the entire Board and the
Independent Directors, voting separately, approved the Distribution Plan and
determined to recommend the Distribution Plan to and for approval by the
shareholders.

WHAT DOES THE DISTRIBUTION PLAN DO?

The proposed Distribution Plan provides that the Fund shall reimburse
Distributors or others for all expenses incurred by Distributors and others in
the promotion and distribution of Fund shares in an amount not to exceed 0.30%
per annum of the Fund's average daily net assets. Reimbursable expenses include,
but are not limited to, the printing of prospectuses and reports used for sales
purposes, expenses of preparing and distributing sales literature and related
expenses, advertisements, and other distribution-related expenses, including a
prorated portion of Distributors' overhead expenses attributable to the
distribution of Fund shares, as well as any distribution or service fees paid to
securities dealers or there firms or others who have executed a servicing
agreement with the Fund, Distributors or its affiliates. Service fees received
by a dealer or financial institution may not exceed 0.25% per annum of the
average net assets of the Fund attributable to its customers. Any fees the
dealer or financial institution receives in excess of that amount are
characterized as asset-based sales charges. A copy of the Distribution Plan is
attached to this Proxy Statement as Exhibit C.

In addition to the payments that the Fund is otherwise authorized to make under
the Distribution Plan, to the extent that certain parties make payments that are
deemed to be payments by the Fund for the financing of any activity primarily
intended to result in the sale of shares issued by the Fund within the context
of Rule 12b-1, then such payments are deemed to have been made pursuant to the
Plan.

Under the Distribution Plan, Distributors will furnish to the Board of Directors
of the Fund, for its review, on a quarterly basis, a written report of the
monies reimbursed to it and to others under the Distribution Plan, and shall
furnish the Board with such other information as the Board may reasonably
request in connection with the payments made under the Distribution Plan in
order to enable the Board to make an informed determination of whether the
Distribution Plan shall be continued. The Distribution Plan shall continue in
effect for periods of more than one year only so long as its continuance is
specifically approved at least annually by a majority vote of the Fund's Board
of Directors, and by a majority vote of Independent Directors, cast in person at
a meeting called for the purpose of voting on the continuance of the
Distribution Plan. The Distribution Plan, or any agreements entered into
pursuant to the Distribution Plan, may be terminated at any time, without
penalty, by vote of a majority of the outstanding voting securities, or by vote
of a majority of the Independent Directors, on not more than sixty (60) days'
written notice, or by Distributors on not more than sixty (60) days' written
notice. In addition, the Distribution Plan terminates automatically in the event
of any act that constitutes an assignment of the management agreement with the
Investment Manager.

If the proposed Distribution Plan is approved by the shareholders of the Fund at
this Meeting, it will become effective on such date as Distributors shall notify
the Fund, which date shall not be earlier than the date on which the
Distribution Plan is approved by shareholders as required by Rule 12b-1 (the
"Effective Date"). It is currently anticipated that the Effective Date will be
on or about July 1, 2000, however, implementation may be delayed at the
discretion of the Board of Directors.

WHAT DID THE BOARD CONSIDER IN MAKING THEIR DECISION?

In connection with their consideration of the proposed Distribution Plan, the
Directors were furnished with drafts of the Distribution Plan and related
materials. In addition, the Directors were furnished with detailed information
concerning the effect of the imposition of the Distribution Plan based on
historical figures and projected on a pro forma basis. In addition, the Fund's
legal counsel provided additional information, summarized the provisions of the
proposed Distribution Plan, and discussed the legal and regulatory
considerations in adopting such a Distribution Plan.

In approving the Distribution Plan, the Directors determined, in the exercise of
their business judgment and in light of their fiduciary duties under relevant
state law and the 1940 Act, that, based upon the material requested and
evaluated by them, the Plan is reasonably likely to benefit the Fund and its
shareholders. The Directors considered various factors relevant to the
situation, including: the nature and causes of the circumstances which make
implementation of the Distribution Plan necessary and appropriate; the way in
which the Distribution Plan would address those circumstances, including the
nature and potential amount of the expenditures; the relationship of such
expenditures to the overall cost structure of the Fund; the nature of the
anticipated benefits; the merits of possible alternative plans or pricing
structures; the anticipated elimination of the sales charges on the sales of TCA
Plan units; the effect of the Distribution Plan on existing shareholders and new
shareholders; the investment and sales history of the Fund; and the additional
revenue to be earned by the Investment Manager and Distributors.

WHAT ARE THE POTENTIAL BENEFITS THAT THE BOARD CONSIDERED?

The Board concluded unanimously that approval of the proposed Distribution Plan
was warranted because there was a reasonable likelihood that the Fund and its
shareholders will benefit in at least one of several potential ways. First,
along with the adoption of the Distribution Plan, it is anticipated that all
sales charges after the first 12 payments on a TCA Plan will be eliminated.
Thus, all existing shareholders would be able to have a higher percentage of
their Plan payments actually invested in the Fund after the first year.

Second, adopting the Distribution Plan would allow the Fund to be competitively
priced. Such competitive pricing structure may result in increased Fund assets
resulting from increased sales of new TCA Plans, thereby potentially allowing
efficiencies in portfolio management. Such competitive pricing structure would
also assist in maintaining Fund assets by discouraging dealers from recommending
redemption from the Fund. Net cash outflow increases the likelihood of having to
dispose of portfolio securities for other than investment considerations. Net
cash inflow generally minimizes the need to sell securities to meet redemptions
when investment considerations indicate that they should continue to be held,
reduces the impact of changes in daily liquidity requirements, and generally
permits an orderly restructuring of a portfolio without the need to dispose of
present holdings. The Board also concluded that enhanced marketing efforts, if
successful, should result in an increase in net assets and afford greater
flexibility in pursuing the investment objectives of the Fund.

Third, paying dealers continuing compensation should motivate them to maintain
and enhance the level of service provided to Fund shareholders. It should also
enable all shareholders to have the opportunity to have their accounts serviced
by dealers. Such services may include, among other things, answering inquiries
regarding the Fund's investment policies and performance, and assisting
shareholders in maintaining records, processing purchase and redemption orders,
changing dividend reinvestment options or account registrations, and enrolling
in special investment plans offered by the Fund.

HOW WILL THE FEES BE CALCULATED UNDER THE DISTRIBUTION PLAN?

In implementing the Distribution Plan, the Board has determined that, initially,
the annual fees payable under the Distribution Plan will be equal to the sum of:
(i) the amount obtained by multiplying 0.30% by the average daily net assets
represented by shares of the Fund that were acquired by investors on or after
the Effective Date of the Distribution Plan ("New Assets"), and (ii) the amount
obtained by multiplying the average daily net assets represented by shares of
the Fund that were acquired before the Effective Date of the Distribution Plan
("Old Assets") by an "old asset rate." Until such time as sales charges are
eliminated for the TCA Plan after the first 12 payments, except for certain face
changes, the "old asset rate" will be 0.00%. Thereafter, the "old asset rate"
will be 0.10%. It is anticipated that the 0.10% will be paid to dealers who are
responsible for the Old Assets having been invested in the Fund, while the new
asset rate will be paid to Distributors and/or to dealers responsible for New
Assets to reimburse them for distribution expenses.

The fee is a Fund expense so that all shareholders regardless of when they
purchased their shares will bear 12b-1 expenses at the same rate. That rate
initially will be close to or equal to 0.00%, unless, as mentioned above, the
sales charges on TCA Plan payments after the first 12 payments are eliminated,
in which case the rate will be at least 0.10%. As Fund shares are sold on or
after the Effective Date, the rate will increase over time. Thus, as the
proportion of Fund shares purchased on or after the Effective Date increases in
relation to outstanding Fund shares, the expenses attributable to payments under
the proposed Distribution Plan will also increase (but will not exceed 0.30% of
average daily net assets without shareholder approval). While this is the
currently anticipated calculation for fees payable under the Distribution Plan,
the Distribution Plan permits the Fund's Directors to allow the Fund to pay a
full 0.30% on all assets both Old and New at any time. The approval of the Board
would be required to change the calculation of the payments to be made under the
Distribution Plan.

HOW WILL THE DISTRIBUTION PLAN AFFECT THE FUND'S EXPENSE RATIO?

The Directors gave particular attention in their deliberations to the estimated
additional costs that would be incurred by the Fund under the proposed
Distribution Plan. The following table indicates the pro forma expense ratios
reflecting the estimated increases in the operating expenses of the Fund if the
Distribution Plan had been in effect during the Fund's previous fiscal year.
These pro forma expense ratios are based on actual sales and redemptions of Fund
shares and certain assumptions as to other factors affecting expenses under the
proposed Distribution Plan. To facilitate a shareholder's analysis of this
Proposal, the table also includes the actual ratio of operating expenses to
average daily net assets of the Fund for the previous fiscal year. The pro forma
expenses are also shown as if Fund assets were comprised of only Old Assets
(where the Distribution Plan fee would be effectively 0.10%) and as if Fund
assets were comprised of only New Assets (where the Distribution Plan fee would
be effectively 0.30%).

PRO FORMA PRO FORMA
ACTUAL EXPENSE EXPENSES EXPENSES WITH
RATIO FOR FYE WITH A MAXIMUM
AUGUST 31, 1999 12B-1 FEE* 12B-1 FEE**
---------------------------------- ------------------ ----------- --------------------
<S> <C> <C> <C>
MANAGEMENT FEES 0.75% 0.75% 0.75%
DISTRIBUTION FEE (12B-1 FEE) 0.00% 0.10% 0.30%
OTHER EXPENSES 0.36% 0.36% 0.36%
TOTAL ANNUAL OPERATING EXPENSES 1.11% 1.21% 1.41%
</TABLE>

* As stated above, the Distribution Plan fees are expected to acrue at the rate
of 0.00% or 0.10% for Old Assets. Currently, all of the assets of the Fund are
attributable to Old Assets. If the TCA Plan sales charges after the first 12
payments have not been eliminated, then the rate would be 0.00%. As a result,
the blended Distribution Plan fee rate currently would be 0.00% per annum of the
average daily net assets of the Fund.

** The maximum allowable Distribution Plan fee would be 0.30% per annum and
would not be reached until substantially all of the assets of the Fund are
attributable to New Assets.

The Directors concluded that while the Investment Manager would benefit from
increased management fees as a result of the anticipated growth in Fund assets
and Distributors would experience increased revenues as a result of the change
in distribution charges, such benefits to the Investment Manager and
Distributors would not be disproportionate to the above-described anticipated
benefits to the Fund and its shareholders. Finally, while adoption of the
proposed Distribution Plan will increase the Fund's expense ratios by the amount
of the distribution payments from the Fund's assets, the Directors were
satisfied that the increased expense ratios would be justified by the benefits
to be received by the Fund and its shareholders.

The Directors realized that there is no assurance that the expenditures of Fund
assets to finance distribution of Fund shares will have the anticipated results.
The Directors determined, however, that there is a reasonable likelihood that
one or more of such benefits will result and they will be in a position to
monitor the distribution expenses of the Fund and to evaluate the benefit of
such expenditures in deciding whether to continue the Distribution Plan.

WHAT ABOUT THE ANTICIPATED TCA PLAN ELIMINATION OF SALES CHARGES? WHAT ABOUT TCA
PLAN II?

The Directors were aware at the time of their decision to approve and to
recommend your approval of the Distribution Plan that it was expected that the
sales charges imposed on all investments after the first 12 payments would be
eliminated, except for certain face changes. This would result in a greater
amount of each existing shareholder's continuing TCA Plan payments being
actually invested in the Fund. The TCA Plan would be closed by Distributors to
new investors. The TCA Plan will remain open to current planholders still
completing their plans.

Further, the Directors were aware that Distributors plans to offer under a
separate prospectus a new contractual plan investing in the Fund, Templeton
Capital Accumulation Plan II ("TCA Plan II"), to new investors in the fall of
2000 TCA Plan II is expected to be offered with additional service and
operational features not available on the original TCA Plans. It is anticipated
that the TCA Plan II will be offered with sales charges only for the first 12
plan payments (except for certain face changes).

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU APPROVE PROPOSAL 5

PROPOSAL 6: REORGANIZATION OF THE FUND FROM A MARYLAND CORPORATION TO A
DELAWARE BUSINESS TRUST

WHAT WILL THE REORGANIZATION MEAN FOR THE FUND AND ITS SHAREHOLDERS?

The Directors recommend that you approve a change in the place of organization
of the Fund from a Maryland corporation to a Delaware business trust. This
proposed change will be referred to in this proxy statement as the
"Reorganization." The Board of Directors has approved an Agreement and Plan of
Reorganization (the "Reorganization Plan"), substantially in the form attached
to this proxy statement as Exhibit D. The Reorganization Plan provides for the
Reorganization, which involves the continuation of the Fund (referred to in this
Proposal 6 as the "MD Corporation") in the form of a newly created Delaware
business trust, named "Templeton Capital Accumulator Fund" (and referred to in
this Proposal 6 as the "DE Trust").

The DE Trust will have the same investment objective, policies and restrictions
as the MD Corporation. This means that the DE Trust's fundamental investment
policies and restrictions will reflect the results of the shareholders' vote on
Proposals 3 and 4 of this proxy statement. The Board, officers and employees
will be the same and will operate the DE Trust in the same manner as they
previously operated the MD Corporation. On the closing date of the
Reorganization, you will hold an interest in the DE Trust that is equivalent to
your interest in the MD Corporation. Essentially, your investment will not
change, and the Reorganization will have no material impact on your economic
interests as a shareholder.

WHY ARE THE DIRECTORS RECOMMENDING THAT I APPROVE THE REORGANIZATION?

The Directors have determined that mutual funds formed as Delaware business
trusts have certain advantages over those funds organized as Maryland
corporations. Delaware law contains provisions specifically designed for mutual
funds, which take into account their unique structure and operations. Under
Delaware law, funds are able to simplify their operations by reducing
administrative burdens. The Delaware law allows greater flexibility in drafting
a fund's governing documents, which can result in greater efficiencies of
operation and savings for a fund and its shareholders. Delaware law also
provides favorable state tax treatment. Furthermore, there is a well-established
body of corporate legal precedent that may be relevant in deciding issues
pertaining to the DE Trust.

A comparison of the Delaware business trust law and the Maryland General
Corporation law, and a comparison of the relevant provisions of the governing
documents of the DE Trust and the MD Corporation, are included in Exhibit E,
which is entitled, "Comparison and Significant Differences Between Delaware
Business Trusts and Maryland Corporations."

The Reorganization also would increase uniformity among the investment companies
in Franklin Templeton Investments, since many of the funds are already organized
as Delaware business trusts, and the Delaware trust form has been chosen for new
Franklin and Templeton funds that have been created over the past few years.
Increased uniformity among the funds, many of which share common Directors,
officers and service providers, is expected to reduce the costs and resources
needed to comply with state corporate laws, and also reduce administrative
burdens.

For these reasons, the Directors believe that it is in the best interests of the
shareholders to approve the Reorganization.

WHAT ARE THE PROCEDURES AND CONSEQUENCES OF THE REORGANIZATION?

Upon completion of the Reorganization, the DE Trust will continue the business
of the MD Corporation with the same investment objective and policies as exist
on the date of the Reorganization, and will hold the same portfolio of
securities previously held by the MD Corporation. The DE Trust will be operated
under substantially identical overall management, investment management,
distribution and administrative arrangements as those of the MD Corporation. As
the successor to the MD Corporation's operations, the DE Trust will adopt the MD
Corporation's registration statement under the federal securities laws with
amendments to show the new Delaware business trust structure.

The DE Trust was created solely for the purpose of becoming the successor
organization to, and carrying on the business of, the MD Corporation. To
accomplish the Reorganization, the Reorganization Plan provides that the MD
Corporation will transfer all of its portfolio securities and any other assets,
subject to its related liabilities, to the DE Trust. In exchange for these
assets and liabilities, the DE Trust will issue its own shares to the MD
Corporation, which will then distribute those shares pro rata to you as a
shareholder of the MD Corporation. Through this procedure, you will receive
exactly the same number and dollar amount of shares of the DE Trust as you
previously held in the MD Corporation. The net asset value of each share of the
DE Trust will be the same as that of the MD Corporation on the date of the
Reorganization. You will retain the right to any declared but undistributed
dividends or other distributions payable on the shares of the MD Corporation
that you may have had as of the effective date of the Reorganization. As soon as
practicable after the date of the Reorganization, the MD Corporation will be
dissolved and will go out of existence.

The Directors may terminate the Reorganization Plan and abandon the
Reorganization at any time prior to the effective date of the Reorganization if
they determine that such actions are in the best interests of the MD
Corporation's shareholders. If the Reorganization is not approved, or if the
Directors abandon the Reorganization, the MD Corporation will continue to
operate as a corporation under the laws of the State of Maryland.

WHAT EFFECT WILL THE REORGANIZATION HAVE ON THE CURRENT INVESTMENT MANAGEMENT
AGREEMENT?

As a result of the Reorganization, the DE Trust will be subject to a new
investment management agreement between the DE Trust and the Investment Manager.
The new management agreement will be substantially identical to the current
management agreement between the Investment Manager and the MD Corporation. It
is anticipated that there will be no material change to the investment
management agreement as a result of the Reorganization.

WHAT EFFECT WILL THE REORGANIZATION HAVE ON THE SHAREHOLDER SERVICING AGREEMENTS
AND DISTRIBUTION PLANS?

The DE Trust will enter into agreements with Franklin/Templeton Investor
Services, Inc. for transfer agency, dividend disbursing, shareholder servicing
and fund accounting services that are substantially identical to the agreements
currently in place for the MD Corporation. Franklin Templeton Distributors, Inc.
will serve as the distributor for the shares of the DE Trust under a separate
distribution agreement that is substantially identical to the distribution
agreement currently in effect for the MD Corporation.

As of the effective date of the Reorganization, if shareholders of the MD
Corporation approve Proposal 5, the DE Trust will have a distribution plan under
Rule 12b-1 of the 1940 Act relating to the distribution of Fund shares
substantially identical to that approved pursuant to Proposal 5. It is
anticipated that there will be no material change to the distribution plans as a
request of the Reorganization. If shareholders of the MD Corporation do not
approve Proposal 5, then the DE Trust will not have a distribution plan.

WHAT IS THE EFFECT OF SHAREHOLDER APPROVAL OF THE REORGANIZATION?

Under the 1940 Act, the shareholders of a mutual fund must vote on the
following: (1) election of Directors; (2) selection of the independent auditors;
and (3) approval of initial investment management agreement for the fund.
Theoretically, if the Reorganization is approved, the shareholders would need to
vote on these three items for the DE Trust. In fact, the DE Trust must have
shareholder approval of these issues or else it will not comply with the 1940
Act. However, the Directors have determined that it is in the best interests of
the shareholders to avoid the considerable expense of another shareholder
meeting to obtain these approvals after the Reorganization. Therefore, the
Directors have determined that approval of the Reorganization also will
constitute the requisite shareholder approval for the Reorganization Plan
contained in Exhibit D, and also, for purposes of the 1940 Act, constitute
shareholder approval of: (1) the election of the Directors of the MD Corporation
who are in office at the time of the Reorganization as Trustees of the DE
Trust,1 (2) the selection of PricewaterhouseCoopers LLP as independent auditors
for the DE Trust; and (3) a new investment management agreement between the DE
Trust and the Investment Manager, which is substantially identical to the
investment management agreement currently in place for the MD Corporation.

Prior to the Reorganization, the officers will cause the MD Corporation, as the
sole shareholder of the DE Trust, to vote its shares FOR the matters specified
above. This action will enable the DE Trust to satisfy the requirements of the
1940 Act without involving the time and expense of another shareholder meeting.

WHAT IS THE CAPITALIZATION AND STRUCTURE OF THE DE TRUST?

The DE Trust was created on __________, __, 2000 pursuant to Delaware law. The
DE Trust has an unlimited number of shares of beneficial interest with a par
value of $0.01 per share. As of the effective date of the Reorganization, shares
of the MD Corporation and the DE Trust will have equal dividend and redemption
rights, will be fully paid, non-assessable, freely transferable, have the same
conversion rights, and have no preemptive or subscription rights. Shares of both
the DE Trust and the MD Corporation will have equal voting and liquidation
rights and have one vote per share. Both the DE Trust and MD Corporation provide
for noncumulative voting in the election of their Trustee/Directors. The DE
Trust also will have the same fiscal year as the MD Corporation.

WHO WILL BEAR THE EXPENSES OF THE REORGANIZATION?

Since the Reorganization will benefit the MD Corporation and its shareholders,
the Board has authorized that the expenses incurred in the Reorganization shall
be paid by the MD Corporation.

ARE THERE ANY TAX CONSEQUENCES FOR SHAREHOLDERS?

The Reorganization is designed to be tax free for federal income tax purposes so
that you will not experience a taxable gain or loss when the Reorganization is
completed. Generally, the basis and holding period of your shares in the DE
Trust will be the same as the basis and holding period of your shares in the MD
Corporation. Consummation of the Reorganization is subject to receipt of a legal
opinion from the law firm of Stradley Ronon Stevens & Young, LLP, counsel to the
DE Trust and the MD Corporation, that, under the Internal Revenue Code of 1986,
as amended, the exchange of assets of the MD Corporation for the shares of the
DE Trust, the transfer of such shares to the holders of shares of the MD
Corporation and the liquidation and dissolution of the MD Corporation pursuant
to the Reorganization Plan will not give rise to the recognition of a gain or
loss for federal income tax purposes to the MD Corporation, the DE Trust, or
shareholders of either the MD Corporation or the DE Trust.

WHAT IF I CHOOSE TO SELL MY SHARES AT ANY TIME?

A request to sell MD Corporation shares that is received and processed prior to
the Reorganization will be treated as a redemption of shares of the MD
Corporation. A request to sell shares that is received and processed after the
Reorganization will be treated as a request for the redemption of the same
number of shares of the DE Trust. The value of your shares will not be affected
by the Reorganization.

WHAT IS THE EFFECT OF MY "YES" VOTE?

By voting "YES" to the Reorganization, you will be agreeing to become a
shareholder of a mutual fund organized as a Delaware business trust, with its
Trustees, independent auditors, and investment management agreement, already in
place, and distribution plan, if Proposal 5 is approved by shareholders, and all
such arrangements that are substantially identical to those of the MD
Corporation.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU APPROVE PROPOSAL 6

PROPOSAL 7: OTHER BUSINESS

The Directors know of no other business to be presented at the Meeting. However,
if any additional matters should be properly presented, proxies will be voted or
not voted as specified. Proxies reflecting no specification will be voted in
accordance with the judgment of the persons named in the proxy.

INFORMATION ABOUT THE FUND

THE INVESTMENT MANAGER. The Investment Manager of the Fund is Templeton
Investment Counsel, Inc., located at Broward Financial Centre, 500 East Broward
Boulevard, Fort Lauderdale, Florida 33394-3091. Pursuant to an investment
management agreement, the Investment Manager manages the investment and
reinvestment of Fund assets. The Investment Manager is a wholly owned subsidiary
of Resources.

THE ADMINISTRATOR. The administrator of the Fund is Franklin Templeton Services,
Inc. ("FT Services") with offices at 777 Mariners Island Boulevard, San Mateo,
California 94404. FT Services is a wholly owned subsidiary of Resources.
Pursuant to an administration agreement, FT Services performs certain
administrative functions for the Fund.

THE SHAREHOLDER SERVICING AND TRANSFER AGENT. The shareholder servicing agent,
transfer agent, and dividend disbursement agent for the Fund is
Franklin/Templeton Investor Services, Inc., 100 Fountain Parkway, St.
Petersburg, Florida 33716-1205.

THE CUSTODIAN. The custodian for the Fund is The Chase Manhattan Bank, MetroTech
Center, Brooklyn, New York 11245.

OTHER MATTERS. The Fund's last audited financial statements and annual report
dated August 31, 1999, and its semiannual report dated February 29, 2000, are
available free of charge. To obtain copies, please call 1-800/DIAL BEN(R) or
forward a written request to Franklin/Templeton Investor Services, Inc., P.O.
Box 33030, St. Petersburg, Florida 33733-8030.

PRINCIPAL SHAREHOLDERS. As of June __, 2000, the Fund had __________ shares
outstanding and total net assets of ______________-. From time to time, the
number of shares held in "street name" accounts of various securities dealers
for the benefit of their clients may exceed 5% of the total shares outstanding.
To the knowledge of the Fund's management, as of [______ __,] 2000, there were
no other entities holding beneficially or of record more than 5% of a class of
the Fund's outstanding shares, except as shown in the following table:

NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENTAGE % OF FUND
------------------------- -------------------------- ----------------------

In addition, to the knowledge of the Fund's management, as of [_____ __,] 2000,
no nominee or Director of the Fund owned 1% or more of the outstanding shares of
the Fund, and the Directors and Officers of the Fund owned, as a group, less
than 1% of the outstanding shares of the Fund.

FURTHER INFORMATION ABOUT VOTING AND THE MEETING

RECORD DATE. Shareholders of record at the close of business on [______ _,]
2000, are entitled to be present and to vote at the Meeting or any adjourned
Meeting. Each share of record is entitled to one vote on each matter presented
at the Meeting. The notice of the Meeting, proxy card and proxy statement are
being mailed to shareholders of record on or about [_____ _,] 2000.

VOTING METHODS. You may vote your shares in one of several ways. You can vote by
mail, fax, or in person at the Meeting. If you were a holder of a TCA Plan on
the Record Date, then you will be sent a voting instruction card for those
shares of the Fund attributable to your investment in the TCA Plan as of the
record date for the Meeting. A voting instruction card is, in essence, a ballot.
The TCA Plan will vote in accordance with your instructions. When you complete
your voting instruction card, it tells the TCA Plan how to vote its proxy on
these important issues relating to the Fund. If you hold Fund shares directly
(not through a TCA Plan), then you will receive a proxy card by which you can
vote your shares directly.

Proxy/voting instruction cards that are properly signed, dated and received at
or prior to the Meeting will be voted as specified. If you specify a vote for
any of the Proposals 1 through 7, your proxy/voting instruction card will be
voted as you indicated. If you simply sign and date the proxy/voting instruction
card, but don't specify a vote for any of the Proposals 1 through 7, your shares
will be voted IN FAVOR of the nominees for Director (Proposal 1), IN FAVOR of
ratifying the selection of PricewaterhouseCoopers LLP as independent auditors
(Proposal 2), IN FAVOR of amending certain of the Fund's fundamental investment
restrictions (Sub-Proposals 3(a) - 3(g)), IN FAVOR of eliminating twelve (12) of
the fundamental investment restrictions of the Fund (Proposal 4), IN FAVOR of
the adoption of a Rule 12b-1 Distribution Plan (Proposal 5), IN FAVOR of the
Reorganization of the Fund as a Delaware business trust (Proposal 6), and/or IN
ACCORDANCE with the discretion of the persons named in the proxy card as to any
other matters that may properly come before the Meeting or any adjournments
thereof (Proposal 7).

REVOCATION OF PROXIES/VOTING INSTRUCTIONS. You may revoke your proxy/voting
instructions at any time by sending to the Fund a written revocation or a
later-dated proxy/voting instruction card that is received at or before the
Meeting, or by attending the Meeting and voting in person.

SOLICITATION OF PROXIES/VOTING INSTRUCTIONS. Your vote is being solicited by the
Board of Directors of the Fund. The cost of soliciting proxies, including the
fees of a proxy soliciting agent, will be borne by the Fund. The Fund reimburses
brokerage firms and others for their expenses in forwarding proxy material to
the beneficial owners and soliciting them to execute proxies. The Fund may
engage a solicitation firm to solicit proxies from brokers, banks, other
institutional holders and individual shareholders at an anticipated cost,
including out-of-pocket expenses, ranging between $_____ and $______. The Fund
expects that the solicitation would be primarily by mail, but also may include
telephone, telecopy or oral solicitations. The Fund does not reimburse Directors
and Officers of the Fund, or regular employees and agents of the Investment
Manager involved in the solicitation of proxies. The Fund intends to pay all
costs associated with the solicitation and the Meeting.

In addition to solicitation by mail, some of the Officers and employees of the
Fund, the Investment Manager and its affiliates, without extra compensation, may
conduct additional solicitations by telephone, personal interviews and other
means.

VOTING BY BROKER-DEALERS. The Fund expects that, before the Meeting,
broker-dealer firms holding shares of the Fund in "street name" for their
customers will request voting instructions from their customers and beneficial
owners. If these instructions are not received by the date specified in the
broker-dealer firms' proxy solicitation materials, the Fund understands that
NYSE rules permit the broker-dealers to vote on certain of the proposals to be
considered at the Meeting on behalf of their customers and beneficial owners.
Certain broker-dealers may exercise discretion over shares held in their name
for which no instructions are received by voting these shares in the same
proportion as they vote shares for which they received instructions.

QUORUM. A majority of the shares entitled to vote -- present in person or
represented by proxy -- constitutes a quorum at the Meeting. The shares over
which broker-dealers have discretionary voting power, the shares that represent
"broker non-votes" (i.e., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power on a particular matter), and the shares whose proxies reflect an
abstention on any item are all counted as shares present and entitled to vote
for purposes of determining whether the required quorum of shares exists.

METHOD OF TABULATION. Approval of the Fund's election of nominees for Director,
as described in Proposal 1, will require the affirmative vote of a plurality of
the Fund's shares present and voting at the Meeting. Approval of the selection
of independent auditors (as described in Proposal 2) requires the affirmative
vote of a majority of the Fund's shares present and voting on the Proposal at
the Meeting. Amending certain of the Fund's fundamental investment restrictions
(as set forth in Sub-Proposals 3(a) through 3(g)), eliminating certain of the
Fund's fundamental investment restrictions (as set forth in Proposal 4), and
adopting a Rule 12b-1 Distribution Plan (as set forth in Proposal 5) will each
require the affirmative vote of the lesser of: (i) more than 50% of the
outstanding shares of the Fund; or (ii) 67% or more of the voting securities of
the Fund present at the Meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present in person or by proxy. Proposal 6,
the reorganization of the Fund as a Delaware business trust, requires the
affirmative vote of a majority of the Fund's shares outstanding and entitled to
vote. Proposal 7, for the proxyholders to have discretion to vote on any other
business that may properly come before the Meeting or any adjournments thereof,
requires the affirmative vote of a majority of the Fund's shares present and
voting on the Proposal at the Meeting or any adjournments thereof. Abstentions
and broker non-votes will be treated as votes not cast and, therefore, will not
be counted for purposes of obtaining approval of Proposal 1, but will have the
effect of votes cast against the other Proposals.

ADJOURNMENT. In the event that a quorum is not present at the Meeting, the
Meeting will be adjourned to permit further solicitation of proxies/voting
instructions. In the event that a quorum is present, but sufficient votes have
not been received to approve one or more of the Proposals, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies/voting instructions with respect to those Proposals. The
persons named as proxies will vote in their discretion on questions of
adjournment those shares for which proxies have been received that grant
discretionary authority to vote on matters that may properly come before the
Meeting.

SHAREHOLDER PROPOSALS. The Fund is not required, and does not intend, to hold
regular annual meetings of shareholders. Shareholders wishing to submit
proposals for consideration for inclusion in a proxy statement for the next
meeting of shareholders should send their written proposals to the Fund's
offices, 500 East Broward Boulevard, Fort Lauderdale, Florida 33394, Attn:
Secretary, so they are received within a reasonable time before any such
meeting. No business other than the matters described above is expected to come
before the Meeting. Should any other matter requiring a vote of shareholders
arise, including any question as to an adjournment or postponement of the
Meeting, the persons named as proxies will vote on such matters according to
their best judgment in the interests of the Fund.

By the Order of the Board of Directors of
Templeton Capital Accumulator Fund, Inc.

Barbara J. Green
Secretary

[_____ ___], 2000

PAGE

EXHIBIT A
FUNDAMENTAL INVESTMENT RESTRICTIONS PROPOSED TO BE AMENDED

-------------------- ---------------------- ---------------------------------------------- -----------------------------------------
PROPOSAL RESTRICTION CURRENT FUNDAMENTAL PROPOSED FUNDAMENTAL
THE FUND MAY NOT: THE FUND MAY NOT:
<S> <C> <C> <C>
-------------------- ---------------------- ---------------------------------------------- -----------------------------------------
3(a) Borrowing 7. Borrow money for any purpose other than Borrow money, except that the Fund may
redeeming its shares or purchasing its borrow money from banks or other
shares for cancellation, and then only as a investment companies to the extent
temporary measure up to an amount not permitted by the 1940 Act, or any
exceeding 5% of the value of its total exemptions therefrom which may be
assets; or [[P]ledge, mortgage, or granted by the SEC, or from any person
hypothecate its assets for any purpose other in a private transaction not intended
than to secure such borrowings, and then for public distribution for temporary
only up to such extent not exceeding 10% of or emergency purposes and then in an
the value of its total assets as the Board amount not exceeding 33 1/3% of the
may by resolution approve.2 For the value of the fund's total assets
purposes of this investment restriction, (including the amount borrowed).
collateral arrangements with respect to
margin for a futures contract or a forward
contract are not deemed to be a pledge of
assets.]
-------------------- ---------------------- ---------------------------------------------- -----------------------------------------
3(b) Underwriting 5. Act as an underwriter. 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.
-------------------- ---------------------- ---------------------------------------------- -----------------------------------------
3(c) Lending 6. Loan money, apart from the purchase of a Make loans to other persons except (a)
portion of an issue of publicly distributed through the lending of its portfolio
bonds, debentures, notes and other evidences securities, (b) through the purchase of
of indebtedness, although the fund may enter debt securities, loan participations
into repurchase agreements and lend its and/or engaging in direct corporate
portfolio securities. 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 other invest-
ment companies to the extent permitted
by the 1940 Act or any exemptions there-
from which may be granted by the SEC.

-------------------- ---------------------- ---------------------------------------------- -----------------------------------------
3(d) Industry 11. Invest more than 25% of the fund's Concentrate (invest more than 25% of
Concentration total assets in a single industry. 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).
-------------------- ---------------------- ---------------------------------------------- -----------------------------------------
3(e) Real Estate and 1. Invest in real estate or mortgages on Purchase or sell real estate and
Commodities real estate (although the fund may invest in commodities, except that the Fund may
marketable securities secured by real estate purchase or sell securities of real
or interests therein or issued by companies estate investment trusts, may purchase
or investment trusts which invest in real or sell currencies, may enter into
estate or interests therein); or . . . futures contracts on securities,
purchase or sell commodity contracts (except currencies, and other indices or any
forward contracts and futures contracts as other financial instruments, and may
described in the Fund's Prospectus). purchase and sell options on such
futures contracts.
-------------------- ---------------------- ---------------------------------------------- -----------------------------------------
3(f) Senior Securities 5...[I]ssue senior securities; purchase on Issue securities senior to the Fund's
margin or sell short; write buy or sell presently authorized shares of
puts, calls, straddles or spreads (but the beneficial interest. Except that this
Fund may make margin payments in connection restriction shall not be deemed to
with futures contracts, forward contracts prohibit the Fund from (a) making any
and options on securities indices and permitted borrowings, loans, mortgages,
foreign currencies). or pledges, (b) entering into options,
futures contracts, forward contracts,
Add in short sales and margin repurchase transactions, or reverse
language repurchase transactions, or (c) making
short sales of securities to the extent
permitted by the 1940 Act and any rule
or order thereunder, or SEC staff inter-
pretations thereof.
-------------------- ---------------------- ---------------------------------------------- -----------------------------------------
3(g) Diversification 3. Invest more than 5% of its total assets Purchase the securities of any one
in the securities of any one issuer issuer (other than the U.S. government
(exclusive of U.S. government securities). or any of its agencies or
instrumentalities or securities of other
4. Purchase more than 10% of any investment companies) if immediately
class of securities of any one after such investment (a) more than 5%
company, inlcuding more than 10% of its of the value of the Fund's total assets
outstanding voting securities, or invest would be invested in such issuer or (b)
in any company for the purposed of more than 10% of the outstanding voting
exerciseing control of management. securities of such issuer would be owned
by the Fund, except that up to 25% of
the value of the Fund's total assets may
be inveted without regard to such 5% and
10% limitations.
-------------------- ---------------------- ---------------------------------------------- -----------------------------------------
</TABLE>

PAGE

EXHIBIT B
FUNDAMENTAL INVESTMENT RESTRICTIONS PROPOSED TO BE ELIMINATED

------------------------------- ------------------------------------------------------------------------------
RESTRICTION CURRENT FUNDAMENTAL RESTRICTION PROPOSED CHANGE
THE FUND MAY NOT:
------------------------------- ------------------------------------------------------------------------------
<S> <C> <C>

Oil, Gas or Other Mineral 1... [I]nvest in interests (other than debentures To be eliminated
Exploration or Development or equity stock interests) in oil, gas or other
Programs mineral exploration or development programs . . .
------------------------------- ------------------------------------------------------------------------------
Investment in Other 1...[I]nvest in other open-end investment companies. To be eliminated
Investment Companies
------------------------------- ------------------------------------------------------------------------------
Management Ownership of 2...Purchase or retain securities of any company To be eliminated
Securities in which directors or officers of the fund or of
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.
------------------------------- ------------------------------------------------------------------------------
Control or Management 4. Purchase more than 10% of any class of securities To be eliminated
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.
------------------------------- ------------------------------------------------------------------------------
Securities on Margin or Short 5.. [P]urchase on margin or sell short To be eliminated
Sales
------------------------------- ------------------------------------------------------------------------------
Pledge, Mortgage or 7.. [P]ledge, mortgage, or hypothecate its assets To be eliminated
Hypothecate Assets for any purpose other than to secure such borrowings,
and then only up to such extent not exceeding 10%
of the value of its total assets as the Board may by
resolution approve.3
------------------------------- ------------------------------------------------------------------------------
Unseasoned Issuers 8. Invest more than 5% of the value of the fund's To be eliminated
total assets in securities of issuers which
have been in continuous operation less than
three years.
------------------------------- ------------------------------------------------------------------------------
Warrants 9. Invest more than 5% of the fund's total assets To be eliminated
in warrants, whether or not listed on the New York
Stock Exchange (NYSE) 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 investment restriction. This investment
restriction does not apply to options on securities
indices.
------------------------------- ------------------------------------------------------------------------------
Unlisted, Restricted and 10. Invest more than 15% of the fund's total assets To be eliminated
Illiquid Securities and in securities of foreign issuers that are not listed
Over-the Counter Options on a recognized U.S. or foreign securities exchange,
including no more than 10% of its total assets in
restricted securities, securities that are not readily
marketable, repurchase agreements having more than
seven days to maturity, and over-the-counter options
purchased by the fund. Assets used as cover for over-
the-counter options written by the fund are considered
not readily marketable.
------------------------------- ------------------------------------------------------------------------------
</TABLE>

RESTRICTION CURRENT FUNDAMENTAL RESTRICTION PROPOSED CHANGE
THE FUND MAY NOT:
------------------------------- ------------------------------------------------------------------------------
<S> <C> <C>

Letter Stocks 12. Invest in "letter stocks" or securities on To be eliminated
which there are any sales restrictions under a
purchase agreement.
------------------------------- ------------------------------------------------------------------------------
Joint and Joint and Several 13. Participate on a joint or a joint and several To be eliminated
Trading Accounts basis in any trading account in securities. (See
Portfolio Transactions on page 15 [of the Fund's
Statement of Additional Information] as to
transactions in the same securities for the fund,
other clients and/or other mutual funds within the
Franklin Templeton Group of Funds.)
------------------------------- ------------------------------------------------------------------------------
Defaulted Debt Securities 14. Invest more than 10% of its total assets in To be eliminated
defaulted debt securities, some of which may be
illiquid.
------------------------------- ------------------------------------------------------------------------------
</TABLE>

PAGE

EXHIBIT C
DISTRIBUTION PLAN

WHEREAS, Templeton Capital Accumulator Fund (the "Fund") is registered as
an open-end diversified management investment company under the Investment
Company Act of 1940 (the "1940 Act"); and

WHEREAS, the Fund and Franklin/Templeton Distributors, Inc. (the "Selling
Company"), a wholly owned subsidiary of Franklin Resources, Inc. and a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Selling Company will act as
principal underwriter of Shares of the Fund for sale to the public; and

WHEREAS, the Board of [Directors/Trustees] of the Fund has
determined to adopt this Distribution Plan (the "Plan"), in accordance with the
requirements of the 1940 Act and has determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Shareholders.

NOW THEREFORE, the Fund hereby adopts the Plan on the following terms and
conditions:

1. The Fund will reimburse the Selling Company for costs and expenses
incurred in connection with the distribution and marketing of Shares of the
Fund. Such distribution costs and expenses may include: (1) payments to
broker-dealers who provide certain services of value to the Fund's Shareholders
(sometimes referred to as a "trail fee"); (2) expenses relating to selling and
servicing efforts; (3) expenses of organizing and conducting sales seminars; (4)
payments to employees or agents of the Selling Company who engage in or support
distribution of Shares; (5) the costs of preparing, printing and distributing
prospectuses and reports to prospective investors; (6) printing and advertising
expenses; (7) dealer commission and wholesaler compensation in connection with
sales of Fund Shares exceeding $1 million; and (8) such other similar services
as the Fund's Board of [Directors/Trustees] determines to be reasonably
calculated to result in the sale of Shares.

The Selling Company will be reimbursed for such costs, expenses or payments
on a monthly basis, subject to an annual limit of 0.30% of the Fund's average
daily net assets. Payments made out of or charged against the assets of the Fund
must be in reimbursement for costs and expenses in connection with any activity
which is primarily intended to result in the sale of Fund Shares. The costs and
expenses not reimbursed in any one given month (including costs and expenses not
reimbursed because they exceeded the limit of 0.30% per annum of the Fund's
average daily net assets) may be reimbursed in subsequent months or years.

2. The Plan shall not take effect with respect to the Fund until it has
been approved by a vote of at least a majority (as defined in the 1940 Act) of
the outstanding voting Shares of the Fund. With respect to the submission of the
Plan for such a vote, it shall have been effectively approved with respect to
the Fund if a majority of the outstanding voting Shares of the Fund votes for
approval of the Plan.

3. The Plan shall not take effect until it has been approved, together with
any related agreements and supplements, by votes of a majority of both (a) the
Board of [Directors/Trustees] of the Fund, and (b) those [Directors/Trustees] of
the Fund who are not "interested persons" (as defined in the 1940 Act) and have
no direct or indirect financial interest in the operation of the Plan or any
agreements related to it (the "Plan [Directors/Trustees]"), cast in person at a
meeting (or meetings) called for the purpose of voting on the Plan and such
related agreements.

4. The Plan shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in paragraph 3.

5. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to the Plan or any related agreement shall
provide to the Fund's Board of [Directors/Trustees], and the Board shall review,
at least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.

6. Any agreement related to the Plan shall be in writing and
shall provide: (a) that such agreement may be terminated at any time as to the
Fund, without payment of any penalty, by vote of a majority of the Plan
[Directors/Trustees] or by vote of a majority of the outstanding voting Shares
of the Fund, on not more than sixty days' written notice to any other party to
the agreement; and (b) that such agreement shall terminate automatically in the
event of its assignment.

7. The Plan may be terminated at any time with respect to the Fund, without
payment of any penalty, by vote of a majority of the Plan [Directors/Trustees],
or by vote of a majority of the outstanding voting Shares of the Fund.

8. The Plan may be amended at any time with respect to the Fund by the
Fund's Board of [Directors/Trustees], provided that (a) any amendment to
increase materially the costs which the Fund may bear for distribution pursuant
to the Plan shall be effective only upon approval by a vote of a majority of the
outstanding voting Shares of the Fund, and (b) any material amendments of the
terms of the Plan shall become effective only upon approval as provided in
paragraph 3 hereof.

9. While the Plan is in effect, the selection and nomination of
[Directors/Trustees] who are not "interested persons" (as defined in the 1940
Act) of the Fund shall be committed to the discretion of the
[Directors/Trustees] who are not interested persons.

10. The Fund shall preserve copies of the Plan, any related agreement and
any report made pursuant to paragraph 5 hereof, for a period of not less than
six years from the date of the Plan, such agreement or report, as the case may
be, the first two years of which shall be in an easily accessible place.

11. It is understood and expressly stipulated that neither the holders of
Shares of the Fund nor any [Director/Trustee], officer, agent or employee of the
Fund shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation hereunder, but
the Fund only shall be liable.

IN WITNESS WHEREOF, the Fund has executed this Distribution Plan on this
___ day of _____, 2000.

TEMPLETON CAPITAL ACCUMULATOR FUND

By:_______________________________

Attest:

-----------------------
Barbara J. Green
Secretary

PAGE

EXHIBIT D

FORM OF AGREEMENT AND PLAN OF REORGANIZATION

This Agreement and Plan of Reorganization (the "Agreement") is made this __
day of ______________, 2000 by and between Templeton Capital Accumulator Fund,
Inc., a corporation created under the laws of the State of Maryland (the
"Fund"), and Templeton Capital Accumulator Fund, a business trust created under
the laws of the State of Delaware (the "Trust"). In consideration of the mutual
promises contained herein, and intending to be legally bound, the parties hereto
agree as follows:

1. PLAN OF REORGANIZATION.

(a) Upon satisfaction of the conditions precedent described in Section 3
hereof, the Fund will convey, transfer and deliver to the Trust, at the
closing provided for in Section 2 (hereinafter referred to as the
"Closing") all of its then-existing assets. In consideration thereof, the
Trust agrees at the Closing (i) to assume and pay, to the extent that they
exist on or after the Effective Date of the Reorganization (as defined in
Section 2 hereof), all of the Fund's obligations and liabilities, whether
absolute, accrued, contingent or otherwise, including all fees and expenses
in connection with the Agreement, including without limitation costs of
legal advice, accounting, printing, mailing, proxy solicitation and
transfer taxes, if any, and taxes assessed by the State of Maryland, if
any, the obligations and liabilities allocated to the Fund to become the
obligations and liabilities of the Trust, and (ii) to deliver to the Fund
full and fractional shares of the Trust equal in number to the number of
full and fractional shares outstanding of the Fund. The transactions
contemplated hereby are intended to qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
("Code").

(b) The Trust will effect such delivery by establishing an open account for
each shareholder of the Fund and by crediting to such account the exact
number of full and fractional shares of the Trust such shareholder held in
the Fund on the Effective Date of the Reorganization. Fractional shares of
the Trust will be carried to the third decimal place. On the Effective Date
of the Reorganization, the net asset value per share of beneficial interest
of the Trust shall be deemed to be the same as the net asset value per
share of the Fund. On such date, each certificate representing shares of
the Fund will represent the same number of shares of the Trust. Each
shareholder of the Fund will have the right to exchange his (her) share
certificates for share certificates of the Trust. However, a shareholder
need not make this exchange of certificates unless he (she) so desires.
Simultaneously with the crediting of the shares of the Trust to the
shareholders of record of the Fund, the shares of the Fund held by such
shareholder shall be canceled.

(c) As soon as practicable after the Effective Date of the Reorganization,
the Fund shall take all necessary steps under Maryland law to terminate the
Fund.

2. CLOSING AND EFFECTIVE DATE OF THE REORGANIZATION. The Closing shall commence
at ________ Eastern time on ________, 2000, or on such later date as the parties
may agree, and shall be effective on the business day following the commencement
of the Closing (the "Effective Date"). The Closing will take place at the
principal offices of the Fund and the Trust at 500 East Broward Boulevard, Fort
Lauderdale, Florida 33394.

3. CONDITIONS PRECEDENT. The obligations of the Fund and the Trust to effectuate
the Reorganization hereunder shall be subject to the satisfaction of each of the
following conditions:

(a) Such authority and orders from the U.S. Securities and Exchange
Commission (the "Commission") and state securities commissions as may be
necessary to permit the parties to carry out the transactions contemplated
by this Agreement shall have been received;

(b) (i) One or more post-effective amendments to the Fund's Registration
Statement on Form N-1A ("Registration Statement") under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended,
("1940 Act") containing such amendments to such Registration Statement as
are determined under the supervision of the Directors of the Fund to be
necessary and appropriate as a result of the Agreement shall have been
filed with the Commission, (ii) the Trust shall have adopted as its own
such Registration Statement, as so amended, (iii) the most recent
post-effective amendment or amendments to the Fund's Registration Statement
shall have become effective, and no stop order suspending the effectiveness
of the Registration Statement shall have been issued, and no proceeding for
that purpose shall have been initiated or threatened by the Commission
(other than any such stop order, proceeding or threatened proceeding which
shall have been withdrawn or terminated), and (iv) an amendment of the Form
N-8A Notification of Registration filed pursuant to Section 8(a) of the
1940 Act ("Form N-8A") reflecting the change in legal form of the Fund to a
Delaware business trust shall have been filed with the Commission and the
Fund shall have expressly adopted such amended Form N-8A as its own for
purposes of the 1940 Act;

(c) Confirmation shall have been received from the Commission or the Staff
thereof that the Trust shall, effective upon or before the Effective Date
of the Reorganization, be duly registered as an open-end management
investment company under the Investment Company Act of 1940, as amended;

(d) Each party shall have received a ruling from the Internal Revenue
Service or an opinion from Messrs. Stradley Ronon Stevens & Young, LLP, to
the effect that the Reorganization contemplated by this Agreement qualifies
as a "reorganization" under Section 368(a) of the Code, and, thus, will not
give rise to the recognition of income, gain or loss for federal income tax
purposes to the Fund, the Trust or shareholders of the Fund or the Trust;

(e) The Fund shall have received an opinion from Messrs. Stradley Ronon
Stevens & Young, LLP, addressed to and in form and substance satisfactory
to it, to the effect that (i) this Agreement and the Reorganization
provided for herein, and the execution and delivery of this Agreement, has
been duly authorized and approved by the Trust and constitutes a legal,
valid and binding agreement of the Trust in accordance with its terms; (ii)
the shares of the Trust to be issued pursuant to the terms of this
Agreement have been duly authorized and, when issued and delivered as
provided in this Agreement, will have been validly issued and fully paid
and will be non-assessable by the Trust; and (iii) the Trust is duly
organized and validly existing under the laws of the State of Delaware;

(f) The Trust shall have received an opinion from Messrs. Stradley Ronon
Stevens & Young, LLP, addressed to and in form and substance satisfactory
to it, to the effect that (i) this Agreement and the Reorganization
provided herein, and the execution of this Agreement, has been duly
authorized and approved by the Fund and constitutes a legal, valid and
binding agreement of the Fund in accordance with its terms; and (ii) the
Fund is duly organized, validly existing and in good standing under the
laws of the State of Maryland.

(g) The shares of the Trust shall have been duly registered, qualified or
otherwise authorized for offering to the public in all states of the United
States, the Commonwealth of Puerto Rico and the District of Columbia so as
to permit the transfers contemplated by this Agreement to be consummated;

(h) This Agreement and the Reorganization contemplated hereby shall have
been adopted by an affirmative vote of at least a majority the outstanding
voting securities of the Fund (as defined in the Investment Company Act of
1940, as amended) at a meeting of shareholders of such Fund;

(i) The Trustees shall have taken the following action at a meeting duly
called for such purposes:

(1) Approval of the Trust's Custodian Agreement;

(2) Approval of the Trust's Shareholders Services Agreement and
Transfer Agent Agreement with Franklin/Templeton Investors Services,
Inc.;

(3) Selection of PricewaterhouseCoopers LLP as the Trust's independent
public accountants for the fiscal year ending August 31, 2000;

(4) Approval of the investment management agreement between the Trust
and Templeton Investment Counsel, Inc., which is substantially
identical to the current investment management agreement between the
Fund and Templeton Investment Counsel, Inc.;

(5) Authorization of the issuance by the Trust, prior to the Effective
Date of the Reorganization, of one share of the Trust to the Fund in
consideration for the payment of the current public offering price of
a share of the Trust, for the purpose of enabling the Fund to vote on
matters referred to in paragraph (j) of this Section 3;

(6) Submission of the matters referred to in paragraph (j) of this
Section 3 to the Fund as sole shareholder of the Trust; and

(7) A Authorization of the issuance and delivery by the Trust of
shares of the Trust on the Effective Date of the Reorganization in
exchange for the assets of the Fund pursuant to the terms and
provisions of this Agreement.

(j) The shareholders of the Fund shall have voted to approve the
Reorganization and, in connection with that vote, been informed that such a
vote would have the effect of directing the Fund to vote, as sole
shareholder of the Trust, to:

(1) Elect as Trustees of the Trust (the "Trustees") the following
individuals: Harris J. Ashton, Nicholas F. Brady, Frank J. Crothers,
S. Joseph Fortunato, John Wm. Galbraith, Andrew H. Hines, Jr., Edith
E. Holiday, Charles B. Johnson, Charles E. Johnson, Betty P. Krahmer,
Gordon S. Macklin, Fred R. Millsaps, Constantine D. Tseretopoules,

(2) Select PricewaterhouseCoopers LLP as the independent public
accountants for the Trust for the fiscal year ending August 31, 2000,
and

(3) Approve a new investment management agreement between the Trust
and Templeton Investment Counsel, Inc., which is substantially
identical to the current investment management agreement between the
Fund and Templeton Investment Counsel, Inc.; and the Fund shall have
voted to approve each such item.

At any time prior to the Closing, any of the foregoing conditions may be
waived by the Board of Directors of the Fund if, in the judgment of the
Directors, such waiver will not have a material adverse effect on the benefits
intended under this Agreement to the shareholders of the Fund.

4. TERMINATION. The Board of Directors of the Fund may terminate this Agreement
and abandon the Reorganization contemplated hereby, notwithstanding approval
thereof by the shareholders of the Fund, at any time prior to the Effective Date
of the Reorganization if, in the judgment of the Directors, the facts and
circumstances make proceeding with the Agreement inadvisable.

5. ENTIRE AGREEMENT. This Agreement embodies the entire agreement between the
parties and there are no agreements, understandings, restrictions or warranties
among the parties other than those set forth herein or herein provided for.

6. FURTHER ASSURANCES. The Fund and the Trust shall take such further action as
may be necessary or desirable and proper to consummate the transactions
contemplated hereby.

7. COUNTERPARTS. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

8. GOVERNING LAW. This Agreement and the transactions contemplated hereby shall
be governed by and construed and enforced in accordance with the laws of the
State of Delaware.

IN WITNESS WHEREOF, the Fund and the Trust have each caused this Agreement
and Plan of Reorganization to be executed on its behalf by its ____________ and
its seal to be affixed hereto and attested by its ____________, all as of the
day and year first-above written.

Attest:

TEMPLETON CAPITAL ACCUMULATOR FUND
(a Delaware business trust)

By: By:

Attest: TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
(a Maryland corporation)

By: By:

PAGE

EXHIBIT E
COMPARISON AND SIGNIFICANT DIFFERENCES BETWEEN
DELAWARE BUSINESS TRUSTS AND MARYLAND CORPORATIONS

DELAWARE BUSINESS TRUST MARYLAND CORPORATION

GOVERNING A Delaware Business Trust (a "DBT") is created by A Maryland corporation (a "corporation") is
DOCUMENTS a governing instrument (which may consist of one created by filing articles of incorporation with
or more instruments, including an agreement and the Maryland Department of Assessments and
declaration of trust and Bylaws) and a Certificate Taxation. The law governing corporations is
of Trust, which must be filed with the Delaware referred to in this chart as the "Maryland Law."
Secretary of State. The law governing DBTs is
referred to in this chart as the "Delaware Act."

A DBT is an unincorporated association organized A corporation is incorporated under the Maryland
under the Delaware Act which operates similar to a Law. A corporation's operations are governed by
typical corporation. A DBT's operations are its articles of incorporation and Bylaws and its
governed by a trust instrument and Bylaws and its business and affairs are managed by or under the
business and affairs are managed by or under the direction of a Board of Directors.
direction of a Board of Trustees.

A DBT organized as an open-end investment company A corporation organized as an open-end investment
is subject to the Investment Company Act of 1940, company is subject to the 1940 Act. Shareholders
as amended (the "1940 Act"). Shareholders of own shares of "common stock" issued by the
business trusts (sometimes referred to as corporation.
"beneficial owners") own shares of "beneficial
interest" which are similar to the shares of
"common stock" issued by corporations.

MULTIPLE Under the Delaware Act, a declaration of trust may The Maryland Law permits a corporation to issue
SERIES AND provide for classes, groups or series of shares, one or more classes of stock and, if the stock is
CLASSES or classes, groups or series of shareholders, divided into classes, the charter is required to
having such relative rights, powers and duties as describe each class, including any preferences,
the declaration of trust may provide. The series conversion or other rights, voting powers,
and classes of a DBT may be described in the restrictions, limitations as to dividends,
declaration of trust or in resolutions adopted by qualifications and terms or conditions of
the Board of Trustees. Additionally, no state redemption. The charter documents that describe a
filings or shareholder approval is required to new series or class, or a change to an existing
create series or classes. The Directors of series or class, are amendments to the fund's
Templeton Capital Accumulator Fund, Inc. (the charter documents and must be filed with the State
"Fund") have proposed to reorganize the Fund from of Maryland. Provided that the charter documents
a Maryland corporation into a Delaware business contain the proper language, the Maryland Law
trust (the "DE Trust"). The DE Trust's allows a fund's board to exchange, classify,
Declaration of Trust permits the creation of reclassify, cancel any of its issued or unissued
multiple series and classes and establishes the stock, or increase or decrease the aggregate
provisions relating to shares. number of shares of stock without shareholder
approval by filing Articles Supplementary in
Maryland. The Maryland Law also permits a board
to change the preferences, conversion and other
rights, voting powers, restrictions limitation
as to dividends, qualifications, and terms and
conditions of redemption of any of its issued
or unissued stock without shareholder approval.

LIMITATION The Delaware Act explicitly provides for a The Maryland Law does not contain specific
OF reciprocal limitation of interseries liability. statutory provisions addressing series liability
SERIES Generally, the debts, liabilities, obligations and with respect to a multiple series investment
LIABILITY expenses incurred, contracted for or otherwise company; however, if the stock of a corporation is
existing with respect to a particular series of a divided into classes, the Maryland Law requires
multiple series investment company registered the corporation's charter documents to set forth
under the 1940 Act are enforceable only against any preferences or restrictions relating to such
the assets of such series, and not against the classes. The Fund is not divided into series or
assets of the DBT, or any other series, provided classes and as a result, the Fund's charter
that: (i) the governing instrument creates one or documents are silent with respect to the issue of
more series, (ii) the DBT separately maintains the interseries liability.
records and the assets of the series; (iii) notice
of the limitation on liabilities of the series is
set forth in the Certificate of Trust; and (iv) the
governing instrument so provides. The Declaration of
Trust for the DE Trust specifically limits
interseries liability.

SHAREHOLDER The Declaration of Trust of the DE Trust requires Under Maryland Law, unless the charter of a
VOTING that forty percent (40%) of the shares entitled to corporation provides otherwise, or there is
RIGHTS, vote at any meeting must be present in person or another governing provision in the Maryland Law, a
QUORUM AND by proxy to establish a proper quorum for voting majority of outstanding shares constitutes a
PROXY purposes. Further, when a quorum is present, a quorum. Under Maryland Law, an affirmative vote
REQUIREMENTS majority of votes cast shall decide any issues, of two-thirds of all the votes entitled to be cast
and a plurality shall elect a Trustee, unless a shall approve a proposed amendment to a
larger vote is required by the Trust or under corporation's charter, consolidation, merger,
applicable law. The effect of the quorum and share exchange or transfer of assets. However,
voting provisions is to make it easier for the under Maryland Law, the Articles of Incorporation
Trust to seek appropriate shareholder approvals may include a provision that requires less than a
for many actions not related to regulatory issues two-thirds vote, provided that the Articles
without experiencing the added costs or delays of require at least a majority vote. Under the
soliciting additional proxies or votes and without Fund's Articles of Incorporation, shareholder
being disadvantaged by abstentions or broker approval by a majority of all votes entitled to be
non-votes. The Delaware Act also affords the cast is required to approve any amendments or
Trustees the ability to adapt a DBT to future restatements of the articles, a merger,
contingencies. For example, Trustees have the consolidation, share exchange, transfer of assets
authority to incorporate a DBT, to merge or or to approve similar transactions.
consolidate with another entity, to cause multiple
series of a DBT to become separate trusts, to
change the domicile or to liquidate a DBT, all
without having to obtain a shareholder vote.

The DE Trust's Declaration of Trust provides that Pursuant to the Maryland Law, unless the
all shares of the Trust entitled to vote on a corporation's charter provides for a greater or
matter shall vote separately by series, and if lesser number of votes per share, or limits or
applicable, by class. Shareholders are entitled denies voting rights, each outstanding share of
to whole and fractional votes for each whole and stock is entitled to one vote on each matter
fractional share owned. submitted to a vote at a meeting of shareholders.
The Fund's Articles of Incorporation provide that
the holder of each shares of sotck is entitled
to whoe and fractional votes for each whole and
fractional share owned, irrespective of the class
or subclass.

The Delaware Act and the Trust's Bylaws also The Maryland Law provides for shareholders to
permit the Trust to accept proxies by any authorize another person to act as proxy by
electronic telephonic, computerized, providing such authorization by telegram,
telecommunications or other reasonable alternative cablegram, datagram, electronic mail, or any other
to the execution of a written instrument electronic or telephonic means. In addition, a
authorizing the proxy to act, provided that such copy, facsimile telecommunication or other
authorization is received within eleven (11) reliable reproduction of the writing or
months before the meeting. This flexibility may transmission authorized may be substituted for the
facilitate proxy solicitations and result in original writing or transmission for any purpose
savings to the Trust. for which the original writing or transmission
could be used. The authorization must be received
within eleven (11) months before the meeting.

SHAREHOLDERS' The Delaware Act permits special shareholder The Maryland Law requires corporations operating
MEETINGS meetings to be called for any purpose. However, as registered investment companies to hold
the governing instrument determines shareholders' shareholder meetings when required to do so under
rights to call meetings. The Declaration of Trust the 1940 Act. The Maryland Law also provides that
for the DE Trust provides that the Board of a special meeting shall be called by the secretary
Trustees shall call shareholder meetings for the of the corporation upon written request of the
purpose of: (i) electing Trustees, (ii) for such shareholders entitled to cast at least twenty-five
other purposes as may be prescribed by law, the percent (25%) of all of the votes entitled to be
Declaration of Trust or the Bylaws, and (iii) cast at the meeting. The Fund's Bylaws also
taking action upon any other matter deemed by the provide that a special meeting upon the written
Trustees to be necessary or desirable. The Bylaws request of the holders of at least ten percent
further provide that a special meeting may be (10%) of the capital stock of the corporation
called at any time by the Board of Trustees, by entitled to vote at such meeting.
the Chairperson of the Board, or by the President or
any Vice President or the Secretary or any two (2)
Trustees. An annual shareholders' meeting is not
required by either the Delaware Act, or the DE
Trust's Declaration of Trust, or the Bylaws.

AMENDMENTS The Delaware Act provides broad flexibility with Under Maryland Law, the charter of a Maryland
TO GOVERNING respect to amending to the governing documents of corporation may be amended only: (i) upon adoption
DOCUMENTS a DBT. The DE Trust's Declaration of Trust of a resolution by the Directors which sets forth
provides that the Declaration of Trust may be the proposed amendments; and (ii) if shares are
restated and/or amended at any time by an outstanding, approval of the proposed amendment
by instrument in writing signed by a majority of the holders of a majority of the corporation's
the then Trustees, and if required, by approval outstanding shares entitled to vote.
of such amendment by shareholders.

The DE Trust's Declaration of Trust also provides The Maryland Law does, however, permit investment
that the Trustees shall have the power to amend companies to amend their charter documents without
the Declaration of Trust without shareholder shareholder approval in order to change its
approval so as to add to, delete, replace or corporate name, to exchange, classify, reclassify
otherwise modify any provisions relating to shares or cancel any of its issued or unissued stock, to
contained in the Declaration of Trust. If shares allocate or re-allocate authorized by unissued
have been issued, shareholder approval is required shares or to increase or decrease the aggregate
to adopt any amendments to the Declaration of number of shares that the corporation has
Trust which would adversely affect to a material authority to issue. Under Maryland Law, a
degree the rights and preferences of the shares of corporation must file articles of amendment or
any series or class. articles supplementary, as the case may be, with
the State Department of Assessments and Taxation.

The DE Trust's Declaration of Trust provides that The Maryland Law provides that, after the
the Trustees may amend and repeal the Bylaws to organizational meeting of the Board of Directors,
the extent that the Bylaws do not reserve that the power to adopt, alter or repeal the Bylaws is
right to the shareholders. The Bylaws of the DE vested in the shareholders, except to the extent
Trust provide that the Bylaws may be amended or that the charter or Bylaws vest such a power in
repealed by the affirmative vote or written the Board of Directors. Consistent with the
consent of a majority of the outstanding shares Maryland Law, the Fund's Bylaws provide that they
entitled to vote, or by the Board of Trustees may be amended, adopted or repealed by the
subject to the rights of the shareholders. affirmative vote of the holders of a majority of
shares entitled to vote thereon, or by a majority
of the Board of Directors as the case may be.

RECORD The Delaware Act permits a governing instrument The Maryland Law contains specific provisions by
DATE/NOTICE to provide for the establishment of record dates which a corporation may determine which
for determining voting rights. shareholders are entitled to notice of a meeting,
to vote at a meeting, or to any other rights.

The Declaration of Trust for the DE Trust provides The Maryland Law requires that the record date be
that the Board of Trustees may fix in advance a not more than ninety (90) days and not less than
record date which shall not be more than one ten (10) days before the date on which the action
hundred eighty (180) days, nor less than seven (7) requiring determination will be taken.
days, before the date of any such meeting.

The Bylaws for the DE Trust provide that all Pursuant to the Maryland Law, the Fund's Bylaws
notices of shareholder meetings shall be sent or allow the corporation to set a date not more than
otherwise given to shareholders not more than ninety (90) days and not less than ten (10) days
seventy-five (75) days and not less than seven (7) before a meeting for determining such rights.
days before the date of the meeting.

REMOVAL OF The Delaware Act is silent with respect to the Under the Maryland Law, a Director may be removed
TRUSTEES/ removal of Trustees. However, the DE Trust's with or without cause by the affirmative vote of a
DIRECTORS Declaration of Trust states that the Board of majority of the outstanding shares entitled to
Trustees, by action of a majority of the then vote. The Fund's Bylaws provide that Directors
Trustees at a duly constituted meeting, may fill may be removed with or without cause by the
vacancies in the Board of Trustees or remove affirmative vote of a majority of all of
Trustees with or without cause. the votes entitled to be cast thereon.

SHAREHOLDER The Delaware Act sets forth the rights of Like the Delaware Act, the Maryland Law permits
RIGHTS shareholders to gain access to and receive copies shareholders to make reasonable demands to gain
OF of certain DBT Trust documents and records upon access to and receive copies of certain corporate
INSPECTION written request by the shareholder. This right is documents and records. Specifically, a
qualified by the extent otherwise provided in the shareholder may, upon written demand and for a
governing instrument of the DBT as well as a purpose reasonably related to such shareholder's
reasonable demand standard related to the interest as a shareholder, inspect and copy the
shareholder's interest as a shareholder of the accounting books and records, minutes of
DBT. Consistent with Delaware law, the Bylaws of shareholder and board meetings, and the record of
the DE Trust provide that a shareholder shall have shareholders' names and addresses at any time.
the right to inspect and copy the minutes and The Fund's Articles of Incorporation and Bylaws do
accounting books and records of the company upon not address shareholder inspection rights.
written demand at any reasonable time during usual
business hours for a purpose reasonably related to the
shareholder's interest as a shareholder.

SHAREHOLDER Personal liability is limited by the Delaware Act As a general matter, the shareholders of a
LIABILITY to the amount of investment in the DBT, and may be Maryland corporation are not liable for the
further limited or restricted by the governing obligations of the corporation. The liability of
instrument. Shareholders of a DBT are entitled to shareholders is limited to the consideration, if
the same limitation of personal liability extended applicable, that they are obligated to pay for the
to stockholders of a private corporation organized stock. There is no provision in the Fund's
for profit under the general corporation law of charter documents varying this protection. A
the State of Delaware. The DE Trust's Declaration shareholder of a Maryland corporation may be
of Trust specifically limits the personal liable in the amount of any distribution he or she
liability of shareholders. accepts knowing that the distribution was made in
violation of the corporation's charter or the
Maryland Law.

TRUSTEE/ Subject to the declaration of trust, the Delaware The Maryland Law requires a Director to perform
DIRECTOR Act provides that a Trustee, when acting in such his or her duties in good faith, in a manner he or
LIABILITY capacity, may not be held personally liable to any she reasonably believes to be in the best
person other than the DBT or a shareholder for any interests of the corporation and with the care
act, omission or obligation of the DBT or any that an ordinarily prudent person in a like
Trustee. A Trustee's duties and liabilities to position would use under similar circumstances. A
the DBT and its shareholders may be expanded or Director who performs his or her duties in
restricted by the provisions of the Declaration of accordance with this standard has no liability by
Trust. The DE Trust's Declaration of Trust reason of being or having been a Director. If it
shields Trustees from liability for the acts or is established that a Director did not meet the
omissions of any officer, agent, employee, manager foregoing standard, the Director, for example, may
or principal underwriter or other Trustee. be personally liable to the corporation for (i)
Trustees and officers of the DE Trust may be held voting or assenting to a distribution of assets to
liable to the DE Trust and any shareholder for shareholders which is in violation of either the
willful misfeasance, bad faith, gross negligence Fund's charter documents or the Maryland Law; or
or reckless disregard of the duties involved in (ii) voting or assenting to a repurchase of the
the conduct of their office as a Trustee or corporation's shares in violation of the Maryland
officer, but may not be held liable for errors of Law.
judgment or mistakes of fact or law.

INDEMN- The Delaware Act permits a DBT to indemnify and There is no provision in the Maryland Law relating
IFICATION hold harmless any Trustee, shareholder or agent to indemnification of shareholders. The Fund's
from and against any and all claims and demands. Articles of Incorporation and Bylaws are also
Consistent with the Delaware Act, the Declaration silent with respect to this issue. The Maryland
of Trust for the DE Trust provides for the Law provides a comprehensive statutory framework
indemnification of officers and Trustees from and relating to the indemnification of Directors and
against any and all claims and demands arising out officers. The Fund's Bylaws require
of or related to the performance of their duties indemnification of officers and Directors to the
as an officer or Trustee. The DE Trust will not fullest extent permitted by Maryland Law and the
indemnify, hold harmless or relieve Trustees from Investment Company Act. Under the Maryland Law, a
liability that results from willful misfeasance, Director or officer who is threatened or made a
bad faith, gross negligence or reckless disregard party to a proceeding, may be indemnified against
of their duties. judgments, penalties, fines, and reasonable
expenses. Indemnification will not be permitted if
the act or omission of the Director or officer: (i)
was mateial to the matter giving rise to the
proceeding and was committed in bad faith, or was
the result of active and deliberate dishonesty; (ii)
resulted in an improper benefit to the individual; or
(iii) if the Director or officer had reasonable cause
to believe tht the act or omission was unlawful.

The Declaration of Trust of the DE Trust also The Fund's charter documents provide for
provides that any shareholder or former substantially similar indemnification of Directors
shareholder that is exposed to liability by reason or officers out of the assets of the trust or
of a claim or demand related to such person having corporation, from and against any and all claims,
been a shareholder, and not because of his or her demands, costs, losses, expenses, and damages,
acts or omissions, shall be entitled to be held arising out of, or related to, such persons'
harmless and indemnified out of the assets of the performance of their duties as a Director or
DE Trust. officer.

INSURANCE The Delaware Act does not contain a provision Under Maryland Law, a corporation may purchase
specifically related to insurance. The DE Trust's insurance on behalf of any Director, officer or
Declaration of Trust provides that the Trustees employee against any liability asserted against
shall be entitled and empowered to the fullest and incurred by such person in any such capacity
extent permitted by law to purchase insurance with or arising out of such person's position, whether
the DE Trust's assets for liability and for all or not the corporation would have the power to
expenses reasonably incurred or paid or expected indemnify such person against such liability. The
to be paid by a Trustee or officer in connection Fund's Bylaws permit the purchase of such
with any claim or proceeding in which he or she insurance for Directors, officers and agents.
becomes involved by virtue of his or her capacity (or
former capacity) with the DE Trust, whether or not the
DE Trust would have the power to indemnify against such
liability. The DE Trust's Bylaws permit insurance coverage
to extent to any agents of the Trust.

</TABLE>

1. The members of the board of a Delaware business trust are referred to as
Trustees.

2. As an operating policy approved and subject to change or elimination solely
by the Board, the Fund will not pledge, mortgage or hypothecate its assets to
the extent that at any time the percentage of pledged assets plus the sales
commission will exceed 10% of the Offering Price of the shares of the Fund.

3. As an operating policy approved and subject to change or elimination solely
by the Board, the Fund will not pledge, mortgage or hypothecate its assets to
the extent that at any time the percentage of pledged assets plus the sales
commission will exceed 10% of the Offering Price of the shares of the Fund.

PAGE

PROXY/VOTING INSTRUCTION

PROXY/VOTING INSTRUCTION
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
SPECIAL SHAREHOLDERS' MEETING -- SEPTEMBER __, 2000

The undersigned hereby revokes all previous proxies for his or her shares and
appoints BARBARA J GREEN, BRUCE S. ROSENBERG, and SAMUEL J. FORESTER, JR., and
each of them, proxies of the undersigned with full power of substitution to vote
all shares of Templeton Capital Accumulator Fund, Inc. (the "Fund") that the
undersigned is entitled to vote at the Fund's Special Shareholders' Meeting to
be held at the offices of the Fund, 500 East Broward Boulevard, Suite 2100, Fort
Lauderdale, Florida at 10:00 a.m., Eastern time, on September ___, 2000,
including any adjournments thereof, upon the matters set forth on the reverse
side of this Proxy.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY SHALL BE VOTED FOR PROPOSALS
1 (INCLUDING ALL NOMINEES FOR DIRECTORS), 2, 3 (INCLUDING 7 SUB-PROPOSALS), 4,
5, 6 AND WITHIN THE DISCRETION OF THE PROXYHOLDERS AS TO ANY OTHER MATTER
PURSUANT TO PROPOSAL 7.

VOTE VIA THE INTERNET:
HTTPS://VOTE.PROXY-DIRECT.COM
VOTE VIA THE TELEPHONE: 1-800-XXX-XXXX
CONTROL NUMBER: 999 9999 9999 999

NOTE: Please sign exactly as your name appears on
this proxy. If signing for estates, trusts or
corporations, title or capacity should be stated.
If shares are held jointly, each holder should sign.

----------------------------------------------
Signature

----------------------------------------------
Date

I PLAN TO ATTENT MEETING: YES [ ] NO [ ]

PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
REQUIRED IF MAILED IN THE U.S. (PLEASE SEE REVERSE SIDE)

PAGE

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 THROUGH 7.

TO VOTE, FILL IN THE BOX COMPLETELY. EXAMPLE

Proposal 1 - Election of Directors. To withhold authority to vote for any FOR WITHHOLD FOR ALL NOMINEES
individual nominee, strike a line through the nominee's name in the list below. ALL NOMINEE AUTHOIRTY (EXCEPT AS MARKED
FOR ALL TO THE LEFT)
NOIMINEES
LISTED
[] [] []
<CAPTION>

<S> <C> <C> <C>
01 Harris J. Ashton 02 Nicholas F. Brady 03 Frank J. Crothers 04 S. Joseph Fortunato
05 John Wm. Galbraith 05 Andrew H. Hines, Jr. 06 Edith E. Holiday 07 Charles B. Johnson
08 Charles E. Johnson 09 Betty p. Krahmer 10 Gordon S. Macklin 11 Fred R. Millsaps
12 Constantine Dean Tseretopoulos

</TABLE>

FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Proposal 2 - Ratification of the selection of PricewaterhouseCoopers LLP as
independent auditors for the Fund. [] [] []

Proposal 3 - Amendments to certain of the Fund's fundamental investment restrictions
(includes 7 Sub-Proposals).
3.a. Borrowing. [] [] []
3.b. Underwriting. [] [] []
3.c. Lending. [] [] []
3.d. Industry concentration. [] [] []
3.e. Real Estate and Commodities. [] [] []
3.f. Senior Securities [] [] []
3.g. Diversification [] [] []

Proposal 4 - Elimination of one of the Fund's fundamental investment restrictions. [] [] []

Proposal 5 - Adoption of a Rule 12b-1 Distribution Plan. [] [] []

Proposal 6 - Reorganization of the Fund from a Maryland corporation
to a Delaware trust. [] [] []

Proposal 7 - Grant the proxyholders authority to vote upon any other business that
may properly come before the Meeting or any adjournments thereof. [] [] []

</TABLE>

IMPORTANT: PLEASE SIGN AND MAIL IN YOUR PROXY...TODAY